Entry #1 - Womens Wear Daily January 12, 2012
Too Faced Cosmetics Gets Investments by Rachel Brown
LOS ANGELES Weston Presidio has acquired a majority stake in Too Faced Cosmetics. Terms of the deal were not disclosed, but industry sources pegged the price for the private equity
firms stake at roughly $170 million.
Founded in 1998 by Jerrod Blandino and Jeremy Johnson as a feminine, flirty and fun antidote to
serious makeup artist brands, Too Faced was one of the oldest privately held cosmetics brands of
its size that hadnt been snapped up by a strategic or private equity buyer. Although Too Faced declined to break out its revenue figures, president Lynda Berkowitz revealed they have
increased nearly 40 percent year-over-year, which would put the brands annual retail volume at close to $100 million, calculating from previously reported approximations of its performance.
We certainly think cosmetics skin care and beauty, in general is an incredibly attractive category for investment largely because of the industrys characteristics: the frequency of purchase, the importance of brands and the growth aspect of retail, said Jeffrey Mills, a partner at Weston Presidio who will sit on Too Faceds board. Addressing Too Faced specifically, he added, We really view Too Faced, even post our investment, as an independent brand run by the team that founded it, built it and will continue to run it. There arent many brands of that scale and of that caliber that we see in the most desirable channels, which are Sephora and Ulta.
Until recently, Blandino remarked that Too Faced never seriously considered linking with a
partner. However, he said the brand realized lately that an investor could maximize our potential and take advantage of the many opportunities that continue to present themselves.
We met with a very select number of hand-picked potential partners and quickly chose the group at Weston because they perfectly fit our family and philosophy, said Blandino, noting the deal only took a few months to complete.
Weston Presidio, which has offices in Boston and San Francisco, typically targets lower middle-
market companies in the consumer, industrial and business services sectors with investments of
$10 to $50 million, and has managed five funds totaling more than $3.3 billion since it started in
1991. Its active portfolio includes jewelry retailer Robbins Bros. Jewelry Inc., stationery
specialist Papyruss parent company Schurman Fine Papers, sandwich shop chain Jimmy Johns LLC and infant product manufacturer Evenflo Co. Inc. Weston has seldom dived into beauty, but
did sell Sassaby Inc., known for its Jane makeup line, to Este Lauder Cos. Inc. in 1997 for an
estimated $50 million.
Blandino, Johnson and Berkowitz, who joined Too Faced in 2009 after holding executive posts
at Perricone MD Cosmeceuticals and Bobbi Brown Cosmetics, are retaining their positions at the
company, which will remain in Southern California. What Weston Presidio offers us is strong strategic guidance, as they have an impressive track record with regards to partnering with high-
growth consumer branded companies. Its the perfect time for Too Faced, said Berkowitz.
Too Faced is distributed through 1,200 retail doors in the U.S. and another 500 abroad, most
notably Boots, Sephora, Ulta and Macys. In fact, Too Faced is so tight with Sephora that Johnson consulted with Sephora USA chief executive officer and president David Suliteanu
when considering possible buyers. Suliteanu advised him to go with his gut and choose a partner who was as committed to the brands future as Jeremy was, recounted Blandino.
Too Faced has about 120 stockkeeping units, and the top five products are its Natural Eye
Shadow Pallette, Naked Eye Shadow Pallette, Shadow Insurance Eye Shadow Primer, Primed &
Poreless Skin Smoothing Primer, and Lash Injection. The eye category accounts for almost 45
percent of Too Faceds business, followed by face, representing 30 percent of the business. The remainder of Too Faceds sales is split about evenly between lips, tools and holiday sets.
Blandino and Berkowitz pointed to international markets as significant future growth drivers for
Too Faced, which does 20 percent of its sales abroad now. This year, the brand is also focusing
on key launches such as the $32 Tinted Beauty Balm containing SPF 20 with four shades in the
spring designed to prime and smooth the skin, while providing antiaging and sun protection
benefits, and Better Than False Lashes, a $35 nylon lash extension system meant to be a fake
lash alternative, coming out in the summer.
