Let me tell you a little about Moiz Ali.
Moiz was an Axe deodorant kind of guy (keep reading, it’ll make sense).
And like many, he found himself reading the labels trying to decipher ingredients, and wondering exactly what he was putting on his body.
Life went on.
It wasn’t until his sister’s pregnancy when she expressed her frustration with deodorant that he had his aha moment (Trends.co).
This set Moiz on the path to creating a safer, natural deodorant.
People thought he was crazy for charging $12 per stick…
But were blown away when he landed one of the biggest deals in the natural care products space.
In today’s Angel Insights issue, you will hear how the natural care product sector is nearing a $30B market, the factors contributing to its growth, significant acquisitions in the space, and why you should be paying attention.
Why Care About Personal Care?
Personal care products include soap, deodorant, makeup, toothpaste, hair products, shaving cream, perfume, and much much more.
Anything used for hygiene or beautification falls into this category.
I’m sure you can think of around a dozen products you use that are personal care products. This is a massive and essential industry.
In 2016, the U.S. personal care industry generated around $237 billion. This number has only grown since then.
The hottest niche within this industry is “natural” products.
These products are the same as their traditional counterparts but without the irritating or potentially harmful chemicals.
I’m going to go over the trends in the industry, the most interesting recent acquisitions, and let you know why you, as an investor, need to have this on your radar.
Natural Personal Care Products Growth and Trends
The global natural personal care market is expected to grow around 11.1% each year (CAGR) from now until 2026. This would bring the industry up to just under $30 billion.
Growth here is driven by increasing awareness of the danger of certain chemicals found in traditional personal care products.
And with social media and celebrity endorsement, the popularity of this trend is spreading rapidly.
For many consumers, synthetic products are dangerous, undesirable, and off-trend.
Just take a second and think about the growth of brands like Whole Foods and the rise of organic, gluten-free, and eco-friendly products.
This movement is extending into other industries, maybe none more than personal care.
Care for the body and the environment is a big deal today. Any product that can make a healthier alternative of a personal care product, is a hot-ticket item.
While startups, especially those that sell direct-to-consumer, have led innovation, established brands are starting to catch up.
For example, Procter & Gamble recently cut around 140 fragrances from their products that are linked to effects like endocrine disruption, reproductive harm, and cancer.
And what’s even more impressive than big brands tweaking their formulas is the incredible number of startups they buy.
Biggest Natural Personal Care Acquisitions
Here are just a few recent acquisitions within the space.
These show just how much major corporations value natural products. They are willing to spend big bucks to buy up strong brands that can modernize their product lines.
This way, they can innovate through acquisitions.
Procter and Gamble Buys VC-Backed Native Deodorant
Natural is a San Francisco-based startup that makes natural personal care products.
Its most popular product is Native Deodorant, a handcrafted deodorant that contains no aluminum, parabens, talc, propylene glycol, or phthalates.
The company found huge success with its direct-to-consumer channel. By going D2C, Native was able to acquire over a million customers in just a few years.
Native attracted venture capital investors from Azure Capital who put $500,000 into the young startup.
Just a short time later, Proctor and Gamble acquired Native for $100 million.
Unilever Acquires Deodorant Startup Schmidt’s Naturals
Another company making a killing on natural deodorant, Schmidt’s Naturals crafts award-winning formulas for natural care products.
In addition to deodorant, Schmidt’s Naturals makes soaps and toothpaste, all of which are plant- and mineral-based.
Unilever is a huge multinational consumer goods company that is no stranger to acquisitions. It has bought a total of 41 companies with a majority of recent acquisitions involving natural-leaning personal care and food companies.
At the very end of 2017, Unilever decided to pick up Schmidt’s naturals to add its natural product line into its portfolio. The deal went down for an undisclosed amount.
Natural Skincare Line For Men Bought by S.C. Johnson & Son
Oars + Alps makes natural products designed specifically for men.
What started as two wives making products for their husbands turned into a successful startup that landed a huge deal.
The company’s first three products were natural deodorant, eye cream, and facial soap. Again, through great success with the D2C model, the startup quickly amassed followers and got the attention of big brands.
Since then, Oars + Alps has expanded its product line, raised $1.3 million of capital, and landed a huge deal with S.C. Johnson & Son.
The same year it bought Oars + Alps, S.C. Johnson picked up another natural brand, Sun Bum, that makes natural and cruelty-free sunscreen.
Japanese Cosmetics Leader Buys Natural Skincare Company
Drunk Elephant makes a line of clinical-quality skincare products without any of the irritants, allergens, fillers, dyes, and colorants that other products use.
The result is an effective product that doesn’t irritate the skin or have any harmful side effects.
Despite being Houston-based, the company caught the attention of Shiseido, a publicly-traded Japanese company.
Shiseido started way back in 1872 and is today the top Japanese company in the global cosmetics market.
The deal was announced in October of 2019. Drunk Elephant is to be purchased for a huge sum—$845 million.
Why Big Consumer Product Brands Acquire “Natural” Startups
The reality is, so many “natural” and “healthy” personal care companies get acquired because the big guys in the space were too slow to innovate.
These trends snuck-up on them. While they were busy with their long-running product lines, small companies were tapping into new consumer desires.
Now that the cat’s out of the bag and the huge potential of these natural personal care startups is clear, companies like Procter & Gamble and Unilever are playing catch up.
Their solution is to acquire the innovation rather than develop it themselves. So far, this strategy has proved to be incredibly successful.
As an investor, I find this space super exciting for many reasons.
First of all, we all have seen natural and organic products grow from a small niche into a huge industry over the past few years. I think most people get by now that if a potentially harmful chemical doesn’t need to be there, it shouldn’t be there.
Simply put, natural personal care products get the job done without the risk.
Next, we all use these products every single day of our lives (most do anyway). Everyone needs toothpaste, shampoo, and deodorant, these don’t just target a small audience, they target the entire population.
Lastly, the market is ripe with acquisitions.
The big brands can’t keep up with the multitude of successful startups making natural products, so they go the M&A route to keep up.
This creates loads of opportunity for entrepreneurs in the space and gives us investors a quick and profitable exit strategy.
Ready to make a move?
The Boardroom’s next startup launches this week (a natural personal care company) and I’ve included them in my latest 3-for-1 offer.