January 13, 2015
Investing in Beauty Brands: BBR11 Thought Leader -Shaun Westfall, Managing Director at Piper Jaffray & Co.
January 13, 2015
Investing in Beauty Brands: BBR11 Thought Leader -Shaun Westfall, Managing Director at Piper Jaffray & Co.
According to the NPD, even during the deepest dip in the recession (2008-2010), sales of skincare products were up 21%.
Other than the fashion, there really is no other industry where brands matter most than the beauty and personal care industry. Strong brand recognition and an almost unshakable brand loyalty are two of the many reasons why the beauty industry is overflowing with great investment opportunities.
This is why we were so excited to include Piper Jaffray & Co. Managing Director, Shaun Westfall, as one of our incredible BBR11 Thought Leaders. Shaun Westfall is a Managing Director at Piper Jaffray where he leads the firm’s investment banking efforts in the beauty and personal care sector. He brings extensive knowledge of the beauty sector as a whole including what makes brands differentiated and successful with consumers, channel partners and ultimately investors and strategic buyers. Over his eight plus year career at Piper Jaffray, Shaun has advised on over a dozen transactions in the beauty and personal care sector including the recent sale of NYX Cosmetics to L’Oréal. In addition to NYX, Shaun has provided numerous companies with strategic and capital raising advice including butterLONDON, Urban Decay, tarte, Bare Escentuals and Ulta.
What are 3 key points from your BBR11 Roundtable discussion, “Understanding the Business Model and Brand Attributes that Appeal to Investors and Strategic Buyers.”
1. Building long term meaningful value in a beauty business stems from the strategic fit of numerous critical business attributes. The ability for a company to manage the linkage between products and product innovation, sales and merchandising, retail relationships and ultimately reaching the consumer is critical to achieving “escape velocity.”
2. Beauty business leaders need to identify the critical success factors in the business and closely monitor them on a weekly basis through a “business dashboard.” Metrics should include retail productivity, SKU level analysis, store comparable sales, inventory stocks at retail and in the company warehouse, working capital and free cash flow.
3. The ability for beauty companies to connect with the consumer has never been greater than today. Measuring and monitoring Social Media success is critical in understanding what she thinks about your brand, your products and her fellow peer consumers. Seeding influencers in Social and driving organic content stands at the forefront of a successful Social Media strategy.
How can beauty brands garner genuine interest from strategic buyers?
Brands generally need to meet 3 core criteria:
- The business should benefit from distribution and relevance in three major accounts or channels such as Sephora or Ulta, and a direct channel like QVC – and at least a toehold internationally.
- A brand needs to demonstrate a set of high-replenishment hero products.
- Show success and brand awareness across multiple geographies and demographics.
Once you have met all 3 criteria, a beauty brand can become highly valuable as investors are willing to pay more for brands that have less risk.
Piper Jaffray & Co. Managing Director, Shaun Westfall, at his BBR11 roundtable presentation: “Understanding the Business Model and Brand Attributes that Appeal to Investors and Strategic Buyers”
Who is today’s beauty consumer? How are they changing?
Today’s beauty consumer continues to grow more and more educated on and discerning of the products she uses. She is quick to tell those in her circle whether she loves or hates a product. Importantly, with social media, blogs, review boards, her circle of influence can be millions of viewers not just her neighbors next door.
What do beauty professionals need to do to continue to connect with today’s beauty consumer?
Beauty professionals must embrace connecting with consumers, developing a community for their brands and work to make each consumer feel special. The days of developing a product and pushing it on a consumer with traditional advertising media are likely long gone. Beauty businesses have an unprecedented level of tools to understand the consumer, her buying habits, the brands and products she loves and why she loves them. Beauty professionals need to quickly digest trends, feedback from surveys. retailers, bloggers, review boards and social media to adapt products to what she wants and needs.
The internet, pop-up shops, and new retailing concepts continue to redefine the landscape. Brands and retailers alike must pursue multi-channel models, utilize content, and develop educationally rich methods to reach consumers. According to research from L2, “If you can get a consumer to watch a 3-minute video, a Google study shows that consumers are 40% more likely to go into a store and look for your brand.”
Social media is making dramatic strides as a powerful means for beauty brand to grow awareness – vloggers such as Michelle Phan, Bethany Mota, Kandee Johnson, Tanya Burr, Zoe Sugg (Zoella) and Dulce Candy, are becoming the new celebs and influencers.
What fosters brand loyalty?
- The brand has a clear personality, beyond aesthetics and themes, that followers relate to on a more intimate level
- Followers have an emotional attachment to the brand beyond a product level
- The brand somehow plays an active role in the consumer’s life
- The consumer in many ways owns the brand, and is implicitly involved in a larger portion of branded content creation
What attributes make a great leader? Tell us about your leadership style.
Great leadership stems from an ability to identify and motivate critical personnel in the organization. Motivating leaders find the balance of asking, coaching and enabling colleagues. Great leaders foster a culture of self-starters, responsibility takers and working together to accomplish a the “ultimate aspirational goal.” My leadership style is to identify colleagues that work well in an environment of a meritocracy. The secret to a leaders success is finding intelligent people and getting them to work very hard for you then rewarding them accordingly.
Shaun graduated with a bachelor’s degree in engineering from the University of Idaho and earned a Master of Business Administration degree from the University of Washington. He lives in Marin County north of San Francisco with his wife, Lauren, their two year old Brennan, and loving lab, Bailey. Click here for more details about Piper Jaffray & Co.
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