CORE’s May: Personal care products boost mood – and PE investments

'Personal care products are generally recession resistant,' says managing partner John May.

People are increasingly turning to personal care products to relieve stress and boost their mood, spurring demand that is helping investments within the sector to weather the tight macroeconomic environment, John May, CORE Industrial Partners managing partner, told PE Hub.

CORE’s portfolio company Arizona Natural Resources (ANR) manufactures, formulates and distributes a suite of customized hair care, skin care, fragrance and cosmetic products. It has more than 800,000 square feet of production space across four manufacturing facilities in Arizona, California, Nebraska and New Jersey. The Chicago PE firm invested in the Phoenix-based company back in 2020.

Earlier this month, ANR announced the acquisition of Contract Filling, a fragrance and deodorant manufacturer based in Cedar Grove, New Jersey.

“This investment is right in the sweet spot of what we do, which is acquiring established founder-owned businesses that manufacture highly specialized products,” said May. “It further complemented our platform in the personal care product space. It is a perfect fit that gives us additional capacity in the East Coast.”

Marianna Beauty, an Omaha, Nebraska-based developer and manufacturer of hair and beauty products together with HealthSpecialty, the Santa Fe Springs, California-based manufacturer of skin, body and hair care products, both acquired last year, are also part of the fold.

John May, CORE Industrial Partners

“Personal care products are generally recession resistant,” said May. That includes hygiene products. “What we are finding is that buyers are buying different fragrances for different moods, whereas it used to be more of a gifting category.”

The addition of Contract Filling gives ANR some geographic expansion and a larger customer base, May said. “We have a lot of the same customers and now we can go to them with a broader, more comprehensive set of product capabilities that we think is going to create even more loyalty within the customer base.” He said that the Gen Z customer base has had the most growth in this category.

The growth of the personal care product and individualization sectors has partly accelerated because of the rise in e-commerce, which has helped customers access beauty brands more easily, according to May. The rise of digital marketing was another booster he cited.

May also believes that the rising demand for personal care products will help the sector allay any recession fears. “As the consumer is bringing more individualization into their buying habits and using it as stress relief, this business and this category continues to grow,” said May. “It did really well in the last recession, and we are seeing the momentum continue.”

Recession fears and rising interest rates are leading to reports of gaps between buyers and sellers in deal valuations, but that has not impacted ANR’s deals. “There wasn’t a big spread between the buy and the ask for us on any of these acquisitions and part of that is because each of them saw the value of what they can bring to the platform,” May said.

Of the four, only Mariana was institutionally owned while ANR, HealthySpeciality and Contract Filling were family owned.

Potential operational risks for the company involve supply chain instability and global chemical shortages. To insulate the business, May said the firm is diversifying the supply base and the number of products.

ANR counts as its strengths the “talented and experienced management team” as well as leveraging the strength of the combined platform through the four different facilities and businesses. This will help them build a resilient business, May said.

“We have built this platform to continue to grow organically but also to add additional acquisitions to it,” he said.

Read here to learn more about PE firms investing in personal care products.