An article written by Karyn Scherer for the NBR published 7th January 2020.

https://www.nbr.co.nz/story/how-dominate-beauty-products-market

Quick facts

Elevator pitch: Founders Shane and AJ created Mix in 2000 with a washing machine pump and a credit card, and since then have been on a relentless journey of democratisation, creating good-quality natural products for all.

Turnover: $50 million

Staff numbers: 80

Compound annual growth rate: 36%

Export revenue percentage: 75% to Australia, Malaysia, Singapore, China, the US and Canada

It’s no coincidence Mix Limited specialises in beauty products that offer “salon quality at supermarket prices.”

One of its founders has a background in hair salons and the other started out in supermarkets.

Shane Young was a barber in the trendy Auckland suburb of Ponsonby when a life-changing event occurred. He was mixing up batches of hair wax, stinking out his St Mary’s Bay flat, when his flatmate’s new boyfriend dropped by for a visit.

“I remember this guy came downstairs and I literally had a double-boiler with wax heated in it, and I was scooping stuff out on paper and pouring it into these jars,” Young recalls. “He asked me: ‘What the hell are you doing?’ ”

Nearly two decades later the pair are not only good mates but they are also partners in the business, which has grown from a part-time whim to a leading beauty products company that sells its wares in more than 6000 stores around the world.

It was Anthony Gadsdon’s experience working for supermarket operator Progressive Enterprises that originally helped him identify a gap in the grocery market for premium hair products. “All there really was, was cheap gel at the time,” he explains.

The pair’s first step was to borrow some money to buy pots, labels and a 44-gallon drum.

“We asked a buddy of mine how we were going to pump it out, and he literally drew on a napkin – which we wish we’d still kept to this day – a pumping system that we could do,” Gadsdon recalls.

Remarkably, that washing machine pump is still in use today in their Mangere factory. But the staff has grown from a few mates helping out at the weekends to more than 80 employees.

Gadsdon attributes their success to a winning combination of skills. He oversees sales and exports while Young concentrates on marketing and production. “Having complementary skills but a common vision is critical,” he suggests.

But the pair admit that good luck and persistence have also played a part.

“The timing was really great,” Gadsdon says. “David Beckham had a mohawk at the time, so all the young guys were getting into that. And it just fitted perfectly with what we were doing with the hair wax.”

For the first 18 months, the pair worked from the back of Young’s barbershop. Once sales started taking off, they hired contractors to do the manufacturing. They also decided to expand into Australia.

It took seven meetings with Australian grocers before they finally got a deal. But it proved to be a particularly valuable experience, as many of the buyers they were dealing with had previously worked for top retailers such as Tesco and Waitrose.

“We think, looking back, it was probably really good discipline and quite a good training ground for us, because it was ruthless. It was good training wheels,” Young says.

Breaking into Australia meant expanding from around 200 stores to 1000 stores almost overnight. “We went from a small hobby business, really, to suddenly you’ve got a small business on your hands. It was very exciting times,” Gadsdon says.

Handling the enormous increase in cashflow was one of their early challenges.

“We didn’t have too much trouble getting customers and ideas and what-have-you. But trying to get that cashflow cycle balanced out very early on, dealing with big retailers very quickly, was our biggest issue,” he says.

They also found themselves struggling to meet demand and decided to set up a manufacturing plant.

In hindsight, it probably would have been easier to persist with contractors, Young says. But they believe the move has ended up giving them a strong competitive advantage. They are now able to respond to new trends and produce new products much more quickly than they would have been able to do with contractors.

Other early lessons included figuring out they needed to be more picky about distributors. Like many fledgling Kiwi businesses, they were initially flattered when approached about new markets. However, they soon learned the best global distributors were unlikely to be knocking on doors in Auckland.

“You get pretty excited when someone offers you a country that you weren’t otherwise planning on. And you think: ‘What is there to lose?’,” Gadsdon says. “But the reality is it’s very distracting, and normally the best distributors are the ones that are too busy to talk to you.”

Competing against some of the biggest multinationals on the planet has also reinforced the importance of having a “really strong” brand, he says. Their initial brand, Dominate, still sells well today and has been joined by new brands such as Primal Earth and Essano, both of which emphasise their environmental credentials.

Simple, colourful packaging has helped but the vital ingredient has been customer research.

“You’ve got to invest in that brand,” he says. “Most importantly, you’ve got to be delivering to consumers and understand what they really need and want. So investing a lot of time and money upfront before you even launch a product is critical.”

In 2017, local private equity firm Pencarrow took a 50% stake in the business.  Gadsdon and Young continue to own around 19% each, with business consultant Peter Borrell holding the rest.

Gadsdon says the company was struggling with more growth than it could handle at the time, and Pencarrow helped with both funding and expertise. “They helped build a really great executive leadership team around us and it made a huge difference.”

Essano is now the top-selling natural skincare brand in New Zealand, and is regularly No 2 in Australia. The company is gradually expanding into Asia, and is also growing in the US.

The beauty products market is fast-moving and social media trends, in particular, keep them on their toes. In Asia, for example, consumers are now demanding anti-ageing products for people as young as 18.

“There are a lot of innovations coming through in terms of technology and ingredients and consumer trends,” Gadsdon says.

The company’s general manager of marketing and innovation, Caroline Clarke, believes the secret to the company’s success is its strong focus on delivering products that customers want, when they want them, at an affordable price.

The Essano brand, in particular, has been a huge hit, she says. The range started out with just five products and now includes more than 50.

“Six years ago the brand didn’t exist and now we’re bigger – in grocery anyway – than L’Oréal or Olay [in New Zealand]. They’re big global brands that have been around for decades.”

 “It’s been a pretty crazy ride,” Gadsdon says. “We’re not now worried so much about cashflow and coming to work and worrying about how we are going to pay the staff. It’s a good place to be in and I think there’s a bit of the journey to go.”