ESW Beauty

0:00Elina Wang:Welcome to the Emerging Brands podcast. Sharing the stories behind brands you'll want to shop next. I'm your host, Kelly Bennett. I am a New York City-based brand strategist for CPG Food and Beverage Brands. In each episode, I'll take you behind the scenes of founders that are building better-for-you products and bringing them to market. it. Also, I talk to brand builders, retailers, industry experts, and tastemakers who help bring those cool products to your shopping cart. You will hear stories of real-life founders, their launch strategies, and practical advice you could use to grow your own brand or simply discover what's next on shelf.

0:42Elina Wang:And the best part is you could shop all the brands featured on the show. This podcast is brought to you by Glimpse. Glimpse is an AI powered deduction management tool that disputes and recovers invalid deductions, winning brands, thousands of dollars and hundreds of hours back to founders so that they can focus on what really matters most. If you're a brand selling in retail, go to tryglimpse.com backslash trial for 30 days free and let them know I sent you. Now let's dive into the new episode. Hi everyone. Welcome back to a new episode of Emerging Brands Podcast with Kelly Bennett. Today is a really special episode because I am able to talk to a founder who has the number one natural mask brand in the US.

1:39Elina Wang:She is currently selling in 19 ,000 plus retail stores. And I also have her interim CMO here on the podcast, who is a fractional executive. And we're going to talk about building a standout brand that has such an incredible retail footprint for a mask brand in beauty that is so competitive. And so we're going to dive into how she built this and also talking behind the scenes of raising capital for retail rollouts. this brand is currently in their series A and we're going to dive into all of it. So Alina Wong, she is the founder and CEO of ESW Beauty is on the show along with Amy Kaepelnick. She is a fractional executive and founder of the Forward Group and she is also the interim CMO of ESW beauty.

2:46Elina Wang:So Alina, Amy, thank you both for coming on the podcast today. Thank you so much for having us. Thank you. You're so welcome. Again, such an impressive step right off the bat, 19 ,000 retail stores. This is goals for so many founders listening. So Alina, I would love to first kick it off to you because the world of CPG is so competitive, especially beauty. So how did you first come up with the concept of ESW Beauty? Of course. So I can start with an intro about what ESW Beauty is and what we are for. We are a wellness-inspired skincare brand. All products are made with clean formulas, clinically effective, derm-tested, and made in Korea.

3:37So there's a little bit of K-Beauty inspiration in everything that we do. I started my career 10 years ago, actually. I started in a K-beauty distribution business working for my mom, a small family business. And we had a very simple business model. We sourced products from Korea and then distributed them, introduced them to retailers in the US. So that's where the B2B DNA for me started and my love for skincare began. And so I did that throughout the years of high school, college, and then on a personal side, I started having health issues, specifically stomach ulcers. That led me to reset my diet and to really start my wellness journey, which is why you see that everything is inspired by better free beverage, like our raw juice face masks, our latte eye patches, our smoothie lip treatments.

4:24And so I saw there was a white space because there was no brand that had this K-beauty powered, wellness inspired and clean formula done clinically effectively. So that's why I decided to embark on this journey. and it was honestly such a gamble because I was still in college at that time and I decided you know what let me take a little bank loan so I took a$25 ,000 bank loan and we made samples we brought it to our first trade show Cosmoprop in 2019 and then we were able to quickly get multiple orders. My first$100 ,000 order came from Kohl's and the rest is history. And so this last year, we ended at 11.4 million gross revenues, EBITDA positive in 19 ,000 doors, category leader in the face mask space and our goal is to become your Gen Z skincare brand, your favorite Gen Z skincare brand.

5:25Okay.

5:26Elina Wang:You just hit on so many impressive milestones, so I have to dig into it more. So you started this while you were still in college. Did I hear that right? That's correct. Very cool. So did you leverage your background in your family business to first take those next steps in order to have samples to even bring to the trade show? Yeah, so no capital. My family did not invest capital, but they did help me with, well, the experiences there, I was able to get to know a lot of manufacturers. And so it made finding these manufacturers, pitching to them a little easier. But it was still a very big uphill battle.

6:10I had very small amount of capital. And if you know, MOQs are 10 ,000 or 20 ,000 units, but I was able to negotiate and get them to be a few hundred. units. And so that made budgeting a lot easier. And then I was able to bring back all of these POs from retailers to these manufacturers. They were quite happy.

