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Why LVMH Invested in a Beauty Brand Sold at Target

Versed, a 'clean' beauty range that debuted last spring, has an unlikely new backer: the world’s largest luxury conglomerate.
LVMH Luxury Ventures is an investor in Versed, a "clean" skincare brand | Source: Courtesy
By
  • Rachel Strugatz
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NEW YORK, United States — The company behind Dior and Louis Vuitton's latest investment is a skincare line sold in…Target.

The luxury conglomerate, which this week reported record revenue of nearly $60 billion for 2019, is setting its sights on affordable, “clean” beauty via its investment arm, LVMH Luxury Ventures. In an unlikely pairing, the fund invested in Versed, a fast-growing mass label where most products are priced at or below $17.99, and some under $10. The brand recently closed an $11 million Series A, led by Sonoma Brands with participation from Greycroft and Marcy Venture Partners.

This marks the second time in three months that LVMH has invested in a young-skewing line. In October, the conglomerate's venture arm led a seed round for Madhappy, a direct-to-consumer LA-based streetwear line that sells $165 hoodies and promotes mental health. At just eight months old, Versed is the youngest and least "luxe" company in the fund's portfolio, which also includes sneaker reseller Stadium Goods, Gabriela Hearst's luxury label and French beauty brand l'Officine Universelle Buly.

The investment in Versed signals new priorities for LVMH: a desire to get into clean skincare, and, potentially, a new focus on mass-market beauty. The conglomerate owns Fenty Beauty parent Kendo and Sephora, which operates more than 2,600 doors globally, but both have clear prestige positioning. None of LVMH’s beauty labels — from Fenty to Guerlain — are clean. LVMH Luxury Ventures did not respond to a request for comment.

They were on the fringes until very recently, and now it's quickly becoming table stakes.

Price positioning is what separates Versed from dozens of clean beauty labels that launched over the past few years, including Cyan, 27 Rosiers, Alpyn Beauty, W3ll People and Marie Veronique. The leading retailers that specialise in clean beauty — from clean-only sellers like Credo Beauty and Follain to Sephora’s “Clean at Sephora” programme — sell higher-end products such as Goop, Drunk Elephant, Tata Harper or Tatcha.

Katherine Power, Versed’s chief executive, said her goal was to develop a clean skincare brand with the look, feel and formulas of a prestige brand, at mass-market prices.

“When we looked at the drugstore skincare aisle, [we saw] it really hadn’t changed in about 50 years,” she said.

Brands like Versed form a growing "masstige" category of affordable but luxe-feeling products, from moisturisers to masks and serums, that typically retail for under $20. Labels from Versed to The Ordinary embrace industry trends such as wellness, a hero ingredient focus, sustainability or cruelty-free, and clean products, which all originated in the luxury sector. While they may look similar, 27 Rosier's "Ready Selfie Go" mask retails for $48, almost five times more than Versed's "Look Alive" mask.

“Bringing the prestige aesthetic, playbook and sensibility to the mass setting to take on the legacy big brands… it’s not that difficult to say that but it’s difficult to do that,” said Kevin Murphy, managing director of Sonoma Brands.

So how did Versed do it?

Power secured massive distribution from day one, launching in more than 1,400 Target stores on the brand’s first day of business. Working with a big-box wholesale partner requires far more units: the label ordered 10 to 20 times more product than what a typical direct-to-consumer start-up might need. Target’s scale allowed Versed to leverage volume, even at the initial phases, to drive down manufacturing costs. By year’s end, Versed, which has 22 products, will be sold in 3,000 doors globally, including over 1,800 Target stores in the US.

Power is eschewing the direct-to-consumer model preferred by start-ups — which glorifies “cutting out the middleman” and spending big on customer acquisition — to focus on building a thriving wholesale business. Aligning with a retailer of Target’s size ensures that Power doesn’t have to pay for ads on social media to find customers.

“[Target] lets us have so much more cost efficiency to our supply chain that as a direct-to-consumer only brand you just don’t get,” Power said. “That really changes the cost-profile dramatically. Even most brands launching in Sephora, they might want to launch in 40 doors to start with.”

Instead of creating custom bottles, tubes and jars, which are among the biggest costs when starting a brand, Power also opted for stock packaging. The focus was on design: pastel colours and modern branding make Versed’s Stroke of Brilliance Brightening Serum or Dew Point Moisturizing Gel Cream look no different than any “clean” product sitting on Sephora or Credo Beauty’s shelves. Even the logo possesses the sans-serif millennial minimalism that propelled brands like Byredo to cult status.

When we looked at the drugstore skincare aisle, [we saw] it really hadn't changed in about 50 years.

Melanie Bender, general manager of Versed, said a refillable programme will begin in April, along with a host of other sustainability initiatives from sourcing 100 percent of paper from Forest Stewardship Council certified partners to using more efficient forms of transportation and prioritising domestic production to reduce greenhouse-gas impact.

“I’m interested in how quickly clean beauty has become the end all be all — and on the fashion side with sustainable fashion. They were on the fringes until very recently, and now it’s quickly becoming table stakes,” said Susan Lyne, president and partner at BBG Ventures. “It will be critically important for companies like LVMH to not just offer clean beauty brands, but to use that learning to make the majority of their brands clean beauty.”

But still, there’s no clear-cut definition for clean beauty. To date, the term has largely been defined in the US by what ingredients products are formulated without. Sephora’s “Clean at Sephora” programme, introduced in May of 2018, highlights labels the retailer believes to be clean, while Credo Beauty and Beautycounter have created extensive lists – “The Dirty List” and “The Never List” – comprised of ingredients products are free of.

For Bender, “clean” is anything that’s safe for one’s body or skin.

“We do look to leading research and leading regulatory bodies to help guide on what that is,” Bender explained, noting that she and Power formulate to EU standards, which are “much more comprehensive than the ones in the US. It’s a matter of 1,300 ingredients versus 11.”

“We have an open formula policy. This year we’ve identified a host of new ingredients that we want to raise the bar and formulate to,” Bender added. “That’s the mentality that you have to have because the information and the expectations are really changing quickly.”

THIS WEEK IN BEAUTY

Estée Lauder doled out a series of promotions this week. Philippe Pinatel and Justin Boxford have been named global brand presidents of MAC Cosmetics and La Mer, respectively.

Can influencers sell pharmaceuticals? The FDA will conduct a study to examine the relationship between paid pharmaceutical endorsements from celebrities, influencers and physicians and consumer behaviour.

Glossier's UK pop-up will remain open. The Covent Garden location, which was set to close on Feb. 9, will now remain open through 2020.

Mascara sales are challenged. The rise of fake lashes and extensions are making mascara less relevant.

Another celebrity beauty brand launched this week. Taraji P. Henson's TPH by Taraji is a haircare range that focuses on scalp care.

Doulas may become the next crop of beauty entrepreneurs. Carson Meyer, a doula, founded C & The Moon, while Christian Toscano, a midwife, founded Roots Rose Radish.

Indie beauty retailers are embracing sustainable practises. Follain and Detox Market are investing in "environmental commitments" to recycling programs with TerraCycle.

Harrods' beauty floor is complete. The UK department store's sweeping overhaul of its beauty department just opened its events and service space.

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