Creating a pioneering skincare philosophy with Medik8

0:00

Audio Transcript

Tim Smallbone

Hello and welcome to Inflexion Point, the podcast that explores those crucial moments in a company's journey that change the trajectory of success. Through conversations with business founders and entrepreneurs, we'll explore what those moments look like and how to recognise and harness them. In today's episode, we're unmasking the fascinating rise of the acclaimed skincare brand Medik8.

Elliot Isaacs

Our big break really came when our big competitor got acquired and I immediately knew there were going to be distributors around the world desperate for a brand. That was a massive moment.

Tom Pemberton

It's got a fantastic brand that is really well aligned with where consumers are, has a very strong value-led culture and very focused on ESG as well.

Tim Smallbone

I'm Tim Smallbone, and in my 20 years as a partner of Inflexion, I have been lucky enough to witness a huge number of those moments that are a part of every success story. Medik8's founder, Elliot Isaacs, started out experimenting with formulas at the back of his father's pharmacy, lovingly known as the Shed, before navigating the challenges of a notoriously competitive industry, to create a unique, science-based skin care philosophy, which has gained global acclaim. I'm delighted to say Elliot is here today to tell us all about it. And we're also joined by Inflexion's Head of Consumer, Tom Pemberton, who led Inflexion's investment in the business in 2021. Welcome to you both. Thanks for joining us.

Tom Pemberton

Thanks for having us.

Tim Smallbone

You really created this from nothing out the back of a pharmacy.

Elliot Isaacs

Indeed, I did. It's been a long time. It's taken 20 years to have that overnight success.

Tim Smallbone

Yeah.

Elliot Isaacs

But yeah, it's humble beginnings for sure.

Tim Smallbone

And what was your original idea?

Elliot Isaacs

The backstory really is I very much admired Anita Roddick, the founder of The Body Shop. She was an absolute pioneer, really. She transformed an industry. And I'm sure there were lots of natural brands emerging around that time, but she really was the first person to make it big in that space.

Tim Smallbone

To make ethical big.

Elliot Isaacs

Yeah, exactly. And after university, I went travelling. I spent like four years away, a lot of time in Asia. And like I say, in my 20s, this was pre-internet – just. It was kind of, you know, all about fair trade and environmentalism as opposed to sort of maybe more now sustainability. And that just really chimed with me. And what I really realised was that there may be a gap for products which were both scientific but also had a kind of ethical dimension.

Tim Smallbone

It wasn't just, I'm going to create something and make a lot of money. You genuinely, your values right at the start before you did any business, that was actually right at your core.

Elliot Isaacs

Yes, but I wouldn't sort of pat myself on the back too much, because it was more about how do I get through life over the lowest part of the fence. And I'd always been told the only sort of piece of business advice I'd ever been given was do something that you enjoy because you know you'll work harder at it. And I like travelling and I like science. So it was more about crowbarring the product into what I knew I could commit to.

Tim Smallbone

At the back of a pharmacy, so your dad effectively gave you access to it, he gave you the tools to enable you to start to experiment to turn those ideas into a product.

Elliot Isaacs

Exactly, yeah. In the old days, you'd go to a pharmacy and the doctor would give you a prescription and the pharmacies would actually make it, so the compounding pharmacy. But that had all fallen out of favour with the, you know, the advent of blister packaging and mass production of emulsification of creams. And, but he still had this space and I was like, Dad, can I use it? And he was like, Yeah, go for it.

Tim Smallbone

He said he taught you how to do that. Well, that's an old skill which you don't use anymore.

Elliot Isaacs

Exactly. He taught me the basics and gave me books, but we learned a lot of that at university. So the mechanics of making the product was less foundational than the selection of the ingredients and the methodology sort of about what to create.

Tim Smallbone

At its heart, there is a science, there is the CSA philosophy, as I understand you call it, which is to do with vitamin C, vitamin A, is it not? You can tell me. That was there right at the beginning, was it?

