Marketing
26 May 2023
e.l.f. Beauty grew quarterly digital sales 75%. Here are the drivers
Upping marketing spend, growing loyalty members and multichannel sales are key to the beauty brand's strategy.
Photo by Andrea Castro on Unsplash
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Digital commerce is helping e.l.f. Beauty pour fuel on the fire.
The brand continues to be one of the shining examples of the staying power of beauty products despite consumer pullback in other areas of discretionary spend. e.l.f. grew net sales 48% in the fiscal year ended March 31 as it reached $500 million in sales for the first time. For the most recent quarter, sales grew by a whopping 78%. The company is seeing profit gains as well, as adjusted EBITDA grew 56%.
With the top-line revenue flowing, the brand was opportunistic about how it invested in marketing in the most recent quarter. After upping spend to 33% of net sales in the quarter, the company ended up with marketing and digital investment at 22% of net sales for the year. That was well above the higher end of its 17% to 19% outlook. In the coming year, it expects 22% to 24%.
The fact that digital and marketing fall in the same category reflects the brand’s approach to marketing. It's a favorite among Gen Z, and has found a home on the social apps that are popular with the generation.
“Our disruptive digital-first marketing engine has built strength across multiple social platforms,” CEO Tarang Amin told analysts on the company’s earnings call. “We are a pioneer on TikTok and are now a four-time TikTok billionaire with our last hashtag challenge garnering nearly 15 billion views. We were the first major beauty company to launch a branded channel on Twitch and the first beauty brand on BeReal.”
As a sales category, digital penetration is now 17%, growing from 14% last year. The channel grew 75% in the most recent quarter.
Amin laid out three factors driving this trend:
Marketing. The marketing investment that e.l.f. made brought strong returns, and the digital-first nature of those ads are bringing people to the brand’s digital sales channels.
Loyalty. E.l.f.’s Beauty Squad loyalty program has 3.7 million members, which is a 25% year-over-year increase. Loyalty members are the biggest driver of the brand’s digital business, accounting for over 80% of sales on the brand’s DTC site.
Multichannel. e.l.f. is the only one of the top five mass cosmetics brands that has a DTC site, Amin said. It is also seeing strong growth at Amazon and other retailer ecommerce websites. The growing presence is “building upon itself,” Amin said.
With digital growth, the brand is seeking to expand capacity in the supply chain that will provide more efficiency and faster delivery, as well. It is shifting to a more distributed ecommerce fulfillment model. Previously, it had one automated warehouse in Columbus, Ohio, which meant shipping to the West Coast could take time. Now, it is moving to a multinode distribution network. With the first couple nodes up and running, there is already improvement in delivery times.
The brand is also adding distribution capacity to its main warehouse in Ontario, California.
As marketing helps more people discover and buy from the brand, the operational improvements will help create a customer experience that lives up to the hype.
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Marketing
09 June 2023
'There's a lot of ways to frame value'
Campbell Soup Company CEO Mark Clouse offered thoughts on messaging amid inflationary shifts in consumer behavior.
Photo by Kelly Common on Unsplash
After months of elevated inflation and interest rate hikes that have the potential to cool demand, consumers are showing more signs of shifting behavior.
It’s showing up in retail sales data, but there’s also evidence in the observations of the brands responsible for grocery store staples.
The latest example came this week from Campbell Soup Company. CEO Mark Clouse told analysts that the consumer continues to be “resilient” despite continued price increases on food, but found that “consumers are beginning to feel that pressure” as time goes on.
This shows up in the categories they are buying. Overall, Clouse said Campbell sees a shift toward shelf-stable items, and away from more expensive prepared foods.
There is also change in when they make purchases. People are buying more at the beginning of the month. That’s because they are stretching paychecks as long as possible.
These shifts change how the company is communicating with consumers.
Clouse said the changes in behavior are an opportunity to “focus on value within our messaging without necessarily having to chase pricing all the way down.”
“No question that it's important that we protect affordability and that we make that relevant in the categories that we're in," Clouse said. "But I also think there's a lot of ways to frame value in different ways, right?”
A meal cooked with condensed soup may be cheaper than picking up a frozen item or ordering out. Consumers just need a reminder. Even within Campbell’s own portfolio, the company can elevate brands that have more value now, even if they may not always get the limelight.
The open question is whether the shift in behavior will begin to show up in the results of the companies that have raised prices. Campbell’s overall net sales grew 5% for the quarter ended April 30, while gross profit margins held steady around 30%. But the category-level results were more uneven. U.S. soup sales declined 11%, though the company said that was owed to comparisons with the quarter when supply chains reopened a year ago and expressed confidence that the category is seeing a longer-term resurgence as more people cook at home following the pandemic. Snacks, which includes Goldfish and Pepperidge Farm, were up 12% And while net sales increased overall, the amount of products people are buying is declining. Volumes were down 7%.
These are trends happening across the grocery store. Campbell is continuing to compete. It is leading with iconic brands, and a host of different ways to consume them. It is following that up with innovation that makes the products stand out. Then, it is driving home messaging that shows consumers how to fit the products into their lives, and even their tightening spending plans.
Campbell Soup is more than 150 years old, and has seen plenty of difficult economic environments. It is also a different business today, and will continue to evolve. At the end of the day, continued execution is what’s required.
“If it's good food, people are going to buy it, especially if it's a great value,” Clouse said.
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