E.L.F. Beauty CEO on consumer migration to skincare, plant-based products

Yahoo Finance’s Julie Hyman, Myles Udland, and Brian Sozzi speak with E.L.F. Beauty CEO Tarang Amin about the state of the beauty industry amid COVID-19.

Video Transcript

BRIAN SOZZI: OK, Mask wearing during the pandemic hasn't stopped ELF beauty from selling a good bit of cosmetics. Let's bring in ELF Beauty CEO Tarang Amin for more on this. Tarang, always good to speak with you here. Interesting week in the world of retail. You had Target and Ulta tag teaming to bring Ulta shops inside of Target. Target is a key customer for you, about 22% of your total sales. Are you involved in that? Does that expand your shelf space? Take us through that.

TARANG AMIN: Sure, so first of all, I think it was a brilliant move on both Target and Ulta's behalf. I think whenever there's something good for both companies, gives Target access to brands that they didn't have access to before. It expands Ulta's footprint. I think it's great, because both are real key customers of ours. Target's our second largest customer, Ulta Beauty's our third largest customer, and we've been having great momentum at both. So I do think it opens up opportunities for us and some of their other key partners in the future, and I think the most important thing, though, is it brings even greater importance to beauty. And I think raising the profile of beauty within Target, obviously, that's the only thing Ulta Beauty has been focused on, I think is a great thing. And we've done really well with those customers, so I'm looking forward to the future there.

BRIAN SOZZI: Another key customer for ELF is Walmart. About 30% of your sales. And I was recently talking with Walmart's CEO Doug McMillon, and his goal or his vision for if they potentially have an ownership stake in TikTok is to bring this marketplace business to life. Have you talked to them about what that might mean for ELF? I know you've had a lot of success on the platform.

TARANG AMIN: Yeah, we have, and we have been talking to them. I think, you know, between our various TikTok challenges, I think we're now approaching 10 billion views, over six and a half million user generated videos, so we really are one of the lead brands on TikTok, particularly for beauty. And so we're talking with them as well as our other key customers in terms of how we collaborate and really continue to help engage this Gen Z consumer where we've had such success.

JULIE HYMAN: Tarang, I'm curious about the balance that we are seeing within cosmetics probably right now where it's skewing a little bit more to skincare because of what's happening in the pandemic, and so how are you guys thinking about that? Do you think that there will be coming out of this, or is there presently, a swing to a more natural look and how can you guys play into that if so?

TARANG AMIN: Sure, so I think, you know, we're fortunate in that we were strong coming into the pandemic. We've executed extremely well. While the color cosmetics category at times has been down as much as 20 to 30%, we just posted our seventh consecutive quarter of sales growth, so I'm really proud of how the team is executing. And a key part of that execution is continuing to have innovation both on color cosmetics as well as skin care.

Skincare is a huge opportunity for us. We only entered the skincare market a few years ago and already on our ELFcosmetics.com, the number one mass commerce site in the US, our skincare business represents 25% of our business, and that compares to about 8% or 9% overall. So we definitely see this consumer migration to skincare, but we're also having great success in color cosmetics, and our plan is to continue the momentum on both.

BRIAN SOZZI: Tarang, one line among many in your earnings call that caught my attention, you are now exploring plant powered clean beauty care products. What is that, and how big a rollout could that be?

TARANG AMIN: Sure, so that has to do with our acquisition earlier this year of W3LL People. They are a real pioneer in clean beauty, been at it for 12 years, have over 40 EWG verified products, which are the high standard of clean. And really, W3LL People is plant powered clean beauty, and we have high hopes for that brand. We're continuing to kind of-- we just did a brand recharge to really get W3LL People front and center for consumers, because to the earlier question, I think that is a trend that's here to stay. People are increasingly conscious of the ingredients that are in their products, and so we have high hopes of W3LL People, including kind of continue to expand its distribution, innovate on it and really put it on our platform to really enhance that brand.

But it's also going to do the things for the company overall. We're already seeing ELF Cosmetics is mainly clean, and with the help of W3LL People, I think we can get further there. Our new brand Keys Soulcare, a new lifestyle beauty brand with Alicia Keys, is coming out the door 100% clean as well. So it is a big focus of our company and really builds on the strengths that we have across all the different areas that consumers love about us.

MYLES UDLAND: And then trying this, of course, is related to the news you guys out had out yesterday about the sustainability milestone you've met, and it really brings up a theme that it seems like we discuss every day here, and it's often executives bringing it up, but is, you know, the way that ESG is going factoring into corporate strategy right now, and this certainly would seem to be, in addition to what you were just outlining there with those new brands coming out, would certainly seem to be at the core of how you're thinking about the next several years.

TARANG AMIN: Yeah, absolutely, and I think for us, it always goes back to our consumers. Our consumers love the fact that we're 100% vegan, cruelty free. We have these high quality cosmetics at these incredible values, and sustainability is increasingly also becoming important. And so we're really proud to kind of announce that as part of our Project Unicorn, which is a major package and shelf relaunch of our brand a couple of years ago, we've saved already over 650,000 pounds of packaging, and it's really putting us on the journey of being even more sustainable and clean and having really, there's nothing that you wouldn't like about ELF. It's clean, cruelty free, vegan. Sustainable is our goal for the future, and we feel that puts us even in a stronger position than we are now.

BRIAN SOZZI: All right, let's leave it there. Tarang Amin, ELF Beauty CEO, always good to speak with you. Have a good weekend.

TARANG AMIN: Thanks, you too.