TO: Clark Hansen, Chief Executive Officer, Anima Mundi Development Partners
FROM: Perianne Caron, Research and Development Department
DATE: July 4, 2021
SUBJECT: AMDP Investment Opportunity with Olaplex [Olaplex LLC]
As requested, I have identified and researched a possible investment opportunity with a haircare company that is committed to socially responsible goals, environmentally sustainable practices, and financial stability and growth. I highly recommend considering Olaplex as an investment opportunity for AMDP. In this memo, I will outline:
• The AMDP investment standards
• Background information about Olaplex and its financials
• The company’s sustainability, cruelty-free, and vegan claims
• Appraisals from relevant sources
• My final recommendation
AMDP Investment Standards
At AMDP, there are specific investment criteria that companies must meet for investment consideration.
The Triple Bottom Line
The triple bottom line is a business concept that encourages companies to measure both their social and environmental impact, along with their financial stability, as an alternative to measuring success solely based on profit – the standard ‘bottom line’. The three main facets of the triple bottom line are as follows:
• Profit – In a capitalist economy, financial performance is essential to a company’s success. Companies should measure their ability to maintain financial growth and generate profit for its shareholders.
• People – A company’s societal impact is also highly important to its long-term success. Companies are encouraged to distinguish between shareholders and stakeholders – those impacted by business decisions, including customers, employees, community members. – and develop sustainable business practices that create value for their stakeholders.
• Planet – The final facet of the triple bottom line highlights the importance of a company’s impact on the planet. Companies possess the ability to drive positive change. One specific action that a company can take to generate a more positive impact is reduce their carbon footprint.
Carbon Footprint
A carbon footprint is the total amount of greenhouse gases – including carbon dioxide and methane – that are generated by our actions. Reducing our carbon footprint globally will be crucial to avoiding a 2ºC rise in global temperature that would be incredibly harmful to the planet. Companies can measure their carbon footprints by counting their direct and indirect emissions and converting them into carbon dioxide equivalents.
Corporate Social Responsibility
Corporate social responsibility elaborates on the ‘people’ aspect of the triple bottom line. It is a management model that helps companies stay accountable to their stakeholders as well as to the public by integrating both social and environmental concerns in its operation. Practicing corporate social responsibility helps companies recognize the impacts their operations have on all aspects of society.
Social Enterprise
A social enterprise counters the traditional commercial enterprise in that it uses a market-driven approach to meet specific social needs and objectives rather than pure profit. Social enterprises aim to maximize profits while also maximizing societal and environmental benefits. The social Enterprise Alliance recognizes three main social enterprise models – opportunity employment, transformative products or services, and donate back – all which have measurable impacts.
Olaplex Overview
Olaplex is an American haircare company headquartered in Santa Barbara, California. It is part of the Personal Care Products Manufacturing Industry. Their original bond-repairing ingredient was invented in 2013 by Craig Hawker, an Australian-born chemist. The company was then founded in 2014 by beauty industry veterans Dean and Darcy Christal [McNulty]. Through a grassroots approach, the company rapidly grew from a single-garage operation to a worldwide sensation. It is now one of the largest independent haircare brands in the world.
The groundbreaking chemistry behind Olaplex products was the main contributor to the company’s rapid growth. The company’s patented ingredient, Bis-Aminopropyl Diglycol Dimaleate, has been proven to “restore damaged and compromised hair by repairing from the inside out”. Because of this ingredient, Olaplex has been credited with introducing a whole new category of haircare to the market – “bond-building”.
Investment Security: Patents
Patents are arguably the best representations of a company’s innovative capacity and are crucial in protecting the interests of the company’s investors [Bajpai]. In addition to the patent for their aforementioned ingredient, Olaplex has over 100 worldwide patents. As such, Olaplex proves to be a very safe option for investors.
Financial Growth: Statistics
Olaplex sells its products through three different channels. 60% of the company’s overall sales have been attributed to professional sales, 15% to retail sales, and 25% to direct-to-consumer sales. While the company’s professional sales faced a significant challenge throughout the COVID-19 pandemic, their overall year-over-year sales doubled in 2020, according to CEO JuE Wong [Sandler]. The year prior, Olaplex reported $100 million in sales and was valued at $1 billion [Sandler].
Financial Growth: Recent Acquisition
In January, 2020, Advent International – a global private equity firm that invests in companies spanning a wide variety of industries – closed its acquisition of Olaplex. Tricia Glynn, a managing director at Advent, praised Olaplex for “differentiating itself [within the haircare industry] by offering superior products backed by patents”. Glynn also identified Olaplex’s rapid growth and success as rare given the size of the company [McNulty].
