Amazon Briefing: Why Heyday and Branded are combining to become Essor

Now, another big change has been confirmed. The Paris-based Branded has acquired the U.S.-based platform Heyday. Together, they’re rebranding as Essor.

Essor claims it brings in nearly $400 million of annual revenue, and as a combined business will be able to jumpstart M&A. The focus has been on finding digitally-native brands and expanding them to new geographies and categories. According to Ben Kaminski, who co-founded Branded and is now chairman of Essor, Branded’s portfolio companies launched over 900 new products in the last year and half, which now represents around 30% of its overall revenue today.

“We see enormous opportunity to really leverage what [Heyday has] been building,” Kaminski said.

Modern Retail sat down with Kaminski, as well as Heyday co-founder Sebastian Rymarz, who will now be Essor’s president, and Branded’s CEO Pierre Poignant, who will be chief executive of the new combined business. They discussed what led to the acquisition, the state of roll-up brands today as well as their plans for the future.

The three executives were clear that they shouldn’t be compared with the other players in the space. But they did confirm layoffs are on the horizon. The focus, according to Essor’s leadership, is on finding new brands and using the platform’s institutional knowledge to expand to new channels beyond Amazon.

It also helps that more brands are looking for an out. “I would say our pipeline now has never been more full of founders saying, ‘Hey, we want to explore selling our business,'” said Rymarz.

Below is the conversation, which has been edited for space and clarity.

Can you talk about what led up to this acquisition? How long have you two been in discussions?

Sebastian Rymarz: The conversations actually began over two years ago. We both spotted each other as playing in a similar ecosystem. As we got to know each other, it became clear to me that Branded was the only other organization in the space taking a similar approach to us. And I had met with dozens of organizations — platforms, houses of brands, different [companies in the] digital-first ecosystem.

We didn’t end up transacting or doing anything together then at the time. We kind of — on again, off again — had conversations. At the end of the day, we both had great businesses. We were both profitable. We both had supportive investors. And frankly, if I’m being honest from an ego perspective, I kind of wanted to keep running my own business.

I think what changed was the M&A market opportunity. DTC brands’ funding levels over the last two years have just plummeted and M&A volume has gone poof. Conversations that we were having with founders two years ago were, ‘Hey, we’re not interested. We’re going to wait this out.’ And I would say our pipeline now has never been more full of founders saying, ‘Hey, we want to explore selling our business.’

And so that opportunity now, in the wake of all the dislocation over the last two years, is greater than ever. And that kind of is what really prompted the why now. Why we’re going to join forces together is we’re going to have a stronger balance sheet, we’re going to be a better organization — $400 million of revenue. And we could take advantage of the opportunity.

Given you two operate in similar spaces, what did Branded see specifically in Heyday?

Pierre Poignant: I think what we’re doing is we’re building brands. So we are essentially acquiring or building smaller brands and transforming them to be global, omnichannel [businesses with] real brand equity and so on. So the start of everything is the product, the brand portfolio. Both [Heyday] and Branded, we went after bigger assets that have some brand equity, that are real brands.

We now have a very good portfolio of health and wellness brands — leading [brands]. Our top 10 brands [represent] 85% of the revenues at the combined company.

Heyday has built amazing capability in bringing brands to retail. We have the Heyday brands in Target, Walmart. They have also done an amazing job building the brand equity of their brands. You can see some of the partnerships that are ongoing. And on our side, we focused a lot on execution on digital channels.

I imagine, even as we talk about expansion and retail, Amazon is still the leading channel for Branded’s brands?

Ben Kaminski: Amazon speaks to about $0.40 to $0.50 of every dollar spent in the U.S. on e-commerce. It’s probably the most competitive place to purchase. So if you win, and you’re able to actually build brand equity on Amazon, that allows you actually to have much stronger success outside of Amazon.

Amazon is a substantial part of our business, probably the same as for many of the others. But we are kind of at that second stage now where we’re unlocking the omnichannel capability. A lot of our brands are going to big-box retail. At this stage, we’ve grown our DTC offering over the years as well. But Amazon is still for us, kind of the proving ground.

It’s been a weird time for aggregators. Some are being acquired, others going bankrupt. Can you talk a little about the ecosystem around you and what the overall atmosphere is like that led to where we are now?

Rymarz: Can I do just a quick timeout? I always kind of cringe when I hear [we’re associated or compared with aggregators]. It’s not factually inaccurate, but I just want to make a very important clarification. When we’re going out and we’re acquiring [brands] — like, when we acquired Boka, for example, or Zitsticka, or others — we’re competing with two types of buyers: strategics/consumer products companies or private equity funds. Never are we competing with an aggregator.

And the reason for that is… our strategy has been: let’s pay a full and fair price for a high-quality brand with potential that our platform can unlock. And we can pay more than a private equity firm can, because we can unlock more because we have that platform. That is very different than an aggregator approach, which has been: let’s minimize the amount we pay; Let’s pay two or three times EBITDA. I don’t have anything that we bought for two or three times EBITDA. We have things we bought for multiples of that.

