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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!
Aaron Alpeter (00:00)
I think the most interesting angle for me would be for Kayali to eventually turn into an acquire itself and become this Middle Eastern luxury platform. And they could play into like regional pride angle and lead all the strategic regional consolidation, not just of
fragrance, so there's a lot that they can do in fragrance, but just have other products as well.
Nathan Resnick (00:25)
Hey, welcome back to eCommerce on Tap brought to you by Sourcify and Izba. I'm your host, Nathan Resnick. Join me with my co-host, Aaron Alpeter. Aaron, for those that are joining us for the first time on eCommerce on Tap, do want to give a quick overview of what we do?
Aaron Alpeter (00:39)
Yeah, first off, thanks so much for joining. We really appreciate it. So each season we take a industry and we kind of zero in on what that industry is. And with this episode, we're going to profile a company where we basically talk about their founding story, reverse into their supply chain and talk about their exit-potential.
Nathan Resnick (00:56)
And before we dive into this week's brand, wanted to ask, are there any kind of tidbits that caught your eye the past week that we should discuss?
Aaron Alpeter (01:04)
Yeah, there are two ⁓ that stuck out to me. The first one is Axe Body Spray, which is probably the first fragrance that most males came in contact with at least a year of a certain age. They announced that they are changing their nozzle to reduce the overall cloud that comes out when you spray it. And I don't know, did you have like the Axe Wars in the locker room growing up?
Nathan Resnick (01:27)
Yeah, I mean that was the whole point of Axe right?
Aaron Alpeter (01:29)
Yeah, was like
mild chemical warfare is what it was. And anyway, so they've looked at this and they said, hey, you know what, maybe we don't wanna be associated with this anymore. And so they're basically changing it. They're making the bottle smaller, but they want less of that fragrance to come out when they do it, which I thought was pretty funny.
Nathan Resnick (01:46)
been talking to so many different founders about these tariff refunds. I mean, I'm sure most people in e-commerce have been following that because tariffs have just been insane to handle for the past, you know, year, seems like almost two years now in terms of what's going on every day seems like something's different. And now basically, it was the Supreme Court, if I'm right, ruled that, these tariffs were basically
unjust and illegal and so brands that paid these tariffs, these increase in tariffs are going to get a refund. I'm not sure if we know when that refund will come, but supposedly it's going to come pretty soon.
Aaron Alpeter (02:26)
Well, yeah, it's a giant mess. mean, there's a very specific way that you have to file the lawsuit. You effectively have to file a lawsuit. It's a paperwork thing. There is a channel to do this, but it's going to be completely gummed up. I when I checked this morning, I think there were over 1,800 businesses that it's filed for a refund, which is just crazy. you know, people are now asking, like, should they refund? Should they not refund? Should they refund and to the consumers, to the companies? And so it's basically a giant mess.
But it's just this uncertainty that kind of goes into, I guess, the bad part of the tariffs.
Nathan Resnick (03:01)
Yeah. I mean, uncertainty is one of the hardest things to deal with in supply chain. So we feel for all those operators out there that are trying to navigate this and Aaron and I will definitely keep a pulse on it. But from what I've heard, mean, most brands are, I guess happy that this lawsuit went through and that tariffs, you know, will be refunded. And we'll see what that process is actually like and how long it actually takes to get that money back. basically, you know, money you thought you didn't have, right?
Aaron Alpeter (03:29)
Yeah, we'll see. mean, tariffs are still enforced in a large part. It's just this one aspect was struck down. yeah, it's going to be an interesting couple of months, couple of years to be sure.
Nathan Resnick (03:31)
Thank
Yeah, that's for sure. Well, this season we're covering Fragrance. Today we've got a pretty exciting brand that honestly was a lot bigger than I thought it was. The scale is pretty just jaw-dropping and the story is fascinating. So if you want to kind of, I guess, kick us off in terms of what we're covering this week.
Aaron Alpeter (04:01)
we like to tell ourselves that fragrance scales because it's beautiful or because the founder is really obsessed ⁓ or because, you know, it's really this culture that travels. But the reality is that prestige fragrance is one of the most structurally gated industries and consumers. We've talked about this in a couple of our episodes. know, upstream, we've got four compounding houses that control most of the world's formulation capacity. And downstream, there's retailers that decide survival basically just off of velocity per door.
And between those two forces, capital kind of allocates accordingly to the brands that ⁓ go through the scale.
