Editor’s note: We’re late this week, because of the start of the youth soccer season in our house. Opening Day of Hunter Soccer Club’s 2nd/3rd Grade Boys league saw Team Freiburg escape with a 1-0 win.
On Tuesday, news dropped that Hero Cosmetics sold to Church and Dwight for $630 million.
Even last year, when money was flowing and the acquisitions were aplenty, this would have been an attention-grabber. But this year? In this market? It was pretty much all anyone talked about Tuesday and into Wednesday.
And with good reason.
According to the press release, Hero—a five-year old business—did $115 million on a trailing 12 month basis for the time period ending June 30. And they did it with a 40% EBITDA margin.
Good grief. We’re not sure which of those numbers is more impressive.
And so, yes, people talked.
What was unfortunate about the talk, at least from our perspective, was how many people seemed to worship the wrong “hero” in the story. A prevailing sentiment on social media was that Hero’s exit (and Hero’s performance to date) was a win for DTC.
Except Hero isn’t DTC. They’re CPG.
If you’re familiar with Hero, you likely know they validated initial traction on Amazon, landed in Target pretty quickly (with additional distribution now in places like Bloomingdale’s, Kohl’s, Neiman Marcus, and Urban Outfitters) and, yes, have a Shopify store.
They have some a distribution strategy that rivals that of any emerging CPG brand (and, judging by EBITDA margins, they’ve executed on that strategy better than any other emerging CPG brand).
So calling them DTC feels disingenuous at best and disrespectful at worst.
Assigning the label takes away from the business strategy. It takes away from work that was done in the other channels. It takes away from the sheer amount of talent and rigor it must have taken to nail three distribution channels in a five year time period.
The reason we’re pushing back so hard here is because, from our viewpoint, this is the most consequential CPG acquisition in quite some time because of what it represents: a well distributed, distinct brand brand with a best in class product.
Simple, but not easy. And that’s what’s worth celebrating.
Repeat's very own coach Lasso!