The B2B and B2C categories had previously been seen as separate entities, but now a small subset of indie brand owners, a majority with philanthropic and sustainability backgrounds, are reaping the benefits of managing both. With the US personal care and beauty market set to reach $128.7 billion in 2030 and the global cosmetics market estimated to hit a $463.5 billion value by 2027, it’s understandable that brands want to get in on the consumer action. Meanwhile, judging by the investments of the year past, BeautyMatter predicts that more brands will capitalize on B2B avenues. We spoke to a range of industry experts in order to delve into the challenges and benefits of diversifying businesses, and why it’s not a one-size-fits all solution.
Change in Numbers
Perhaps the most persuasive argument for having an ingredients- or innovations-led subsidiary is being able to impact bigger social and economic change with the support of other brands. Recent tech innovations like natural skincare brand Three Ships Beauty’s source map, which helps consumers trace ingredients from origin to final product, could easily be utilized for alternative businesses.
Launched in 2012, Kadalys harnesses the antioxidant powers of bioactives in unused and rescued green, yellow, and pink bananas for its personal care range, helping to decrease the 22 million tons of bananas discarded annually. Founder Shirley Billot discovered the potency of banana by-products through a research program around the polar and nonpolar molecules of the banana tree, which evolved into the R&D branch of the company, and soon thereafter its raw materials side. Billot sees the B2B branch as reinforcing the credibility and efficacy of the B2C brand, while the B2C activities build demand and awareness for the B2B branch. Both are managed by separate teams.
Billot also ensured that 100% of the plant growers involved are also shareholders of the company. Supporting the economic development of the French Caribbean region is of vital importance to her, largely enabled by the B2B side. “Identifying new uses of agro-waste provides a new financial resource for the Caribbean economy, one that is incremental to traditional businesses like tourism,” she explains.
For Billot, her B2B business was key in creating the industry-wide change she is aiming for. “When you’re trying to change the world, you need allies and supporters who are also vested in seeing changes come to life,” she states. “As I embarked on my journey, I understood that the best way to launch a B2B business for upcycled and eco-conscious raw materials was to start by launching a consumer skincare brand. An organic beauty brand allowed me to highlight the innovative bio-active ingredients and create demand with discerning and knowledgeable consumers.”
Kaibae, which recently achieved B Corp status, is focused on “lost crops”: the baobab tree and shea butter from the African savanna, cacay from the Amazon, allanblackia from African rainforests, seaweed from Zanzibar. The company also practices regenerative agriculture, working in close cooperation with the local communities they source their ingredients from, as well as replenishing the microbiome (whether that of human or soil) from the inside and out. “In order to make the impact that we want to make, we have to buy in volume. The best way was first to bring baobab to the market, and make other companies with a bigger marketing voice than us talk about baobab in their products,” co-founder Dr. Luc Maes explains. Baobab in both powder and oil form is now finding application in topical products, nutritional supplements, and beverage/food products, with some clients progressing from a monthly one-box order to a full pallet. The bulk ingredient sales represents the largest part of their business, although the weighting with its B2C side is leveling out more over time, and as Kaibae increases their representation in the digital space.
The entire journey began with interest in bringing baobab’s benefits to Dr. Maes’ patients, while also increasing biodiversity and supporting local communities in the process through a sustainable supply chain. Getting other companies involved in the raw materials game has been crucial to increasing the benefits of their social and economic ambitions. Today, Kaibae provides baobab to the likes of Nature’s Path Organic and Patagonia Provisions for their products, and also became a recipient of Burt’s Bees’ Natural Launchpad initiative in 2017.
Fellow co-founder Barbara Maes has also seen a substantial increase in interest in baobab as more research divulging its benefits is released. For Kaibae, the B2B branch isn’t a side hustle, but the foundational basis of the entire enterprise. The commitment to traceability and quality, all while improving people’s health and that of the planet in the process, whether on the ingredient or B2C side, remains an important aspect for Kaibae’s co-founders.
“That same story that we allow our ingredient suppliers to tell is also what we tell through our retail brand. So they really do complement each other,” Barbara Maes comments. As for worrying about damaging their brand DNA through shared ingredients or innovation, the plethora of factors that determine the final company story means this isn’t of concern. “Whether you’re buying the ingredients or retail brands, we maintain our commitment to the communities. We want to tell the world this is an amazing ingredient and share it,” she comments.