Nathan Resnick (04:35)
today's story really shouldn't make sense. Today we're talking about Kayali. It's an influencer born middle Eastern position fragrance brand, which, you know, scaled
globally really through their distribution partner Sephora. And the interesting part isn't just that it exists, but that it has thrived outside a system that isn't really built for newcomers.
So the question isn't, you know, did they make a good perfume? It's how did they get through that gate? Right. And once they were inside, they, you know, really kind of made themselves durable. Right. And so I'm curious, you know, what made them lasting in those distribution channels? Cause a lot of times you see these fragrances come and go. And I think the answer kind of lies within the culture dynamic there. And that's one story.
But you know, is it leverage? That's a different narrative as well, right? And so it's an interesting dynamic. Before we dive in, here's a quick reminder, like and subscribe. and I appreciate everyone tuning into Ecommerce on Tap brought to you by Sourcefine and Izba. For us to keep doing this, you've got to hit the subscribe button. So take a second and do that right now. What gets you excited about this episode though, Aaron?
Aaron Alpeter (05:46)
You know, for me, I think it's the Middle Eastern angle. I think you can't talk about fragrance without talking about Middle Eastern influences. And that's why Kayali is really interesting to me is we need to understand what it represents. you know, fragrance in the Middle East is not a niche category. It's a ritual. It's an identity. It's social architecture. ⁓ Oud, which is traditional Middle Eastern fragrance, has been traded across the Arabian Peninsula in Southeast Asia, really for centuries. ⁓ Oud is a rare
Resonance and tense like you know with it Fragrance is hard because it once you once you smell it, know what it is, right? but it's fragrance in general is burned in homes and worn as contrary oil and skin and You know, honestly, thanks to the nativity story frankincense was probably the first fragrance that I was aware of even though I didn't quite know what it was today in Arab Gulf households
fragrance layering is really the norm. So you'll see wood chip incense called Bakhoor regularly burned in the air. Oil is usually applied on the pulse points and it's not uncommon to finish with the spray layered on top. And so this progression, this relationship with fragrance isn't aggressive, but the scent is very prevalent in Middle Eastern culture.
Nathan Resnick (06:56)
Yeah. it's interesting when you compare this with Western fragrance, because, that evolved very differently, right? And I think as we discussed in our category kickoff episode, the French side obviously became a export model and kind of Western prestige fragrance kind of included some of the structured pyramids, controlled projection and kind of versatility. in North America, especially the goal of fragrance is often kind of
more subtle or not overpowering. And that's kind of like the, aesthetic we go for, but it's actually, you around retail risk management, I would say. so retail buyers, I think optimized for kind of blind by safety, lower return rates and mass comfort.
if you look at traditional Middle Eastern scents, they're more kind of this high intensity food that can polarize, and also at the same time, increase risk return and, could hurt the kind of shelf appetite.
Aaron Alpeter (07:53)
Yeah, you're right, because it's one of those things where ⁓ oud is a dividing sense, right? And historically, Middle Eastern fragrances have really struggled to break into the North American market. Look at Amouage as an example. It's an Omani heritage house that started in 1983, and it's deeply rooted in Middle Eastern perfumery. ⁓ Its scents are really complex, it's resinous, it's globally well-respected, but in America, or in North America in general, it's remained very niche.
and it's got limited distribution, it's kind of locked away behind specialty counters. So it's revered, but it's not mass scaled.
Nathan Resnick (08:29)
Yeah, Middle Eastern fragrance, wasn't absent from North American shelves because it lacked depth. think it was more so filtered because Western retail was kind of built around this different scent philosophy.
those buyers weren't in tune with kind of the Middle Eastern fragrances, which is definitely one of the core tensions that we're going to discuss today. But, if a Middle Eastern fragrance brand wants to scale globally, does it kind of preserve its ritual intensity or should it kind of recalibrate for this kind of Western line-buy behavior?
Aaron Alpeter (09:01)
Yeah, I think there's always this question of adaptation when you turn to new market. think of like American Chinese food. So I don't know if most people know, but Chinese food, as you would think of in America, is not Chinese. If you go to China, I mean, you know this, it is its own category. People have, I think they call it American Chinese food, it's very interesting because
if I'm introducing something that's culturally rooted into a new environment, the question is how far do I adapt it to what the market already likes in order to build a viable business? And at what point does that adaptation start to dilute the very thing that made it distinct?
