AMDP Investment Proposal - ILIA Beauty

 ADMP INVESTMENT PROPOSAL (ILIA Beauty)

To: Clark Hansen, CEO of AMDP

From: Sophia Tranguch, Research and Development Analyst for AMDP

Date: March 8, 2024

Subject: ILIA Beauty Investment Proposal

As a Research and Development Analyst at AMDP, I recommend that AMDP invests in ILIA Beauty. ILIA Beauty is a pioneer in the beauty industry because it challenges the conventions of clean makeup and sustainable beauty. Through innovation and transparency, ILIA Beauty is setting new sustainable standards and people are taking notice because of consumers' increasing concern for the planet. Investing in ILIA Beauty strongly aligns with our core values of investing in companies that are ethical and environmentally responsible.

This investment memo contains:

· An overview of AMDP's ethical and sustainability criteria

· An outline of ILIA Beauty’s background, financial data, and claims

· Two expert opinions on ILIA Beauty’s environmental impact

· Final AMDP investment recommendation

AMDP Standards

The principles of AMDP are embodied in its investment in successful companies that conduct their operations in an ethical and environmentally responsible manner. The subsequent standards are utilized to assess possible investment opportunities. 

Triple Bottom Line 

The "triple bottom line" theory (TBL) is a sustainability based business approach that is different from conventional reporting frameworks in that it takes into account social and ecological factors, which are frequently hard to measure. The triple bottom line is divided into three different sectors:

·      People: Influence of corporations on human capital, which not only has a responsibility to shareholders but customers, employees, and vendors. This impact can either be direct or indirect. 

·      Planet: Recognizing a business’s carbon footprint and implementing specific actions, like utilizing energy-efficient technologies, cutting back on energy use, properly disposing of hazardous waste, and implementing a variety of green business practices. 

·      Profits: Companies that are dedicated to the triple bottom line consider earnings from the perspective of not just serving shareholders but also the larger community. This entails providing fair compensation to employees, assisting local suppliers with business, and stimulating economic growth and wealth creation (Fernandes, 2024).

Benefits of the Triple Bottom Line Theory: This theory has the power to drive change because when a business chooses to follow a socially conscious model, it benefits both the environment and people. 

 

Corporate Social Responsibility 

Businesses that practice corporate social responsibility make an effort to conduct their operations in a way that improves society and the environment rather than degrading it. A study that was published in the Journal of Consumer Psychology indicates that customers are more inclined to behave favorably toward a business that has taken steps that benefit them. There are four types of CSR: 

·      Environmental responsibility: Actions to preserve the environment 

·      Ethical responsibility: Fair and equal treatment to customers, employees, and vendors regardless of age, culture, race, and sexual orientation.

·      Philanthropic responsibility: The responsibility to contribute to society by either donating or fundraising for charitable causes.

·      Financial responsibility: In order to be environmentally, ethically, and philanthropically centered, a company must invest financially (Fernando 2024)

 

Social Enterprise 

Social enterprises are dedicated to using their profits to address societal needs and promote the common good. The three common models include, but not limited to, donating goods or services for each purchase made, developing innovative products, and employing individuals who have less support than others. 

(Annie E. Casey Foundation, 2020). 

 

Carbon Footprint

The environmental effect that humans have is known as the carbon footprint and is measured in CO2 units. Since businesses are thought to bear the largest responsibility for the greenhouse impact, many are setting the standard for sustainability and cutting back on energy use. Carbon dioxide emissions are from:

• Cars and trucks driven 

• Air travel

• Boxes shipped

• Plastic bags 

• Products manufactured 

• Emissions from imported meats and fruits consumed 

• Air Conditioning

We can save the ecosystem and planet for present and future generations by lowering our carbon footprint. We can do this by implementing energy-efficient practices, waste reduction, water conservation, ecosystem preservation - just to name a few (Endesa, 2023). 

Overview of ILIA Beauty

Background

ILIA is a sustainable makeup brand founded in 2011 by siblings Sasha Plavsic and Zacharia Ilia. The company is a pioneer in the clean beauty sector because they create high-quality makeup and skincare products that are also sustainable. ILIA Beauty offers foundations, lipsticks, eyeshadows, mascaras and blushes across numerous Sephora locations in the U.S. and Canada. They have garnered popularity because they focus on using natural and organic ingredients in their makeup products while a lot of other makeup brands utilize harmful chemicals and fragrances. They have also taken an eco-friendly approach by utilizing recycled aluminum and glass materials for their product containers instead of using plastic. On top of that, they try on using renewable energy sources at their manufacturing facilities and have implemented a recycling program with Pact Collective that customers can employ so beauty packaging can be fully recycled. ILIA’s commitment to sustainability and making meaningful changes towards an environmentally friendly future sets them apart from other makeup companies (Chomsky, 2024). 

Financial Data

A private company like ILIA Beauty does not disclose its detailed financial information publicly but here is what was released on February 2, 2022:

• The brand tripled sales from $30 million in 2019 to $100 million in 2021, with half of the revenue coming from DTC and a few hundred points of distribution, including Sephora, Credo, Space NK, and Mecca.

• 70% of Ilia customers repurchase within 12 months.

• Ilia's hero product is the Super Serum Skin Tint, which has sold more than 1 million units since it launched in 2019.

