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Ecommerce on Tap is a world where Supply Chain meets storytelling. Join Nathan Resnick and Aaron Alpeter each week as they offer insights into the backend of successful businesses. Brought to you by Sourcify and Izba Consulting!
Nathan Resnick (00:00)
Ariana Grande fragrances have generated over $1 billion in cumulative retail sales since launch. So, we're talking about pretty, pretty big numbers here
Hey, welcome back to Ecommerce on Tap brought to you by Sourcify and Izba. I'm your host, Nathan Resnick. Join my co-host, Aaron Alpeter. Aaron, before we dive in I want to first give a quick overview for those that are joining us for the first time here about what Ecommerce on Tap is.
Aaron Alpeter (00:31)
Yeah, first off, thanks for joining. We have a lot of fun doing this. Each season we take an industry and we go really deep on it. We'll do a deep dive at the beginning of the season to bring you up to speed with why that industry is the way it is. Then we do six profiles of well-known companies. Then we have a founder interview at the end. And so this is our last episode for this season in terms of a deep dive. I'm really excited for this one.
Nathan Resnick (00:55)
Yeah, today we're covering Ariana Grande and her fragrance empire, if you will. we've touched on a lot of celebrity driven brands like this. And so today we're going to go really deep behind the scenes in terms of what actually makes a celebrity driven brand successful. the supply chain, the scope, the partnership, kind of everything in between. But before we dive in, there any tidbits that caught your eye the past week?
Aaron Alpeter (01:20)
Yeah, there was one that I read about FedEx and they recently surpassed UPS in terms of, I think, having the largest market cap of the major carriers. But what really caught me with this article I read was about their full on full thwarted embrace of agentic workforces. And so they've been using
AI for a long time to help figure out, you know, like software development and delivery routes and stuff like that. But what they've really committed to doing starting in 2027 and then through 2030 is to basically build out these agentic workflows in every aspect of their business. I think a lot of people are talking about this and, know, they just went on the record and said that, you they're going to put a date to it. But it was just really interesting how they want it to be core to over half of their operational workflows.
Nathan Resnick (02:08)
Yeah, that's pretty wild. mean, to see the consolidation and to see them really execute on their AI strategy here. I mean, that's, that's awesome.
Aaron Alpeter (02:16)
Yeah, they mentioned that the hardest part is going to be getting all of the data ⁓ connected and synchronized, which is someone who's been playing around with AI in our own business and with some of our clients. That is the hard part, because it's like, how do you figure out what data is acceptable or needed for a particular problem? And you don't want to give it too much data because then it won't know what to emphasize. And so it's a really interesting product. I can't imagine what it looks like for somebody at FedEx at scale.
Nathan Resnick (02:45)
Yeah, yeah, it's pretty, pretty amazing to see the efficiencies that different businesses can etch out with AI in today's world. I had a reporter reach out to me from Forbes asking about Izba's 10th birthday, and that's coming up pretty quick here in April. So Izba has been around for almost 10 years. How does that feel, Aaron?
Aaron Alpeter (03:07)
It feels weird. It's like, did my life go a little bit? But no, it's been a lot of fun. I can't believe that the company is turning 10 and it is beyond my wildest dreams for what we could have done even just starting out. So yeah, it's a lot of fun.
Nathan Resnick (03:24)
Well, I mean, to see the number of people you've helped implement and execute their supply chain and scale their supply chain and the amount of challenges that every supply chain team member has faced over the past decade is pretty wild. I mean, I don't even think you could count on two hands the number of challenges that has come up in the past, even three years, right? And just to see all the turns and changes that has happened over the past decade.
I think it's been pretty eye-opening for everybody in the ecosystem.
Aaron Alpeter (03:56)
I appreciate it, I think between COVID and these tariffs, it's been at least three lifetimes.
Nathan Resnick (04:03)
I believe it. believe it. Well, today diving into Ariana Grande and kind of this whole celebrity fragrance dynamic. I mean, it's really just an incredible eye opening story, right? Because a lot of times in the news, we hear about these celebrity driven brands that we don't quite understand how they're developed, how the partnership comes to be, what the supply chain looks like, and even what scale they are at. So I think we should really kind of start there in terms of, you know,
going deep on this deep dive and this season around fragrance.