Nathan Resnick (09:35)
Yeah. And so I think that's kind of the tension here is there's this obvious question of, who is capable of navigating that kind of adaptation that is culturally rooted in product, but different from kind of North American retail philosophy. And so you need someone that kind of understands which elements are sacred and can't be touched and which elements are more flexible and which differences are just perception and not substance. Right. And I think that's where.
kind of the Kattan family becomes interesting because they aren't just Middle Eastern, they're not just Western, but because they're this blend of both. And I think we need to sit with their background a little longer because that's where we'll kind of normally get the full context of how their business was formed.
Aaron Alpeter (10:23)
Yeah. So let's kind of dive in there. So Ayla, Huda and Mona Kattan are three sisters who were born to Iraqi parents in the early to mid 1980s. And there's a 10 year gap between Ayla and Huda and only a two year gap between Huda and Mona. And so Huda and Mona spent most of their formative years in Cookville, Tennessee and in Dartmouth, Massachusetts. And they were raised in traditional conservative Iraqi household inside this American cultural environment.
this meant that inside and outside the home were really not the same world. At home, identity would have been more structured on heritage, family cohesion, traditional expectations. The food, the language, the beauty norms, modesty expectations would have reflected traditional Iraqi culture. ⁓ And family dynamics would have emphasized a collective identity over individual expression. On the outside, they're growing up American with public school, American media, American beauty standards, American social expectations.
And when you grow up inside a two value system simultaneously, you don't just absorb both. You have to learn how to navigate between them. And I think that that ability to navigate between cultures is really important. It's not just about speaking multiple languages. It's about reading the room. And it's about understanding when ⁓ intensity feels normal, when your uniqueness is something that people are celebrating, when it might feel a little bit too much. And so growing up Iraqi American in the American South,
means that you're often a visible minority in one context and a cultural outsider in another. And so you might, you know, it's possible that they might've felt too Arab at school, but too American at home.
My wife can definitely relate to this feeling as well. She immigrated to the US from Russia when she was seven. And she always felt a little bit out of place wherever she was. She was always the Russian girl ⁓ in school, but when she went back to Russia, she was American. And whether that be in the accent that she had or the things that she liked to do or didn't like to do, it was the thing that she's had to of navigate. And so she's always been a little bit different, but also trying to blend at the same time.
And these tensions are difficult to navigate. People become much more sensitive to tone, they become much more sensitive to presentation, and they try to find what feels legible in different environments. And so I think that this element, I don't wanna talk about this as just, ⁓ they have an Iraqi background, but I think that this ability to navigate and understand these cultures really matters a lot when you're talking about founders.
Nathan Resnick (12:53)
Yeah. I mean, I wonder if that kind of upbringing creates more defensiveness or does it create more adaptability? Right. mean, I'm curious to think about that.
Aaron Alpeter (13:03)
It's a good question. I think it probably creates more pattern recognition. So if you spent your entire life adjusting to how you present yourself, depending on the audience, you develop an instinct for where that line is. You kind of know which elements are non-negotiable and which elements are flexible. And so when I think back to the story about Glow Recipe, one of the episodes that we did last season, how are they able to navigate both Korean and American tastes and to help launch the K-Beauty movement?
That instinct is exactly what adaptation and global consumer brands requires.
Nathan Resnick (13:35)
Yeah, I mean, I think it's also important to note that the sister did not simply grow up in America and later discover Middle East as adults. The family actually moved to the UAE in about 2002. Their dad got a teaching job there. And so I think that timing matters a lot as they were not small children, but they were in their late teens and young adults. so
Their formative years were kind of split between the United States and early adulthood in the UAE. And so I think that kind of creates this different identity profile in someone who grew up entirely in one place. And it's important to note that in 2002, 2003, there was not kind of a neutral historical moment. The Iraq war begins in 2003 and the kind of Middle Eastern identity inside the United States.
had become more kind of charged and challenged in the wake of 9-11, kind of cultural visibility, you know, becomes this kind of political visibility as well. And so, you know, we don't necessarily, ⁓ I think, need to go into geopolitical backdrops and whatnot, but yeah, I think being Iraqi-American in that moment definitely carried weight. And then relocating to Dubai ⁓ places them in really a completely different culture environment.
Aaron Alpeter (14:55)
Yeah, if you go back and look at what Dubai was like in the early 2000s, it was booming. I mean, it's still booming, but it was really just in the midst of this massive transformation. So this was a great place to be in general.
