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‘Minimalist’ brand acquisition to be positive for the brand and HUL

We consider media insights (link), of HUL looking to acquire the Minimalist brand, as positive. With 100% own capacity and differentiated approach to address skin- and hair-care needs of cohorts, Minimalist has rapidly logged Rs3.5bn in revenue for FY24, with a mid-single-digit margin. Minimalist targets revenue of Rs10bn and mid-teens margin in coming 3 years, with 1/3rd of this revenue from international markets. If the deal with HUL materializes, we see it as a win-win for both, with Minimalist charting scale-up by leveraging HUL’s offline distribution; similarly, HUL would gain access to a digital savvy cohortbase, R&D know-how, and manufacturing capability. (Detailed insights on Minimalist in our Corner office view: 1x1 with Mohit Yadav - Founder, Minimalist.) HUL is one of our select sector preferences, basis execution ability.

Minimalist – Discerned approach of addressing skin-care needs with actives

The Minimalist brand is making progress on positive word-of-mouth, leveraging ecommerce (90% of sales) platforms for scale with 100% own production. Versus peers, Minimalist has a differentiated approach toward expansion: a) selective innovation approach (4-5 SKU launches annually, with a 1-2-year launch timeline, b) expanded actives-based offering into hair-care and baby-care (vs skin-care focus by peers), c) first to apply for product patents (for the hair-care range). The brand posted Rs3.5bn revenue in FY24 (with mid-single-digit OPM). As highlighted in our corner office view with founder Mohit Yadav (link to report), Minimalist aspires for ~Rs10bn revenue over 3-4 years (capacity already in place). We believe further scale up requires expansion in the offline channel, where it has selective presence now. With large incumbents adopting activesbased offerings, we see the segment seeing fast expansion.

HUL getting its act together in beauty and wellbeing

As the competition from D2C brands is ebbing and naturals as a trend has waned, we believe HUL now has a fair opportunity for enhancing its play in beauty care. The company has widened its play in skin care under seasonal brands like Ponds and Vaseline. Riding on the actives-based personal care demand, HUL has widened its product offerings with active benefits. We see a dedicated brand, built on actives, to be accretive.

Minimalist a good fit for HUL; HUL still our key preference among our coverage

HUL relies on strong parentage and R&D team to address or shape the consumer trend. With Minimalist, HUL is likely to gain a decent consumer base (if the deal materializes), where 60% users are loyal and order 4x a year. Expected valuation of Rs30bn looks lofty on the current base, but is reasonable, given robust growth ahead (3x sales on revenue aspiration of Rs10bn in 3 years), asset base (1/3rd utilization), and R&D team. We see a synergistic opportunity, with the brand gaining access to HUL’s specialized distribution network, and HUL leveraging brand insights to connect better with cohorts.

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