Aaron Alpeter (04:37)
Yeah, know, perfume is one of the most profitable products in the entire luxury category. And it really feels like everybody is starting a fragrance brand, at least has at some point in time. You know, as we think about this being the last deep dive episode for this season of Ecommerce Tap, I think it's important that we step back and look at just some of the strange things about perfume. And we went over a lot of these in our category kickoff episode. perfume is one of the most profitable products in luxury.
and yet it only costs a few dollars to actually manufacture the juice. So a bottle of perfume that sells for 120 bucks may cost a buck 20, you know, $2 for the actual oil or fragrance that matters. I think about like the alcohol, the packaging, all those sorts of things. The real value in fragrance isn't the ingredients, it's the brand identity.
that's attached to that scent. And I think it's very, very different from some of the other things that we've profiled and some of the other things that we buy. It really is about what kind of club you're joining. And so luxury companies realized, gosh, decades ago, that perfume could be a really good entry product to help people get into that ecosystem. I think most people are probably not gonna spend $10,000 in a handbag ever, but they may buy a $300 bottle of perfume because it feels like owning a piece of the brand.
Nathan Resnick (05:53)
Yeah, I mean, it's pretty wild, right? Because I feel like we couldn't do a season about fragrance without touching on celebrity fragrances. And I feel like, you know, once that formula worked for fashion houses like Chanel and Dior, the kind of industry as a whole really realized something else that like, perfume can monetize the identity of a luxury brand, it might also be able to monetize the identity of a celebrity, right? And so I think the kind of
The thesis really stemmed from the idea that the modern celebrity fragrance industry, which kind of for a time became a very strange but also very profitable corner of consumer products, is kind of really what we're reviewing today as a whole, right?
Aaron Alpeter (06:40)
Yeah, absolutely. So let's kind of go back and take a look at some of the heyday of celebrity fragrances. So let's go back to the mid 2000s and it was kind of something where every celebrity almost automatically got a perfume deal. If you were famous enough, there was a company that was willing to put your name on something or to sell something. And so the list of celebrity fragrances.
from this era is almost comically long. So Britney Spears had fantasy, Jennifer Lopez had glow, Katy Perry had purr, Justin Bieber had one called someday, Taylor Swift actually had one called wonderstruck. And even like TV stars like Snooki launched Snooki Couture. And I mean, there were fragrances tied to athletes, actors, reality stars, even political figures. And at one point Donald Trump released a perfume called Success by Trump and Diddy launched a fragrance that was ironically called unforgivable.
Nathan Resnick (07:36)
⁓ it seems like everyone had a fragrance brand of their own
Aaron Alpeter (07:41)
Yeah, it sure does. And some chose not to try too hard with their naming. ⁓ Michael Jordan had Michael Jordan Cologne. Lionel Messi had Messi Eau de Parfum. Sophia Loren had Sophia Loren. Paris Hilton had Paris Hilton. And not to be up down by her co-star, Nicole Richie had Nicole Richie Fragrance. Shakira had S by Shakira. And I hear that paired well with Mariah Carey's M by Mariah Carey.
Halle Berry simply had Halle, and Naomi Campbell and Kate Moss had namesake fragrances, while Bruce Willis had Bruce Willis Man, and Jay-Z had Gold Jay-Z.
Nathan Resnick (08:14)
Is that it or are we, is there more?
Aaron Alpeter (08:17)
Well, not quite. There's a few other notable ones. I would include like Heidi Klum had shine Cher had uninhibited. Sarah Jessica Parker had lovely Patrick Dempsey was unscripted Reese Witherspoon had bloom. Antonio Banderas had Diavolo David Beckham was instinct and Victoria Beckham was intimately Beckham. Nicki Minaj had Pink Friday. Beyonce had heat Avril Lavigne had Black Star. Drake had Drake fragrance oil. Of course, every Kardashian had one as well.
