In this episode of TD Cowen’s Retail Visionaries Podcast Series, Jonna Kim, Vice President, Apparel, Footwear & Textiles and Retailing/Specialty Store research, speaks with Suveen Sahib, Co-Founder and CEO of K-18 hair, which has disrupted the haircare space.
They discuss K-18’s unique patented peptide technology that repairs damage from bleach, color, chemical services, and heat – restoring strength, softness, smoothness, and bounce to hair. They also discuss K-18’s growth strategies and core competitive advantages in the market. Press play to listen to the podcast.
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This is the Visionary Podcast series and about visionary ideas and people. My name is Jonna Kim. I’m Cowen’s retail analyst. In this episode of our retail and luxury Visionary Podcast series, we are excited to spend time with the co-founder and CEO of K18 Hair, Suveen Sahib. K18 Hair has disrupted the hair care space with its unique patented peptide technology that repairs damage from bleach, color, chemical services and heat. K18 has disrupted the hair care space with its unique patented peptide technology that repairs damage from bleach, color, chemical services and heat, restoring strength, softness, smoothness and bounce to hair. And Suveen has been on the mission to develop cutting-edge innovation and liberate self-expression and hair through a less is more approach. Suveen, thanks for joining us today. For those who are less familiar with your brand, could you just talk about why and how you find K18 and what is so special about your technology?
Jonna, thank you for that lovely introduction. Great to be here. I come from a tech background for the last 10 years and worked my way onto hair care thanks to my co-founder, Britta Cox, who founded AQUIS hair towel. During many of our conversations, one of the things that really kind of stood out to me was how much of a struggle hair care happens to be with most of us. The amount of time, effort and the number of products that go into [inaudible 00:01:51] hair can be overwhelming. And this is more true for anyone who loves expressive hair, which translates into chemical damage. And the genesis of that lies… The struggle lies in our hair habits and in industry which is rooted in cosmetic chemistry that for decades has basically served one purpose, which is about masking damage.
Think about this way. Cosmetic chemistry is great for styling outcomes you want. For makeup, color, everything, it works great, but cosmetic chemistry does not understand the biology of life. It does not understand your scalp, your hair or your scalp. And that’s why we turned to biosciences wherein we saw that what looks like a hair fiber outside is inside one of the most sophisticated biological composites. It’s these millions of ladders, interwoven and interconnected. And these are essentially… These are molecules connected together by electrostatic attractions. There are no physical structures. You can’t solve this through physical chemistry. And that’s where we ended up mapping the entire keratin channel and testing it out over a period of 10 years to identify the molecule that could actually go into the hair and reconnect these broken polypeptide chains that make for the strength and the last of hair. And that’s what K18 is all about.
That’s very impressive. And the bond building category is getting really big and competition is getting a lot fierce. You talked about this a little bit too [inaudible 00:03:19]. What separates you from other competitors such as Olaplex? And what do you think is ahead for the category?
Firstly, K18 is a biotech product. It was not created in a formulation lab. It was designed by probabilistic structure and sequence analogies using competition, approaches we apply in biotechnology. The formulation came next. And this element of its biotech origin is what makes K18 unique. Now when you think about hair care evolution, it started with hair conditioners and repair treatments and all of which sit outside of the hair, but as I said earlier, hair is a biological composite. It was not meant for products sitting on the hair. They don’t solve anything other than masking the damage and driving styling outcomes. And then you had the next generation when you had the… Became the era of the bond builders, super revolutionary. And what they focused on was on containing cystic damage, which kind of occurs during bleaching processes and others and which translates into roughness on the surface of the hair, but again work near the subcuticular regions.
But when you think about what contributes to the strength and the elasticity of hair, which is what we are concerned with, they lie in these polypeptide chains that run along the length of the hair. And when these break, they break because of these alkalinity in the surfaces. You cannot patch them again. You got to bring them back the way they were naturally configured. And that’s where the K18 technology kind of came in as it fitted right in, it reconnected these chains and it also reconfirmed any broken bonds. So it was able to do what the bond builders did and a lot more essentially in the region where it needed to. And being able to do that with the radical simplicity and just in four minutes, it’s what endeared K18 to the stylists who started building up their option for K18 across the world. They love its simplicity. They love the fact that it gets them to accomplish a lot more with artistry and the fact that it allows them to do it with less frustration.
