TLDR:
Unilever Ventures, a corporate venture capital fund, has been a pioneer in the beauty and wellness investment landscape since 2002. The firm has made strategic investments in early-stage brands, focusing on customer retention strategies, physical retail spaces, and affordability. The investment landscape in 2023 was challenging, with economic uncertainties and market saturation prompting a shift towards profitability and cash preservation. Looking ahead to 2024, focus will be on operational efficiencies, financial health, and emerging markets like India. Investors are seeking companies with sustainable cash runways and strong brand propositions that can adapt to changing consumer behaviors and market conditions.
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Corporate venture capital funds have become a trend in their own right, but Unilever Ventures has pioneered the concept of venture investments since 2002. The London-based corporate venture arm of the British multinational consumer goods company Unilever was launched to empower forward-thinking entrepreneurs with big ideas. Over the last two decades, Unilever Ventures has been a constant in the beauty and wellness investment landscape, empowering founders with strategic capital investing in brands, commerce-enabling technologies, and B2B/enterprise technologies. Unilever Ventures is the quietly loud firm that has made early-stage investments, amassing a portfolio of some of the best brands in the beauty and wellness ecosystem. In 2023, the fund landed on the BeautyMatter Power Player list for the second time.
While other venture arms make minority investments in testing the waters before acquiring the businesses outright, Unilever Ventures keeps a strict wall between the investment arm and its parent company. Olivier Garel, the Managing Partner of Unilever Ventures, leads the quietly loud London-based venture and growth capital arm of Unilever. He shared his thoughts about the beauty and wellness investment landscape.
Looking Back at the Investment Landscape in 2023 The year 2023 was overall challenging for the beauty and wellness industry. Even with its inherent resilience, the market has become oversaturated. The shift away from scalable performance marketing has led to a greater emphasis on customer retention strategies and a renewed focus on physical retail spaces as efficient customer acquisition falters. Economic uncertainties, inflation, and rising interest rates have prompted consumers to be more cautious with their spending, leading to a heightened demand for affordability in terms of price points, promotions, and pack sizes. Some companies are dealing with the aftermath of overstocking due to supply chain disruptions from the previous year, resulting in compromised balance sheets.
The funding environment has become very challenging, with equity investors and debt providers exercising increased caution, raising the hurdles to secure financing amid high interest rates. As we navigate this landscape, it is clear that there is a drive to prioritize gross margins, establish a definitive path to profitability, and extend the cash runway to weather the storm. With increased closures or bankruptcies, the industry adapts and evolves in response to these new consumer behaviors and market conditions.
Despite these hurdles, we have remained an active investor, adding five new Beauty & Wellness companies to our portfolio. We have witnessed a significant resurgence in in-store shopping, and many of our brands are enjoying strong momentum, helped by concerted efforts from some of the best retailers to promote inclusivity and support to independent brands. The beauty market has also seen a shift, with “clean beauty” becoming an expected standard and a focus on science-backed beauty products.
Categories, Trends, and Markets That Will Be a Focus As we project into 2024, the lessons learned from the past year will heavily influence market focus. The market will continue to adjust to a challenging funding environment by focusing on operational efficiencies and strengthening financial health. Globally, while the focus on China may decelerate, the acceleration in India’s beauty and wellness market offers new and exciting opportunities for growth. Brands are expected to prioritize customer retention strategies and explore opportunities in brick-and-mortar setups. The continued drive for inclusivity and support for indie brands will persist, although outcomes will vary and necessitate careful consideration. Thanks to AI solutions, 2024 should see more brands enhancing consumer experiences or content development. Efficacy and longevity will remain key buzzes.
Investment Landscape for 2024 in Beauty and Wellness The investment landscape in 2024 for the beauty and wellness sector will be marked by prudence and a demand for demonstrable paths to profitability and unique, differentiated offerings. The industry’s resilience continues to attract investment, but the criteria for financing have become more stringent. Investors are looking for businesses with solid gross margins, a sustainable cash runway, and a clear profitability trajectory. The slowing down of indie beauty exits and the increase in closures point to a more cautious investment approach, with potential investors looking for well-managed inventory, efficient operations, and compelling brand propositions that can withstand the pressures of a crowded marketplace.
The shift back to physical retail means businesses with a robust offline presence or those that can create a seamless omnichannel experience will continue to have an edge. Moreover, with the landscape of global beauty shifting, investors will continue looking towards emerging markets like India for long-term growth potential, balancing out the traditional heavyweights (US). The key will be identifying companies that survive and thrive by adapting to these new consumers and market realities and leveraging emerging technologies.