Nathan Resnick (08:46)
I feel like we're have to cut this short because it seems like the list goes on for like a hundred or more that you could read through. But I think we all get the point, you know, why in the world would we need another fragrance brand? And it's just pretty wild to see the number of celebrities that launched their own fragrance brand. You know, something must be going on with this category, right? And I think the way that I look at it is the problem really stems from most of these fragrance brands weren't really built.
to become lasting brand, right? They kind of launched with heavy marketing spike during the holiday season and then faded as retailers moved on to the next celebrity deal, right? Kind of just had this continuous hype cycle. And by the early 2010s, many department store buyers believe celebrity fragrance had burned itself out basically. And I think if you put yourself in a buyer's shoes, it makes scents just given the,
few dozen names you listed, it seems like this is just this repetitive cycle that buyers got birds out from.
Aaron Alpeter (09:51)
Yeah, you're absolutely right. I think that's what makes this story so interesting because just a few years later, after what we would consider the peak of celebrity fragrance, she launches a perfume called Ari and ends up building basically a billion dollar company. And over time, that that fragrance line became probably the most popular and successful celebrity fragrance business in the world.
I really think it's interesting because despite building a billion dollar company, she actually owns very little of it. And the more that I dug into this episode, the more interested I became in it as a case study for several reasons. It touches on a lot of the themes that we've talked about throughout the season and so many of the companies that we profiled, whether it be Dead Cool or Le Labo or Phlur, they started out as a reaction against a brand like this one.
Nathan Resnick (10:38)
Yeah, I mean, I'm excited for this as well. This does seem like kind of the perfect case study for celebrity fragrances for a lot of reasons. But I mean, there were and there are a lot of celebrity fragrances that you could point, but perhaps kind of the most important in my opinion was Elizabeth Taylor, who built a very successful and surprisingly durable fragrance brand in the eighties all the way through the early 2000s. Right. And so, you know, I think
there's some brands of that list that really stick out and had some lasting staying power. But for our purposes of this episode, we're really going to focus and hone in on the post internet celebrity fragrance industry, which I think really begins in the early 2000s when Jennifer Lopez, Gotta Love J.Lo, launches Glow in 2002. And this fragrance that she launches really becomes an enormous, and I mean,
huge, huge commercial success that proved that celebrity identity can really drive perfume sales globally.
Aaron Alpeter (11:43)
Yeah, JLo, the licensing model spreads like wildfire. Britney Spears launches Fantasy, Faith Hill, Shania Twain, Jessica Simpson, and even Mary-Kate and Ashley Olsen build an entire fragrance portfolio. And while it felt that every major celebrity had a fragrance business, these fragrances were rarely operated by the celebrities themselves. Instead, they were run through a licensing agreements and where fragrance companies that already had the infrastructure and
oftentimes the scents would produce and distribute these perfumes globally. And in fact, there's this kind of like entire industrial fragrance complex out there that we would into a little bit during the kickoff episode that's worth revisiting. so, you know, behind the scenes, the perfume industry is dominated by only a handful of companies that design most of the scents and formulas that are used around the world. So there are major fragrance houses like Givaudan, Firmenich
IFF and Symrise which employ professional perfumers that people would call noses in industry. And they create the scent compositions used by the brands. And these formulas move through a global supply chain. Fragrance oils are typically produced in places like Grasse in France or Switzerland and Germany before being bottled and distributed globally. And the packaging, the bottle manufacturing, the filling can take place in Europe, United States, and even parts of Asia. And sitting between the celebrity
and that infrastructure are licensing companies such as Coty, Interparfums, Parlux and Luxe Brands. And these firms handle the product development, the manufacturing, the marketing and the retail distribution. before digging into the fragrance, I think it's important we dig into the celebrity. So why don't you give us a quick biography of who Ariana Grande is.
Nathan Resnick (13:22)
Yeah, you know, I thought Ariana Grande was always a pop star. I didn't quite realize she actually, you know, had a big breakthrough originally on TV, right? So in 2010, she was cast as Cat Valentine on the Nickelodeon teen sitcom, Victorious. And, you know, this was really young in her career, right? I mean, she was born in 1993 in Florida.
and began performing at a young age and kind of really first step foot actually on Broadway at age 15. So, you know, before her big break on kind of this teen sitcom show, she was more focused on Broadway and musicals. But after Victorious ended in 2013, she kind of continued the role in a spin-off series called Sam and Cat and really, I think, expanded her visibility amongst teen viewers. At the same time, though, kind of
you know, at first behind the scenes, she was, you know, really preparing for a music career, right? She was influenced by artists like Mariah Carey, Whitney Houston, and Madonna. And she kind of developed this pop and R &B style built around, you know, this kind of really strong vocal range and whistle tones. And so in 2013 at age 20, she released her debut studio album, Yours Truly.
