Scott Oshry [00:00:23]: Hi, I’m Scott Oshry, the Chief Marketing Officer at Maesa, and to me, it’s a matter of conceptualization.
Kelly Kovack [00:00:38]: While brands are the consumer-facing manifestation of the beauty and wellness industry, there’s a vast ecosystem behind the scenes that brings them to life and keeps them in business. I’m Kelly Kovack, founder of Beauty Matter. A new trend has emerged from this ecosystem, and it’s called brand incubators. These turnkey operations are uniquely equipped with the infrastructure and knowhow to fast-track made-for-retail lines often done in collaboration with an influencer or an entrepreneurial celebrity. For big box retailers like Target and Walmart, these incubator brands have helped reinvigorate their beauty aisles with brands that are not only relevant, but exclusive. Success requires creative vision, business acumen, and an organization that runs like a well-oiled machine. Scott Oshry, the Chief Marketing Officer at Maesa and his team are pioneers of the incubator model. While it seems like a new incubator pops up every day, this business model is one that is far more complicated than it appears.
So Scott, thank you so much for joining us this afternoon. I know it’s taken a lot; we’ve been trying to sort of plan this for months. Schedules, sickness, but here we are. I think COVID has slowed everyone’s schedules down. So, it’s really good to see your face – well, or hear your voice, because I see your face, but it’s a podcast. You know, so, maybe we should start with a little background on Maesa, because Maesa is sort of a behind-the-scenes player in the beauty industry, and responsible for many brands people know, but can you explain what Maesa is, and sort of as a company, and what you guys do in the ecosystem of beauty?
Scott Oshry [00:02:38]: Maesa is a – although I thought we used to say this and we were unique, but no longer are we unique, a beauty brand incubator. So, we pride ourselves in identifying white space globally, and conceptualizing brands that fill that white space. So, at the highest level, that’s what Maesa does. We break that down into two categories: one category is we help existing beauty brands bring new products to market, manage brands that they have, they sort of outsource their work to us, and we manage that work for them. We do it in an ala carte way, but I would say the majority of our business now would be full turnkey for other beauty companies that come to us. We help them identify growth within their brands, new categories, new product launches, and then manage all of those said launches from a formula, packaging, manufacturing, regulatory standpoint, and we ship them products. On the other side of what Maesa does within incubating is when we incubate directly for retailers, and that, actually, is broken down into two segments. One might be a retailer coming to us saying, “Hey, can you help us identify a white space?” or, “We’ve kind of identified a white space,” or “We’re kind of thinking about a brand, can you create something for us?” For example, Urban Outfitters was looking for something new and different and we conceptualized with them the brand Ohii, and then provide that turnkey to them. What Maesa then does at the highest level, is when we incubate a brand for a retailer, that starts off exclusive at that retailer, with the idea that post that exclusivity being up, that brand will then ship everywhere; no different than a full CPG company. So, that is when we look again at a white space not only particular to that retailer that we would be launching in, but being sure that it not only works for that retailer for launch, but then has the ability to then go to a multitude of different retailers post-launch, and when we do that, we do that regionally. So, that’s happening in the United States, but we also have retailers in seven other countries. So, we take those same brands, and we’ll launch those brands under the same model in those other regions where they will have some exclusivity for a certain amount of time, and when that exclusivity is up, they will branch out.
Kelly Kovack [00:05:31]: You know, I also – I think that, I mean Maesa has sort of grown into a very sophisticated business and a very large business. You had a business before this called Zorbit that you founded with some other colleagues, and that’s, I think, where I first met you and Scott Kestenbaum who was supposed to be on the podcast with us today but isn’t, and you know, you guys have really been innovating on the supply side of the beauty industry for a long time. You know, Zorbit was kind of this new way of selling packaging, even from how you guys designed it, even to how you guys did new business, it made the supply side of the business seem fun, and the supply side of the business is not usually very fun. Can you share a little bit about those Zorbit days? Because they were kind of crazy; they were kind of the seeds of what you built at Maesa.