Elliot Isaacs

I think right at the beginning, it was more what works. When I was about 12, 14 years old, something like that, I was at home, I remember it distinctly, and on the TV that night, BBC One, Panorama, there was a documentary about this thing called Roaccutane, which was a medicine which the BBC were reporting how it had these side effects, which was to remove wrinkles. I mean, it really worked. It's designed for acne, but it removed wrinkles as a side effect. And the story was just how like people were clamouring for this product. And I remember distinctly my mum and dad having a row because I think my mum asked my dad to bring one home and he said no because you needed a prescription, and they were just like, ah can you go for it. And then the next day when I went down to the pharmacy, there were people waiting outside the shop. I just couldn't believe it. My dad's like up that step in a pharmacy, you know, sort of with all the medicines behind him and just sort of saying no that he couldn't give it to him. And it was so funny because he had a beautiful store and there were shelves full of beauty products. They walked right past that glitzy packaging and all the celebrity endorsements. They wanted the stuff that worked.

Tim Smallbone

Wow.

Elliot Isaacs

And that really had an impact on me. Although I don't think I really realised it then, but I definitely remember later going, oh yeah, there's definitely neurons that have been kind of shaped there.

Tim Smallbone

You knew from that there was a market.

Elliot Isaacs

Yeah, I knew that whatever people said, they actually wanted results. So I knew I had that confidence to go for results. I found essentially that there were three ingredients that were very widely researched and very frequently found to have significant efficacy. And they were vitamin C, sunscreens, and vitamin A, retinoids. And that kind of made sense as well. It was like, yeah, that should be it. And then you're like, well, why isn't everyone just doing that?

Tim Smallbone

That's the question. This is not an industry short on brains.

Elliot Isaacs

I know. I think a lot of the brains that are doing physiology or pharmacology, they go into the drug industry. And it's because of regulation, because you can't really make medical claims for a cosmetic. And there's very good reason for that, and I'm not sort of bemoaning that, but you can't really. And so the talent that was really interested in science and biochemistry kind of went to the more sort of medicinal side of the sector, and cosmetics tended to be sort of very marketing led. And that was fine. Even for larger companies, they were quite happy with that because for them, even though they could afford to develop drug-like cosmetics, there was no benefit to them because they could never make the claims that it wasn't worth the R&D. But I didn't know any of that stuff. I just did it. And that's almost the benefit of ignorance.

Tim Smallbone

So by putting those ingredients together, you had a cream which you were confident was going to work because of the science. I've got to ask, as someone without a lab, I mean, when a large company does it, they'll do masses of testing for working out in the market. What do you do? To say to Mum, can you put Mum and put this on me on your face?

Elliot Isaacs

You literally did. Yeah, it was friends and family and everything like that. I don't know why they trusted me, but they did use it.

Tim Smallbone

You're going to burn your face.

Elliot Isaacs

Yeah, exactly. No, it was well researched and all the ingredients were very carefully selected. And I was using medicinal grade ingredients because that's what I could get through the pharmacy.

Tim Smallbone

And tell me about that moment where you went from research and product to a commercial sale of the product?

Elliot Isaacs

There wasn't really, the internet was just sort of starting, so there wasn't e-commerce. You really had the choice of sort of pharmacy or department stores. We went with department stores because the cost of the product needed that price point. They didn't actually do that well in department stores. The reason why was because the products were too complicated for self-selection. So what we needed was a place to be able to retail the products where we had sort of an intermediary that could kind of explain. And there was a new trend appearing from the States called Professional Skincare. It was a new channel. And there were these brands that had come over from the US. So the French owned the luxury, and then the US owned all these professional brands. And so I wanted to get into professional. I realised that was a channel to market for us.
Tim Smallbone

So it's all about educating the consumer.

Elliot Isaacs

Exactly.

Tim Smallbone

So they knew why this was different.

Elliot Isaacs

Exactly right. It was B2B2C. Our big break really came when our big competitor, SkinCeuticals, got acquired and I immediately knew there were going to be distributors around the world desperate for a brand because they were going to lose it.

Tim Smallbone

Helpful.

Elliot Isaacs

Yeah. So that was like within five months.

Tim Smallbone

That was a moment, was it?