I don't know if you remember that coming out, Aaron, but that was a hit. remember the day in 2013, yours truly. That was pretty incredible. And really, I mean, to be honest, the album just, I think, blew everybody away. It shocked the world. It was number one on the Billboard 200 and became a major hit globally. And I think in general, critics really praised her vocal performance. And many did compare.
her voice to kind of classic pop and R &B singers. So, you know, after her album release, her fame really skyrocketed and, even further in the 2014 with her second album, I think kind of making that transformation official from, a teen, sitcom star to kind of more of a now full-scale pop superstar.
Aaron Alpeter (15:37)
Yeah, she became one of the defining artists of the mid 2010s. And by this point, she had become such a powerful presence, not only in music, but in youth culture and in social media. And she had a very distinctive aesthetic. So the high ponytail, the retro and style pop sound, this glamorous image, it made her very instantly recognizable. And, know, her tens of millions of followers online didn't hurt either. And so she was widely seen as a ⁓
incredibly influential young celebrity of her generation and just ripe for a fragrance deal. And so she decided to enter the market in 2015. And by the time she launched her first perfume, Ari by Ariana Grande, she had already built a global fan base through TV and chart and this personal brand. And the fragrance really capitalized on this. It was popular with young consumers and it marked the beginning of what become one of the most successful celebrity fragrance brands in the modern era.
Nathan Resnick (16:35)
Yeah, at the time celebrity fragrance was actually a declining category, right? And I think most retailers were cautious about new launches. I mean, it kind of actually looked like the worst time to launch if you think about it, because, lines from
Williams or Lady Gaga, kind of really were just becoming a collector's item on eBay. But I think one thing that made Ariana different and really kind of gave her an edge.
where she had this massive, digital fan base that was already really deeply engaged with her online. And so instead of relying entirely on department store marketing, Ariana's fragrance really kind of could reach millions right off the bat on social media.
Aaron Alpeter (17:18)
Yeah. And when a celebrity launched a brand, what does that market look like? mean, so many times we when we profile a founder or a company, we think about the long struggle of founders. I mean, I think the founder of dead cool was working on it seven years before it actually took off. And so this doesn't feel like it's a one of those suffer in isolation before people start to notice sort of things.
Nathan Resnick (17:39)
Yeah, it's a really good question. mean, celebrity fragrance launches, you know, like Ariana Grande perfumes isn't, really entirely built by the celebrity themselves. It's really more so a structured partnership, right? So the celebrity provides the brand, the audience, oftentimes creative direction. Um, but really while listening or partnering with a beauty operator, like Luxe brands in Ariana's case. And so they handle the product development, the manufacturing and distribution.
And so behind the scenes, have fragrance houses that are actually developing the scent and, contract manufacturers that are producing the bottles and then retailers like Sephora or Ulta that, handle the final distribution. so the development cycle for fragrance is actually relatively fast compared to other consumer products. you can go from kind of concept to store shelf in like nine to 18 months. ⁓ And once the brand is established,
follow-up releases, often called flankers or variations on existing scents can launch even faster. And so I think, this is kind of an example in Ariana Grande's case, they had launched more than a dozen fragrances since her first one in 2015. So just the pace of iteration and product expansion is very fast in this space. But the real kind of scale engine in this industry is retail distribution.
⁓ And so before production even begins, the brand is really pitching fragrance to large retailers like Ulta, Sephora, and other department stores. And retailers in this case are typically purchasing these products in advance, which of course helps finance production and kind of ensures that immediate shelf presence there when the product launches. And so sometimes you have an exclusive launch, right?
to really build a pipe and visibility into that storefront. ⁓ But I would say because fragrance has high margins and strong emotional branding, it can scale extremely quickly. And I think a product too can move enormous volume. And once kind of a hero fragrance SKU becomes popular, you kind of have this breakout dynamic and then expand into limited versions or multiple layers on top of that breakout SKU. And so...