While the idea of safeguarding special formulas and unique ingredients is employed as a success strategy by some, consumer brands that have entered the B2B space have no qualms about sharing the fruits of their labor with others.
Micaela Nisbet, founder of natural and sustainable skincare brand Neighbourhood Botanicals, evolved her business into dissolvable and compostable packaging refill company On Repeat. The packaging is even suitable for aqueous-based products, one of the largest challenges for compostable packaging formats, as the introduction of a liquid normally begins the biodegradation process in such materials. Nisbet sees using both channels as a way of cross-marketing, but an even larger impact tool. “The main driver was that I wanted to offer refills to Neighbourhood Botanicals customers. But the way that we had researched and set that up was such a huge undertaking that it deserved to be its own stand-alone company. It’s a much bigger drop in the ocean,” Nisbet says. “It wouldn’t deliver the positive change that we wanted in the beauty industry from a small indie brand.”
Acquiring customers for On Repeat in the beginning stages was particularly challenging, given the minimum order requirements of half a ton and communicating what Nisbet and her team wanted with no reference on the market. “We talked to suppliers and they wanted us to send photos or something similar to what we were trying to emulate, but it didn’t exist. It was quite hard to explain the concept to people in order for them to be on board. We had a lot of naysayers, but in the end we got it to work,” she says.
The perseverance is paying dividends, not only having found a sustainable solution for her B2C brand, but also opening up the market for more clients that are joining her quest for compostable refills. “Neighbourhood Botanicals has been very slow, but steady organic growth. I really enjoy the creative side of it, but On Repeat has much more limitless possibilities in terms of growth,” she says. Current business conversations are happening on an international scale with companies in the US and Australia. Nisbet shifted from a complete in-house fulfillment service in the UK (which would have meant faster biodegrading of packaging) to selling dry packaging across the world. Outside of the beauty realm, household cleaning brands and milk brands have expressed interest, and given the film’s food safety certification, it’s a compatible partnership. “We're always talking to clients and trying to figure out if our solution would actually be the most environmentally friendly for them, or whether they're probably better off doing it a different way. We don't want to take on customers for the sake of it, because the whole founding principle of the company is to reduce waste,” Nisbet comments.
With the UK Plastics Pact, which aims to remove all single-use packaging and ensure 100% of packaging is recyclable, compostable, or reusable by 2025, soon to come into effect, many companies are looking for solutions such as those offered by On Repeat. “Every brand is thinking about ways to make their day-to-day operations more sustainable. Consumers are demanding that the brands that they love become more environmentally aware, so it's a great opportunity for a company like On Repeat to step in, slot into anybody's mainframe, and give them the green credentials that their consumers are hoping for,” Nisbet adds.
B2B endeavors provide an additional independent revenue stream amidst the highly competitive B2C market, whether to fund consumer marketing or simply provide the means for further product development.
Nohbo (No Hair Bottles), which first appeared on Shark Tank back in 2016, crafts single-use, biodegradable pods for shampoo, conditioner, and body wash, as well as single-use hand soap strips, which soon gained wider industry adoption, alongside a $3 million seed round. Under the guidance of creative innovation agency Bartlett Brands, they separated their B2B and B2C offerings, the latter evolving into a brand by the name of Sunrise Session that launched in 2021, while expanding business conversations to the CPG and hospitality realms.
Given the decrease in need for travel-friendly formats during the pandemic, diversification was key to Nohbo’s survival. Rebecca Bartlett, founder and Creative Director of Bartlett Brands, has noticed three distinct structures in the B2B/B2C space: separate supplier/manufacturer and consumer brands under the same roof, such as Biossance and Amyris, or Ladykind, which recently expanded from contract manufacturing into the B2C space; a consumer brand rebranding into a separate B2B business like Ace of Air and Infinitas; or a consumer brand wholesaling its innovation like Nohbo. In the case of Ace of Air, its infrastructure bides well for duplication, as it is entirely circular in sourcing, production, and packaging. The company also offers stainless-steel packaging, a tech platform to track materials, and their own sanitization system for refills.