In the early 2000s, it was becoming a global luxury hub. Western brands were expanding aggressively there and the mall culture was exploding. Modern retail was born. It was becoming international. It's becoming aspirational. And so these sisters moved from being cultural minorities in the American South to being cultural fluent insiders inside a rapidly modernizing Gulf economy. And the move back to the Middle East wasn't just a geographic one, but it changed how they saw themselves and what changes felt dominant, what feels peripheral.
Nathan Resnick (15:39)
Yeah, I let me ask this. Do think that moving at that age is different from growing up entirely in Dubai?
Aaron Alpeter (15:47)
yeah, I think so. mean, if you grew up entirely in Dubai, the Middle Eastern ritual, the culture, that is kind of the default state. If you grow up entirely in the US, the Western retail norms would be your default home base. But if you split your formative years between the both, you don't really have a default for either, you compare them. And I think that that comparison, that ability to kind of understand the bets in both ecosystems really brought enormous strategic awareness.
I've been seeing this a little bit in my own life with my own family. We've been in Canada for almost two years now, but I'll forever be shaped and changed by some of the things I've learned here, observed, and experienced. so spending times in different cultures is really key. And for the Kattan sisters, it really set them up well for what would come next, because they weren't really fully American. They weren't really fully Emirati. They were really this perfect blend of both, which means they understood how American consumers interpreted intensity.
and the importance that we're thinking about beauty and fragrance later on. They understood how gulf consumers interpreted subtlety and where misunderstandings likely could happen between the two. And so if we come back to fragrance, if the Middle Eastern scent culture prioritized projection and ritual and Western retail prioritizes versatility and safety, really the only people who'd be capable of translating one to the other without flattening it would be someone who spent time in both. And so...
If you're going to be a Middle Eastern position fragrance brand that scales into North America, you shouldn't assume that it's either purely authentic or purely a compromise. It has to be something else. It has to be this translation element, and that can only come from a lived experience between these two cultures.
Nathan Resnick (17:27)
Yeah, I mean, I think we've got to go back to the three sisters now who have lived in both cultural systems, but, kind of, I think this cultural fluency alone does not necessarily build, you know, this business, right? At some point someone has to step in the arena and that person was really the first middle sister, Huda, who trains as a makeup artist in the United States. So she studies at a makeup academy in Los Angeles, begins working with clients there. And she develops, I think,
this kind of technical skill, not just kind of aesthetic instinct. And when she moves back to Dubai and begins blogging in 2010, this is kind of around that, you know, early beauty blogging era and kind of the era of pre Instagram dominance. so she kind of creates and grows with this pre creator economy infrastructure outside of kind of pre direct monetization pathways.
And I think that means that, her influence wasn't built inside a monetization machine, right? It was more authentic through consistency and technical authority because, you know, she had trained as a makeup artist, right? And so she was one of the earliest beauty personalities to merge this kind of heavy glam aesthetic with accessible tutorial driven content. And so she would do stuff like kind of dramatic eye looks or high impact transformations.
And I think most importantly here, she built an audience in English, which meant that her reach was not limited to the gulf. She was really building this international audience from day one.
Aaron Alpeter (19:03)
Yeah, and that audience really grew fast. So by the mid 2010s, Huda had amassed millions of followers across Instagram and YouTube.
and she became one of the most followed beauty personalities in world, not just in the Middle East, but globally. And became a global beauty voice operating out of Dubai. In 2013, she launched Lashes under the Huda Beauty brand. And it is a very specific category choice. was low formulation, small M.O.Q.s, high repeat purchase, very shelf-friendly. So it was a very smart, very self-aware decision. And she chose a product that she could authentically demo.
and it really complimented her glam aesthetic and fit well into retail. Sephora Middle East picks up her lashes pretty early, which gave her instant retail credibility and social proof and just accelerated this velocity. so Mona and Alya end up joining the business as well and really lean into marketing and operations. They built this really powerful combination of audience scale, retail distribution and product market fit.
Nathan Resnick (20:02)
Yeah, mean, but lashes are not the end of the story here, right? They really kind of became the wedge. And by 2015 and 16, In-Huda Beauty really expands into a lot of different categories like eyeshadow palettes. so kind of think highly pigmented, bold color stories, Instagram friendly packaging, and really designed with this high visual impact. so...
These palettes performed extremely well. They had really strong launch sell through rates. They went viral across social media and just repeat retail support. And so the company then launches complexions, think like foundations, concealers, powders,
fastest growing brands globally. And the brand expands beyond the Middle East, into Europe, North America.
at a meaningful scale and it becomes present in hundreds and thousands of doors internationally. So you can imagine Sephora has got this first Middle Eastern driven brand that expands nationally and just really has strong sell through rate. It becomes this not just niche regional brand but it becomes one of the largest influencer-born beauty companies in the world.