6:29Elina Wang:Oh, I'm sure. So that is incredible that you were able to leverage those relationships with the background of your family business and also those learnings to know how to negotiate because that is not easy. And that's really, really impressive that you did that. And so you were able to negotiate, say, 100 units, go to the trade show, get the POs, show that you had those POs in order to then grow the business. Yes. Okay. I'm obsessed with this story already. So how did you land on, again, the K-beauty, the clean ingredients, and just finding different ways to differentiate. Also, the brand and the product names are really, they just sound really delicious too.

7:22Elina Wang:Anything food inspired I'm in. What was that for you? Was it just your intuition? Were you seeing trends in the market? Like what was helping you have a sense of, okay, these are the different things I want to hit on? Yeah, it was a little bit of everything, but the sequence of my thought process came from, well, I love skincare and I want to create a brand of my own. Being in the K-beauty industry, I know how powerful their R &D is and their manufacturing and how innovative they are. So it always had to be starting from products made in Korea. And what was very important for me was that I was putting out products in the market that were clean, non-toxic.

8:07And so we specifically use the Whole Foods Body Care Standard as the golden standard to formulate our skincare. And then I wanted to make sure that there was a differentiation in the angle, packaging, brand positioning. And because of my wellness journey where I discovered these better free beverages, I got really intrigued by the idea of making that the branding of, of the brand. And, um, that's kind of how the whole story of K beauty clean. And then this wellness, healthy beverage inspired came from, um, and then I want to make sure in a clean and clinical is different. And Amy can talk about that more too, but not only do I want clean formulas, but I want to make sure they're clinically effective for your skin.

8:55And so we make sure that all products are derm tested and that we use key actives from Korea to make sure that the formula is effective in doing what it's supposed to be doing.

9:08Elina Wang:Very cool. So you touched upon essentially bootstrapping, right, to get this brand to the trade shows, get those POs. What did that look like then to be able to start fundraising? I know that you're currently in a Series A, and that's where, Amy, I would love to dive into that with you. But what did that first, Alina, look like of making that leap, of expanding your retail footprint and also knowing, like, okay, we're going to have to fundraise? So beginning to now, it's been six and a half years. So we started in 2019 and then now 2026, we've bootstrapped for the first six years. We were very much slow and steady.

9:52The first few years were around -

9:54Elina Wang:That's impressive. Yeah, like one, you know, up to like one, 2 million. And then 2024 at like four and 25, 11 this year, forecasting hit 20. So you can see that the last few years we've really grown and scaled a lot. And so it's more and more capital intensive because you want to be able to scale. You need to bring on more team members. You need to be able to invest more in marketing, invest more in innovation. And so that's why I ultimately decided to start fundraising because to hit the next goals and be able to do so productively and efficiently, you need more capital. Absolutely. So Amy, I would love to kick it to you next.

10:36Elina Wang:the conversation around raising capital. What are investors looking for? I was just mentioning before we hit record earlier today, I did an event with Dream Ventures and very much talking about fundraising and really getting a brand to stand out to investors. And I would love to hear from your point of view. You're also an expert in beauty, marketing, and also supporting with making a brand stand out to investors, right? So I would love to hear from your perspective, what advice do you have in this next shift for a brand? Yeah. So it's such a great question because we are in the world of indie brands, which I love.

11:28I've always championed and supported indie brands along the way. And so with that, every indie brand is really looking for investment, whether it's angel investment, whether it's VC, whether it's growth equity, whatever it is, they're all trying to get their hands on money, on capital. I think what's happened post-COVID is that, and I know Alina can speak to this as well, being in the raise process, is that the investors are no longer impressed with this growth at all costs. After COVID, economy changed, the availability of resources changed, and investors learned a lot, and they've actually become more cautious along the way.

12:13So they want to see profitability or at the very least a clear and believable path to it. They want strong contribution margins. They want healthy unit economics. They want a real understanding of how is this business actually going to work or actually works beyond just top line revenue. They want to see traction across multiple channels. I mean, we've been screaming omni-channel for a decade plus, but there are still brands out there that are truly not omni-channel. So D2C, meaning like.com, retail, Amazon, wholesale, TikTok shop, et cetera. But just as importantly, they want to see traction with the consumer.

12:54So are people coming back? Is there a repeat purchase? Is there loyalty? As we know, beauty has one of the lowest loyalty percentages across all of CPG. It's at like 23 % was like, like two years ago. So, you know, especially for a demographic that ESW serves where they're really interested in what's trending and they want, they're very much into testing and finding out the products that, um, they like and that, and that they want to, um, keep a space in their, vanity or makeup bag or whatever. I would also say, is there a real community around the brand or are people just buying it once because it went viral on TikTok?