Sustainability Claims
Olaplex is a company devoted to “developing and maintaining sustainable products with environmental, social, and economic benefits while protecting public health and the environment”. The bottles used to package products are made from recycled plastic collected from the ocean. Olaplex makes significant efforts to reduce their carbon footprint, in part by reducing their secondary packaging. Each year, the company’s sustainability efforts save 27MM gallons of water, prevent 17MM pounds of greenhouse gases from being emitted into the environment, and save 21K trees from being cut down.
Cruelty-Free and Vegan Claims
Olaplex proudly claims its products to be both cruelty-free and vegan. Its products are also free of parabens, sulfates, phthalates, and phosphates. The company has confirmed that no animal testing occurs at any point during the production of their products, as well as upon their completion. Additionally, they are not owned by any parent company that tests on animals.
All of Olaplex’s products have received the Clean seal from Sephora, ensuring that the products meet the strictest clean beauty standards across the industry. The “Clean at Sephora” program also highlights brands that use sustainable packaging and practice sustainable sourcing. All of Olaplex’s ingredients are responsibly sourced and have a low environmental impact.
Critical Appraisals
Ethical Elephant, an “ethical consumer guide” that highlights conscious and cruelty-free companies and products, praised Olaplex for meeting cruelty-free product standards. They verified claims made on the company website that the company does not test any products or ingredients on animals, hire third parties to test on animals on their behalf, or sell products in mainland China where animal testing is legally required. Ethical Elephant also praised Olaplex for its use of ingredients that are responsibly sourced and not derived from animals in any way, verifying that its products also meet vegan standards.
Tracey Cunningham, a renowned celebrity hairstylist, is one of many well-respected industry professionals that serve as ambassadors for Olaplex. In an interview with Laura Schreffler from Haute Living, Cunningham not only praised Olaplex for its products but also its clean practices. She commended Olaplex owner and co-founder Dean Christal for his commitment to clean products. Cunningham also told Schreffler that she has “loved working with the company from day one” because of its socially and environmentally conscious practices.
Final Recommendation
Olaplex proves to be a financially safe investment due to its 100+ worldwide patents and rapid economic growth. Olaplex also proves to be committed to sustainability and environmentally responsible practices. By investing in Olaplex, AMDP would be investing in the protection and betterment of our environment, the protection of animals, and the improvement of consumers’ daily lives.
Sources:
Bachmann, Steve. “Do Patents Make Sense for Start-Ups? Top Benefits of Patents to Tech Start-Ups.” Bachmann Law Group, 31 Aug. 2016, bachmann-law.com/do-patents-make-sense-for-start-ups-top-benefits-of-patents-to-tech-start-ups/.
Bajpai, Prableen. “Patent Dominance: Top 5 Companies Leading the Charge.” Nasdaq, www.nasdaq.com/articles/patent-dominance%3A-top-5-companies-leading-the-charge-2020-01-17.
Barone, Adam. “The Aims of Social Enterprises.” Investopedia, Investopedia, 19 May 2021, www.investopedia.com/terms/s/social-enterprise.asp.
“Clean at Sephora.” Sephora, Sephora USA, www.sephora.com/beauty/clean-beauty-products.
Fernando, Jason. “Corporate Social Responsibility (CSR).” Investopedia, Investopedia, 6 July 2021, www.investopedia.com/terms/c/corp-social-responsibility.asp.
“Is Olaplex Cruelty-Free & Vegan?” Ethical Elephant, 24 June 2021, ethicalelephant.com/is-olaplex-cruelty-free-vegan/.
McNulty, John. “Advent Closes Buy of Olaplex.” Private Equity Professional, 18 Jan. 2020, peprofessional.com/2020/01/advent-closes-buys-hair-care-brand-olaplex/.
Miller, Kelsey. “The Triple Bottom Line: What It Is & Why It's Important.” Business Insights - Blog, 8 Dec. 2020, online.hbs.edu/blog/post/what-is-the-triple-bottom-line.
“Our Story.” Olaplex, Olaplex LLC, olaplex.com/pages/our-story.
Sandler, Emma. “Olaplex Launches App for Professional Hair Stylists to Be More Tech-Focused.” Glossy, 1 Feb. 2021, www.glossy.co/beauty/olaplex-launches-app-for-professional-hair-stylists-in-aim-to-be-tech-focused/.
Schreffler, Laura. “Tracey Cunningham Shares The Benefits Of Olaplex.” Haute Living, 18 May 2021, hauteliving.com/2021/05/benefits-of-olaplex-from-celebrity-colorist-tracey-cunningham/697840/#.
“What Is a Social Enterprise?” Social Enterprise Alliance, 11 June 2019, socialenterprise.us/about/social-enterprise/.
“What Is CSR?” UNIDO, www.unido.org/our-focus/advancing-economic-competitiveness/competitive-trade-capacities-and-corporate-responsibility/corporate-social-responsibility-market-integration/what-csr.
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