Issue Issue 1 2008
ghd’s straight to the top
The iconic hairdressing company, ghd, experienced a management buy-out for the second time in 11 months in 2007.
Montagu Private Equity bought into the ghd brand, owned by The Jemella Group, in July. ghd is the market leader in hair styling irons which are stocked by over 50,000 beauty salons and hairdressers across Europe, Australia, South Africa, and North America. The deal, which is worth £160m, will involve a significant cash injection enabling the company to continue its growth in both the UK and the overseas market.
Lloyds Development Capital (LDC) was the previous investor, having bought in July 2006. ghd’s managing director, Martin Penny put the deal together. Speaking at the time he said: “We are focused on building ghd into a global hair beauty brand. Joining forces with LDC provides a fresh impetus for a management team that has worked hard to establish the company’s success over the past six years. Key to our growth strategy is to ensure ghd remains a high quality must have product for both beauty industry professionals and for consumers who want professional performance.
“Bringing on board an institutional investor of the calibre of LDC ensures we have not only the financial backing we need but the operational expertise and strategic input to help us drive the business forward.” Looking back the words seem prophetic; the company’s turnover grew from £55 million to £82 million with a projected turnover of £120 million for 2007. The amount of employees also increased from 180 to 300 in the time the group were in charge.
The story of ghd started in 2001 when Martin invested in the products after being impressed with the product, which a friend had sent from the States. Using a small Korean manufacturer, an initial order of 1000 items was placed. The first year of trading was slow with salons initially reluctant to stock the product. However in the second year sales went through the roof due to word of mouth and a six-month order backlog was caused through demand for the stylers from ghd evangelists. The same manufacturer, Kica, still manufactures the stylers today in what is clearly a close relationship. To put the growth of the two companies into context, ghd and Kica were both the fastest growing companies in their respective countries in 2005, with Kica now manufacturing in six factories. The fact that ghd has an exclusive distribution deal shows the mutual benefits the two companies enjoy from the relationship.
In 2004 ghd introduced a range of hair products to complement the styling iron. This strategy was a result of Martin’s concern that ghd was too reliant on one product, despite sales of £46 million. The range, called ghd Thermodynamics, includes products that provide protection against the overuse of the iron and now account for ten per cent of the company’s sales. The business’ global presence has been boosted by a number of subsidiaries. Local managing directors are offered an opportunity to participate in the equity, a simple formula that has proved successful in all of ghd’s overseas territories. To date there have been enquiries to start subsidiaries in over 50 countries, including Brazil, Russia, and Canada.
Whichever country the company’s products are sold in, they can only be found in salons. The reluctance to allow the stylers and ghd Thermodynamics products onto supermarket shelves is down to Martin’s belief that ghd should stay loyal to the hairstylists who helped the brand achieve its success in the early days. Martin is also aware that recommendations from hairstylists are key to the brand retaining its number one position in the market.
The styling irons still account for the majority of the company’s sales today. Described as one of the most successful hair products in history, there are three different stylers, which are used to create straight hair, curls, flicks, and waves. The most common is the ghd MK4 styler, which uses average sized plates. The ghd salon styler uses large plates while the ghd mini styler has smaller plates, making it ideal for shorter hair, which has proved popular with men. There are a number of gift boxes that contain the irons alongside a clutch bag, purse, mirror, creation spray and a DVD which provides a guide to achieving all the latest looks. All of the irons use ceramic technology that seals the hair cuticle giving protection from the extensive damage and frizzing caused by some of the cheaper products on the market.
A limited edition pink styler was recently launched, with £10 of the price going towards Breakthrough Breast Cancer. In total, ghd has raised £1.5 million for Breakthrough Breast Cancer over the three years that the campaign has been running. Celebrities such as Naomi Campbell, Cameron Diaz, and Madonna were all on the waiting list for the product that quickly sold out. The relationship between the company and celebrities is not a new one; Victoria Beckham, Gwyneth Paltrow and Sienna Miller are all high profile users of ghd products.
ghd Thermodynamics make up some of the support products. The range includes treatments such as shampoos and conditioners, hairsprays, colour protection, spiking wax, anti-frizz, and texturiser. Complementary products include premium gift sets, facemasks, head wraps and a number of hair protection creams. A selection of ceramic hair brushes complete the portfolio. The barrel of the brush retains the heat of the hairdryer, so it is possible to style and dry the hair at the same time. The ceramic technology, which is present in all four of the brushes, eliminates static to create a smooth shiny finish.
By establishing itself as one of the leading and most sought after brands in the hair care industry, ghd is under constant scrutiny but also enjoys positive recognition – It won the Sunday Times Fast Track 2005 award for the fastest growing business of the year. With a rapidly growing turnover and successful expansion Martin Penny was named the Consumer Products Entrepreneur of the Year and North Region Overall Entrepreneur of the Year two years ago. The products have also gained publicity through their involvement in many fashion shows such as New York Fashion Week, Alice McCall, and Willow Lingerie and the brand’s sponsorship of British reality television show The Salon, which challenged celebrities to run a hairdressing studio.
The fashion shows are an integral part of how the company markets itself as the eyes and ears of the fashion world frequently attend the events. An artistic team of creative professionals – known as the ghd Directive are responsible for the overall look of the shows. Handpicked from the top of their respective fields, the team is made up of stylists, make-up artists, choreographers, photographers, fashion stylists, and of course hairdressers. The development of directional looks for the international fashion shows, television and film appearances, seminars, and other promotional events are ultimately decided by the team. Talented individuals from all sectors have the opportunity to join the ghd directive by attending one of the many auditions that the company runs across the UK.
Like ghd itself, the industry is growing rapidly and experiencing massive expansion. To put that into context, the professional hair care industry was worth £150 million in 2001; in 2006 that figure had grown to £500 million. There can be no doubt that ghd is the company that drives the industry, the numerous awards and the balance sheet bears testament to that. It is the company that started the demand for straightening irons although ghd irons curl as well as straighten and the one with the most recognisable brand and a commitment to innovation and quality. When Martin put in his first order for the product even he cannot have believed that it would have been so successful. The reality is that it is hard to think of hairdressing without thinking of ghd. Women in many countries across the world would be lost without them; indeed the same could now be said for the men who have been quick to take advantage of the mini styler.
Considering the territories that the company is not yet operating in the potential for further growth is almost limitless. By developing a range of high quality products under a celebrity endorsed brand name ghd has come up with an almost bullet proof marketing formula. Its portfolio contains products that make people, particularly women, more confident about the way they look, it is not hard to see why it has been so successful so quickly. It is even less difficult to predict that the company will continue to experience prosperity and further expansion across the world.
Industry: Hair care products