Elliot Isaacs

That was a massive moment.
Tim Smallbone
Yeah.
Elliot Isaacs
That was a massive moment. Within five months, we had five distributors international.
Tim Smallbone
So that was a real change moment, that competitor being acquired, SkinCeuticals being acquired, suddenly opened a lot of doors, opened a lot of channels for you.
Elliot Isaacs
Absolutely. And I should say, because I have name-checked them, that I really respect SkinCeuticals. They did great stuff, great products. So this was an opportunity. And I almost felt like, if I was them, I wouldn't mind because they...
Tim Smallbone
You're bringing the market forward together.
Elliot Isaacs
Exactly. And they'd kind of got to a higher rung on that ladder and they were moving to another one and it was now someone was going to grab that. So we made sure we did.
Tim Smallbone
And were there any inflection points in terms of the development of the product?
Elliot Isaacs
Oh, yes, absolutely. I mean, I guess the first inflection point was the idea of CSA and the realisation of the gap in the market. And then, as we just discussed, the opportunity to get into professional. And I would say the next inflection point was Crystal Retinal, the development of that product, which took a long time and absolutely put us on the map. I mean, that's when we became, I think, a global brand. It was always a long-held ambition to do it before anyone else did. And that's why actually I invited my brother Daniel, who's a chemist, to come on board. I was literally rang him up and said, Dan, do you want to change the face of skincare?
Initially it was about sort of refining and perfecting some of the early formulations I had. And then it was like all set for this sort of big project. And I just happened to see something in the kind of scientific literature, news if you like, coming out of South Korea about a way that they had managed to stabilise something, not what's in Crystal Retinal, but close to it. And that was like fundamental. We contacted the people in South Korea. We got flights out there. And then we basically said, we want to be the exclusive partner for you with this ingredient. And that then created these new classes of retinoids, which we…
Tim Smallbone
And that became your flagship product.
Elliot Isaacs
That became our flagship product. And we had a moat all around it. We have patents around the stability system, and it is just incredible.
Tim Smallbone
And your brother, bringing your brother with his chemistry skills, was integral in unlocking that.
Elliot Isaacs
Oh, absolutely. Yeah. I mean, Dan is a top drawer scientist. I mean, I'm probably more generalist and he's the specialist.
Tim Smallbone
Tom, what did Inflexion see in the business?
Tom Pemberton
We'd been speaking to Elliot for three, four years before we invested, but we'd identified Medik8 as a business that was really standing out against the crowd and the competition because of the fact that it was so well invested from a product perspective and had, to Elliot's point earlier, had really thought about how they had built and brought to market every single product. And it was genuinely differentiated when we did our market research.
Anyone that was in the know about skincare and anti-ageing skincare talked about how great the Medik8 products were and how loyal customers were once they got hold of the product. So for us, that was a really interesting starting point.
And then we obviously spent more time with Elliot and the rest of the team and felt a real shared ambition around where he wanted to take the business and where we thought we could support in taking the business, which was very much continuing that growth trajectory from an international perspective, investing in the team, particularly focusing on the digital side of the business, the sustainability side of the business, and then really being selective about the core markets that we were going to go after with a big focus on the US.
Tim Smallbone
It's a ferociously competitive industry with some enormous global brands in it. Did you not worry, Tom, you know, we were going to get stamped on by, you know, competitor reaction? I mean, Elliot, it must be something you'd lived with for a long time.
Tom Pemberton
It's a massive industry with a lot of competition. But what is interesting and what we were observing, particularly over the last probably five years and then further accelerated during the COVID period was consumers were doing a lot more research and becoming a lot more informed. And so less likely to just fall for a marketing story and more really getting into the detail and understanding, does this product work? Are the ingredients the right ingredients to be used? Does this brand stand for something that I can align with? And that's where Medik8 really stood out.
Elliot Isaacs
Yeah, I think, you know, we did have something different. And we built quite a lot of moat around the product, not just sort of published IP, registered IP, but also just know-how. And I think that once the larger competitors, which really could do something, noticed us, it was almost too late. We really grew very fast once we'd perfected that product. And I think that was one of the benefits of kind of honing the product first, because we didn't have to iterate too much once we reached the point where everyone wanted us. And we're fully vertically integrated, which is a massive part of the business actually and how that started.
Tim Smallbone
You always were.
Elliot Isaacs