13:41And I've noticed that investors are also thinking a lot about more longevity. So is this brand culturally relevant with staying power? Or is it more of a trend-driven brand having a moment? Can it survive beyond the current hype cycle? I know for a fact that with certain brands that have launched, that have had a lot of viral moments, a lot of traction behind it, celebrity brands, this is kind of what investors are looking at because they say, okay, yes, you have a celebrity as a face or yes, you've had early traction because this is really niche. This is solving a problem right now. But if I invest in you, is that going to be a problem in three years?

14:26Or what happens if this celebrity, you know, doesn't, doesn't know business or isn't running the company or isn't involved or has a PR nightmare, really looking at is this brand and is the face of the company going to have longevity? And I think with that, um, my last, my last insight I would say is, is it brand founder led? Is the brand founder led? Again, you have a lot of these celebrity brands or famous founders, maybe they're influencers, you know, like summer Fridays. And it's like, are they actually going to be the face? Are they going to put in the work? Are they going to be there? Because investors know that there is a power with founders who are front and center because you can't manufacture people buying from people.

15:18Elina Wang:Yes. And I'm sure Alina has everything you said. Yeah. No, I'm like nodding my head as you were saying everything. And it very much was similar to the conversation I was having this morning of a founder led brand and a brand that has staying power and has retention and has community. So Alina, from your experience now from the last six plus years, what have you heard from investors that really has made your brand stand out to them? Yeah, I think it's one, it's the soul of the brand. And then also it's the numbers and the economics that I think we've really were able to hit on and prove. I mean, the branding is very strong.

16:06we found a white space and we found a good market. I think that we've proven out retail traction that is very difficult for a lot of brands. We did it all bootstrapping. We are EBITDA positive. We have good gross product margins. And I think ultimately the key is from the little marketing capital that we've had, we were able to generate a lot of success thus far. So I think all of that combined, it shows to them that we've built a foundation without them. So with them, ESW can definitely take off.

16:47Elina Wang:I'm obsessed with everything you just said, because again, it's not easy. And the fact that you did that on a bootstrap budget is really incredible. It really, really is. So Amy, from your perspective of fundraising and retail rollout. What is some insight there that you would share with a founder who is focused specifically on rolling out more retail doors? We know that is incredibly capital intensive, always super competitive. Then you have more people getting piece of the pie. But I would love to hear from your learnings, some insight and advice on how to best approach that. Yeah, this is also another great question.

17:40And I will die on the hill of what I'm about to say. Obviously, these insights are outside of ESW. Just want to make that clear. These are insights that I've been able to gather over my 20-year career working with indie brands. So to answer your question, the first question I ask a brand founder when they say, hey, listen, I want to expand into retail. I'm like, do you have the financial and human resources to support this expansion? Because retail sounds so great out loud and on paper, but the reality is it's incredibly huge undertaking. One that can sink your business if your business is not ready for it.

18:25Because the easiest part is really getting in. The hardest part is staying in. The hardest part is meeting the sales velocity because especially when you're an indie brand, your brand might not have the community. It might not have the brand awareness. It might not have the budget to promote the retail doors that your competitors do, that you've been, the competitors that have been around for a lot longer that have more revenue, have a larger budget. And unfortunately, we're still in this world where even though retailers want indie brands because they understand the consumers want indie brands, the retailers are not going to support you.

19:12They don't care. Hard stop. They don't care what your situation is as a brand. They are going to hold you to standards that they set for you as well as their competitors. And the less you perform, the more shelf space they will take away from you. And so it becomes a really difficult, I think, situation where you're like, is this just a race to the bottom or a race to being released? I think there's also incredibly high cost for retailers that founders don't realize, like founders who haven't expanded into retail don't realize. And that's everything from shelf displays to sampling to the paid media that is required to be paid by the brand.

20:00And I really don't say this to scare or deter founders from going after their retail goals. I mean, I think I know your space is a lot of food and Bev and me and Alina, our space is really beauty. And I know with food and Bev, really the way to growth is to expand into retail. So I don't say this to scare detour founders. It's more of like, this is the reality and you have to prepare for it. Secondly, on the cost aspect is I think they underestimate the cost and the logistics it takes, or like that is involved in fulfilling the PO, not even getting the PO of like, you know, again, food and Bev.