Entry #1 - Cosmetic Industry Article Summary
Jerrod Blandino and Jeremy Johnson, founders of Too Faced Cosmetics one of the oldest privately held
cosmetic brands, has yet to be bought by a strategic or private equity buyer. In the past Too Faced never
considered connecting with a partner, based on what Lynda Berkowitz, President of Too Faced
Cosmetics, has implied they have never had too. But lately the brand has realized that an investor would,
maximize our potential and take advantage of the many opportunities that continue to present
themselves. After meetings with a select few hand-picked prospective partners they were able to choose
the group at Weston. Weston Presido usually targets lower middle-market companies in the consumer,
industrial and business services with investments from $10 to $50 million. Though Weston in the past has
rarely invested into beauty, but did sell Sassably Inc. to Estee Lauder Cos. Inc. back in 1997 for $50
Since Too Faced has never had an investor before, Weston seems like a good pick. Though the group has
not invested in the cosmetic industry much, based on their numbers they seem to know what they are
doing. Though it is implied that the company does not necessarily need an investor, it wont hurt them
now that they have one. The investment for Too Faced will surely do what they expect it to do, and be
able to reach their full potential and take advantage of the opportunities that present themselves.
Entry #2 - Business Week March 29, 2012
Why Wal-Mart Is Worried About Amazon by David Welch
Five years ago, the worlds largest retail chain didnt have to worry much about the worlds largest online mall. Only about a quarter of Wal-Mart Stores (WMT) customers shopped at
Amazon.com (AMZN), according to data from researcher Kantar Retail. Today, however, half of
Wal-Mart customers say theyve shopped at both merchants. Thats leaving the mega-retailerwhich long ago bested local brick-and-mortar merchandise stores and supermarkets across
Americawith a massive online competitor that is too tough to ignore.
Threatening Wal-Marts dominance are two trends: The discounters traditional customersbargain hunters making less than $50,000 a yearare getting more tech-savvy, and more-affluent shoppers who began frequenting Wal-Mart during the recession are returning to Amazon
as their finances improve. Amazon has moved into merchandise categories that Wal-Mart
traditionally has sold, from diapers to vacuum cleaner bags. In its last fiscal year, Amazon posted
41 percent revenue growth, to $48.1 billion, vs. 8 percent at Wal-Mart. The chains 2011 online sales amounted to less than 2 percent of its $264 billion in U.S. revenue, says Kantar. Amazon is always in our sights, says Jeremy King, chief technology officer at the retailers @ WalmartLabs skunkworks in Silicon Valley. My biggest issue is playing a catch-up game.
In the last year Wal-Mart has increased its investment in its online business. The company has
spent more than $300 million acquiring five tech firms since May and hired more than 300
engineers and code writers in the U.S. and India. Wal-Mart is also launching a program to allow
the 20 percent of its customers without credit cards or bank accounts to make online purchases.
Wal-Marts acquisitions include Kosmix, a social-media firm, and iPhone app creator Small Society. The company hopes the newcomers can find a way to stop shoppers from engaging in
scan and scram. Thats when would-be customers use their smartphones in stores to scan an items bar code and then buy it online from a rival merchant. The chains tech team also is working on a concept called Endless Aisle, which would let shoppers immediately order from
Walmart.com via smartphone if an item is out of stock. You cant ask people to leave their phones at the door. So you have to give them value and an experience, says Venky Harinarayan, @WalmartLabs senior vice president of global e- commerce. The former Amazon executive joined from Kosmix.
Wal-Mart is trying to improve links between its store inventory, website, and mobile phone apps
so that more customers can order online and pick up their purchases at stores, which half of Web
customers do already. Wal-Mart is trying Web-based shopping tactics, like its Pay With Cash
program for Wal-Mart customers who dont have credit cards. The new program allows them to reserve products online and pay cash at their nearest store. To cater to its affluent customers,
Wal-Mart is selling more expensive itemsfor example, high-end televisions from Sony (SNE) and Samsungonly online.
Harinarayans team is also trying to tackle a new problem for Wal-Mart. Last year the chain was the No.1 destination for holiday shoppers, with 53 percent of U.S. customers visiting its stores.
That was down from 59 percent the year