We always were. The thing is, when I was making that first product, Retinol 3TR, the problem was we couldn't get anyone to make it for us because it needed to be handled very carefully. It had to be nitrogen filled at the top. And we were obviously low volumes so we couldn't get contract manufacturers, so we had to do it ourselves.
Tim Smallbone
You do the research yourselves, you do the development yourselves, you do the packaging yourselves, you put it in the bottles, you do all the marketing. It's a very broad business, and presumably, Tom, that was pretty unique when you're looking at these sorts of companies.
Tom Pemberton
Absolutely, yeah. We look at dozens of beauty businesses every year and many more outside of the beauty category within the consumer space. And you don't find many businesses that have this much in-house capability, from conception through to the lab, through to R&D, through to development, through to then actually making the product and manufacturing, distribution, and then on top of that, all of the brand and marketing, and education piece with an omni-channel network that you're selling through online, you're selling through retail, e-tail, and also into other international markets. That is really what has driven the massive growth within this business. It's hitting a really great sweet spot for consumers and is loved by consumers that are only getting more and more and better educated on what works and what doesn't. It's got a fantastic brand that is really well aligned with where consumers are, has a very strong value-led culture and very focused on ESG as well. And then the way that everything is executed in this business, from the product development through to how we position in our channels and how we talk about the brand and the marketing is just done to that extra level.
Tim Smallbone
It's really interesting to go back to the very beginning, the whole ethical idea was at the very core. So there's a science strand run through your whole story, but also the ethical brand. And if you do feel yourself quite lucky, because that's become like a huge trend with consumers, particularly young people, to want to be seen to be championing ethical brands.
Elliot Isaacs
Yeah, very much so. I mean, we definitely felt as if the market came to us. We were very driven by what we wanted to do and we felt that it was the right thing to do commercially. It's not that it was just sort of a hobby, but there's no doubt that the market did come towards us. Or I would say that one of the things just generally about the natural movement when it started was it seemed to sort of not like science. It was just sort of science was kind of the enemy. For me, science is a method by which we reason and arrived at the truth. We didn't see science and ethics in conflict. We found them to be synergistic. And so, yeah, for us, it was a very natural thing to do.
Tim Smallbone
The ethical theme has flown all the way through, and now you become a B Corp.
Elliot Isaacs
Yeah, absolutely. I mean, we... I think we've, as we touched on right in the beginning, we've always kind of thought of ourselves as quite sort of sustainable or ethical and the way we treat people and everything. And I think this is a great thing, actually, that retailers started to ask questions a few years ago of every brand in any category. Retailers and consumers are putting pressure on retailers, and the retailers are going to their suppliers and saying, you make all of these claims about yourself, show us the goods, right? And we decided that we should be externally audited. We decided B Corp would be the best accreditation for us. And we went to them and we said, how are we doing? What do we need to improve on? And within six months, we got a score, I think, around 89. And I think the average UK business that takes this test is 55. So we did really well. The team are fantastic. And yeah, I'm really proud of that because I think there's only like 60 beauty companies in the world that are B Corp. So we're really proud to be in that club and share all of our learnings with them.
Tim Smallbone
I've got to ask you, you're going along, you've been very successful, selling all around the world. And you invited Inflexion to take a stake in the business. What was the thinking behind that moment?
Elliot Isaacs
It was a significant turning point for us. And it came about in the wake of COVID. We'd been bootstrapping Medik8 for 20 years at that point. Every day we were coming into work and in hindsight realised that we'd been gambling everything that we'd ever worked for. Overnight, every single clinic in the world was mandated to close. All that revenue had vanished and it was an existential moment for the business, there's no doubt about that. We had to pivot really quickly, so pivoting to direct to consumer, expanding partnerships and other channels, helping out our professional clinics at the same time with affiliate drop shipping. But thanks to the efforts of the team and the full vertical capacity, we didn't just survive, we flourished. But despite that success, the experience left its mark on us. And it was a wake-up call that we were far too exposed personally, if I'm honest.
Tim Smallbone
Yes.
Elliot Isaacs
Whilst we, you know, diversified in product and in geographies, we hadn't really diversified our own sort of personal positions. And at the same time, we were like massively ambitious at that point. We were like, right, how do we take some chips off the table and really take this to the next level. Because what we realised we were doing subconsciously was holding back on some investments.
Tim Smallbone
So your risk return profile as an individual was holding you back from making those big steps for the business.
