More consumer investors are looking to ramp up their investments in the beauty space.
Some of the most attractive consumer startup exits over the past couple of years have been in the beauty space. Hair care brand Olaplex went public in 2021, securing a valuation of roughly $14 billion on annual revenue of $282.5 million. And earlier this year, acne brand Hero Cosmetics sold to Church & Dwight for $630 million on annual revenue of $110 million. Encouraged by these attractive valuations, and the fact that beauty has a reputation for being recession-proof, more investors are now on the hunt to find the next hit skincare, makeup or hair color brand.
Cavu Consumer Partners is one such example. Founded in 2015 by Rohan Oza, Clayton Christopher, and Brett Thomas, Cavu initially largely focused on the food and beverage space, as part of its quest to “democratize healthy living for all.” Some of its most notable portfolio companies include Bai Brands, which sold to Dr. Pepper for $1.7 billion, and Beyond Meat, which had a valuation of $1.46 billion at the time of its IPO in 2019. Over the years, Cavu has also played a greater hand in helping its portfolio companies with branding and marketing, through its own in-house agency called Uncommon.
Cavu made its first foray into beauty when it invested in clean beauty brand Osea in 2021, and most recently led Topicals’ $10 million Series A in November.
Cavu principal Jenna Jackson is spearheading the firm’s expansion into beauty, and spoke with Modern Retail about what similarities Cavu sees between beauty, food and beverage. This conversation has been edited for clarity and length.
What similarities do you see between food, beverage and beauty?
Our North Star has always been to democratize healthy living for all people in their families. That definition has changed from when we started — the founders were investing in food and beverage. If you [think back to] 2016, 2017 and people trying to live healthier lives, they were focused on what you put in your body, what you ate and drank. And that has evolved through 2020 and the pandemic.
The consumer has really evolved [in] thinking about how to live a healthier life — and that has evolved to what you put on your body. The vast majority of consumer spending is led by women — she’s reading food labels, and suddenly she was looking around and being like, ‘wait what’s in my beauty and personal care, what’s in my pet food, what’s in my kid’s food, what’s in my cleaning products?’ And so it was a very natural jump for us into beauty and personal care.
How do you feel like brands have to go about distribution differently in beauty compared to food and beverage? Are there certain growth tactics that work in beauty that maybe don’t work in food and beverage and vice versa?
One of the major differences in beauty is the strength of the two major retailers: Sephora and Ultra. I love Nordstrom, I love Kohl’s, I love Credo — there’s so many cool tactics in order to get into great retailers, but really the sale is dominated by those two guys.
That’s an interesting thing that you have to navigate as a beauty founder is; if you want to achieve that scale, it appears that you have to really choose one of these two retailers to go into. That feels different than food and beverage where there are a lot more grocery chains and other outlets,
Glossier just chose to go into Sephora after three years of DTC only. The power of those two retailers is something you will always have to confront as a beauty founder.
So what type of beauty brands are you looking to invest in right now?
We love category creators. When we were looking at Osea, which is the first business we did, they’re a really incredible clean, green beauty brand that was founded in 1996. If you think about people doing clean beauty in 1996… they were really spearheading in that area. They had that authenticity of so many years of staying true to their values and their mission.
With Necessaire, so much of the focus in effective, clean skincare had been focused on the face, and nothing from the neck down. We loved that Necessaire took those principles and disrupted the body category and created this idea that you should be using clean and highly effective skincare ingredients that we’re using here below the neck.
And then Topicals — they’re doing the same for chronic skin conditions.
And are there any areas within beauty that you feel like people are really gravitating towards right now?
Covid restrictions are out — people are out there wearing makeup, they’re wearing fragrance. That seems to really be like the flavor of the month right now.
We have not seen a lot of fragrance deals previously, and I’m seeing a ton come across my desk right now.
There’s been quite a bit of melding into this idea of feeling food, looking good — using things that make me feel good about the environment, about the community.
I think hair has gotten quite hot as a category to invest in, and for the consumer to think about, ‘ok I did the face, I did the body, now let’s focus on what’s on my head.’ Scalp care is really hot. We’re seeing a lot more body care.
How do you feel like the first quarter of next year is looking for beauty brands, especially should a recession hit? Are there certain brands that you think will perform better?
I do think everyone is really holding tight and trying to follow how Black Friday went, how Cyber Monday went, how we think Q4 is going to end, how the Christmas shopping period is going to be. And that will largely inform Q1 of next year.
There are a lot of people saying, ‘I think we’ll have a better than expected Q4, and that will be okay and things will be okay.’ And then there are other people that are like, ‘it’s going to be a worse than expected Q4 and it’s going to be a really tough year next year.’
These are pretty unprecedented times, right? We’ve been through other recessions but not really on the back of a two year global pandemic.
I think we won’t know until after this recession. Because there’s been a lot of historical data that beauty is a resilient category in a recession.
I think brands that have a strong reason to exist on the shelf of their consumer will fare better during this time.
Take Topicals — if you have a chronic skin condition, and you have a brand that you’re using that is working for your chronic skin condition, but also makes you feel good because the branding is great and the community is strong and the messaging makes you feel good about yourself — you’ll be more hard pressed to trade down something like that.
This story was updated to correct the spelling of Cavu Consumer Partners.