We Have a Very High Bar For M&A: E.L.F. CEO

Bloomberg

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00:00Susan, I'll start with you because this is your first brand campaign, global brand campaign,

00:04as we mentioned, since you were acquired by Elf back in 2023. So why now? Why in 2025 are you

00:12launching this? Well, thank you first off for having me on the show today. This is really

00:17important to us. When we were first acquired by Elf, we were only at 5% penetration, which means

00:23that there is a lot of room for us to really get out there and get our name out to

00:28consumers. But it really took a second for us to focus on distribution, work with the Elf team and

00:36really get our bearings. And so we've started to really expand globally and make that a focus. So

00:42now it's time for us to really get the marketing out there. Well, Turing, let's talk about that a

00:47little bit more because Elf has been pretty inquisitive over the past couple of years. And

00:51when it comes to especially the distribution piece, what can Elf bring that maybe some of these brands

00:57that you bring on couldn't have necessarily done on their own? Well, first of all, we have a very high

01:03bar when it comes to M&A, just given the strong organic growth of our existing brand portfolio.

01:08Every one of our brands grew this last year. And so when we look to M&A, we really look to our vision

01:12of building a different kind of beauty company, one that builds brands, that disrupts norms,

01:17shapes culture and connects communities. And we very much found that with Notorium.

01:22And our approach is different. Our approach is not to overly integrate any of the acquisitions

01:27we do, but to actually support a founder's vision. Susan Yar has an incredible vision for Notorium.

01:33And so one of some of the things that we can do to help her accelerate that vision is we were able

01:37to expand the brand into all Ulta Beauty, into Boots, additional customers, invest more behind the

01:45marketing and enhance the team. And so those are the areas that we've stayed focused on.

01:49I am curious, Tarang, just about just general trends right now. We've talked a lot on this

01:54program about the idea that Gen Z, which has been, I think, a big driver of Elf's growth,

01:59that they may be pulling back just a little bit from some of their beauty purchases,

02:04not necessarily in terms of volume, but certainly on a price basis. And I'm curious as to how

02:07if you're seeing that on your end. Well, I think we're different that way. We're by far the number

02:13one brand amongst Gen Z. I think we're a 35% mind share. The second highest brand is 9%.

02:19And so we have real strength in Gen Z, Gen Alpha, and Millennials. And so we continue. I mean,

02:25I think this last quarter, we announced our 26th consecutive quarter of net sales growth.

02:30We're also the only brand to grow market share for 26 consecutive quarters. So we continue to be strong,

02:37and mainly because we have the brands that Gen Z, Millennials, and Gen Alpha want, and we know how

02:43to engage them. Well, Susan, I do want to talk to you just about kind of your evolution and, you know,

02:49founding this company, you know, what is it, five, six years ago, whenever it was. And the idea that

02:53you sort of tapped into a certain zeitgeist at the time, particularly with some of the younger

02:58buyers, but also with people even, you know, of my generation who are looking for, I guess,

03:03cleaner beauty products. And at the same time, you know, we don't necessarily want to pay, you know,

03:08300 bucks, you know, for a La Mer, you know, lotion or something.

03:12Exactly. Well, I'll throw out there just to add to what Tarang was saying. You know, the industry

03:16doesn't need more beauty brands. They need really great beauty brands, not generic ones. And so I

03:21think that's where we stand out a lot and why we loved joining Elf Beauty as well. For me, you know,

03:28I had been online for a very long time. I'm one of the adults online is what I like to joke and say.

03:34I've been online since before YouTube was owned by Google. So I, you know, I really have had the

03:40opportunity to see what my viewer was purchasing, what kind of products they really were gravitating

03:46towards, the ingredients, the price points, the retailers. So that was something that we really

03:50took into account in forming Notarium and creating these products. But for us, you know, it really comes

03:57down to consistency. We want our consumer to be consistent with their skincare routine because that's

04:02when they see true results with their skin. So we wanted to make sure that we created biocompatible

04:07products, meaning that your skin actually recognizes the formulations, the pH levels are really great

04:13for your skin. They're clinically effective and they're at price points that make a lot of sense.

04:18And so I think that really has stood out to our consumer.

04:22I hear what you're saying. I consider myself chronically online as well. And I do want to talk a

04:27little bit about how you reach new customers because there is the TikTok of it all. You,

04:33of course, just heard your held your first in-person pop-up event. And from what you've seen so far,

04:38I mean, what is the ROI reaching someone on the internet, on their phone versus being able to

04:44actually get a sample, get product into their hands physically?

04:47Well, we know that our products are phenomenal. They're really great. They're great price points.

04:54And once we get them into the hands of a consumer, they're going to come back and repurchase. So our

04:59repurchase rate is about 50%, which is much better than our competitors that tend to be about at 30%

05:05repurchase rate. So we just want to make sure that people are trying our products and see just how

05:10great they are. That's why this pop-up is really important. Yes, it's good to have campaigns on social

05:14media and to talk about education, let people know why our products are different, because there

05:19really is so much to say about our products because we formulate them very thoughtfully.

05:23But it's when a person tries the product that we are in, they become part of our community and they

05:29trust us and they come back and purchase more and more of our products. And Turing, I'm curious,

05:33you know, from where you're sitting, what you're seeing in terms of consumer demand when it comes to

05:37skincare, which of course we're talking about with Naturium versus beauty products. I think when most

05:42people think of health, they think of makeup naturally. But when you look at your portfolio,

05:47do you see any trends emerging there? I think one thing that we see is a blurring of the lines.

05:53You're now having makeup products that have many more skincare benefits. You've got skincare brands

05:58including some hybrid approaches. So what we're seeing is there's a huge appetite, particularly

06:03amongst Gen Z, Gen Alpha millennials for both color cosmetics and skincare. And we've been seeing

06:10both markets rise. So Turing, as we sort of move forward in this evolution, I guess the question

06:16is, what types of acquisitions, if at all, would you be looking to make going forward?

06:22Well, I'd say it's similar to Naturium. We're in our most recent acquisition, Rode. Brands that are

06:27disrupting the industry. I mean, Naturium went from zero to $100 million in less than two years.

06:32Rode went from zero to $212 million in less than three years. And so these brands that break through,

06:40and are really resonating with consumers, is our first focus. The second is, we want them to be

06:45able to meet our vision of disrupting norms, shaping culture, and connecting communities.

06:50So very strong orientation in terms of delighting our communities. And of course,

06:55just real confidence in the quality of the products and how much white space is ahead.

07:00And Sarah, and I want to, excuse me, I want to just give you the last word here. And this is really

07:04just about the idea of expansion and sort of where you think you can take Naturium. And at some point,

07:09we get this idea that, okay, if you have enough product lines and enough areas here,

07:14I mean, what becomes of that? Can you envision this as a company as more than just what you have

07:18now? Or is it just about deeper penetration with the existing lineup of products?

07:23I mean, we want to be a household name, and we will be. And this is something I promised

07:27Terang a couple of years ago when we first started talking. Global expansion is a very big priority for

07:33us. Right now, you can find us in the United States in big retailers like Ulta, Target. We're

07:38also on Amazon. In Canada, we're in Shoppers Beauty. We're also in Space NK and Boots in the UK.

07:45And now we're about to launch in Sephora in Australia. I'm actually headed there next week.

07:51And it's just a really important portion of our business is to make sure that everyone really

07:57gets the opportunity to try our products and use our products because we really do feel like

08:02everyone deserves their skin.

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