I think ultimately, know, celebrity fragrance works because it combines kind of three powerful elements, right? Number one, a built-in audience. Number two, highly efficient licensing and manufacturing infrastructure. And number three, just global retail distribution that can put a product on thousands of shelves overnight. And, know, I think one thing maybe we should double click on is just the partnership dynamic behind Luxe brands and Ariana and just the whole infrastructure. Because if I recall, Aaron,
⁓ Izba had a deal they were exploring with Nicki Minaj at one point, right?
Aaron Alpeter (20:30)
yeah, we've been lucky enough to talk with a couple of celebrities over the years. several TikTok influencers, et cetera. And so I think that it's a very interesting approach because, on the one hand, it is kind of dumb. It's just like...
It doesn't matter what the product is, as long as someone's name is on there, people are going to buy it, which is, I don't know, it's like a little bit frustrating a little bit on some level, but on the same level, on the other hand, it's it makes perfect sense to I mean, you're able to to get in front of a lot of people. You're able to cut through the noise. Your acquisition costs are super low. And so why wouldn't you? I mean, this is why you've kind of looked at this. But yeah, we've been able to look to work with several celebrities and celebrity brands and.
sometimes you kind of go back and forth between, you going to partner with this licensing deal or are you going to go back and build something and operate it yourself? And it usually becomes, you know, more of an equity play. And I think that we'll get into that in a little bit more later on in the episode.
Nathan Resnick (21:26)
Yeah, I mean, it's always an interesting dynamic, right? And just the kind of reach and volume that a lot of these celebrities can drive, make it very exciting for, you know, companies like Luxe Brands or distributors or, and their retail partners.
Aaron Alpeter (21:40)
Yeah, you know, coming back to Ariana, I mean, she was really just one of the the the countless faces who had launched a celebrity brand until 2018. And that's when they released a fragrance called Cloud. And fragrance reviewers started to compare the scent to Baccarat Rouge 540, which is a luxury perfume, and it can cost hundreds of dollars per bottle. And the comparison spread across the fragrance industry online.
where they started creating this really powerful narrative that the $60 perfume smelled very similar to a $300 luxury fragrance. And so once TikTok and YouTube fragrance communities amplify the comparison, cloud became one of the most popular perfumes in mass prestige retail. And again, like I love this episode because there's so many case studies and this is another one where, know, Ariana shows that another element of fragrance is this dupe culture.
and this attention of taking a very well-known, very distinct, very expensive perfume and trying to create something that is very much the same.
Nathan Resnick (22:45)
Yeah, I mean, who doesn't love a good knockoff, right?
Aaron Alpeter (22:49)
Yeah, well, the strategy worked out really well and it led to another good case study in terms of how fragrance brands are typically built around this concept of hero scents because cloud became the hero said, do you want to walk us through that one?
Nathan Resnick (23:00)
Yeah. mean, so I would say typically successful traditional perfume brands usually revolve around a hero scent, right? So like you think about Chanel number five, right? That's probably like one of the most popular hero scents ever. And I think once a hero scent emerges, typically brands expand around it with flankers, kind of variations of that original scent. And so cloud eventually, like you said, becomes the hero scent for Ariana's fragrance line.
And, it follows just this pretty rapid brand expansion and sustains long-term sales. And so I think this really ends up being a huge boom to their business. Industry reports suggest, Ariana Grande fragrances have generated over $1 billion in cumulative retail sales since launch. So, you know, we're talking about pretty, pretty big numbers here in terms of, you know, retail sales. And I think one thing that every listener should kind of keep in mind is
given this partnership structure with Sephora and Ulta, know, typically those retail partners are taking like 40 to 60 % of the retail price. So maybe let's break down a, you know, $70 bottle for a better illustration, right? So you've got your retail margin in there. Let's call that 50%. So 35 bucks. You've got product manufacturing, which is, you know, maybe all in with the bottle and everything like 15 to $20. You've got marketing around $7 per.
You've got Ariana's royalty of maybe $3 and, you know, it leaves you with an operating profit of like five to $10, right? Depending on, you know, product manufacturing and the royalty there. so, you know, you can see kind of how though the retail volume and scale is incredible, the actual net margin behind everything, once you kind of, understand the unit economics there, it's still strong, but it's not, as high as, as some other brands.
