Beauty Store Business

OCT 2017

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4 October 2017 | News From eft: courtesy of Freeman Beauty, Dan Dalton/ Caiaimage collection FREEMAN BEAUTY ACQUIRED BY YELLOW WOOD PARTNERS Yellow Wood Partners, a Boston-based private equity firm that invests in consumer brands and companies, acquired Freeman Beauty from Champlain Capital, a private equity firm with offices in Boston and San Francisco. Yellow Wood will invest in Freeman in partnership with CEO Jon Achenbaum and the company's senior management team. Freeman Beauty has been a leading specialty beauty company for 40 years with a portfolio of brands across the skin care, hair care, foot care and specialty bath and body categories, marketed in the food, drug, mass and specialty beauty retail sectors. Freeman has developed a solid track record of innovation with its brands Feeling Beautiful, the number one facial mask brand in the mass market, Beauty Infusion facial masks, Psssst! dry shampoo, c.Booth bath and body care products and Bare Foot foot treatments. "Freeman is a beauty industry pioneer that has created strong differentiated brand identity throughout its history. The company's brands are recognized as leaders in the mass facial mask and dry shampoo categories and enjoy broad distribution in mass and specialty-oriented beauty and personal care channels. Yellow Wood's focus is to partner with great brands with strong consumer loyalty where we can help accelerate growth and assist with cost efficiencies. We have great confi- dence in the future potential of Freeman's brands and look forward to working with Jon Achenbaum and his team to fully expand into new and existing channels," said Dana Schmaltz, founding partner, Yellow Wood Partners, when the acquisition was announced in August. Jon Achenbaum, CEO of Freeman, added, "We believe there is a substantial opportunity to grow distribution with all of our customers, and especially to expand outside of the U.S. and Canada into interna- tional markets, including South America and Europe. The team at Yellow Wood fully understands our brands and customers, and together, with their functional-area operating experience, can help expand our products to new and existing categories and identify consumers around the world who will enjoy our products." Tad Yanagi, partner at Yellow Wood, said, "Freeman has a proven track record of bringing nature- inspired and efficacious products quickly to the mass channel and we expect to optimize their new product development initiatives by focusing on the key brands. We hope to leverage our success in beauty and personal care to build on Freeman's leading position in the market and help guide the company through an extraordinary period of growth." Having recently completed fund raising for Yellow Wood Capital Partners II LP, with $370 million of committed capital, Yellow Wood is poised for growth. In July, the company completed a $1.425 billion sale of PDC Brands, a rapidly growing provider of beauty, personal care and wellness brands, after quadrupling the company's revenue. SKINCARE SALES OUTPACE MAKEUP SALES Despite the expansive influence of makeup gurus and beauty influencers in general across social-media platforms, consumers appear to be finding more value in the condition of their skin beneath the makeup. Skincare sales have outpaced makeup this year, according to second quarter 2017 prestige-beauty insights from NDP Group. Skincare sales grew 6 percent over second quar- ter 2016, to $1.4 billion, this year, compared to the makeup category's 4-percent increase, followed by fragrance's 1-percent increase. It's worthwhile to note, however, that sales in men's fragrance surpassed that of women's, at a 4-percent increase versus 1-percent increase, respectively. "Skin care's accelerated growth is being driven by newer brands and products that are capturing greater market share," said Larissa Jensen, executive director and beauty industry analyst for The NPD Group. "This is a continued trend as we have seen a lot of excitement and innovation in skin care coming from smaller, more limitedly distributed players, which resonate with the consumer desire for discovery and uniqueness." Retailers should also note that within the skincare category, hair offerings outpaced all other skincare category growth, digging its way out of a deficit from second quarter 2016 to a roughly 10-percent increase; followed by face care with more than 5-percent growth; and then body care and sun care. Notably, prestige beauty overall saw a 4-percent increase to $4.2 billion, despite the hit to total makeup sales—a more than 10-percent decrease, including a deficit in the lip category, but with a slight boost to nails, which modestly emerged out of deficit. "Makeup's slowdown in performance has been observed since 2016, and amplified in 2017 by fewer launches, a struggling lip segment and softening average prices. Despite this, there are areas of growth in the cat- egory, like palettes and sets, which may help fuel greater gains for the remainder of the year, as cost-conscious consumers continue to seek out value," added Jensen. ■

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