Scott Oshry [00:06:32]: Yeah, it’s a little hazy. Zorbit was a lot like being in a fraternity. I’m not sure…I think I blacked a lot of that out, but thank you for the compliments. You know, it was a group of us, but I think what made Zorbit work, and what ultimately is making Maesa work, is that we didn’t come from the beauty industry. So, we were in a completely separate industry, we had built a company up for 10 years, and like Maesa, it was a very fast-paced company; we were on Inc 500 five years in a row, and we exited that company to a pretty sizeable company and kind of went on our own way, and sort of did all those things that people do when they sell a business, and Scott Kestenbaum, I wish he was here to expand on the story, but stumbled into doing a project for Victoria’s Secret Beauty, and that’s what sort of brought us into the business, and we all came from a different business where we were full turnkey and we were fully vertically integrated outside of contract manufacturing, so we had in-house industrial design, in-house industrial engineering, in-house branding, in-house graphic design, in-house everything, and we would fight for retail space and build brands, and we were our own CPG company and we would support said brands all throughout the United States. So, when we started supplying people, we took the same approach: we would walk in, and they would say, “Gee, I’m kind of thinking about this bottle,” and we would come with full CAD work, everything spec’d out, graphics done, mechanicals done, this sort of concept of you have a graphic designer and then you have a mechanical person and they’re not one and the same and everything was engineered, and we took into consideration undercuts and fill weights and we just sort of…that’s how we had to be when we were our own company, so we started servicing other people, we just kind of took that same approach, but I guess that’s sort of what thrusted us fully quickly, and on top of that, we also weren’t pigeon-holed that we would only do molding or only do plastic or only do glass or only do some segment, because in our old world, we were doing everything. So, we just started doing everything and we were kind of an anomaly within the business and sort of not bound by conventional thinking because we were just a bunch of freaking knuckleheads that just came from all over the place and so under your comments of, “What was it like?” and “It seemed like you guys were fun,” I guess we were, because we were just a bunch of kind of kids.
Kelly Kovack [00:09:11]: You threw great parties!
Scott Oshry [00:09:13]: Yeah, everybody was paying attention to these kids, and we were out there going, “We could do this and we could do that,” and we did, and yeah, it was fun. It was definitely fun.
Kelly Kovack [00:09:23]: I have…I think there are three people who used to work for me who work for you guys now, and you know, I guess because I’ve known you guys and I also understand the culture because it’s sort of very similar to how I’ve run the businesses that I have, but you have this culture, you had it at Zorbit and it exists at Maesa where it’s like, work hard, play hard, you know, like you guys work so hard, but you also have a lot of fun doing it, and you’ve created a culture where people actually like, hang out – well, probably not now, because nobody is working in the same place anymore, but there is this culture of like, people actually like to hang out and socialize together, and it’s a really kind of special culture. It’s not an easy culture, because you guys really work hard and have very high standards, but you know, how has that evolved during the last five months? Because that culture is something really special, I think. It’s not for everyone, but it’s very special.
Scott Oshry [00:10:23]: Yeah, I mean, a lot of accolades, thank you. So, everybody that works – all of the sort of founders, partners in this company, we’ve never worked for anyone else, ever, so we don’t know how it’s supposed to be. So, we just kind of do it the way…we just, again, going back to sort of that collegic statement, we just do it normally, so we don’t have really a hierarchy, and we like to – so, I’ve got a lot of isms, and one of my isms is we don’t have bosses, it’s just a lot of people working together, trying to create something new, better, different, relevant, and accessible, and everybody’s voice matters – everybody. So, it does feel…it is a tough environment, one of my other statements I bring up to people when they’re interviewing is, so they say, “So, what’s the corporate culture like here? What would it be like to work here?” and my response is, “Well, I guess it would be like working, living, breathing, in a submarine during wartime.” That’s what it’s like at Maesa, so if you can thrive in a submarine during wartime, you’ll do great here. So, the reason I state that is because you brought up how we’ve been sort of transitioning over these past five months which truly have been awful for the world. The new saying is, “It’s like working in a submarine during wartime with a torpedo in the water.” So, everyone has upped their game. The red light is on, we could be sunk, and that hyper-sense of adrenaline rush, whereby you know, you’re threatened and you’re alert and astute, that’s just where everybody works for us went, and man, it’s so funny you bring it up, because we were just having an upper management meeting today discussing next steps, when we’re going back to the office, working to ever-navigate these waters right now, and we were just reminiscing about how proud and kind of in awe and humbled we are about how everybody just stepped up and not one thing has been missed, our growth plan for next year is unwavered, our sales are unwavered, we’ve had a couple small downsizing, which hurts, but all in, we’ve kept that same kind of family feel, and we’re lucky. Lucky.