Um, and I think, in general, celebrity fragrance royalties are typically, five to 10 % of wholesale revenue. And so we can estimate Ariana's probably earning a few dollars per bottle sold, which, becomes very meaningful when millions of bottles are sold. Right. So I think to kind of sum up the whole picture, you take a billion dollars in fragrance sales over the last 10 years. That probably comes out to be around, a hundred million dollars in a net revenue or so.
And the operator Luxe Brands who controls and pays for the manufacturing relationships, distribution network, and many of the brand assets, probably brings in around 55 million a year in revenue. so Ariana kind of possibly makes five or 10 million, which is pretty incredible to say the least. after it's all said and done, the profit margins, think net-net for Luxe and Ariana are pretty similar.
Aaron Alpeter (25:49)
Yeah, if Luxe Brands is interested in a e-commerce on tap fragrance, think Nathan and I would be open to that ⁓ if we get someone who feels as Ariana. But no, it's pretty fascinating. think like this is a really interesting piece because it's easy to say Ariana Grande fragrances is a billion dollar franchise. Like it's it's created a billion dollars over the course of its pretty long life. And yet she owns very little of it. And, the distinction here is that she owns royalties, not the underlying equity.
And so to dig in a little bit more on who Luxe Brands is, they are a New York based beauty company that specializes in developing, marketing, and distributing prestige fragrances and beauty brands around the world.
their whole business is really focusing on celebrity driven fragrance lines. And so their business model is partnering with well-known artists and media personalities to turn their personal brands into a global perfume business. So think like Khloe Kardashian, but also well-known brands like Cosmo Magazine and Hummer. I'm kind of curious what a Hummer ⁓ fragrance smells like. So I'll have to try that one next time I see one at the store. you know, Luxe was...
was really started and has this perceived edge in terms of being able to tell a good brand story, their design, their digital marketing. And they work with fragrance manufacturers and retailers to create products that resonate with younger consumers in global fan places. And as a result, they are a major player in the celebrity fragrance space. And to some extent, it's a bit of a machine where they kind of already know what the fragrance is gonna be. They know what's playing well.
a lot of this forecasting and research and things that are going on. And it's just a matter of finding the right vehicle, the right celebrity or car company to tie it to. And so I'm serious. If Luxe Brands wants to a call, we'll give you an exclusive deal, e-commerce on tap. Nathan and I would gladly split five, $10 million a year.
Nathan Resnick (27:46)
Yeah, that's for sure. We'll, we'll drop our number in the show notes. Now, wait, doesn't Ariana have another beauty brand?
Aaron Alpeter (27:55)
Yes, she does. So she launched a cosmetics company called REM Beauty in 2021. She initially did this in partnership with a company called Former Brands, who went bankrupt in 2023. And then she basically bought back most of those assets in bankruptcy. she's got one business that she owns a lot in and one that she probably doesn't own anything.
Nathan Resnick (28:18)
Yeah, I mean, pretty wild distinction, right? And I think it's kind of interesting. At first, I was wondering if they are affiliated with each other. But, when you look at the websites, they are very different in terms of aesthetic, right? The fragrance brand is really just pictures of her while, know, Rem doesn't really have pictures of her and kind of only pays slight homage to her by promoting a line of wicked inspired products.
So if you go to kind of ariana grande fragrances.com versus rem beauty.com, it's quite a bit different honestly, and you can really tell it's very different actually.
Aaron Alpeter (28:52)
so for those of you who are on YouTube, we encourage you to go and look at it. mean, we just got them up side by side. yeah, mean, Ariana Grande Fragrances, it's just Ariana. She is the brand which makes sense for that type of business, especially how Luxe Brands is running it. But R.E.M., I mean, they've got no pictures of Ariana. It's a lot of UGC.
Yeah, it's very interesting here. I there's the wicked thing you were talking about, but even just the aesthetics are very, different from each other. You would almost think that like, okay, maybe they would coordinate a little bit on colors or styling or things like that. But these are inherently two very different brands that ⁓ have a common celebrity.
Nathan Resnick (29:36)
Yeah, it's pretty wild. It's very, very different.
Aaron Alpeter (29:41)
Yeah, it's really interesting because even though they're not affiliated at all, other than Ariana's involvement,
once again, this is a great case study of another trend in celebrity consumer products. Over the past 20 years, celebrity consumer products have evolved through several models. There's been licensing deals, founder-owned brands, and then this portfolio strategy that combines both. And so to dig into those a little bit more, the licensing model is the classic celebrity endorsement product strategy.
