After a few years of high expenses acquiring brands and building its new manufacturing facility in Clayton, Victoria, beauty manufacturer BWX is refocussing on cutting costs and delivering earnings growth. At the business’ strategy day on Thursday, chairman Ian Campbell told investors the business is not where it expected it would be after half-year profits fell by more than 120 per cent, but that international and local teams had a plan to bring strong growth moving forward. “Clearly we los
we lost some focus on our core business,” Campbell said.
“While we dealt with some side projects, we had a global pandemic present new challenges at the same time. Our objective today is to demonstrate that we have heard your concerns, and have plans to address them.”
BWX currently owns and operates the Sukin, Go-To, Andalou Naturals and Mineral Fusion brands across its major markets, and runs online retailers Nourished Life and Flora & Fauna.
Chief executive Rory Gration, who stepped into the lead role in January after former CEO Dave Fenlon exited the business, said that while BWX acknowledges it is facing short-term challenges, it is taking action to create a clear path forward.
“Over the last five years BWX has invested heavily in expanding our brand portfolio,” Gration said.
“We’ve increased our market share in the global natural beauty category, which is $40 billion, but we also invested ahead of that growth curve and our expectations overshot the reality of earnings and revenue growth in a Covid-19 environment.”
The issue, Gration said, is that BWX strayed from its high-margin brands, and that it let its operating costs exceed sales. Moving forward, the business will focus more on controlling its capital expenditure, and seek to drive margin growth through better terms with distributors and more efficient manufacturing processes in its new Clayton facility.
BWX is reallocating its focus internationally as well, pulling back on the European market, and instead putting more time and energy into its operations in the United States, China, Ireland and Australia.
Digital businesses under review
The Nourished Life and Flora & Fauna brands are likely to see some degree of changes moving forward, as the business puts its Australian digital operations under a strategic review.
“The gross margin on our digital segment is much lower [than other parts of the business],” Gration said.
“That is predominantly a result of selling other companies’ brands. Ninety per cent of the revenue generated through our e-commerce platforms aren’t from our own brands.”
Moving forward, BWX will try to negotiate better terms with its suppliers, expect them to “contribute to the customer acquisition cost”, and will find other ways of creating operational efficiencies.
For example, the business recently closed Flora & Fauna’s dedicated warehouse in Sydney in order to move the business’ warehousing to Clayton. This led to the unemployment of up to 30 workers, some of whom live with disabilities, and were hired as part of an effort by Flora & Fauna to help people with disabilities get into the workforce.
“There’s a significant amount of work involved in redeploying a team, in terms of reskilling and retraining,” Graiton said.
“Unfortunately, those workers being located in Sydney, and our facility being located in [Victoria], meant there were limited opportunities for relocation, and we don’t have those types of jobs in Sydney.”
The review is expected to be completed in “the coming months”.
Customers are expecting more
BWX’s stable of brands have long been marketed as ethical, organic, or natural, but moving forward Graiton understands that what is inside a bottle is less important than what the brand behind it is actually doing.
“I think as consumers evolve, they’re expecting more, and we’re continuing to address that,” said Graiton.
BWX has traditionally put its money behind supporting many smaller initiatives, Graiton said, rather than making larger donations or partnerships. But, moving forward, this could change.
“If we pull all that spend together we can actually do things that are more impactful, and things that we can leverage more.”