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Alex Grant June.15.2022 5 min read

How One Leading Fortune 500 Beauty Company Found Acquisition Targets They Didn’t Even Know Existed

The beauty industry is large and growing with a total market value expected to exceed $716 billion by 2025. It seems as though new players in the space appear almost daily, with celebrity-founded, organic, and diversity-led brands starting to make a dent in market share. The rise of TikTok has certainly had its impact on the industry as well, with products and brands blooming into virality seemingly overnight. Creators and viewers alike are more than willing to purchase viral products and share their take. In fact, the hashtag #TikTokMadeMeBuyIt has over 13.7 billion views, alluding to the new way consumers interact with brands. 

Consumers are forming relationships with independent brands unlike ever before. Social media platforms with eye-catching imagery enable them to discover, engage with, and shop for viral products in an instant anytime, anywhere. A recent Instagram survey found that 44% of those surveyed use the app to shop weekly. This emphasizes two major industry shifts. The first is that consumers want to be exposed to relevant brands and products with minimal friction between discovery and purchase. The second is that more established brands would do well to fully embrace the digital revolution and start analyzing the successes of these viral brands in order to stay ahead of upcoming trends and competitors that are disrupting the traditional beauty industry.  

Here at CircleUp, we’ve spoken to countless M&A and Innovation teams at enterprise companies who feel at a loss with the speed and complexity of the shifting beauty industry. Today’s data solutions are either too narrow and miss insights from new hyper-relevant channels, too limited by not having enough longitudinal data to support claims, or too late by reporting data months after it’s relevant. However, with the universal data that our technology platform Helio, provides, CPGs have a better alternative. We were able to support one such company, a leading Fortune 500 in the beauty space, in their mission to source emerging brands that they had been having difficulty finding on their own.  

The Request

 

Identify 20 high-interest “dermatologist-recommended” skincare or makeup brands.

To put this request into perspective, Helio tracks more than 100k skincare and makeup brands, so narrowing the sourcing list down to 20 was no small task. Below is a graph that showcases the processes the Helio insights team took to support the client’s request. 

 

brand search

 

The Solution 

To start, the Helio team narrowed the list down from 100k to 14k brands that matched the client’s size requirements, based on estimated online and offline sales. 

Then, the team identified brands with attributes that aligned with “dermatologist-recommended,” and utilized a data density match to ensure that these brands mentioned the attribute enough times to confirm they accurately met the client’s requirement. This narrowed down the list even further to 1,000 brands. 

Here’s the fun part! 

To identify brands that best matched up with the client’s request out of the remaining 1000, the Helio insights team utilized an M&A Growth Sourcing Matrix, shown below, that plotted the top 50 brands based on their web traffic and social media growth. Brands that landed in the top right corner of this graph exemplify those with the most promising offline growth potential. The matrix also highlighted overall Helio Growth Predictor score and the likelihood that a brand’s revenue was at least $20 million, as requested by the client. 

M&A Sourcing Matrix – Online Following Growth Score vs. Online Interest Growth Score

M&A Sourcing Matrix – Online Following Growth Score vs. Online Interest Growth Score

From there, the client narrowed its diligence focus directly to 20 brands that appeared in the top right quadrant of the chart, or in other words, those with the strongest offline performance, to begin diligence and outreach. By leveraging our attribute data, Helio improved the client’s sourcing efficiency and efficacy, and as a result, the client sourced 20 new prospects that directly aligned with their investment thesis.

Helping clients fall in love with brands they have never seen before is one of our favorite things here at CircleUp. You can see an example of how we helped a Fortune 500 CPG increase sourcing efficiencies by 210% here, and how we helped Btomorrow Ventures break into the functional beverage category here

Interested in seeing what Helio could help your team discover? Reach out to us today

 

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Alex Grant

Alex Grant is Senior Communications Manager at CircleUp.