Kelly Kovack [00:13:15]: Yeah, and your team has grown. I mean, it’s not a small team anymore, but it does feel sort of like, you know, it doesn’t feel like a big business, but it definitely is a big business.
Scott Oshry [00:13:26]: Yeah, we just moved into a new space, unfortunately right before COVID, and I was space planning that space and we were moving in…what are we now? I guess it’s maybe like 30,000 square feet, 35,000 square feet, and it was going to last us four years, and now we’re looking at, if everything goes right, at six months from now, we’ll be out of space.
Kelly Kovack [00:13:53]: That is amazing. But, you know, you intimated that what you used to do was sort of…you were one of the only people kind of incubating brands, and now I feel like every one considers themselves a brand incubator. There are so many of them. You know, I still think that the way you guys go about things is very different. I think having had the opportunity to work with you guys, one of the things I love is nothing is ever a problem, anything custom, no problem, we can do that. Have you, I guess, during COVID, because you do have sort of these competitors, but I would say, you know, you guys have had all of these years to refine the supply chain, which is really the secret sauce, but your model is heavily reliant on retail. How have you navigated sort of the retail shut-down?
Scott Oshry [00:14:50]: It’s another one of those things where we’re just fortunate in the industry that we’re in. So, if you think about it, places like Walmart, Target, Amazon, CBS, those places – Dollar General – those places are thriving, their numbers are up, and that makes up the bulk of our business, those are the people that we sell to. So, I hate to say things like this, because people have lost their lives during COVID, people have lost their loved ones, they’ve lost their business, the disruption that has happened to them is life-changing. So, I hate to make statements like, “Wow, we’re having some of the best weeks that we’ve ever had,” but we are, because those retailers are thriving.
Kelly Kovack [00:15:36]: No, I do think, you know, during this period, it’s really a matter of were you considered an essential retailer or not? But, I think even before COVID, I was really sort of impressed by what was happening in the food, drug, and mass channel, much more than department stores. What Hy-Vee has created, it looks like a Sephora in a food store, and you know how Target has reinvented themselves and what Walmart is doing, almost the mass outlet seems more exciting and more dynamic in many ways.
Scott Oshry [00:16:20]: I’m a huge believer in retail, because I’m a huge believer in experience, and I think when you look at the people who have succumb, I mean obviously COVID has accelerated the retail channels and retailers that were struggling a little bit, so it certainly accelerated it, but you had retailers that were doing great and going, and it was because they offered a reason to shop. I said it a moment ago, which is we show up to work every day and try to think again how we can be new, better, different, relevant, and accessible, and there’s retailers that fill that space. You had department stores closing in Manhattan, but Nordstrom’s was expanding. You have retailers like Hy-Vee who the numbers they put on the board are crazy, but you have Target who is gaining ground tremendously and new categories they’re getting into are growing, and you look at that and it’s not hard to understand why, because they’re offering something with a point of view; they’re offering something that is different, and it’s just now that the threat of online shopping really started to sink in. Amazon Prime came around, it changed Amazon, it changed how we shopped. Again, COVID has accelerated that, but I think it didn’t so much change how we shopped, I think it changed how we find product, and that’s the key differentiation. Whether I’m walking down the store aisle with my legs and my eyes and looking for something, my legs are just a carrier for my eyes to go see, no different than if I’m thumbing through webpages with my thumbs and looking with my eyes, my thumbs are just a way to go see. So, retailers that bring interesting products to purchase do well, and consumers are searching that out, and consumers will talk about experiences all day long and stores that they like to go to all day long, so I think retail is going to make a resurgence because post-COVID, people are going to want to go out, they’re going to want to be with their friends, they’re going to want to walk, they’re going to have those life experiences, they’re going to be able to take selfies and picture and film and create moments outside of their home, and places that offer a reason to be, I think consumers will hunt those out.
Kelly Kovack [00:19:07]: You know, it just actually occurred to me that the channels we’re talking about, the Hy-Vee, the Target, the Walmart, they also don’t have the same issues of a Sephora or an Ulta or a department store where the biggest question now is what does that experience look like, because it was very high-touch, but you can’t touch anyone. Testers were probably always disgusting and probably should have gone away a long time ago, but that, you know, in the channels that are sort of thriving right now because they were open, they’ve always had to think about the category differently, because it wasn’t as high touch and it was more open sell. So, they almost have, I guess, a competitive advantage in this kind of environment because the expectations are different.