And so by the late 2010s, public reporting in places, Huda beauty revenue in the hundreds of millions annually. I mean, you can imagine just the scale internationally with Sephora as their main distribution partner. I mean, I think really this was a win-win for both companies.
Aaron Alpeter (21:27)
Yeah.
Huda's following wasn't just Gulf base, right? It wasn't just Arab or Iraqi diaspora. It was global. was US, Europe, Middle East emerging markets. And so when we talk later about fragrance, we're not talking about launching a small culturally aligned based. We're talking about launching an audience that already spans the exact geographies where prestige fragrance is really very difficult to break into.
Nathan Resnick (21:51)
Yeah. mean, so while Huda is scaling lashes and then pallets and then complexion, what is Mona doing? Because, you know, it's easy to assume that she was just along for the ride, but that's really not at all what was happening.
Aaron Alpeter (22:05)
That's right. So Mona is deeply embedded in Huda from really the get-go. She really focused on the brand storytelling. She engaged heavily with the community. She became a viable, visible personality in the ecosystem and was really instrumental in shaping the tone of the business.
makeup artistry, Mona's identity started orbiting something different, and that was fragrance.
And so long before Kayali existed as a product, Mona had publicly positioned herself as obsessed with perfume. She shared her personal collection online, she talked about layering, she talked about scent memory and emotional association, and she leaned into fragrance as a ritual. And this persona earned her the nickname among her followers as the Perfume Princess
Nathan Resnick (22:46)
I like that nickname. Do you think that was organic or do think there was kind of strategic positioning inside a portfolio that didn't yet have a fragrance vertical?
Aaron Alpeter (22:57)
two things can be true, right? So Mona genuinely appears to have been deeply into fragrance, but she also occupied a different personality space than Huda. And so
Huda's persona was really around transformation, glam, authority, and Mona's persona really emerged to be more about emotion, ritual, softness, and that differentiation mattered inside a family brand.
Nathan Resnick (23:19)
Yeah, I mean, because Huda Beauty obviously scale aggressively in cosmetics. And if you're building on institution and probably the guidance in some sense of Sephora as well, you eventually look for kind of these margin-rich adjacent categories, right? And fragrance is one of those high margin, more giftable, more luxury signal of categories. And so the question really becomes, did Mona want to build a fragrance brand or did the ecosystem
really need one. And so by 2017, Huda Beauty takes on growth equity capital that seems to be when the business goes from this kind of high velocity product to more of a beauty infrastructure entity, expanding different categories, really deepening their supply chain relationships, their retail trust compounds a ton, and the international expansion becomes a lot more structured. So I think that's really when fragrance becomes viable.
When Mona Kayali launches in 2018, it's not entering cold, it's entering with this established retail trust, capital depth and supplier credibility.
What's interesting is that Mona launches Kayali not just as its own venture, but as part of Huda Beauty, which in retrospect seems like the most natural thing to do. And by the time they launched in 2018, Huda Beauty is already this global established brand. The Sephora relationships are extremely strong. The brand has institutional capital that's backing it. And so think the decision is not whether to launch fragrance.
The decision is how to launch it, right? And you spin it out independently. Do you launch inside the Huda machine? I mean, that really was a key question.
Aaron Alpeter (24:59)
Yeah, and I think launching inside the established machine does a couple of things immediately. First, it leverages these existing retail relationships. It leverages the audience at scale, and it reduces the go-to-market risk. It signals seriousness to suppliers. And it also has this inherent linkage that it creates. And Kayali is initially seen as an extension of Huda. It's not really born as independent in the consumer's mind.
Nathan Resnick (25:27)
Yeah, I mean, you think Mona could have launched Kayali independently at the time?
Aaron Alpeter (25:32)
I don't think at the same scale. mean, certainly she could have, she could have launched it, but not the same scale.
Nathan Resnick (25:37)
Yeah, but I mean, even with her following.
Aaron Alpeter (25:40)
⁓ Well, I mean, the following can definitely get you DTC sales, but it's not going to get you shelf space. mean, that infrastructure, existing relationships, that's really what's going to help you break through.
Nathan Resnick (25:50)
you think Kayali was inevitable once Huda
became institutionalized?
Aaron Alpeter (25:57)
⁓ I think it became logical, right? So I don't think anything's inevitable in business, but it certainly was the next logical step.
