New DTC toolkit   //   June 15, 2022

After selling a majority stake to Unilever, Nutrafol looks to new products and retail expansion for growth

Since launching in 2014, Nutrafol has become known for its hair growth supplements — even catching the eye of a $100 billion consumer goods conglomerate.

In late May, Unilever acquired a majority stake in Nutrafol — continuing its streak of acquiring health and wellness startups like Liquid IV and Olly. Before the acquisition, Unilever held a 13.2% minority stake in the brand.

Nutrafol’s revenue grew 100% year-over-year in 2021, and the company says it’s on track to do so again this year. For the past few years, the company has relied on subscription plans to grow and sustain its customer base — currently, between 85% to 90% of Nutrafol’s online customers are subscribers. But the company has big expansion plans — including plans to grow its retail footprint and roll out new products. For example, this month, Nutrafol launched its first major product category beyond supplements, by debuting scalp-focused shampoo and essence. 

Giorgos Tsetis, co-founder and CEO of Nutrafol, told Modern Retail that the company will continue to operate independently. However, the acquisition by Unilever will help with the brand’s retail and international expansion, product development and internal team growth.

“This is our baby and we want to continue to lead operations,” Tsetis said. “They [Unilever] see everything we’ve done to date and how well it’s working, and are leaning on us for the growth strategy.” 

“The right time” for an acquisition

Since it launched eight years ago, Nutrafol’s sales strategy has been focused on targeting specific channels. Testis said that the company started out by partnering with medical and haircare professionals, including doctors and hairstylists, to sell its products; Nutrafol works with about 4,000 healthcare and hair professionals — and refers customers to them locally for treatment consultations. Today about 90% of the business is DTC, which includes the brand’s official website and Amazon store, Tsetis said.

The company has largely acquired customers through digital and offline marketing, such as connected and linear TV, and paid social media ads. Nutrafol has also increasingly worked with a number of influencers on promoting its hair growth-promoting products. 

According to Tsetis, about 80% of Nutrafol’s audience is women “which wasn’t necessarily the plan when we launched.” Over the years, the company noticed a growing demand among women, especially those dealing with menopausal and post-natal hair loss. Earlier this year, the company launched separate men and women’s website portals to serve their different needs, Tsetis explained. 

In the past six months leading up to the acquisition, Nutrafol has focused on improving the website experience by designing specified hubs based on the customer’s hair and scalp needs, Tsetis said. 

For online brands looking to be acquired, timing and momentum are essential, said Tsetis of the decision to sell the brand.  “Obviously, the external environment has become harder due to a lot of economic factors shifting,” Tsetis said. “If a company isn’t profitable or showing sustainable growth, it’s difficult to appeal to a conglomerate.” 

A strategic retail expansion 

Until now, Nutrafol has been mainly sold through the company’s own online channels and its network of professionals. It is currently carried at over 1,300 clinics and salons across the country. But, Tsetis hopes to expand Nutrafol’s retail presence following the acquisition.

“Unilever’s backing will also help us continue to scale on a global level to further tap into this market,” he said. “Retail is a big part of that.”  However, the brand isn’t planning a mass retail presence, Tsetis said. “We’re premium priced, so we’re thinking about a limited retail distribution with the right partners,” he explained. “We don’t want to suddenly be in thousands of doors and hoping for the best.” 

For Nutrafol, Tsetis said that retail is a great way to introduce people to the brand via its topical products while still trying to get repeat customers to buy online. He named the new Scalp Support product line, which includes shampoo and build-up mask, as good fits for retail shelves. On the other hand, the company will continue to fold growth supplements customers into the subscription plans. 

“So it will be about finding retail partners that can think out of the box,” Tsetis said. “Whether it be folding the new customers into their own e-commerce Nutrafol subscription or our own.” 

Tsetis said the acquisition will also offer resources to build out the Nutrafol team. The company currently employs 160 people, with plans to hire more internal roles in the coming months. “Adding the right people to help us scale is important,” Tsetis said.

Nutrafol is the latest addition to Unilever’s portfolio of wellness supplements brands. The CPG giant has been rapidly growing its vitamins, minerals and supplements (VMS) segment — which has become one of its fastest growing categories. In fall 2020, Unilever acquired hydration brand Liquid IV last fall, followed by nutrition supplements brand Onnit in 2021. Back in 2019, Unilever acquired vitamins and supplements brand Olly for an undisclosed sum. 

Pravani Pillay, senior manager in the beauty practice at strategy and management consulting firm at Kearney, said Unilever’s growing portfolio of beauty and wellness brands isn’t surprising. 

“We’re seeing new and emerging categories such as haircare, wellness and personalized beauty being favored acquisition targets driven by explosive consumer interest,” Pillay said. Pillay also noted that DTC brands in these categories are of particular interest among investors, and have been able to raise funding based on continued consumer demand.

“Many large conglomerates simply don’t have the agility to build these brands internally and meet the speed to market,” she said. “Therefore, investing through acquisition not only diversifies product portfolios but also augments manufacturing and R&D capabilities.”

For Nutrafol, the acquisition is another opportunity to continue grabbing a bigger market share of the hair and scalp care market.

“Subscription will continue to be a core part of the business, but it will evolve as we expand the topical lines,” Tsetis said. Currently, these products are sold à la carte while Nutrafol gauges customer interest in potential subscription plans. 

From a product and formulation perspective, Nutrafol has several new lines in the pipeline, Tsetis said. “I don’t believe in diversifying too quickly just to increase basket sizes,” he said. “We invested in science and clinical testing early on, which we plan to continue doing,” he said.