Scott Oshry [00:19:55]: I agree with you, but also I think that those environments aren’t super new anymore. So, I think you would pop into an Ulta and a Sephora because you were out, and now that you’re not out, you’ve found other ways to buy, so then you ask yourself the question, I’m going out, do I want to go to Sephora, do I want to go to Ulta, and maybe think to yourself, “Eh, I guess I kind of don’t have to. You know, I’ve been there a bunch and nothing’s really changed, I guess I can maybe get it online,” so again, I think that it goes back to experience. This is an example I was using the other day when we were talking about fixturing and experience and how that can drive. If you live in Manhattan, I urge you to pop into the Restoration Hardware in meatpacking. So, this is a huge space, huge space. It’s what, five floors, six floors, with a restaurant on top.
Kelly Kovack [00:21:00]: Oh, it’s massive.
Scott Oshry [00:21:02]: And, it’s full. Every single day. The restaurant, packed. And there’s just people drinking coffee, sitting on furniture, hanging out. Just there with their dogs hanging out. And, they finally reopened post the shutdown here in New York, and I went there to look at a color for a couch that we were going to order, and we walked in the door, and it was packed. So packed that they were actually asking people to leave because it was too many people post-COVID. So, that just goes to show you that people do want to get out, and that’s still a fresh, new experience, and so people want to experience that. So, I wonder if again, Ulta and Sephora are going to be pressed to create something that feels a little new to kind of pull their customer back in.
Kelly Kovack [00:22:06]: Yeah. I mean, what retailers, I mean, not just in the beauty space, but what retailers are you sort of inspired by, that really do create sort of experiences and reasons for people to shop? Or at least – maybe not even shop, sometimes I think retail is about the experience itself, and you might buy it only, but it’s an important piece to the path to purchase.
Scott Oshry [00:22:35]: Yeah. Well, the aforementioned one, Restoration Hardware, I think is doing a really, really great job creating experience. I was very anxious to go to the new mall here in New Jersey, 85% experience and 15% shopping, because the idea was if you’re really enjoying the experience, it will draw you back in to then come and shop, so they have indoor skiing and a waterpark.
Kelly Kovack [00:23:02]: Oh, the one in New Jersey?
Scott Oshry [00:23:04]: Yes, I was very anxious to go see what that’s like, because it’s taking that concept to the highest level. I think, to be quite honest with you, although it’s less about experience and more about just a tribute to constantly thinking product at a higher level, Target has still not disappointed. They just continue to challenge themselves and I find that refreshing. There’s some newness that’s coming out from a retailer that I can’t mention, I wish I could, because it’s going to be really interesting.
Kelly Kovack [00:23:45]: Okay, well you’ll send us the press release.
Scott Oshry [00:23:47]: Yeah, it’s the retailer that you’re not expecting, a really fresh concept in a very interesting price strategy, and it’s going to be…if it works, it’s going to really challenge Walmart and Target at the same time.
Kelly Kovack [00:24:12]: Interesting. You know, I couldn’t agree more about Target. Living in Manhattan, it’s not so easy to get into a Target and really experience it kind of the way you do in the suburban stores, but I spent most of the past five months in Maryland, and I was just recently in a Target, and I was really blown away, because I had seen the pictures and I had read about it, but I was impressed by the experience. It was beautiful, it was clean, it was easy to shop, Kristin S. looked amazing. But, yeah, I’d like, you know, if I lived here, I would shop beauty here.
Scott Oshry [00:24:52]: Yeah. Actually, here’s another one thing that I should have mentioned, and shame on me. Five Below. So, if you’ve never been to a Five Below, again understanding that it’s geared for a young adult, they take design pretty darn seriously. You walk in there and you start picking up headphones and beauty products and home products, and you look at the packaging, and its four bucks and you’re pretty shocked. So, they have built a very interesting experience for that age group, for pre-teens and teens, they have this huge candy section that looks like you walked into Willy Wonka and candy everywhere and entertainment. You could see the kids shopping, it’s like a little slice of Disney Land. They’re running around, they’re looking, they’re picking up, they’re wanting, they’re asking, “Can we get this? Can we get this? Can we get this?” and smartly done. You might drive by one and look at the logo on the outside of the store and maybe think, “There’s not something special there,” but they’re also built an experience, and they were thriving pre-COVID – thriving.