• In April 2021, Pai skincare raised a Series B investment round of $9 million from Famille C Venture.

• Financo Raymond James was Famille C's financial advisor and Willkie Farr & Gallagher LLP and Villey-Girard-Grolleaud acted as its legal counsel.

• Product retailer Sephora(@sephora on Instagram) proved key in sparking digital interest in, driving $489.1K EMV across 44 posts as Ilia’s top Q1earner, an improvement upon its $139.8K via 13 mentions last quarter (Beauty Matter Business). 

Company Values & Claims

ILIA Beauty stands for “clean, skin-centric beauty.” They believe that skin should look like skin and they do this by challenging the conventions of clean beauty through utilizing safe, potent formulas. Clean beauty essentially means that cosmetics and skincare products are free from harmful chemicals that should be avoided. All ILIA formulas are made without talc, parabens, phthalates, petrolatum, mineral oil, synthetic fragrances, BHA/BHT, propylene glycol, PED’s, D4, D5, D6 and chemical screens. In addition to making their products more clean and cruelty free, ILIA Beauty actively is taking steps to reduce their carbon footprint by simplifying their course materials so they are both safe for the product and the planet. They have started an initiative that encourages their U.S. customers to mail in up to 10 empty beauty products per month. This can be any brand's beauty containers and Pact Collective will responsibly break it down so it doesn’t end up in a landfill. Their goal is to “create clean makeup, from start to finish” and ILIA Beauty is doing exactly that. ILIA Beauty’s values align with AMDP’s corporate social responsibility agenda (ILIAbeauty.com)

Expert Opinions

Opinion 1

According to the Sustainability Review, written by Raf Chomsky, a dedicated author focused on raising awareness about sustainable practices and environmental responsibility, “ILIA is a brand that should be on your radar.” Chomsky examined ILIA’s product ingredients listed on their website and exclaimed how ILIA's ethos confirms the authenticity of their claim to use safe products. Additionally, Chomsky raves about how ILIA is one of the only zero-waste makeup companies that simultaneously make strides to lower their carbon impact while producing high-quality goods for their consumers (Chomsky, 2024).  

Opinion 2

Esha Chhabra, a Forbes writer, highlights in her article the strong recycling efforts that ILIA Beauty makes. According to Chhabra and the Past Collective, a non-profit targeting waste recycling, “approximately 120 billion beauty and wellness products are produced each year – and most of that ends up in a landfill at the end of its life.” ILIA Beauty has partnered with the Past Collective because they value sustainability and creating a greener future for society. Chhabra exclaims how ILIA is actively making more drop off locations to make it easier for consumers to recycle. Alltogther, Chhabra believes that ILIA is making a difference for the planet compared to other beauty brands (Chhabra, 2022).. 

Final Recommendation

After evaluation of ILIA Beauty, I recommend that AMDP invests in ILIA Beauty. Though ILIA Beauty is still a relatively new and less popular makeup brand than other companies, ILIA Beauty strongly aligns with AMDP’s mission to invest in companies that are ethical and environmentally responsible. ILIA Beauty is a leading makeup brand in the sustainability sector as it strives to minimize its environmental footprint by using eco-friendly packing materials, sustainable production practices, implementing a recycling initiative, and using safe ingredients in its products. Ultimately, ILIA Beauty provides a model for the beauty industry at large, demonstrating how businesses can effectively transition to a more ecologically conscious future.

Thank you,

Sophia Tranguch

Works Cited

“About Ilia: Sustainable Skincare-Powered Makeup.” ILIA, iliabeauty.com/pages/about. Accessed 9 Mar. 2024.

The Annie E. Casey Foundation. “What Is a Social Enterprise?” The Annie E. Casey Foundation, 10 Dec. 2020, www.aecf.org/blog/what-is-a-social-enterprise.

Business, BeautyMatter. “Clean Makeup Company Ilia Acquired.” BeautyMatter, 22 Aug. 2023, beautymatter.com/articles/clean-makeup-pioneer-ilia-acquired-by-courtin-clarins-family.

Chhabra, Esha. “Ilia Furthers Its ‘clean’ Beauty Journey with Multi-Use Products.” Forbes, Forbes Magazine, 12 Oct. 2022, www.forbes.com/sites/eshachhabra/2022/09/30/ilia-furthers-its-clean-beauty-journey-with-multi-use-products/?sh=474283213bd4.

Fernando, Jason. “What Is CSR? Corporate Social Responsibility Explained.” Investopedia, Investopedia, www.investopedia.com/terms/c/corp-social-responsibility.asp. Accessed 9 Mar. 2024.

SeventhQueen, and Raf Chomsky. “Top 8 Zero Waste Makeup Brands for Eco-Friendly Beauty.” Sustainable Review, 29 Jan. 2024, sustainablereview.com/8-sustainable-makeup-brands-to-try-now-going-zero-waste/.

“What Is a Business’s Carbon Footprint and How Can It Be Reduced?” Endesa, www.endesa.com/en/blogs/endesa-s-blog/business/business-carbon-footprint. Accessed 9 Mar. 2024.

“Why You Should Pay Attention to the Triple Bottom Line.” Business.Com, www.business.com/articles/triple-bottom-line-defined/. Accessed 9 Mar. 2024.