Nathan Resnick (26:05)
Well, it ended up being a great decision all around. Right. And I think it's interesting how intentional of a launch they had, the name itself means my imagination in Arabic. The brand leans into the idea of layering and the storytelling really centers around personal ritual and its position as this modern, but culturally anchored brand. And, I think this is not
quite the DTC test. is really kind of a global Sephora launch with prestige pricing and full retail confidence by Sephora, since day one. And so the initial lineup included scents like Vanilla 28, Elixir 11 and Citrus 08. And I think these kind of scent choices are interesting because while there is Middle Eastern storytelling intertwined with the brand, the scent profiles are really globally accessible.
⁓ and so each scent, know, vanilla, citrus, musk, you know, they're all, think, safe, versatile and kind of, centered around the ability to sell globally. And so this is kind of not an oud-forward aggressive opening, and I think they didn't lean with this kind of culture, intense expression that, Middle Eastern fragrances often have. They re they really led with something that was more, broadly wearable.
Aaron Alpeter (27:23)
Yeah, and pretty soon after launch, one SKU very quickly rises to the top and begins to dominate, and that's Vanilla 28. And so that becomes their hero SKU, and it performs well in store and it translates well across geographies and it really starts to gain traction on social media, especially on TikTok.
So with the success of vanilla 28, a lot of outsiders start thinking of Kayali from shifting from Huda Sisters Fragrance line to a legitimate contender in Prestige Fragrance.
Nathan Resnick (27:49)
a lot of times with these launches, when you have, three or five SKUs typically there's going to be one that is kind of that single powerhouse SKU And so it's interesting to see that with the same case with Kayali, right? And so they had an awesome.
launched but growth, obviously it wasn't guaranteed. could you imagine if vanilla 28 had underperformed, what would have happened? I mean, like, likely shelf compression, slower reorder cycles, and, you know, potentially brand plateau. And so I think the first kind of year was obviously not guaranteed here, even though they had that strong retail distribution. But, instead of plateauing,
Kayali expands, do more scent launches, travel sizes, giftable sets, and really broader international distribution. And importantly, it kind of begins to stand on its own inside Sephora. And so it earns this kind of independent shelf identity, it's merchandise beyond the Huda kind of extension, and it builds its own repeat sales cycle basically.
Broadly speaking, the time, right before COVID, these notes were resurging and social media was accelerating the fragrance discovery. And I think this blind-buy culture was normalizing.
Aaron Alpeter (29:03)
Yeah, we mentioned that TikTok was just so critical to their growth. Do you think that Kayali would have scaled as big as it did without TikTok?
Nathan Resnick (29:12)
I mean, that's a good question. I think it definitely would have survived, right? I'm not sure it would have accelerated the same way, especially when it comes to sell through rates on retail shelves.
Aaron Alpeter (29:23)
Got it. So in other words, like TikTok is the key unlock for this whole brand.
Nathan Resnick (29:27)
I mean, think TikTok and COVID, right? mean, e-commerce in general accelerated like crazy during COVID. And, Sephora, probably across the world was shut during COVID, but, they still had their online distribution. And Sephora is, an established ⁓ online presence when it comes to fragrance shopping.
Aaron Alpeter (29:45)
Yeah, well, you speaking of COVID, when we move into 2020, the broader beauty industry fractures in a way that's critical to understand Kayali's trajectory because COVID didn't just impact every beauty category equally. So if you think about color cosmetics, which was ⁓ Huda Beauty's main line, it experienced immediate pressure due to lockdowns, reduced social gatherings, and just widespread mass usage. And so that suppressed the demand for event-driven or expressive makeup categories.
At same time, fragrance was initially slow in store due to retail closures, but began to rebound as consumers leaned into self-care, ritual, and personal luxury within the home. And so by 2021 and 2022, prestige Fragrance emerged as one of the fastest growing segments in the global beauty industry. And it was supported by this pent-up social demand and gifting recovery and acceleration of digital fragrance online. And what made this divergence really important is that the cosmetics and fragrance, even though they may sit together on the shelf,
they operate on fundamentally different cycles. so cosmetics really depends heavily on trend turnover, ⁓ influence amplification and just shade complexity, can increase the overall SKU count operational load that a business has to have. Fragrance by contrast really depends on the longevity of a hero SKU, if you're leading into that strategy, and really the repeat purchases and the emotional attachment that someone has to that fragrance. And so...
