WWD Honors: Olaplex, Best-Performing Beauty Company, Small Cap

·8 min read

Hair care business Olaplex started small.

The founder, Dean Christal, approached scientist Craig Hawker with an idea: create a solution to solve the problem of hair breakage. Hawker created a molecule, called Bis-Aminopropyl Diglycol Dimaleate, that rebuilt broken hair bonds caused by chemical damage from hair coloring and mechanical damage from styling. Olaplex — and the bond building category — was born, and it was patented.

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Christal took the product out to the professional hair community, testing it with major colorists including Tracey Cunningham, whose client base includes Jennifer Lopez, Charlize Theron and Emma Stone. It quickly went mainstream in the colorist community, allowing them to achieve new feats, including platinum blond colors for those with naturally dark strands.

Olaplex went public in September. - Credit: Photo by Vanja Savic
Olaplex went public in September. - Credit: Photo by Vanja Savic

Photo by Vanja Savic

“The biggest fear they have is when they take their client to the sink…and they start removing the foils, and they start seeing breakage. Of course, the client can’t see it, they can see it, and your heart really goes into palpitations,” said JuE Wong, Olaplex’s chief executive officer, who joined the company in 2019. With Olaplex, which colorists could use by simply mixing it in with the chemical and color treatments they were already crafting, the professionals started to see less damage, Wong said.

“With Olaplex 1 and 2, No. 1 first, they were seeing no such breakage — the hair was coming out stronger, it looked better and the clients were super happy. Tracey Cunningham was just over the moon, and that was the genesis of word of mouth in the professional setting,” Wong said. “That was much better than any advertising campaign, any marketing campaign.”

Between 2014, when Olaplex launched, and 2018, the company only had two products for the backbar — No. 1 and No. 2 — and one for customers to take home and use between salon visits, No. 3. They all centered around repairing broken hair bonds, instead of coating hair strands to improve feel.

Then Sephora came knocking, Wong said.

“Customers were asking Sephora, and Sephora was hearing all this, ‘No. 3,’ searches on their website, calls into customer service support, and they started asking, ‘what is this No. 3? Is it a fragrance, like Chanel No. 5?’ When they found out it was Olaplex, they called Olaplex up,” Wong said.

It took the brand a while to make a decision about starting to work with Sephora because of allegiances to the professional community, Wong said. The business told its professional partners that it would never sell No. 1 or No. 2 in retail, and set about creating a line that took hair treatments at home to the next level.

“There were really no treatment skus that talked about repairing your broken disulfide bonds. A lot of products for treatment were hair masks, which really was masking the problem. It will make your hair feel really good when you use it and rinse it off, but once you shampoo it off, your hair goes back to what it was,” Wong said. “But No. 3 actually repaired your hair, so even after you shampoo and you touch your hair, it felt really good. By word of mouth, it expanded.”

Today, Olaplex has three backbar products, and at retail and direct-to-consumer sells No. 0, a bond building treatment; No. 3, a “hair perfector”; No. 4, a bond maintenance shampoo; No. 5, a bond maintenance conditioner; No. 6, a bond smoother; No. 7, a bond oil, and No. 8, a bond intense moisture mask. The company tries to avoid secondary packaging, Wong said, in order to limit its carbon footprint.

As the brand’s products gained traction, Olaplex had started to garner a lot of attention — including from competitors, which started launching their own products that claimed bond building properties. Legal battles between Olaplex and L’Oréal have spanned multiple continents, and have since been settled outside of court, according to an Olaplex spokeswoman. Terms of the settlement are private, she said.

Those cases have not detracted from the company’s financial success. Olaplex posted a 90 percent increase in sales for 2020, during the pandemic, with $282.3 million in net sales, up from $148.2 million in net sales for 2019. In forms filed with the U.S. Securities and Exchange Commission, Olaplex said sales during the first half of 2021 increased 171 percent over the prior-year period, to $270.2 million, with $94.9 million in net income.

