A pivot has paid off for Lux Beauty Club.
After starting three years ago in hair extensions, the brand overhauled its business model and relaunched with CBD at its core in June. In a blazing cannabis beauty and wellness segment, investors and licensing partners welcomed the move. Lux Beauty Club’s parent company Sobe Organics Inc. has raised $750,000 in early-stage funding from 1000 Angels, Executive Forum Angels, DKNY Sportswear president Terri Speiser, entrepreneur and politician Neelam Brar, founding member of Impax Ventures, and angel investors Jessica and John Ason. It’s also struck a licensing deal with Perry Ellis International for CBD products under the Gotcha and Ben Hogan labels.
“We play in a very different space than most CBD brands. While all the Sephora’s and Anthropologie’s are great, our bread and butter are spas, pharmacies, hotels and small independent boutiques. There’s been nothing in the mid-tier for them,” says Victoria Flores, who has an extensive background in the finance industry and created Lux Beauty Club with nurse Leslie Wilson. “CBD is such a big opportunity. There’s really a lot of space for everybody at different levels.”
Lux Beauty Club has five stockkeeping units priced from $49 to $98: Orange Awake CBD Oil, Peppermint Peace CBD Oil, Sleeping Beauty CBD Oil, CBD Beauty Butter Body Cream and bestseller CBD Relief Roller. The brand’s products are carried at around 1,800 points of sale, where Lord Jones and Mary’s Nutritionals are its chief competitors. In less than a year, it’s generated $500,000 in revenue, an amount Flores forecasts will at least double in 2020. About a quarter of the revenue is from licensing arrangements.
“Let’s be honest, there’s a war on the ground right now for CBD. It’s about how fast we can bring these products to market, and we can go into many markets with licensing,” says Flores. “Our mission is being bigger than just a single brand. Our mission is housing different brands.”
Lux Beauty Club’s product pipeline is being ramped up to address gaps in the field of available CBD merchandise. Nine bath and body care, and anti-aging SKUs are set for release in January, including a mask combining CBD with hyaluronic acid and charcoal that’s received a strong positive response from distribution partners that have gotten a first glance. Through its licensing arm, Sobe Organics can direct products at specific demographics or other CBD category niches that remain underserved. It’s working on a brand for baby boomer consumers, for example.
Flores says the main challenge in pushing Sobe Organics forward is having enough manpower to execute upon the opportunities it’s presented. The company is expanding operations to seize the opportunities it runs across. Sobe Organics has hired manufacturer representative groups Focus on Beauty Brands and Diverse Manufacturing to heighten its retail presence. In addition, it appointed Wilson’s husband Richard Namad, formerly sales director at Perry Ellis, president and head of licensing to assemble the licensing portfolio.
Namad helped raise money, too. Although Flores held positions at Katz Capital, Morgan Stanley and Themis Capital previously, she encountered obstacles to securing funds for Sobe Organics, especially before Lux Beauty Club transitioned to CBD. As a woman and Latina, investors’ doors didn’t swing open for her. Flores says, “Once Richard came on board, it has been easier. We have both been talking to investors, but they always reply to his email.” Prior to the latest funding round, Lux Beauty Club amassed $300,000 from friends and family members.
In its past incarnation as a hair extensions brand, Lux Beauty Club faced major supply chain setbacks. It initially depended on hair from China, but the quality of the hair began deteriorating. As a result, it switched to a supplier from India, and the hair quality improved. However, Flores and Wilson sensed supply chain problems would continue to trip up Lux Beauty Club.
“We had a come-to-Jesus moment. We needed to build a company that didn’t have supply chain issues and develop a brand that people loved. We could tap into the same customer network,” says Flores, noting Lux Beauty Club’s target customer is a woman over 30 years old interested in alternative holistic products that often lives outside of New York and California. “We learned so much from that experience. We had a great team, and we could shift fast. We had made all of the mistakes and wouldn’t repeat them.”
Today, Lux Beauty Club has a much tighter handle on its supply chain. To ensure it has inventory on hand, it’s connected to the hemp farmer it relies on for the CBD in its products through a line of credit. Flores declines to disclose the name of the hemp farm. “Most CBD brands, truthfully, aren’t lab-tested. We have all of our certificates of analysis on display. We make sure we have all of the necessary licenses. There is no middleman. There are no brokers,” she says. “We are able to scale and be competitive for a luxury product.”
Ultimately, Flores envisions Sobe Organics as part of a larger company angling to capitalize on CBD’s surge. “A lot of the cannabis stocks are getting hit right now, but that’s just the nature of the market. It goes up and down. There are a lot of players out there looking to benefit from the growth of CBD. It will be what we’ve seen with Lord Jonesrecently. The companies gaining traction in a certain number of doors will be acquired,” says Flores, elaborating, “We already had a term sheet offer to buy us. That wasn’t what I wanted because we still have a lot of room to grow. It didn’t make sense for us, but I know that, in 12 to 24 months, the conversation is going to be very different.”