Warpaint Cosmetics – More Than Skin Deep
Warpaint London PLC (“Warpaint”) is an on-trend colour cosmetics business aiming directly at the biggest retailers on the market.
Warpaint provides high quality, on-trend colour cosmetics including recognisable brands such as Technic, Body Collection, Chit Chat and Man Stuff and its leading brand, W7. Employing over 120 people around the world, the company has 167,000 square feet of warehouse and office space in the UK alone, including an HQ a stone’s throw from Heathrow Airport. And that is just the start.
“We also have offices based in Hong Kong, the US and China,” says Sam Bazini, CEO and co-founder of the business. “The US office is used for sales in the biggest cosmetic market in the world. Our offices in Hong Kong and China, are used for sourcing products and quality control. We outsource all our own production, giving us the best prices, the flexibility of supply, quality, and service.”
Warpaint is a strong business, with a strong balance sheet, and absolutely zero debt.
“We do not even have a photocopier on a lease,” as Bazini tells us.
A Dedicated Follower of Fashion
Having a great balance sheet is one thing, but in Warpaints’ sector, success is also a matter of taste.
“We watch the market very carefully. If a prestige brand produces something innovative or on-trend, we’ll try and get the W7 version out within three-to-six months,” Bazini says. “We are fast to market and affordable.”
Being a follower of fashion does not mean simply fitting in with what’s already out there, however.
“When you look at a lot of cosmetic brands, they’re all quite similar,” Bazini says. “Our products sell themselves. Both with their disruptive nature and affordable price. If you look at it in Tesco next to other brands, the packaging stands out. It doesn’t follow one theme.”
When Bazini says its products sell themselves, he means it. Warpaint is frugal in its marketing spend and PR, leveraging eye-catching packaging and high quality for the price. It means Warpaint has always been a profitable and dividend-paying business, with a reliable stock.
“We have no debt to fund enabling the business to maintain, a large range of colour cosmetics that we keep in stock all of the time,” says Neil Rodol, Warpaint’s CFO. “Anyone can have a full range delivered within 72 hours because we invest in the inventory. It’s fortunate, but no accident that we have no debt. We are a cash-generating business buying product and selling it for a good profit. We are entrepreneur-led; we understand how to make a real cash profit on every sale.”
This means Warpaint has the resources to bypass the issues faced by the just-in-time supply chain model, with five-to-six months of inventory in stock.
Warpaints’ packaging is more than eye-catching. It is a key part of Warpaint’s sustainability strategy.
“Wherever we can, we are reducing plastics in all of our products to make them recyclable,” Bazini says. “There are some limits. Nail polish needs a nylon brush. The product won’t function without it. But where possible we remove all the plastics from our packaging- particularly our gift packs.”
Where the company’s gift packs used to have a plastic inner tray and clear window to show off the product, they now use cardboard packaging with nice imagery of the products printed on the front. The company has brought on board Kevin Laughton, a “packaging guru” who is helping the firm meet new legislation, compliance, and further reduce plastic usage wherever possible.
“We are moving away as much as possible from plastics and it is something our investors are insisting on. Consumers are insisting on it, and it is really on the radar of the retailers we supply,” Bazini says. “Besides anything else, it is the right thing to do.”
Bang for Your Buck
Sustainability is just one of the challenges Warpaint is facing. The economy has been going through interesting times of late, with the Pound Sterling dropping in value against the US Dollar. At the same time, global supply chains are facing untold levels of disruptions.
“When it comes to currency, we have had to be nimble and clever, but what can you do when the exchange rate is unfavourable over a prolonged period of time?” Rodol says. “We do though have a toolbox of options available to maintain our margin.”
The company has always paid a dividend ever since it came to market. Even in the height of Covid when the dividend was not paid, the company then paid it as a special shortly thereafter.
Meanwhile, when it comes to currency challenges, the solution is a simple one.
“The best solution to the currency challenges is to grow our US business,” says Rodol. “If we can generate more dollar income that goes a long way to helping with the dollar exchange rate.”
It is a solution Warpaint is already making excellent progress on.
“In 2018 we acquired our American distributor. We wanted them to focus on W7, so we changed the management and put in place a strategy to move forward,” Bazini says. “We started targeting the larger retailers just like we’re doing in the UK, the likes of CVS, Walmart, and Walgreens. They pay quicker, it gives you a lot more visibility, we know what they’ll sell, what they’ll order, and that’s a part of our growth strategy.”
The company has already filled a significant Christmas order with CVS, which Bazini tells us will act as a “Trojan horse” to get Warpaint’s all-year-round products into the retailer’s stores. The company’s products are now in 190 CVS Stores on a trial basis from January. It is a story that echoes Warpaint’s story in the UK.
“We started in 50 Tesco stores two years ago, we’re now in 1,400,” Bazini tells us. “We have got 96 products into HEB Grocery Stores. We are targeting the larger retailers to replicate what we’re doing in the UK. We are also growing our e-commerce business, using Amazon Small & Light. We have no appropriate infrastructure there, so it is the quickest and easiest way to sell our products online.”
Everything that Warpaint does is based on profit. As Bazini points out, “We don’t chase turnover for the sake of turnover.”
And the US is only the next step in a global strategy.
“We’re already a global brand but our real vision is we want to grow the US and China, China’s a big part of our strategy,” Bazini says. “If any compelling acquisitions come along, we’ll look at them, but we feel there is still enough room for organic growth. We are only in 80 Boots stores, and we’d like to be in more. There is space to be had in Tesco, in Asda. The plan is to grow the business and grow our market share.”
While the company has always paid out a dividend, the recipients of that dividend are not the only beneficiaries of Warpaint’s success.
“We gave all our staff a £1,000 cost-of-living bonus in October to see them through the next few months,” Bazini tells us.
Bazini is very aware that everyone is cost conscious right now. It is a need he intends for Warpaint to meet, and this has led to a recent forecast upgrade for the business. This year Warpaint forecasts sales growth of 20% to £61 million and generating an adjusted profit of at least £9 million.
“One thing we are seeing in the market data that we purchased is that 71% of UK consumers who buy cosmetics think the price of the product is an important criterion,” Bazini tells us. “With the current cost of living crisis, this will only increase. So, we are well-placed as an affordable brand. We are seeing sales increase already.”