Yeah. That’s very helpful. And you have your signature product, hair mask and then shampoo, which kind of stands for your simplicity approach as well, but as you think about your product portfolio, is there right level of skew count that you think about? And how do you envision new product launches?
I want kind of go back to your other question because both of them are interlinked, which is about the future of hair, especially the hair repair. We see hair repair being the future, because when you think about expressionist what drives hair care, every time where you’re expressing your hair, whether you’re coloring or bleaching, it entails three stressors. One is harsh chemistry. Number two is mechanical damage from all that pushing and pulling. And number three is extreme heat stress. So try doing what you do to your hair, try doing that with a silk dress or a cashmere sweater and you’ll see there is the difference in three washes and hair is our most precious asset. So for us, the first thing is about how do we through biotechnology mitigate the impact of these three stresses on hair so that we can help our community whether the stylists and the customers drive more of that hair expression and hair happiness without compromising hair health?
So when we kind of are doing that, the key thing is not about how many SKUs. It’s about how do we solve some of the bigger problems. I believe in less is more for hair. And that fundamentally is about how do you maintain a very, very tight assortment. And that those inspirations come from the Apples and the Teslas of the world which have created huge scalable businesses and yet have a very, very clear path and driven substantially profitable businesses. And to do that you want to kind of focus on how do you solve some of the bigger problems and then whether now that translates into one launch a year or one launch in two years, it should not be driven by those calendars. It should be driven by how do you create [inaudible 00:07:16] that truly are game changers and can transform the hair experience while mitigating the frustration that goes into hair care and saving your time.
So for us, it’s been about building, continuing to build up the hair mask, which most of us know. What you don’t know is that we have the mist repair mist, which is actually [inaudible 00:07:34] on the salon. So building these out in the back bar and leveraging these to drive stylist advocacy and adoption outside of the back bar into the community is how we kind of are going about it.
It was also the same reason why when you think about shampoos, I don’t think the world needed another shampoo, but as we understood the dynamics and the interactions of chemically damaged hair with water, with minerals and water, with products in the hair and how they all impacted your hair strength and hair habitat, that’s what got us to creating a detox which has been loved since its launch and removed more than about 95% of the product [inaudible 00:08:15] and more the 70% of the minerals. Similarly, our daily shampoo, everyone is loving it and it’s one of the first mainstream microbiome certified shampoos out there. So it’s all about maintaining strong SKU productivity and heartful invention rather than incrementality.
One trend we are seeing or hearing is there are some muted demand in salons and consumers are pulling back a little bit and salons are buying more closer to their needs. Are you seeing similar trends as you talk to your stylists? And how do you think the environment will evolve?
I do not think there’s a diminished salon demand. Consumers are more than ever going into salons for the services. What’s happening is that for decades, both the pro trade and the salons and the stylists basically had not a huge appreciation for capital optimization. Look at every salon. You have 100s of products out there on the display and 100s of SKUs kind of carried in the inventories and they have very little capital. So deploying these capital on multitude of products and with [inaudible 00:09:23] with a narrow functional spectrum delivering the value is not the best business sense.
So as stylists and salons and the pro trade came out of the pandemic, they started more appreciating the value of capital and real estate. And that’s what in turn is driving them to kind of see how they can kind of create, how they can stock multifunctional products that can work across all hair types services that can be [inaudible 00:09:48], that can drive spontaneously the services and increase their ticket size and their ability to delight more clients. And this is what’s kind of a driving K18. This is something that was long overdue in the salon industry. It’s just that the pandemic accelerated this.
Yeah. That’s helpful color. You’re currently in Sephora, [inaudible 00:10:07], and you have your own D2C network and then you’re obviously in salons. What takes priority for you as you think about your distribution footprint over time?
