Hero Cosmetics: How Ju Rhyu built a $630 million pimple patch business
My wife had a pimple and she came back from the store with a patch from Hero Cosmetics that was supposed to help kill pimples. And it did. Color me impressed.
So what’s that worth? $630 million.
Turns out Ju Rhyu who was one of the co-founders was working as an expat for Samsung in South Korea and saw people wearing patches on their faces. She was curious and found out they were patches to help calm down their acne.
Ju Rhyu, co-founder Hero Cosmetics
Ju had a breakout and was amazed how well they worked. The patches use hydrocolloid gel which is a fluid absorbing gel and they work to pull out all the gunk out of your pimples.
Here’s a pivotal moment. Ju’s in a different country and something novel works. She didn’t ignore it, she started looking into what was offered in the U.S.
In the U.S. there’s two acne patches. Okay onto the next idea right? Nope. Ju worked at Kraft in the past and realized that the two companies sold the patches as a medical product in the bandaid aisle. Ju thought it would work great as a beauty product in the cosmetic aisle.
So she leaned in.
She found two other co-founders, they threw in $50,000 total and started contacting the manufacturers in South Korea (turns out they have to be listed on the boxes so that’s easy).
Some manufacturers ignored them but they eventually landed on a factory and placed a minimum order for 10,000 boxes. The year was 2017. They launched on Amazon and within 40 days had sold over $10,000 and three months they sold out of their initial order.
They had product market fit and a business.
So here’s a product that already existed, but Ju marketed it to a different clientele and boom, it’s working. Lesson there.
Ju focused on press for the first six months and used a service called LaunchGrowJoy where for a fee they provide access to editors and you could pitch stories for articles they are writing.Once they had traction in a few publications Ju hired a PR consultant to take it over.
Next was retail. She had some previous contacts and emailed all of them the key points of the product, the problem it solved and a photo of the product. After that she cold emailed every retail shop she could think of by guessing the naming conventions on emails.
In January 2018 they entered retail in Anthropologie stores. By the end of the year they had one product and over $1 million in sales.
In 2019 they launched in over 1,500 Target stores with a $7 box that had six of their original patches and six invisible patches to be used during the day.
In November 2020 they took on an investment from Aria Growth Partners (undisclosed minority stake). But now the clock had started as an investment firm would need an exit or an IPO to realize a return.
They continued to add retailers and by 2021 their business was 10% direct to consumer and 90% Amazon and wholesale. They had grown to 50 employees and the rocket ship growth was continuing. They ended the year passing $100 million in revenue for the first time.
Now this is just amazing. Profitable from year 1, hitting $100 million in sales in five years. Bonkers.
By 2022 they had seven patch and five non-patch products to cover the entire life cycle of acne. A box of patches sold every two seconds.
And people noticed.
They started a sales process by interviewing bankers and eventually sold to Church and Dwight for $630 million. That was 5.5x the $115 million trailing 12 month revenue or 14x the $45 million EBITDA.
Let’s say that again. A business that was started for $50,000, was profitable every year and by its sixth year was making $45 million in EBITDA. Amazing.
How many of us after seeing the patches in South Korea would have said, ah it’s already in the U.S. no opportunity there? But Ju’s experience as a brand manager helped her realize that positioning a product was key.
There’s money everywhere!
What can we learn from Hero Cosmetics?
Look for opportunities when you’re traveling abroad
People pay to solve problems
Don’t abandon an idea if it already exists, try and see if there’s a spin you can put on the product
$100 million in annual revenue is a great spot to sell a consumer product company, once it gets bigger there’s fewer buyers (or you could IPO)
Strategic buyers will pay up for companies!
Sources
Ju Rhyu medium post
Glossy article
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