Coty Buys Younique, Valuing Cosmetics Startup at $1 Billion -- update
January 10 2017 - 3:04PM
Dow Jones News
By Khadeeja Safdar
The next Avon lady could be in your Facebook feed.
Younique LLC, a social-media-driven cosmetics company that sells
products through about 200,000 "presenters," on Tuesday agreed to
be acquired by Coty Inc. in a transaction that values the
four-year-old startup at $1 billion.
Coty, whose brands include CoverGirl makeup and Clairol hair
dye, said it plans to buy 60% of Younique for $600 million in cash.
Younique's founders, siblings Derek Maxfield and Melanie Huscroft,
would own the remaining 40% and stay with the company as its chief
executive and chief visionary officer, respectively. Younique said
it was profitable and had about $400 million in revenue in
2016.
Mr. Maxfield, a computer programmer who previously founded a
software company for the direct-selling industry, paired up with
his sister Ms. Huscroft, who has a background in advertising and
spent 16 years as a homemaker, to build the Lehi, Utah, company.
The siblings couldn't immediately be reached for comment.
Younique sells cosmetics ranging from $19 lipsticks to $39
moisturizers, often through virtual parties on Facebook and other
social platforms. Part of its marketing is that it is a
"mission-first" company that supports a foundation that helps women
who were sexually abused.
Mr. Maxfield also has used his personal story, which includes a
battle with leukemia in the 1990s and his Mormon faith, to recruit
salespeople. "I may not know of you personally, but I draw strength
from the fact that across the ocean there is an army of women who
are carrying out that same mission for us," he told a group of U.K.
salespeople in 2015, according to a video of his remarks posted on
YouTube.
Unlike Avon Products Inc., Younique's sales are mostly made
online, with presenters using social media to inform friends and
family about deals. If users buy the products within an allotted
time frame, the presenter receives royalties. Presenters also
recruit other salespeople to their networks and collect additional
royalties. The job is designed to appeal to young mothers who can
earn income by working from home.
Younique is part of a crop of upstarts that have taken the
direct-selling business model pioneered by companies such as Amway
and Avon and adapted it to the internet age.
Rival Rodan + Fields started as a department-store brand but now
largely relies on a direct-sales force to pitch its skin-care
products on social media. The San Francisco-based company said its
revenue increased 90% in 2015 to $626.9 million.
Both Rodan + Fields and Younique launched in the U.S. but now
sell their products through networks in several countries. Avon,
meanwhile, has struggled to expand its ranks of salespeople and
struck a deal last year to sell 80% of its North America business
and a 17% stake in the parent company to Cerberus Capital
Management LP for $605 million.
The Younique deal was announced as Avon hosted a gathering of
hundreds of its top sellers in Scottsdale, Ariz. A key part of
Cerberus's strategy for the company is to make it easier and more
profitable for representatives to sell online and through social
media.
One big change: Avon representatives will now make as much
profit for online sales as they do for in-person orders. The
company also is working to help representatives beef-up their
social-media presence and get products more quickly to consumers, a
big change given that Avon's 130-year-old system still relies
heavily on paper catalogs and timelines created to accommodate the
postal system.
Coty is the latest consumer-products maker to scoop up an online
upstart, allowing it to sell products directly to customers and
sidestep department stores and specialty retailers such as Sephora
and Ulta Beauty.
Last year, Unilever PLC paid $1 billion to acquire online razor
seller Dollar Shave Club. Coty in 2015, bought parts of Procter
& Gamble Co.'s beauty business for about $13 billion, an effort
to expand its footprint in the sector.
The Younique acquisition is expected to close at the end of
Coty's fiscal third quarter.
In a statement, Coty's chief executive, Camillo Pane, called the
siblings "tremendous entrepreneurs who have built one of the most
engaging and fastest-growing e-commerce companies in beauty."
--Sharon Terlep contributed to this article.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com
(END) Dow Jones Newswires
January 10, 2017 14:49 ET (19:49 GMT)
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