Young Rich List 2023: Hismile and Bondi Sands lead one of the … – The Australian Financial Review

Bondi Sands, founded in 2012 by Wilson and Blair James, both Melburnians, is a line of tanning products that trades on the idea of the sun-kissed, beach-loving Australian, a sentiment that has struck gold in 32 countries, across 40,000 stores. It now has 120 products, everything from sunscreen to lip balm and even merchandise (like a Bondi Sands-branded Frank Green coffee cup, yours for $34.95).

“Blair and I met when he had a [tanning] salon in Port Melbourne,” says Wilson. “I was a customer and we became friends. We were always talking about brands, we were both interested in consumer behaviour. Blair had a strong understanding of professional tanning but he said that there wasn’t a great DIY product in the market. He couldn’t refer clients to a good product to use at home, or if they were travelling.” Tanning products existed, of course, but Wilson and James thought they could do better.

The pair partnered with a retailer right away, snagging a deal with Priceline that gave them exposure in about 450  stores. This is a very different path taken by many nascent beauty brands, who go direct to consumers armed with little more than a website and an Instagram account. Wholesaling cuts into your margins and can also halt cash flow. But Wilson wanted his brand to have a strong presence on retailers’ shelves. “We wanted visibility and volume.”

The business was self-funded initially: James sold his salon, Wilson took out a second mortgage. They even lived together to save money. “We ate a lot of microwave meals,” says Wilson.

Like Hismile, Bondi Sands didn’t invent the category it plays in. But through a combination of nifty product innovation and savvy marketing, it has come to dominate it, with 54 per cent market share in Australia, 40 per cent in the UK and 16 per cent in the US, a market it only entered six years ago.

“Innovation isn’t always about product,” says Wilson. “It’s often about how you talk to your customers, how do you appeal to them? SPF is a good example. There are [at least] six brands in Coles, and the product is broadly the same. How do you differentiate yourself? How do you tell a story?” The story of Bondi Sands, he says, is “confidence, joy, fun. When you’re wearing Bondi Sands, you should feel good about yourself.”

Beauty brands often tout their cheery credentials: use this product and you’ll feel better. But of course, most products in this space are here to make you look better. Which some might think is a problem when so many of them are marketed squarely at children (like, for example, SmileStikas).

There’s a reason for this: Gen Alpha, whose oldest members are currently 13, will soon have money of their own to spend. And even before they’re cashed up with jobs, the average American teen, according to a recent study from Piper Sandler, will spend $123 a year on make-up and $119 on skincare. That’s a 32 per cent increase for make-up from the year before, and an 11 per cent increase for skincare. All those pastel bottles and cutesy names look as collectable as the toys they’ve just left behind.

Tomic, possibly weary of this line of questioning, doesn’t think his strawberry or grape bubblegum toothpastes are specifically targeted at children.

“We feel our toothpaste is made for everyone, which is unique,” he says. “Adults, kids, everyone. Why should there be a differentiation between what kids like and what adults like? As an adult, I want toothpaste to taste nice!” Mirkovic clarifies: “When we started, our target market was very specific: 19 to 25-year-old women. But everyone has teeth. The market is so big. But it’s also stale. It needs innovation.”

They launched Hismile in 2014, bootstrapping the business from the beginning with $10,000 in savings each. Teeth-whitening was a growing trend among their friends, but they noticed that people complained that the chemicals hurt their teeth, and that the products didn’t always yield the results they wanted.

“We just knew there was a better way,” says Tomic. Theirs is a classic founders’ mentality: by their own admission, equal parts chutzpah and naivety. “We were like, let’s just do it.”

Six months into his commerce degree, Tomic left university, and Mirkovic quit soccer (he played for two Gold Coast teams) so they could launch the company. They spoke with “hundreds” of dentists, chemists and research scientists to formulate an improved whitener. “We had to lean on brighter minds than ours,” says Mirkovic. “We still have to. But we are questioners. We are always asking, why are things done a certain way?”

Most of their funding went straight into the product, leaving little behind for marketing or advertising. That, they left up to the social media gods – or goddesses, as the case may be – Kim Kardashian is a fan, through a paid product placement that took, Tomic estimates, about 18 months to procure (Kardashian is apparently quite rigorous when it comes to products she endorses).

It’s hard to overestimate the supercharging of Kardashian’s stamp of approval, but Mirkovic is close to blase about the effect her viral TikTok reel about the toothpaste had for the brand. “It didn’t change the trajectory of the business,” says Mirkovic with that founders’ moxie, “it accelerated it.”

“When we started, influencer marketing wasn’t really a thing,” says Tomic. “Our product was unique – pain-free whitening, which didn’t really exist in the market. Our idea was to send it to as many people as possible on the east coast of Australia. We positioned it to people with a few thousand followers, people who would feel thrilled to receive it and then share it. Naturally, that started to scale.”

Even now, direct-to-consumer sales comprise 60 per cent of the Hismile business; it only entered wholesale 18 months ago (it is stocked in Chemist Warehouse, Myer and Sephora, in Walmart in the US and Galeries Lafayette in Europe). It now sits firmly alongside Colgate and Oral-B – average price $3.50, compared with Hismile’s $13 – and will compete with these legacy brands more squarely.