In the case of Biossance, their unique branding of plant-sourced squalane has generated over $160 million in sales, with squalene representing 20% of Amyris’ annual revenue. It’s a dream outcome, but not a reality for every biotech brand. Bartlett advises assessing each company’s situation on its own merit. “Once the investment is made, either into the ingredient technology, the packaging technology, or the infrastructure, the question is: What's the quickest way you can make money after that? If a B2C brand is not going to hit that unicorn status, or you’re going to have to put so much money into marketing and it's going to take years for it to even be profitable, at least you have this other pathway [with B2B],” she states.
In regards to rebranding and redesigning for the B2B market, Bartlett remarks that “the main thing with B2B rebranding is that it has a very different value proposition.” Whereas a B2C brand requires exceptional packaging and branding to stand out in an overcrowded marketplace, its B2B venture would be more focused on emphasizing the wider industry impact of an innovation, a deeper dive into the technology and mechanics behind it, as well as a more sophisticated tone of voice.
While companies such as Dr. Bronner’s and Burt’s Bees have entire teams dedicated to sustainable sourcing, for a brand looking to shift from B2C to B2B, building a supply chain from scratch is a huge undertaking. This doesn’t mean there can’t be room for improvement. “I wouldn't go from having a consumer brand to sourcing ingredients from zero. I would recommend the company reevaluate the ingredients they put in their products and collaborate with companies that are more sustainable, more committed to regeneration, and more climate conscious,” Dr. Luc Maes adds.
Dr. Maes’ advice for smaller companies is ensuring the sustainable origin, traceability, and organic methods of their ingredients as much as possible. “I would be very conscious about what ingredients you use and where they come from. Work with a formulator that has the same values, then if you want to go to the next step, there are numerous organizations that are committing to sustainable sourcing, regenerative farming, and more.” “You have to find a trusted partner in the community where you want to work,” Barbara Maes adds. She doesn’t see being a B2C brand themselves as any hindrance to having other companies purchase their ingredients. “We don't want people to not source from us because we have an outward-facing brand. Some companies just buy from distributors, but I want them to buy from Kaibae too because of our niche of rewilding your microbiome, preserving biodiversity, and regenerative agriculture,” she states.
It’s evident that the leap from B2B into B2C is the far more feasible option, but even so, this comes with its own set of challenges. “If you can hit it big as a B2C brand, that can carry an entire business. But not every consumer brand manages to do that. It’s so expensive to acquire consumers and so hard for B2C brands to survive,” Bartlett explains. “The consumer is transient through their brands, unless you are based on something substantial that really connects on a deeper level.”
For those looking to diversify their business branches, Nisbet advises organization, time management, and clear division of both business operations are key. “It's better to spend a whole day focusing on one brand and really get into that mind frame. It boils down to focus, and blocking off your time for each project. Everything takes a lot longer than you think it's going to, and so I found it important to not put time pressure on myself either.”
However, for other companies such as Kadalys, making the jump from brand to consumer side was actually a better strategic decision—proving the vital importance of gauging demand and also financial means for whichever pathway the entrepreneur chooses. “My vision has always been to create a B2B business, but I started with a B2C business because the consumer demand for green products has grown at a faster rate than the demand in the B2B market,” Billot explains. Millennials and Gen Z are a particularly strong driving force, with the B2C branch presenting a bigger business, although Billot is predicting “fantastic growth” for the company’s raw materials branch in the imminent future.
The ideal partners for a B2B business were a crucial element across the board for all four interviewees. A more collaborative model is especially important for smaller brands who are otherwise unable to reach minimum order quantities for actives or ingredients. Beyond the numbers, there is also an emotional connection imperative to such business expansions. “The key is to do your homework and understand the value you can bring to other businesses,” Billot explains. “In many ways, B2B as a second business can help you empathize and relate to your potential customers who are often selling to end consumers—just like you are.”
While a B2C or B2B side hustle may not be the solution for every company, those who have invested the blood, sweat, and tears into creating both, underpinned by a commitment to change the beauty industry for the better outside of their own companies, are substantially widening their network of contacts whilst driving business for their other channel. Nonetheless, the decision to do so needs to be well considered, well planned, and above all, well executed.
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