Beauty & Balance

Frédéric Fekkai Buys Back Business

Frédéric Fekkai is back in the driver’s seat of his namesake brand.
The hair stylist/entrepreneur has partnered with Cornell Capital to acquire Fekkai Brands, the  joint venture created by Designer Parfums and Luxe Brands that bought the business in 2015.
Terms of the deal were not disclosed and both Fekkai and Cornell declined to comment on the numbers.
Fekkai Brands, which consists of the Fekkai brand sold in mass market retailers and The One by Frédéric Fekkai sold at Ulta Beauty, as well as six salons in North America, is estimated by market sources to have a wholesale volume of about $35 million. Analysts estimate that the purchase price would have been around or slightly less than the estimated $50 million that Designer Parfums and Luxe Brands paid for it.
Cornell Capital LLC, a $2.5 billion private investment firm founded by Henry Cornell, former vice chair of Goldman Sachs' merchant banking division, is said to have the majority stake in the venture; Fekkai's fund, called Mistral Capital Partners, is believed to have the minority. The duo created a new holding company called Blue Mistral, which will own both the Fekkai brands as well as Bastide, the Provençal-based skin- and body-care line that Fekkai and his wife, Shirin von Wulffen, acquired in 2016. Fekkai and von Wulfffen will continue to own the majority of Bastide.
Fekkai will become chief executive officer of Blue Mistral and will appoint ceo's for each.
“The opportunity to partner with Frédéric, a proven entrepreneur in the beauty sector, as he returns to the helm of his iconic brand is truly compelling,” said Cornell. “Leveraging Cornell Capital’s cross-border network and operational expertise, and Frédéric’s deep relationships and reputation within the industry, Fekkai Brands is well-positioned to succeed in the growing global cosmetics and personal-care industry.”
The deal marks the fourth time the 23-year-old Fekkai brand has been sold. Fekkai first introduced his product range in 1995 as part of a joint venture with Chanel. Almost a decade later, they parted ways and the brand was acquired by Catterton Partners. In 2008, Procter & Gamble bought Fekkai for a reported $440 million, before selling it in 2015 for an estimated $50 million.
At the time, reports swirled that Fekkai was keen to buy back the business, but the entrepreneur was unable to put a deal together. Determined to regain control of his name and his brand, Fekkai reached out last May to owners Dilesh Mehta and Tony Bajaj and asked if they’d be interested in selling. The answer was yes, and Fekkai was able to put the financing together over the summer.
In an exclusive interview with WWD, Fekkai laughed when the speed of the deal this time around was remarked upon. “It sounds fast, but for me it was painful,” he said. “It’s like when you’re buying a car, but you have to wait six months for it to be delivered. You want to drive that car right away.
“The brand needs a leader,” he continued, “someone who knows what they’re doing, who the team can respect. I will be there, working in all of the departments — in the salon, marketing, product development.”
Fekkai is very clear on the direction he wants to head. Priorities include ramping up product development, introducing pop-up salon formats, building a digital presence for the brand and expanding internationally — particularly in Hong Kong and China. (Cornell, who founded Goldman Sachs’ principal investment business in Asia in 1992, is said to have considerable expertise in this area).
“The good news is the brand has great recognition and the salons are still well-run — the teams are well trained, the products are well-designed,” said Fekkai, who noted that another plus is that the two-tier distribution structure of the existing brands gives the company cross-channel exposure, particularly in the fast-growing prestige hair-care category.
But there are significant challenges, too, say industry insiders. On the product side, the mass market hair-care business remains difficult, and some analysts believe much of the brand’s sales come from diverted products in the gray market.
Meanwhile, Fekkai’s marquee salon, located in Henri Bendel’s Fifth Avenue flagship, will be forced to relocate in December when that store closes permanently. Opening a new one represents a significant capital expenditure.
Moreover, the competition has changed drastically from when Fekkai first launched. Companies like Luxury Brand Partners, the creator of Oribe Hair Care, among others, have emerged as key players in the prestige and professional segments, and a new generation of star stylists, like Ouai’s Jen Atkin, have used social media to parlay their fame into burgeoning brands. The salon side of the business has changed dramatically, too, particularly with the rise of ‘bar’ concepts like Drybar for styling and blowouts and Madison Reed for color.
Fekkai seems eager to take on the challenge, thrumming with excitement as he talked about his plans for the brand and acknowledging that the world is very different from when he first launched. “I don’t want to rewrite the same book,” he said. “It has to be different. That is what drives me.” He plans on being a strong presence in the salons — working on a few select clients, overseeing the development and education of stylists and interacting with salon-goers to learn about what they want and need.
“The salon is a great marketing vehicle. It’s something you can not sell on Amazon — you can’t buy the experience on the Internet,” he said. “To be an innovator, you need to be in the business. When I touch my customer’s hair, when I see their color, hear their challenges, I know what they need. I don’t want to do another shampoo. We need to figure out products that are relevant to the world of today.”
Rather than open permanent new salons, Fekkai plans on opening pop-ups in key locations during inflection points throughout the year — for example, he envisions a pop-up salon in Los Angeles during awards season. London, Hong Kong and Shanghai are also on the horizon.
“It’s not about conquering the world, but rather being a presence in the cool cities of the world,” he said.
In terms of distribution, Fekkai said he’s not going to “rock the boat,” adding he will largely keep existing distribution, but has no plans to add mass market doors.
The deal also means he becomes master of his digital domain — Fekkai will now have the rights to the web site and social channels with his name, which he plans to develop and use extensively for education and commerce, doubling down on direct-to-consumer sales. He’s also looking to artificial intelligence to help customize products for consumers in a way that replicates the in-salon experience.
While it's unusual for a founder to buy back a brand, there is a precedent. Drs. Katie Rodan and Kathy Fields sold their namesake skin-care brand, Rodan + Fields, to The Estée Lauder Cos. in 2003 with the goal of building out the business in department stores. They bought it back in 2007, and pulled out of department stores the following year to focus solely on direct sales. Today, Rodan + Fields is the number-one skin-care brand in the U.S., with 2017 sales of $1.5 billion.
No doubt that's a model Fekkai would like to emulate, and now that the deal is done, he seems eager to put his foot on the gas pedal and reestablish his brand’s credibility and relevance. “I’m an entrepreneur, a brand builder,” he said. “The drive for me is to build a great team and give a strong legacy to the brand. The founder is back.”
 
Source: Read Full Article