by Paris – Call it Beauty CEO Disturbance.
Since the beginning of this year in particular, there have been plenty of high-level executive changes.
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L’Occitane Group, Avon Products Inc., Biologique Recherche, L:a Bruket, Susanne Kaufmann, Fresh and Orveon are among the fleet of companies — of all types: small to large, public to private, in all product categories — to name . new chief executive officers.
Other recent C-suite recruits include Olaplex, Amika, Avon Products Inc., Beautycounter, Eighth Day, Fresh, Orveon, Harklinikken and Fekkai.
These appointments resulted in a confluence of phenomena.
“Beauty is a very dynamic category, and with the scope of change that companies and brands have to keep up with, sometimes changes in leadership can help support brands as they evolve to align with that,” said Sasha Radic, managing director at Jefferies.
The beauty market is also very competitive. “And it’s only gotten more competitive over the last three or four years,” said John Long, North American retail sector leader and senior client partner at Korn Ferry.
Market saturation has made it harder for beauty makers to have truly differentiated offerings.
“Just that level of competition creates a challenge for any CEO to not only maintain their market share, but to grow their business – and the pie is only growing that much,” said Long. “So, of course, you need to be in good shape going forward.”
He described 2023 and 2024 as “reset years.” “They are years when companies [asking]: ‘Do we have the right leader for the business, given the mandates we need to push them forward?’” said Long. “Certainly through COVID-19, there has been a tendency not to do too much that would proactively disrupt management teams.”
Coming out of the coronavirus pandemic, which has been a particularly strong period for many consumer-focused companies, boards and investors are looking for gains.
“Last year in general in retail was pretty tight,” Long said. “There was growth, but when you took out inflation, the growth was largely muted. So as we approach 2024, the focus of investors is on growth.”
Since there has been less M&A activity with the release of COVID-19, that is also picking up, especially for private equity in the beauty space.
“We expect to see more transactions in 2024 and 2025 than we’ve seen in the last year or two,” Long said.
Anne Raphaël, managing partner at Boyden, noted that private equity is expected to pick up investment momentum in the beauty space soon.
“Beauty has always been a very good business — and it’s always a very good business to invest in if you have the right brand and the right team,” she said.
It is essential to continuously transform the business, with innovations such as product introductions and retail evolutions, including services.
“As a job function, it’s very complicated as CEO,” Long said, adding that if investors aren’t seeing growth in the beauty business this year or last year, they may want to make executive changes.
“Another thing to consider is that the skill set you needed as CEO to get through the disruption caused by COVID-19 is not necessarily the same skill set you need now to run the business to grow,” he said. “You might succeed. It’s just that some CEOs will not be as equipped to deliver a growth mandate as others.”
Few CEOs felt ready to move on after COVID-19, because it was such a tough time. The health crisis has led to changes for individuals and businesses and the way brands interact with consumers.
“That’s reflected in the changes in leadership, changes in management and the dynamic needs of leading a beauty brand today,” Radic said. “All of that is coming together and being reflected in the changing landscape of brand leadership as well.
“Each situation is specific to the company,” she continued. “The reason behind one brand change in management is not the same as for another.”
“They all have a different explanation and justification,” agreed Joël Palix, founder of boutique consultancy Palix Unlimited.
CEO changes are nothing new to the beauty industry.
“It’s often the case that as brands emerge they’ve brought in leaders,” Radic said. “Typically, the leaders you have from early stage to a little bit bigger scale are not the same leaders you have when you’ve scaled it from early stage to a much larger company. Also, sometimes people retire.”
“Sometimes it’s more of an evolution in the organization — where you move from founder to CEO,” continued Palix.
That is the case, for example, at Biologique Recherche, Harklinikken, Fekkai and the Eighth Day, with Jean-Guillaume Trottier, Stuart Miller, Tennille Kopiasz and Savannah Sachs, respectively, coming to take the reins.
In some cases, when the founders stay, the CEO is a new type of role, Palix explained.
Other times, a brand’s ownership changes, which may lead to the appointment of a new CEO, as at The Body Shop. Some groups, such as Amika and Avon, have promoted internal executives – Chelsea Riggs and Kristof Neirynck.