Kaminski: The market approach that we’ve been taking is we’ve looked at acquiring larger brands on day one. So they needed to have proven themselves already, many of them in the consumable space, and so $10 million-plus in revenue. That’s a big differentiation from where a lot of the other guys went to. They went to buy products businesses, listings companies or whatever you want to call them.

The second big factor, at least for us, from day one, we always partnered with founders. So for us, it was not about acquiring a product portfolio. It was about bringing really, really talented founders on board and basically freeing them up. A founder who can build a $10 million, $20 million or $30 million business without ever raising money has a superpower. It may be product development, it may be community building. We got to leverage that superpower, and we basically, as a platform, are going to take care of the rest. We’re going to let that founder basically do what he’s doing best.

I think the third one is just quality over quantity. A lot of the aggregators went and bought hundreds of product companies with $2 million to $3 million of revenue. For us, we focus much more on buying a quality asset and then applying our levers of product development, geographical and channel expansion. And we’re doing all of that — leveraging technology and the data assets that we’ve built over time.

As the combined entity Essor do you have specific acquisition targets or a number of deals to be made in the next year?

Poignant: We are on a journey to build the next new kind of digital and native consumer product platform. The next CPG. So we need to do the right thing. It’s not about, ‘Hey, I want to do this over the next few years.’ It’s, ‘I want to make sure I build a platform and I build my brands.’ So it’s not about, ‘I have targets every year to buy a certain number of M&A brands.’ We don’t function this way.

That being said, Seb mentioned it: In four years in this, we’ve never seen the whole pipeline so full of great brands. So then it’s a matter of, for us, making sure we have the focus and we can bring value to these brands. And then, yeah, we can execute two, three, four per year. The focus now is on integration and making sure we’re successful. So don’t expect us to do four to five acquisitions over the next twelve months, that’s for sure.

The Branded team has pointed to Heyday’s past successes with wholesale expansion — it seems like it’s become perhaps the bread and butter of Heyday’s approach when talking about growing your brands. Can you talk about how you’re building wholesale retail expansion into your digital programs?

Rymarz: I wouldn’t say it’s our bread and butter. I want to be perfectly clear: digital — be that Amazon or direct-to-consumer through the website — are our biggest channels and should be and will always be. The whole premise is: How do we acquire these digital-first, emerging brands and transform them into household brands?

However, you’re right in saying we have done very well from the standpoint of going from zero to now in dozens of retailers with 55 of our SKUs. And I think it’s a very simple value prop to a retailer. The value prop is: Look, we’ve been able to demonstrate that digital shelf success translates to physical shelf success. It’s a very data-driven approach. And once we demonstrate that with one product with Target, now it’s easier to show the story that we can do it with two. And then once with two, it’s easier to show with three.

The second component is: Target knows they’re not facing Zitsticka or Iron Flask or Boka. They’re facing what was Heyday and what was Branded but is now Essor. That is an organization that fulfills on time, an organization that has real financial means. It’s not a small DTC startup that has, frankly, a component of unreliability. And that’s no offense to the DTC startups — it’s very hard. But we built a real platform. And so when you pair that reliability with the continued demonstration of success, that’s been the formula that’s feeding that channel.

Can you talk about the operational changes that come with the acquisition? Will there be layoffs?

Poignant: We’re going to be very decisive on integrations. We want to bring focus on leveraging the two strengths of the team. This is above the line — building on the strength of each other to build this cohesive bread portfolio. That said, of course, there are also going to be below-the-line synergies. And also there are redundancies, redundant jobs. We’re not going to share numbers out of respect for the colleagues impacted. But yes, there will be, obviously, below-the-line slashes.

What would you say you are looking for in new brands now? It’s not just about Amazon sales velocity anymore, right?

Kaminski: I think we want to see defensibility. That comes with scale in a certain respect of market size that you’ve built. I think the second big part is: We are very focused on consumable businesses. So businesses in personal care and beauty that have a high recurring revenue element, usually a very loyal customer base.

I think if somebody has built that on Amazon, that just further amplifies it — like the percentages of Subscribe and Save, for example, on a brand.

As you know, like 75% of the searches on Amazon are usually unbranded. People are looking for a keyword. We are actually interested in the 25% of searches that people are making on somebody actually looking for this brand. So those are metrics that are very, very important to us.

Rymarz: Ben mentioned a critical half of the equation, which is defensibility and all the different metrics we look at. And there are many, many more: Is this going to be an enduring brand that deserves to exist?

The second component is opportunity. And, most importantly, how do our platform and our capabilities match up against that brand? We have four growth levers: new product development, omnichannel expansion, global expansion and digital-native brand building. If we look at a brand and they’re in 70 geographies, scattered across 30 retailers already, they could be a great brand and defensible, but they’re not for us because we can’t pull our levers.

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