20:42And I would say ESW sits in the middle of that.

20:46Elina Wang:Right. And that's why I'm obsessed with your brand. I love how it's like in the middle. Yeah, exactly. And so like, you know, we're not even talking about going to the trade shows and how much expo costs and how much all, you know, all of these trade shows costs, but it's like the cost and logistics involve in fulfilling a PO that you get. And it's like, you know, unless you have terms with your co-man or a debt lending company, it's like, You're going to need to front the cost, which can be over a million dollars. And so I've seen that be a shock to a lot of founders like, oh, my God, how am I going to fund this PO?

21:25And on a logistic side, and this will be my last point, I think founders need to make sure that their supply chain can handle that volume and then also meet the deadline. because again, as ESW knows, since we're in 19K doors, the retail deadlines are pretty firm. And sometimes they'll even hit you with like a late fee if you don't, if you're not indoors by a certain date. So yeah, I mean, there's a lot of upside in retail, but there's a lot of nuances that I think founders don't really realize when they have these goals of wanting to be an Alta or wanting to be in Sephora, wanting to be in Whole Foods.

22:00They don't understand really the 360, the cost and the strategy and the logistics that go into it that can really be detrimental to a business, not help it, but sink it.

22:13Elina Wang:Do you have one piece of advice for an early stage founder to say best prepare or start preparing them for that expansion into retail? Something fairly simple or something to keep in mind in the early days? Yeah. Um, so one of the first things I always suggest to a founder is build your DTC, build DTC as much as you possibly can before you venture out into retail. Again, I know food and Bev is a little bit, a little different with DTC. Yeah. It's a little bit different. Yeah. Because you know, how many sales are you really going to make of like, I know one of your brands is Coda, right? And it's Coda.

22:57Yeah. So yeah, such a great brand. And it's like, well, is someone really going to be ordering cottage cheese from a dot com? Like, no. Is it really going to be ordering off Amazon? Also, maybe no. So it's it's a different wheelhouse. But I think within beauty, you still have opportunities to own your revenue and own some channels. And I know, you know, you can't solely own TikTok shop and you can't solely own Amazon, but it is channels that are half owned and you are still making sales. You are still learning what products are consumers really gravitating towards and which ones they aren't. And then when you're on.com, because consumers will still buy on.com, that's when the learnings can just really be expansive.

23:42They're giving you information. You're seeing how they're shopping and their behaviors in the back end with like G4. That is going to shape everything. That's going to shape your strategy. That's going to shape the channels you go after. That's going to shape your product dev. That even can shape what retailers you go after. You might launch thinking I'm a Sephora brand. And then you really are doing the research and you're like, actually, I think I might be an ultra brand, which is completely different consumer. So I always say lean into D2C, build community, learn who your customer is, experiment, A-B test, do all of that stuff.

24:27Then you work out all the kinks in your supply chain, on your website, with logistics, shipping, operations, all of it. Then when you're ready and when you have the manpower and the financial power, then start going after the retailers. It doesn't mean you can't introduce your brand. It doesn't mean you can't do trade shows. It's still good to do those things on the outset to get these buyers familiar, but just be prepared.

24:54Elina Wang:That's a great piece of advice. And it sounds like having a solid foundation that you're able to operate yourself and have the learnings and the data and building that retention and building that loyalty, then going after retailers. Again, it's nuanced depending on which vertical CPG. But I think overall, I totally hear what you're saying. And I absolutely agree with having that foundation. Alina, for you, a piece of advice I would love to hear is, again, you've done a very impressive job bootstrapping, opening up retail doors. Now expanding your retail fundraising. What piece of advice would you share, say, in those early days that you were bootstrapping opening retail doors that you've learned that was really helpful?

25:42Elina Wang:And also now that you are fundraising and expanding in retail, any lessons you've learned in that chapter? yes of course um i would say you really need to be financially prepared this is something that i wish i knew before okay good thing in the beginning i chose retailers that were not expensive but if you want to go into a target and ulta any sort of national retailer it's very expensive um i would say build out, this is very just hard technical advice, but a financial model, understand what are all the costs in retail besides the cogs of your products, there's shipping, there's trade spend that you need to do.

26:31There is like, if you want to do an Ulta, a gondola fee in store field education, your brand marketing, the more expensive your product is, the more expensive it is. So for us, we created masks. And so for retailers and for us, it was less risky. But if you have a$40 cream,$50 cream, it's very expensive because you need to convince a customer to buy a$50 cream.