“You have to go where the customers are,” says Tomic. “For us, that’s everywhere from dentists to chemists to beauty retailers.” By the end of 2023, he says, the brand will be in 20,000 doors across the globe. That’s a number they’re hoping to double by the end of 2024. “We’re still a little tiny dot on the radar,” he says. “You can’t be naive in thinking that where you are now is where you will always be.” There is, he says, “no limit” to the number of products that Hismile can make. The only barrier is creativity. “All you have to do is see the opportunities.”

It’s something global investors are seeing quite a lot of in Australia. In April, French beauty conglomerate L’Oréal announced it would purchase Melbourne-born Aesop for $3.7 billion. Bondi Sands followed with its transaction in August. In March, Estée Lauder invested in Vyrao,
an independent fragrance brand owned by former fashion editor Yasmin Sewell.

In 2020, Korean beauty giant Amorepacific took a 49  per cent stake in quiet Melbourne-based skincare company Rationale, which has since entered the US and Singaporean markets. In 2021, BWX, an Australian company, bought a majority stake of Foster Blake’s Go-To skincare for $89  million (a deal that has since gone south after BWX was placed into administration in April this year).

“Beauty used to be really boring,” says Jessica Hatzis, owner of Frank Body, a coffee scrub now sold in Mecca and Priceline (and overseas in Bloomingdale’s, Ulta, Selfridges, Boots and Sephora). “It was led by a handful of global conglomerates that played it safe. There was nothing memorable from a brand perspective. Now there is a sense of fun to skin, body, haircare and cosmetics. It’s a more joyful interaction with the customer. And that is really appealing to that Gen Z consumer, and even those who are younger than that.”

Hatzis would know. Frank Body, which has since expanded to include skincare (“It’s important to offer a product people can use every day,” she says), started as a side hustle in 2014: Hatzis is a marketer who also owns branding agency Willow & Blake. If endearing messaging now looks contrived and copycat, it’s because Hatzis and her co-founders kicked it all off a little under 10 years ago with their cleverly packaged scrubs and engaging copy (like “Guess what? You’ll be naked in one minute” on the pack).

Frank Body was part of the first wave of independent beauty start-ups in Australia. Kate Morris, the founder of Adore Beauty, was there to witness its rise. “When I first started in beauty 23 years ago, it was a very different landscape,” says Morris, who now runs investment firm Glow Capital. Indeed, even 10 years ago, the only Young Rich Lister in the beauty business was model Miranda Kerr, whose Kora Organics brand was then four years old.

“There were very few independent brands. You had to go through a department store, you had to advertise in glossy magazines. The barriers to entry were very high. When those barriers came down with social media and e-commerce, there was a wave of start-up brands and they could target customers directly.”

That market, Morris says, is now saturated, and the proliferation of brands is slower. Getting cut-through requires one of three things: a pre-existing platform or audience, the endorsement of a major influencer, or genuine product innovation. “There was a window where brands got through, but it’s harder now.”

Morris was a pioneer in the beauty industry; Adore was the first female-founded business to list on the ASX. Her own story reflects the sentiment that a window has closed. Adore floated at $6.75 per share but it’s been down ever since. This past year it’s struggled to climb above $1.

Hatzis’ brand is another one that got through the window, and has evolved with the industry. Investor sentiment has grown “significantly,” she says (Hatzis was not a Young Rich Lister, but in 2021, Frank Body sold a stake to Chinese firm EverYi in a deal that valued it at $100 million).

“We have a really interesting beauty retail environment that isn’t as swayed by macroeconomic factors and international trends,” she says. “We are very open to new brands, and globally, Australia is seen as synonymous with quality. And we are an isolated market to test and learn in.”

Wilson agrees. “Australians have an entrepreneurial mindset,” he says. “We are prepared to give our ideas a go.”

Though the Bondi Sands co-founder has just enjoyed a $450 million payday, he says the industry here makes succeeding a challenge still. “When we say we are Australian made, people overseas take that seriously,” he says. “So I’d like to see, at a government level, more support for that. It’s disappointing to see that the government is pulling away from manufacturing. We should be showing that we can build companies from here.” Wilson wonders, for example, why Bondi Sands is taxed at the same rate as global entity L’Oréal.

Not that it has hindered the company much. And whether the shelves are too crowded remains to be seen – right now, Australians appear to have an endless appetite for personal care; this year we will spend about $22 billion on beauty and grooming. And while Gen Xers are the industry’s biggest market, spending $2.4 billion, younger customers (aged 15 to 34) are not far behind, spending $1.9 billion annually according to IbisWorld. But major transactions aside, most start-up beauty brands are fledgling, at best.

“It’s very easy to be a fad on social media,” says Hatzis. “Brand can get you noticed but the nuts and bolts are so important: pricing strategy, distribution, product pipeline, retail footprint . . . these make you a great brand, long-term. The high of social media won’t last forever. Ultimately, you need to have a product that really works, one that’s new enough to capture people’s attention. There is no real secret to it.”

The November issue of AFR Magazine, including the Young Rich List, is out on Friday, October 27 inside The Australian Financial Review. Follow AFR Mag on Twitter and Instagram.