In a year filled with beauty acquisitions and investments, one brand has taken a different path: Olaplex, the hair care brand focused on rebuilding damaged bonds, went public.
The company raised $1.8 billion in an initial public offering in September 2021 at a valuation of more than $15 billion, with net sales increasing 81 percent year-over-year in the third quarter. In November 2021, the brand said it expected to end the fiscal year with net sales of at least $580 million.
After going public, Olaplex hopes to build on its current momentum, and is betting it can translate consumer enthusiasm for its hero product into a multi-step haircare routine, all featuring the brand’s patented technology.
But with rapid growth challenges ahead: Increasingly, competitors, old and new, are using a similar science-based approach to hair care. To be successful going forward, the brand will have to increase its product range without breaking up sales and retain customer loyalty in a crowded environment – all while creating an in-house infrastructure that can support such high-level growth.
“[An] “The IPO is not the end, it’s the beginning,” CEO Jo Wong said. “You’re under more scrutiny but you also have more opportunities.”
behind the ascent
Dean Crystal and Eric Presley founded Olaplex in Presley’s garage in Santa Barbara, California in 2014. They initially created the hair care professionals brand, launching three products called No. 1 Bond Multiplier and No. 1 Bond Multiplier. 2 Bond Perfector, for professional salon use and No. 3 hair supplement for home care. Olaplex patented the star ingredient of this product, Diaminopropyl Diglycol Dimalate, which is intended to repair and reconnect broken bonds in hair, a year later. It is still found in every Olaplex product.
Olaplex gained a following in salons, but it was in the hands of celebrity hairstylist Tracy Cunningham, whose clients included Jennifer Lopez, Drew Barrymore and Jennifer Garner, that it was a brand change. Crystal and Presley credit Cunningham’s influence as a major driver behind the brand’s early successes, helping to unlock interest in “fixing the bond” as a subcategory in hair care. Since then, the brand’s first consumer treatment, called the No. 3 Bond Perfector, has become the brand’s hero product.
“There is a bit of innovation going on [in the beauty market]Gina Rosenstein, beauty director at Harper’s Bazaar. “Their patented technology is really unlike anything else and that’s what sets it apart from the competition.”
Olaplex continued to ramp up its consumer products division, and by 2019, private equity firm Advent International had acquired Olaplex for an undisclosed amount, and appointed Moroccan oil executive JuE Wong as the brand’s new CEO.
At the time, the brand had only five products, and professional products accounted for 47 percent of its business. Keen to grow the consumer-facing Olaplex business, Wong has invested in the brand’s digital presence and direct-to-consumer e-commerce offerings, revamped the website, invested more in social media strategy and expanded in China through partnerships with Amazon. It ended up serving the company well once the pandemic hit, forcing salons to close and putting the company’s professional business — which still accounts for roughly half of sales — on pause.
“In hindsight, he made me look like a genius,” said Wong.
Even as salons closed, Wong found a way to keep the brand’s professional business going, too: She launched a 90-day affiliate program for stylists, which has generated nearly $400,000 in commissions and more than $1 million in sales.
But it’s the company’s DTC business that has boomed during the pandemic, as consumers focus on hair care in lockdown. The growth of Olaplex’s DTC and retail categories, including Sephora and Ulta, is now outpacing its professional offerings. Net specialty and DTC retail sales grew 128 percent and 87 percent from 2020 to 2021, respectively.
Revenue for hair masks and scalp treatments, in particular, has doubled since 2019, according to data from the NPD. Olaplex outperforms the overall hair care category, which saw eight percent revenue growth in 2020 compared to the previous year, as well as the rest of the prestigious US cosmetics market, which is down. That momentum has also continued in previous shutdowns: From January to August 2021, sales of hair products increased 55 percent compared to 2020, according to the NPD.
Wong credits the brand’s growth in part with a trend she calls “hair skin beautification.” Consumers’ approach to hair care is increasingly similar to their own to skincare, creating multi-step routines that go beyond shampoo and conditioner. These customers are especially desirable for brands because they are not swayed by an exorbitant price tag – as long as they see results.
“When prices go up, they are willing to pay a premium,” Wong said.
Olaplex is building its product offerings to cover more steps of this routine, having launched two products over the past year bringing its total offering to eight. Demand follows: The average customer on the Olaplex website buys roughly three to five products in a single transaction, according to the company. For the brand, it was a show of interest in what the company does other than its hero product, the No. 3 Bond Perfector.
“The impressive thing is that none of the new products break up sales of existing products,” said Joanna Kim, an analyst at Cowen.
TikTok also deserves some of the credit for the brand’s growth, with its No. 3 product going viral on the platform: the “Olaplex” hashtag has nearly 567 million views on the platform along with transforming hair and educational videos. The brand primarily relies on user-generated content to fill out its own channels, which have plenty to choose from. On average in the last 90 days, Olaplex has had 400,000 posts about its products across channels, according to the company.
I look ahead
Olaplex’s initial public offering will allow it to manage demand and maintain sustainable growth, building research and development as well as marketing and distribution channels. Wong added that the recognition from his show has opened up the brand to a new pool of talent that it plans to expand rapidly this year.
“We want to stay very focused, very organized, and very disciplined,” Wong said. “Modernity is not for the sake of modernity… We will formulate so that the formula is correct.”
Wong is concerned about supply chain constraints and ensures that the team has protection against the schedule they have set themselves. It helps that Olaplex carry a relatively small number of products, most of which come in the same bottle, making implementation simpler.
Over the next three years, the company is on pace to launch a professional product and two retail products annually. Currently, Olaplex’s R&D team is working on a production schedule from 2025 to 2029. It is also looking to expand its retail presence, striking a new partnership with Ulta last year.
There are still challenges ahead, especially in the form of increased competition. Bond building has become a class in its own right, with competitors ranging from Amika to Bumble and Bumble. Barbara Storm, Augustinus Bader, and other prestigious skincare brands have entered the hair care category, hoping to build on the loyalty they have built with consumers.
“It is inevitable that others will want to enter, but I think so [Olaplex is] “It’s in a very good position,” said Manola Soler, an analyst at consultancy Alvarez & Marsal. “In essence, their strategy is to get a really good product, and it seems to be working.”