Jonna, first of all, we do not think of channels. We think of what’s the community we need to serve out there and how do we kind of optimize the touch points, what are the drivers of advocacy and how do those advocacy translate into adoption and finally loyalty. And when we kind of look at that path, it’s about the stylists. They are the North Star. So it’s about deepening our relationships and distribution within the stylist adoption. And that was the reason for example we launched in SalonCentric just about four weeks back, because that gave us access to about a million stylists that we did not previously have access to in an efficient way. You go to your stylist. They know your hair better than anyone else. They are the educators. They are the content creators. So it’s about deepening distribution and their adoption, the back bar, and leveraging that back bar in turn to drive retail sales in the salon and retail sales in D2C and others.
Talking about Sephora, we see them as apex beauty retailer in America. They got more than about 3 million beauty insiders and the love that they kind of created with this community is incredible. They are the leaders when it comes to driving new adoption trends and new thought leadership. So for us, okay, Sephora was a natural partner. So it’s not about how do we kind of again drive more and more distribution. It’s about how do we kind of work better with our current partners. And also one of the things we had noticed is that when you drive a threshold level of critical momentum in the salon adoption, it has a huge impact on your retail and your sales. And that’s what we’re kind of learning and that’s why even when it comes to retail outside of North America, we’re not really launch retail other than in a few markets because for us, that style is adoption and that critical threshold is key to driving retail and D2C in a more efficient way rather than focusing on them as specific channels.
Yeah. Stylists are at the core of your strategy and tying the marketing to that as well. Just would love to hear more about your marketing priorities and strategies as you continue to grow. And how important is it for you to drive organic awareness through hair stylists versus other channels?
As I said previously, stylists are our North Star. So everything is about education and education driven marketing. So it’s not about simply kind of a driving basic content marketing. What we kind of are doing is we kind of accessing them on the salon, on the social media. And that’s where we kind of are seeing TikTok kind of play a key role in our evolution. We kind of embraced TikTok early on because to us, it was not just about entertainment. It was about education, entertainment and showcasing transformational hair experiences with spontaneity.
The second thing that also happened is that the brand had a very strong and an authentic voice which resonated with the TikTok community and that’s been driving the brand over the last two years. We already kind of are number one on TikTok. We’re the fastest growing brand there. Our first campaign generated more than 11.2 billion views. Our new campaign, which we launched in Jan 2023, has already garnered over 8.4 billion views in the last three months, sorry, three weeks I would say. We are number four on the social metric scale within the hair care category. And a lot of this is not about us. It’s about the fact that the product is working and the fact that our stylist community, they are embracing the product in a big way. They love its simplicity. They love the way it extends their artistry. They love its spontaneity. They’ve become our biggest content co-creators. And that in turn is fueling the growth and the momentum for this brand. So for us about simply continuing to do that right and not lose focus there.
That’s helpful. And to the extent that you can share on your consumers, could you just discuss key characteristics of your core customers? How often do they shop with you? Do you see a lot of them coming back? You mentioned I think before it lasts about three months. So after that, do they replenish your products?
First of all, K18 is probably the first universal hair care product in the industry. We all have been led to believe that everyone’s hair is different and these products work for Caucasian hair, these work for [inaudible 00:14:46] curly hair, these work for Asian hair. At the molecule level, all hair is the same and gets damaged the same way. So those conversations about specific hair products for hair types have value when we’re talking about styling outcomes, not for hair care. K18 is the first has demonstrated that it works. And that’s why it’s become a global brand and the first universal product which spontaneously works literally across every hair type, every hair service. So it’s a huge plus point that we’ve been able to kind of validate.
Now having kind of said that, I mean the key thing is how do we kind of continue kind of driving that compelling value and to whom that matters the most? It’s anyone who loves hair expression and that hair expression essentially means chemically damaged hair. So we kind of are seeing substantial gravitas over there. And that in turn is when we kind of look at repeat sales. They’re the ones who are coming back. Now they’re coming back to buy K18 on our site. Within stylists, we have more than about a 70% adoption and a repeat rate. And they’re buying from once a month to once or three months depending upon the number of services they use it.