They license their name to an operator who already has the product and the infrastructure. And the advantage is there is it's very little operational responsibility. They're really not doing a whole lot other than taking some pictures, promoting it, et cetera. ⁓ You get very fast global distribution. You get immediate scale because that's already all been built out by your partner. But the downside for the celebrity is it's very limited ownership. And most of the value sits with the operator, not with the celebrity whose name it is.
⁓ The founder model is relatively new over last 20 years, and this is where celebrities started launching companies that they actually owned. So whether it's like Kylie Jenner with Kylie Cosmetics, Rihanna with Fenty Beauty, all with the Honest Company, this really goes on and on. ⁓ These businesses really started to function more like venture-backed businesses, and a of times they were venture-backed. And for the celebrity, there was large equity upside, there was control over the brand direction, it was really something they were building.
But the downside is that these are hard, right? Even with the celebrity backing, it is difficult to build a long, durable business that somebody else wants to buy. And, you when you look at these two models, the most sophisticated celebrities are starting to combine both of these. And so they're building multiple consumer businesses with different structures. And so I think about Ryan Reynolds, helped build out
Aviation Gen, which sold to Diageo, Mint Mobile, which sold to T-Mobile. He's kind of had that playbook. George Clooney had Casamigos Tequila, which also sold to Diageo, and of course, Ariana Grande is there. And so I think for her, as you look at her portfolio, the fragrance is obviously a very large scale royalty cash cow, and REM Beauty is potentially a long-term equity asset. And so...
I'm kind curious, which one do you think is more valuable to Ariana? Which one would rather own? Would you take the cash or take the equity?
Nathan Resnick (32:01)
Yeah, I mean, it's a
good question, right? I think if you look at it from like a sale perspective, right, growing beauty brands typically sell for three to five X revenue. And, on the other hand, let's say Ariana's fragrance franchise generates, you know, I don't know, 50 to 70 million annually in wholesale revenue. Then, you know, that franchise might typically be worth 150 to 350 million. But most of that equity is probably sitting with Luxe brands.
So, you know, we're not quite sure what she gets beyond royalty checks, but compare that to REM, which, even if it had smaller revenue, Ariana has, obviously a much, much greater equity stake in that company. So on paper, I would probably say REM is worth a lot more to her in terms of personal net worth. But, while REM generates the equity value, her fragrance partnership really generates stronger.
maybe stronger cash flow, right? I'd be surprised if she's pulling out 10 million a year from Rem Beauty. And so I think even though the ownership isn't affiliated with one another, it's quite possible that Ariana was using some of the cash flow and experiences from the fragrance brand to help grow and invest in her cosmetics brand. I mean, do you think the fragrance brand will be sold soon? What do you think the thoughts are there?
Aaron Alpeter (33:20)
I mean, it could be, but I think that Ariana's royalty checks probably won't change. So it's more of a question and a thought process for Luxe brands. like, look, there are a couple of strategic buyers that are out there, but it's going to be the other usual suspects like Coty and Puig and LVMH. But I think like Interparfumes, who's one of the ones we mentioned earlier, who is really big on licensing and normally does these sorts of things, they're doing it with
brands like Jimmy Choo and Montblanc and Coach. So they're more on the brand side, the luxury house side. I mean, I could see maybe them selling that sort of stuff. ⁓ But I mean, Luxe Brands is a good thing going on right now. It's probably a meaningful part of their revenue and probably.
one of the pitches that they have for why other celebrities should do projects with them as they can point to and say, look what we've done with Ariana. And so I don't think it makes sense for Luxe to sell unless they wanted to sell the entire business and the founders want to cash out.
Nathan Resnick (34:18)
Yeah, I mean, it's just a really interesting dynamic with these celebrity driven fragrance brands. And I think this whole season has been just a really incredible take on fragrance as a whole. I mean, we've got, I know an interview coming up in two weeks with someone that's been building, investing in and aggregating multiple businesses over their career. And really decided a few years ago, despite all their success elsewhere, that they wanted to build a fragrance brand. So definitely make sure you stick around for that.
But as I think about everything I've learned from this episode and all of the other companies we've profiled, yeah, I've got to kind of ask, what are your biggest takeaways when it comes to fragrance? what should people really walk away with here?