Gregg Renfrew returned as CEO of Beautycounter, the brand she founded in 2013 and left a year ago.
Amanda Baldwin has succeeded JuE Wong at beleaguered haircare brand Olaplex, with investors believing a management change is needed for a brand turnaround.
Meanwhile, Orveon, the parent company of BareMinerals, Advent International-owned Buxom and Laura Mercier, has named Neela Montgomery to the CEO role.
As the beauty market has changed over the past two years, the needs of the companies have reflected that. Still, some tenants are safe. The success of a beauty brand is about its DNA, its essence, its products, its scale and its scalability, one source said.
The first two aspects are crucial because a brand grows net sales up to 5 million euros, and from 5 million euros to 15 million euros. (Many brands have reached the 5-million-euro-10-million-euro sales threshold today.) However, it is a completely different story on a scale from 15 million euros to 40 million euros or 50 million euros.
The CEO who grows a beauty business up to 15 million euros does not need to have all the expertise to take the brand to the next step and level, especially in the current challenging environment.
“[For a beauty CEO], you need to have a lot of expertise in different things,” said an industry source. “A lot has changed in the last 24 months. Competition has increased dramatically in the wake of COVID-19; we have seen many brands emerge. It’s a very crowded market right now.”
Other direct-to-consumer brands have less of an advantage than during the pandemic, as others have filled the gap with their DTC approach.
Some believe it is the end of the DTC-led playbook. In the last five to 10 years, the growth playbook crystallized, which was around performance marketing-led customer acquisition, digital marketing-led, and paid media driving a lot of that conversion.
Unit economics and media cost no longer support that playbook, so brand marketing in the traditional sense of the term is changing. That’s where CEO experience comes into play, including omnichannel communications and retail distribution channels, as the role of wholesale has returned.
Not all brand leaders were agile enough to change gears or were too wedded to a single vision, according to some industry sources.
The mindset of a CEO is important. “They need to be clearly open to all the new trends and change,” said Edouard Thoumyre, managing partner at Accur Recruiting Services. He also noted how beauty today is becoming more closely related to the hospitality industry and the experience it provides.
In addition, there is a challenging microeconomic environment, with difficulties in Asia and travel retail, for example.
“All this makes scale even more important, and that means you need strong omnichannel and international expertise, and a very strong marketing and business strategy institute,” said the industry source.
So, in order to build a sustainable beauty business that will reach the 40-million-euro-to-50-million-euro sales threshold — when strategists are interested in possibly acquiring brands with high valuations, such as sales of 5- once — it is possible. It is essential that it has an established business model, is strong in multiple retail channels and geographies, and has a powerful marketing strategy.
Many newly appointed CEOs in companies such as Biologique Recherche, L:a Bruket and Susanne Kaufmann are coming from large groups, where they have successfully grown brands at companies such as the Estée Lauder Cos.
Raphaël noted that they all have an international profile and a strategic vision, able to maintain a healthy mix of creativity, specificity, brand DNA and the right level of promotion.
Another Lauder alumna is Ada Lien, who was named CEO of Fresh at LVMH Moët Hennessy Louis Vuitton.
Executives recruited from large groups tend to have a strong entrepreneurial lens for execution strategy and marketing, along with rigorous training, according to the industry source.
In addition, some such executives are attracted by the potential to join a much smaller brand and be part of the business’s scaling story, perhaps with a possible eventual sale, the industry source continued.
“In many of the recent appointments… people have had very strong international sales backgrounds,” Thoumyre said.
Laurent Marteau, who was recently named CEO and managing director of L’Occitane Group, is among them. He was previously at La Prairie Group as vice president of global travel retail and specialty routes, and a member of the board of directors, then became vice president for Europe, the Americas, the Middle East and Africa.
“Finding a good CEO in beauty is not an easy person,” said Palix. “Beauty requires people to have soft skills, but also hard skills because you need to manage and deliver the business.
“It’s almost like managing different types of business, because on one side you have products, retail and services. You need to be agile between the three – and be comfortable with digital technology and,” he said. “It takes a lot of skills.”
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