Hawthorne Is Coming at You and Your Old Spice—With Algorithms

(Bloomberg) -- They said they wanted “leathery.” Not smoky. Not spicy. Real leather.

That’s how Brian Jeong and Phil Wong, two entrepreneurs who introduce themselves with hugs rather than handshakes, shared their vision in the New York offices of Givaudan SA, the 123-year-old Swiss fragrance maker.

They urged Olivier Gillotin, a perfumer since 1976 with successes like Ralph Lauren Polo Red and Balenciaga’s Cristobal, to follow his creative instincts. So he did—to the nearest Jaguar dealership, where he spent hours sniffing the upholstery—creating a new cologne within months. For Gillotin, who says some clients take six to seven years to formulate a fragrance, the early 2018 experience was “refreshing.”

For Jeong and Wong, the experience created Leather and Woody, one of 20 colognes their startup Hawthorne has been recommending to men based on an algorithm that analyzes their habits and body type. On Tuesday, it launched an array of personal-care products for men, including scented soaps and deodorants, sold directly to consumers from its website using the same personalization techniques.

The fledgling personal-grooming company is the latest to challenge the supremacy of industry giants like Procter & Gamble Co. and Colgate-Palmolive Co. Small firms like Dollar Shave Club and Harry’s have already grabbed market share through similar direct-to-consumer models and analysts say the industry is ripe for more change. Whether or not Hawthorne succeeds with its expanded product line, its newest launch is showing the industry a few evolutionary tricks.

“We want to replace Irish Spring or Old Spice,” Jeong, 29, says, speaking in Hawthorne’s small SoHo headquarters decorated with eucalyptus sprigs and a basketball hoops game. “But we realized there’s an accessibility issue. Guys don’t say: ‘bro, you smell great.’”
 

Jeong and 29-year-old Wong, friends who’d powwowed over skateboards and sneakers since age 12, had a revelation in 2014 when Jeong enrolled in the University of Pennsylvania’s Wharton School: their peers were using the same products as their fathers—Colgate-Palmolive’s Irish Spring deodorant soap dates to 1970, and P&G’s potpourri-inspired Old Spice cologne was first sold to men in 1938. Because many men didn’t talk about style, it seemed harder to get them to try something new. Yet at the same time, startups like eyeglass maker Warby Parker and Harry’s were taking off.

Established personal-care companies risk irrelevance if they don’t keep pace with demands for “highly personalized, real-time experiences,” according to research by EY’s FutureConsumer.Now. They’re spending to boost organic growth, but inconsistent results so far invite rivals, says Duncan Fox, an analyst at Bloomberg Intelligence. And those competitors are having a field day: consumer-products startups made up just 2 percent of market share, but accounted for 25 percent of growth from 2012 to 2016, according to Innovative Brands LLC.

“One of the problems for consumer-product companies across the board is it takes too long to get a product from concept to shelf,” says Erin Lash, a Morningstar analyst. She described P&G as a company that has faced challenges from a “lack of value-added innovation.”

P&G is still the personal-care leader, with Head & Shoulders the world’s No. 1 shampoo brand, a “clear demonstration” of its ability to meet men's needs, says spokesman Damon Jones. It recently announced Gillette Skin Guard—what Jones calls its “most significant launch” in about a decade—which re-positions razor blades to improve shaving for the 70 percent of men with sensitive skin. The company’s grooming and beauty divisions together made up 37 percent, or about $3.6 billion, of its net earnings for fiscal 2018.

Disruption Is Coming

Hawthorne is small—with a $2.2 million seed funding round. But it’s been doubling its customer base monthly, Jeong and Wong say. Its investors include Kai Bond, principal at Comcast Ventures, an early stage investor in Dollar Shave Club and Birchbox Inc., and Shana Fisher, a seed investor in Pinterest Inc.

“The disruption in the personal beauty space is just at the very beginning,” Bond says.

Other businesses also see that promise. Innovative Brands has an accelerator designed to help small-business consumer brands. Harry’s has a lab dedicated to building new consumer-product lines.

While P&G has done some direct-to-consumer business, Jones says, the company believes most shoppers don’t want to go to a bunch of different websites. The Old Spice line, which includes deodorants and body washes, is still one of its faster-growing businesses, and includes a care kit for beards, introduced in September, he says.

Colgate-Palmolive spokesman Thomas DiPiazza declined to comment.

In 2015, when Jeong dropped out of Wharton to start Hawthorne with Wong, they began polling students and friends, finding that men tend to buy personal-care products at the grocery store and hesitate to try new products. Hawthorne’s subscription-based model is calibrated to replace products based on how often a consumer uses them. It also tells men what cologne to wear for work or play, and how to apply it, taking out any guess-work.

Its algorithm matches the product to the man through online questionnaires that ask if he is a meat eater or vegetarian, and if he likes beer or cocktails. It tries to deduce body temperature and looks at IP addresses to check for a warm or cool climate—a key factor in fragrance.

That bespoke element may be the startup’s biggest boon. “People want more personalization, it’s not a need that’s fully met,” says Innovative Brands Chief Executive Officer Joe Jacober.

Gillotin, the perfumer, recalls a large client once sent him in circles reformulating a fragrance because some notes didn’t work in China, while others weren’t popular in South Africa. With Hawthorne’s Leather and Woody, a niche product it only recommends to 2 percent of customers, the assignment was much narrower.

The “animalistic note,” as Gillotin describes it, “like a barn without the dirty part” is suggested for the meat-eating man who runs hot, works in the creative industry and whose favorite drink should be Scotch.

To contact the editor responsible for this story: Lisa Wolfson at lwolfson@bloomberg.net

©2018 Bloomberg L.P.