They can support longer life cycles of products. They don't have to innovate as quickly. And as a result, they have higher margin durability. And so while Huda Beauty was navigating maturity in this crowded cosmetics market, Kayali was operating inside a category that was really starting to blossom and have its own economic momentum.
Nathan Resnick (31:26)
Yeah, I mean, publicly disclosed, they stand alone revenue numbers for Kayali are limited. I mean, we can speculate about their scale, right? You Huda Beauty has widely reported it generating hundreds of millions annually in late 2010s. And so you can think kind of Kayali's individual revenue, though not formally disclosed in detail, you kind of take a conservative approach.
based on the door count and sales velocity and average selling price point that like, I probably estimate it's somewhere in the high tens to low hundred million of dollars annually. And I think what matters more than the exact number is actually the trajectory rather than the absolute size. I mean, even if Kayali remains smaller than Huda Beauty in terms of total revenue,
it is plausible that percentage growth outpaced cosmetics during parts of this period. And so from 2020 through 2025, Kayali expanded its key portfolio in a very disciplined manner. mean, the brand introduced flankers and limited editions while maintaining emphasis on those kind of hero sense that we discussed.
And they layered on travel sizes and this kind of ritual positioning and just social amplification through TikTok. I think really accelerated their growth and normalized kind of fragrance layering content. so geographically, Kayali deepened its North American footprint while maintaining kind of Middle Eastern relevance and expanding further into Europe. so North America definitely became a primary growth engine here rather than a secondary market.
What's really important, I think, is the brand stood on its own ground inside Sephora environments rather than kind of being merchandise purely as an extension of Huda Beauty.
Aaron Alpeter (33:16)
Yeah, and the growth rate really mattered a lot. More so the growth rate than the absolute scale of the business when you start to think about the portfolio of the cosmetics business and then the fragrance business. And so if Kayali is growing faster in a category with higher gross margin potential and longer product life cycles, it begins to look less of a supporting vertical and more of an independent asset. And so by 2024, 2025, there was a structural divergence between the two businesses.
that became increasingly more clear. And when you have two businesses inside the same family of brands that begin to follow different growth curves and economic logics, then you start to think about separating those two businesses. And that becomes kind of like the rational decision as opposed to a reactive one.
Nathan Resnick (34:02)
Yeah, mean, which one do you think was really outperforming the other here? I mean, it seems like they were both, really growing strong within Sephora and internationally.
Aaron Alpeter (34:12)
Yeah, I think in absolute terms, Huda Beauty likely remained much, much larger. But in terms of category momentum and relative growth weight, think Kayali may have been more dynamic during parts of the cycle. And so I think that that distinction can create internal and external strategic pressure. Investors may see a clear exit path for fragrance, and you may need to start thinking about splitting up the leadership roles and doing things differently. And so this idea of portfolio clarity
begins to become much more attractive. And so when you start to combine the category divergence, the growth momentum, the leadership differentiation need to be there, and just this public identity evolution, the separation of the two companies becomes the next logical step. And so the question doesn't become, you know, why split, but rather do we keep two increasingly distinct assets under one governance structure? And eventually, Cali formalized its independence from Huda Beauty and became a standalone company in late 2025.
Nathan Resnick (35:10)
Yeah, I mean, what what do think we should make of this separation, right?
Aaron Alpeter (35:15)
I think the reality is it's just a good business move. It's a good structural move. I mean, it's true that like Huda and Mona have had some public disagreements about the protests in Iran, both unfollow each other, which I think is like the worst thing that one influencer can do to another one. But if you look at things rationally, like Kayali is a fragrance brand that's in the growth cycle, while Huda Beauty is a cosmetics brand navigating maturity and competition. And so you've got different prospective buyers that may value them differently.
As a result, for each one to reach its potential, you need leadership that's focused on just that entity. And so if Mona wants to fully own fragrance and Huda wants to focus on cosmetics and media, then that separation really starts to clarify authority, regardless of any political differences that might be out there.
Nathan Resnick (36:02)
Yeah, I mean, so let's say now, Kayali is obviously structurally independent. The question, I think, becomes how they can this get, right? And if you look at the fragrance category, it's one of the highest margin segments in Prestige Beauty. There's strong gross margins of 60 to 70 % at the brand level, fewer SKUs required for scale, and I think really kind of hero-driven economics that they saw in their initial launch as well.