Olaplex filed those SEC forms as it prepared to debut on the Nasdaq — a decision that Wong said was made because of Nasdaq’s requirements about board diversity.

“The Nasdaq requires the listed companies to at least have two diverse candidates on their board, and we felt that was a very good mandate,” Wong said. “Sometimes you need to almost legislate behavior, otherwise you don’t get the outcome.”

Olaplex’s employees are 77 percent women, and 40 percent minorities, Wong said, and 18 percent of the company’s board are minorities.

Olaplex went public on Sept. 30. Valuation expectations were originally around $8 billion, but when Olaplex stock began trading at around $25 a share, the company’s valuation nearly doubled, landing closer to $16 billion. (When the Estée Lauder Cos. went public in 1995, the stock was priced at $26 a share.) Since then, Olaplex’s stock price has stayed fairly consistent, hovering in the mid-20s. The company is expected to host its first earnings call in November.

Its standout financial performance, as well as the success of its IPO, is the reason Olaplex is the recipient of this year’s WWD Honor for Best-Performing Beauty Company — Small Cap.

For the IPO, Olaplex flew most of its team to New York. “The special sauce of Olaplex is every employee feels like they are part of the success. It’s not just the success of the management team or the success of the original team, but all of us pulled together,” Wong said.

Wong joined Olaplex in early 2020, shortly before the onset of the coronavirus pandemic. Previously, she’d run Moroccanoil, Elizabeth Arden and Strivectin. When Advent International bought Olaplex in 2019 at a valuation that industry sources said was around $1 billion, I hired Wong to oversee the brand’s continued expansion.

She was employee number 36 on an all-remote team. “The original team has given me a strong foundation to build off of,” Wong said. “They were the ones who took it so far.”

Gradually, the team has grown, and now has about 100 people, all of whom work remotely. “As we get bigger, you’ve got to be more mindful of how to bring people together. Even with or without COVID-19, we have always had our standing calls with our team members. We have our town halls on a monthly basis, monthly senior team members meeting, and if COVID-19 wasn’t around we would have two annual off-sites for the entire company to come together,” Wong said.

Wong routinely surveys Olaplex employees about their feelings on company culture. When she started, Olaplex’s employee NPS score was around 50, and after a February survey, went up to 69, she said.

“More than 90 percent of employees polled said they felt very much aligned with the culture of the company,” Wong said. “We did that survey purposefully before bonus announcements because we didn’t want to skew the results. It was very good to see that people, even before they knew they were going to get bonuses, they were still very invested in the company.”

Wong said the company’s success all comes back to patented technology and a strong community, which has overlapped with the rise of high-end hair care.

Marketing-wise, Olaplex’s community has been critical to its success.

Olaplex has long had social media accounts, including a separate Facebook page just for professionals where colorists can talk about products and how to use them. Consumers talk about Olaplex on social media, too, Wong said, and the company has 12.4 million uses of its hashtag for content that is “largely unsolicited,” she said.

Wong said that given the amount of content, which she estimates would take $300 per item to produce, gives Olaplex “close to $4 billion in user generated content.”

In 2020, Tribe Dynamics said Olaplex had earned media value of about $95 million because of posts on social media, which equaled about 33 percent of Olaplex’s total sales for the year, Wong noted. That allows Olaplex to invest in its community, instead of spending directly on marketing, she said.

Olaplex’s rise has coincided with a major uptick in the prestige hair category broadly. In the second quarter of the year, prestige hair care was up 70 percent year-over-year, to $346 million in quarterly sales in the U.S, with particular strength in coloring and care products.

Wong said hair care has been ritualized today, much like skin care.

“The difference with prestige hair care today is the visibility — you can actually see a difference. And very often when you see a difference, you remember, ‘Oh, I want my hair to look like that,'” Wong said.

FOR MORE FROM WWD.COM, SEE:

Healthy Hair Aspirations Drive High-End Hair Care Sales

Olaplex Soars in IPO

JuE Wong Talks Olaplex’s Success

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