Enhancing the brand with new products
Carlyle acquired Holland & Barrett International (H&B), a 147-year-old retail chain, as part of our Nature’s Bounty investment in 2010.
In H&B, Carlyle saw an opportunity to strengthen supply chain management, build on H&B’s commitment to ethical sourcing and use customers’ interest in sustainable and natural product attributes to refresh and strengthen the brand. As a result, a quick succession of advances followed Carlyle’s investment, including:
- Packaging: Elimination of plastic bags six years before a UK tax went into effect
- Ingredients: Removal of microbeads from products in 2012, four years ahead of this issue emerging in the UK press
- Product: No genetically modified ingredients in any of its products
- Product: A specially selected array of Free From products and an online filtering system ensuring those customers shopping with particular allergens in mind can do so effectively
- Provenance: 100% Manuka honey ingredients with full supply chain awareness from hive to shelf on Manuka honey
- Reformulation of aromatherapy oils to be 100% pure.
H&B now leads the market with product innovations, many of which include sustainable attributes or natural ingredients. Customers are responding: H&B estimates that in the one-year period from October 2015 to September 2016, the company’s Free From products attracted 142,000 new customers into the stores. Customers buying Free From products also bought them more frequently than other products.
The focus on environmental, social and governance issues is driving top-line growth for H&B:
- Sales for the emerging category of “ethical” beauty sales had a compound annual growth rate (CAGR) of 20% between fiscal years 2013 to 2016.
- Retail revenues from Dr. Organic grew 27% (CAGR) from 2012 to 2016.
- Manuka honey products accounted for 4% of UK sales in fiscal 2016.
- Sales for Free From products grew 29% CAGR from fiscal 2011 to fiscal 2016, with the Free From brand boosting the category of allergen-free items.
H&B’s ESG consciousness is paying off, with industry-leading financial performance including 32 consecutive quarters of like-for-like growth and year-over-year sales growth exceeding 10% for H&B retail stores. EBITDA has grown from £78m in 2010 to £151m (25% margin) in 2016.