Urban Decay, GlamGlow, First Aid Beauty — the list of indie beauty brands that have been snapped up by major beauty corporations over the past five years alone is almost staggering. Hungry to connect with (and profit off of) a diversifying consumer, large companies like L'Oréal and Estée Lauder went on a brand-buying binge. For the most part, outside of a few minor hurdles (ahem, Deciem), this model has been working splendidly. But somewhere along the way, executives also realized that in addition to providing proven success and a rabidly loyal fan base, there was a lot they could learn in the development of their own brands. Enter, incubation.
Marrying their extensive resources with the bold risk-taking strategies and leanness indies bring to the table has allowed companies to create and foster brands that live within their portfolio but operate independently from the rest of the business. Companies like Kendo and Seed Beauty were quick on the scene, formulating and collaborating with celebrities and influencers like Kylie Jenner, Rihanna, and Marc Jacobs. According Seed Beauty President and Co-Founder, Laura Nelson, "We believed there was a better way to deliver beauty to consumers. Through vertical integration, self-funding, and a passionate team we felt that we could deliver relevant, high quality products, at accessible price points directly to the digitally native beauty enthusiast."
So massively popular were these endeavors, beauty juggernauts like Revlon, L'Oréal, and Unilever quickly took notice. But, instead of searching for external talent, they instead looked to their existing employees to innovate and create. Take Seed Phytonutrients (not to be confused with the aforementioned Seed Beauty), for instance. The sustainably minded personal care brand was the brainchild of Shane Wolf, the Global General Manager of L'Oréal's hair-care division, a 14-year veteran of the company.
"I had the idea of launching a natural brand because I wanted to push the boundaries of clean, high-performing products, but pushing even further into the territory of sustainability," he explains. "So I thought, if I'm going to do this, and really make a difference in the world, it obviously makes sense to do it from inside the world's largest beauty company where I can effect change on a large scale as a result of leading by example."
With that in mind, Wolf pitched the idea of Seed Phytonutrients up the management chain, finally landing in front of L'Oréal CEO Frédéric Rozé, who approved the endeavor. Wolf was allocated a small team of dedicated L'Oréal employees, including Brad Farrell, Vice-President of Global Brand Marketing, who left his position in order to devote himself wholly to the brand. Explains Rozé, "The team works out of Seed's Doylestown, Pennsylvania offices, where they are close to their farming partners. While they are a part of the L'Oréal family and take full advantage of the company's support and input, the brand operates independently to ensure the founding vision is being realized every step of the way."
That type of autonomy is one of the key points of difference for incubator brands from acquisitions (and many of the other brands under corporate control, for that matter). For Revlon Chief Creative Officer Linda Wells, that aspect was a major draw when conceptualizing and executing her own incubator brand project, Flesh. "I was involved in some conversations [within Revlon] about starting a prestige brand that was not attached to Revlon," she says. "The real mission was to follow an indie mentality within a company. So using outside resources for formulations, shading, creative and production — [basically] working with a really small team of outside people but with the support of the company."
That's all well and good for the incubating brands, but the question then becomes, what exactly is the benefit to the company — other than, obviously, a share of the profits? Why give their employees free reign, rather then just integrate the ideas into their existing product lineup? Wolf notes that for L'Oréal, the benefits revolved around an entrepreneurial ripple effect in the company as a whole. "It was said internally that if we can inspire employees to do something that [they] believe in and are convinced is going to make a difference in the business and then really take it and own that," he says, "then imagine how we can drive the results of our total company worldwide"
Wells provides a more practical explanation: the fact that incubation, rather than acquisition, results in more internal control and relative frugality. "It's a lot less expensive to develop a line internally than it is [to acquire] independent companies that are commanding a price of $ 2 billion," she says. "Companies like L'Oréal and Unilever have realized that you can tap internal talent and get these things rolling. But you have the strength of this company to support, fund and help direct these brands, which is really ideally the best of both worlds."
That said, as widespread a trend as internal brand building is, that doesn't necessarily mean major corporations have abandoned acquisition entirely. Notes Molly Landman, Director of Hair Brands for Unilever (whose Love Beauty & Planet sustainable hair and skin brand was built in-house from scratch), "When there is a space in the portfolio or an unmet consumer need, we will look to expand our ranges of hair and skin products, whether it's through an acquisition or incubation of a new brand or product innovation." In other words, in the crowded, innovation-driven, incredibly competitive beauty market, open mindedness is key to success and survival.
Rozé notes that for L'Oréal, "Our strategy has always been to identify, nurture and scale the very best beauty ideas, whether they are coming from inside or outside of the company," he says. "While we sometimes bring those ideas in through acquisition, it is also exciting that we have so many in-house entrepreneurs who are developing innovative new business models that are responding to the new expectations of consumers." He hints that there may be more of these types of partnerships percolating within the company.
Regardless, it'’s clear that as companies become more attuned to those unmet consumer needs, it's only a matter of time before incubation goes from experimental endeavor to the new beauty establishment.