Aaron Alpeter (35:00)
I think my first honest reaction is just, wow, like what an amazing, what an exciting category from just the history of nobility who wanted to smell like flowers to selling the concept of an emotion or a memory to celebrity fragrances, to the industrial complex that powers everything. mean, this is a really fascinating industry that I know very little about before we went on this journey together. And so it's one of the fastest growing for a reason. And I'm really excited to kind of be a part of it going forward.
despite there being so many fragrances out there and so many celebrity brands, there's still plenty of room for people to make a play because at the end of the day, you're either selling your persona or a mission or you're selling access into a tribe that relies on a common memory or an emotion that pretty much anybody can experience. So there's really nothing quite like it out there.
Nathan Resnick (35:51)
Yeah, I mean, I'm impressed just by the back end, right? Because I think physically speaking, there's not a ton of differences between a thousand dollar bottle and a $60 bottle, but the margins are incredibly high. really the kind of most expensive part is probably the packaging and the shipping. If you're going at DTC route, the actual perfume itself is, you know, very, very affordable to produce in terms of the formula.
Um, but it's also kind of the best and worst type of DTC category, right? Because on the good side, it's very small and lightweight and, kind of has dirty packaging. So makes logistics and shipping easy. on the other hand, really until recently, was near impossible to sell this online. And so it's something that, has to be experienced, very few people are kind of just buying perfume online, at least traditionally where they wanted to go, try a scent in store. so.
I think one thing I've thought about is have I found myself kind of doing anything different in my personal life as part of this season.
Aaron Alpeter (36:52)
Have you?
Nathan Resnick (36:54)
Not necessarily. I've been a Dr. Squash fan and user for quite some time now and really love that brand so I'm staying loyal there.
Aaron Alpeter (37:05)
Well, I've completely rediscovered fragrance in my own personal life. I used to wear fragrance in like middle school and high school and in the college. And it was just kind of something that you had and you would use. But I actually stopped wearing fragrance when I worked at the Lipton Tea Factory. And this is kind of a funny story, but the reason being is that tea...
absorbs fragrance from its environment really really strongly and there's the story that was told my first week there in Lipton they have what they call a master tea taster and so they they have this whole network of people who calibrate you know their palates around the world so they say okay this is what Lipton should taste like and this tea taster tastes every batch that comes off of the line to make sure it's up to the quality that's there and this was decades ago but the tea taster
was going through and was trying something, came off a machine and said, it's not quite right. And so he basically went down to the floor, went down to the machine, found the operator and said, I can taste your perfume. I need you to go like wash it off and go back to your machine.
And it was wild. And so I kind of had to stop wearing fragrance as well and didn't really get back into it until I started doing this episode. And now I love the idea of layering and figuring out how things can go together. And I just feel more confident about trying different things and kind of collecting things. And so it's been a really fun addition to my wardrobe and my expression for how I'm feeling that day.
Nathan Resnick (38:37)
Yeah, that's cool. mean, I am struck by just how the category has changed grown and large part fueled by TikTok, right? You know, you look at the explosion and just ramp of Phlur and dead cool and, you know, some of these other brands that we, that we covered and, it's not to say that the shift is going away from, the traditional chemicals that power, all major fragrances. And I think people are really kind of
going back to discovering the roots in an all natural and kind of herbal approach to the industry. So I think it's going to be pretty exciting to see where the industry goes in the next five or 10 years.
Aaron Alpeter (39:11)
Yeah, for sure. I these businesses also don't traditionally get to be massive, but you don't really see like a road level acquisition in this space, but you don't need one because fragrance margins are so high. And so you can have a wonderful business for people that have a very modest scale of 20, 30, 40, 50 million dollars. And if you want it completely like it's a great lifestyle from the profit coming off. But even just as you're building that and you're you're kind of keeping to this prestige element.
I mean, you can have multiple nine figure exits for a business that's doing under a million dollars.
Nathan Resnick (39:43)
Yeah, it's incredible. Well, this was a great episode of Ecommerce on Tap brought to you by Sourcify and Izba. Please subscribe, leave a review, and share with a friend. Aaron and I greatly appreciate you tuning into this episode, and we will see you next time.