And so, upside scenarios I think are really strong here, right? Vanilla 28 remains culturally relevant for the next five years. They get maybe a second hero SKU that emerges and their international door count continues to expand. I mean, they could definitely cross the kind of 250 million annual revenue range that would position them really in kind of serious acquisition territory.
then the question kind of becomes who might be interested in buying a business like Kayali.
Aaron Alpeter (36:57)
Yeah, that's a fun question. I think there's a couple of brands that immediately jump out to me as potential homes for an eventual exit. The first one is Puig So they're a strong fragrance consolidator. They own Byredo and Carolina Herrera, and they really have just this deep infrastructure and prestige scent. And Kaoli would fit well in their portfolio, be an influencer native fragrance and expands this Middle Eastern narrative adjacency into their existing portfolio. ⁓
Of course, any sort of fragrance acquisition, have to talk about Estee Lauder and LVMH. So, you know, Estee Lauder owns Jo Malone, the Labo, Kilian. And so they really understand this prestige storytelling. And Kayali would fill a gourmand scent niche and the social native gap. And, know, they've got good, strong Sephora overlap with their existing brands. And so I think that could be interesting for LVMH or for Coty for that matter. They've got a history of doing well with influencer fragrance brands.
and they already have some Middle Eastern marketing adjacencies throughout the rest of their portfolio. I think the most interesting angle for me would be for Kayali to eventually turn into an acquire itself and become this Middle Eastern luxury platform. And they could play into like regional pride angle and lead all the strategic regional consolidation, not just of
fragrance, so there's a lot that they can do in fragrance, but just have other products as well.
Nathan Resnick (38:20)
Yeah, I mean, you know, when we started this episode, we said that this story shouldn't make sense because kind of the prestige fragrance world is one of the most dated industries and consumer. yet this, you know, influencer born Middle Eastern position brands scaled globally through Sephora. I think now that we've kind of talked about the formation, the rise of FUTA beauty, the launch sequencing, the hero SKU of vanilla 28 and the eventual separation.
the story really makes a lot more sense, not in the way that I think most people would expect. Kayali does not teach us that authenticity alone wins. I think teaches us more so that authenticity without kind of infrastructure stalls. And so I think you see Kayali continue to invest in their distribution and their infrastructure. And I think for me, a major takeaway.
is that the idea that, culture fluency is an advantage, but only when it's translated and not just transplanted, right? If you look at kind of the roots of Kaola, didn't just attempt to export Middle Eastern fragrance culture in its purest form into Western retail, they kind of understood that Western shelf environments are optimized for kind of blind by safety, lower return risk and versatility, right? And so
I think the brand calibrated intensity without erasing their identity, which kind of suggests that, successful culture brands are not rigid. They are kind of these strategic translators. And if you look at, the sisters upbringing, that's really kind of how they grew up, right? They grew up ⁓ Iraqi ⁓ immigrants in America. And, then we're in the UAE and Dubai and kind of continued, I think, to be these
really strong translators across border. And so think the deeper insight here is that cross-culture brands scale not by kind of preserving everything, but by knowing exactly what cannot be compromised and what must be adjusted to align with a new market, right?
Aaron Alpeter (40:24)
Yeah, I think you're absolutely right. really what I think they've done a great job of is taking something that is so rooted in this Middle Eastern identity and making it palatable and something that ⁓ audiences outside of the Middle East are interested in trying. so they're not kind of, it's not like IKEA who's got yellow and blue everywhere and it's very Swedish. It's just like, hey, this is something that's cool.
Yes, it's got this great Middle Eastern storytelling. And so I think that it's really good that way that they've done it. I think that, ⁓ you know, all of the Kattan sisters grew up navigating the cultural tension that you're talking about long before they navigated the market tension.
The code switching that they were able to do between their own heritage, whether that be Iraqi and American, really mirrored what Cali was able to do later on between Middle Eastern retail and Western retail expectations. And so I just think this is a great lesson of this cultural negotiation that translates into this brand level calibration. And when you see all these things, whether it be K-Beauty, whether it be Middle Eastern fragrance, or some of the other things we'll get to, it's just so important you've got someone who has a foot in both worlds so you can understand and be that bridge.
Nathan Resnick (41:36)
Yeah, definitely. Definitely. mean, this was a great story and I think it kind of shows that, hey, you know, there is opportunity to grow a real strong and eventually independent brand inside another one once you get some scale, right? And have some really strong distribution partners. So I really enjoyed this story. Love this episode of e-commerce on tap brought to you by Sourcify and Izba. But here's your reminder to share with a friend, leave a review and click the subscribe button. Thank you again for tuning in.