And also we want to be mindful of the fact that many times these metrics are just looking at what’s the retention rate on my site. Consumers are not out there buying, going and just kind of buying it from your site. We live in an omnichannel world. So as a consumer, I might kind of have my discovery on the K18 site but then I might continue my retention, I might repeat purchases using using my Beauty Insider points at Sephora or my Amazon Prime relationship with Amazon. So what we kind of [inaudible 00:16:33] really kind of look at is what are the primary levers, what are those drivers of adoption and how do we really kind of focus on that rather than just simply looking at D2C metrics in isolation.
And as a relatively young brand, how do you balance growth and profitability? And do you plan to prioritize one over another? Or you try to prioritize both at the same time?
I know this is not a usual practice when we talk about growth. I believe that growth and profitability should come together. That’s when you build solid plans, because that pushes you to kind of think of smarter growth pillars. And that’s been kind of a key to us as a business from day one. K18 has been profitable from day one. And while we grew by more than 150% the last one year, we actually increased our profitability by about 10X versus the first year of the launch. And that matters both at the margin level, that matters at the EBITDA level. So to us, it’s not about one or the other. It’s about how do we really continue to progressively drive both the elements and continue to be stronger, which in turn also kind of means how do we kind of deploy our capital more smartly.
In the last many, many years, the D2C universe has distorted our understanding and our appreciation of capital in many ways. This is not about how do you trade future LTV value for today, how do you use paid acquisition marketing to acquire customers? No, it shouldn’t be that. In the last two years, more than about 50% of our traffic comes from organic sources. And that in turn drives our sales and that’s what matters. As long as we continue to doing that, we’ll drive profitable growth. It also kind of means how do you kind of deploy capital if… How do you create that brand affinity at the top of the mind level not deploying paid capital marketing, and then kind of look at smarter ways of engaging and retaining your audiences and driving co-creation, co-content creation with the community. Let them become a part of your community. And those are some of the pillars that we kind of constantly kind of looking at and checking the boxes and see to it that we stay focused onto that path of profitable growth at all times.
Yeah. You’ve built a really strong model and very impressive to see all the growth you’ve had. As we close out this session, what has been most fun for you? And what has been most challenging for you? And as you think about the next three to five years, where do you see the brand evolving?
I mean, first of all, I’d have say it’s been super inspiring and exciting to see how K18 came about as a concept on a computer to actually becoming a global brand in 100 countries and growing the way it has and scaling both on revenues and profitability the way it has. Lucky to be working with an amazing team that focuses on cross-functionality and is creating a symphony that kind of resonates out there. So we couldn’t be more excited about where the brand is. Ultimately, I kind of see this becoming a global biotech beauty leader once that’s kind of really embraced and advocated by stylists to the larger community. And therefore, innovation to us is always going to be core to how we kind of go about building. So this innovation is not just about the products but innovation in the way we approach and create more immersive consumer touch points and drive more adoption and loyalty.
And then finally, if you kind of think about it, the beauty industry has been shot so far on optimizing design and functionality when it comes to really building product efficacy and sustainability in real terms. And when it comes to these concepts, nature is the ultimate engineer. It’s time for us as well the entire beauty industry to shift our thinking on that front and start harnessing the design and functionality from nature in optimizing our lives. That’s what will strengthen our relationship with beauty and wellness and fundamentally restructure everything we do and how we interact. And that’s where K18 has been playing a pioneering role. To us, our genesis in biotechnology is how we kind of see us continuing to kind of drive novel innovation and drive functionality and being able to kind of create products that actually make a difference to our stylists’ lives and along with them, our consumers’ life. When we kind of do that, we can restrengthen this whole relationship we have with our hair. And I think who doesn’t want to have a good hair day.
Well, thank you, Suveen, for joining us today. And congratulations on all your success.
Thanks for joining us. Stay tuned for the next episode of Cowen Insights.
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