Elliot Isaacs
Yeah, I would say that this is a problem for a lot of founders in those sort of, in those middle years, when you sort of, you're doing, you're kind of doing all right, you're doing really well, and you know you can do more, but you realise that it's kind of all on you. And then someone said, have you thought about private equity? And I'm sure for non-financial people like me, private equity has got that kind of reputation. I don't know why, but it's got that sort of short-termism reputation, they're not really looking after the business and all of that stuff. We spoke with lawyers, corporate finance people, tax partners, and they genuinely said, Inflexion are the good guys. And what I really loved is that they didn't want us to change the secret sauce. There was never any talk about that. It was always like, look, we know what we know, you know what you know, let's do this. And I think that's it. We're just like, let's do this. So it was brilliant for us.
Tim Smallbone
You wanted to change the personal risk reward balance. You want to take some value off the table. But also it was to do with accelerating the growth going forward. Tom, have we been able to help with accelerating the company's growth?
Tom Pemberton
Like all of our investments, there are a number of areas that we focus on in terms of scale and scaling the businesses. With Medik8, when we met Elliot, sort of three, four years before we did the investment, we were talking about the scale of ambition that he had with the business and the opportunity set that he had globally. And over the years, we just stayed in touch and talked about, what might be a strategy for the US, what might be a strategy for Asia, how would you think about approaching that? And we'd already developed a bit of a relationship around that. And so when we then got into a very quick diligence process and talking through what the growth story might be like post investment, it was all about giving Elliot and the team the support, the advice, and also the investment in the business to be able to really scale. So our focus was around how do we build a really fantastic, best-in-class digital part of the business. So we hired a big team there to support on online customer acquisition, trading through the own website. A big focus on ESG and sustainability. So we have a team now in the business who are fantastic, who are doing a brilliant job, being really innovative on the sustainability front. Elliot talked about it before, but the US, obviously a massive market for beauty and particularly skincare, but you need to be careful about how you approach the US and make sure you're hiring the right people and going about the strategy the right way. So we took a bit of time to think through that. And within about 6 to 12 months of investment, we hired a team out there. And now that has become the fastest growing part of the business.
Tim Smallbone
And from your point of view, Elliot, what difference has Inflexion made?
Elliot Isaacs
They helped us increase our marketing budget, which is a different way of saying reducing our EBITDA margin. That was a very crucial decision, actually. And nod to our chair, Chris Elshaw, who was part of that decision with Tom. And another thing that Chris was sort of instrumental in is implementing a global-local strategy. So the idea is that we sort of have a head office, a global concept for our products and our technology, but in a go-to-market strategy, all the countries will operate on their own and take the HQ marketing, but adapt it for the local market, which is really important because it was getting to the point where we were trying to operate everything out of London.
Another thing is that, right at the beginning of the investment, we had plans to move into a new innovation centre, 100,000 square foot facility in Aylesbury, and that was going to give us the capabilities and the capacity through to, I think, FY29 or FY30. And we had the plans on the table, we had it all ready to go, but again, it was like 3 million pounds, it was a lot of money to, you know, take out of working capital. And just having Inflexion on board and knowing that they'd sort of stamp that decision and say, yeah, what are you waiting for? Just do it. And then we did it. And it's again been a brilliant thing.
Tim Smallbone
And Tom, we've been involved in a lot of the team changes.
Tom Pemberton
Yeah, as Elliot said, we've increased the headcount significantly and that's across all key functions within the business. A big focus for us as investors is we're always backing high growth businesses that are performing really strongly, but often because you're growing so fast and running around, there maybe hasn't been that moment to step back and say, what is the optimum organisational structure and how should we go about that? And that's always a big focus for us. And so working closely with Inflexion's talent team, we worked through where does the business need to invest in terms of key personnel across each function and help support in hiring people. So we've brought in amazing people within the team across marketing, across brand, across ESG, head of people. We brought in a new CEO recently who's done a fantastic job helping with scaling the business, particularly internationally. So for us to support the growth ambition that we've had with this business, we've needed to really invest in the capability. They had a brilliant team before, but it's just supplementing in key areas and bringing in people that have a little bit more expertise, particularly with that international agenda that we've been pursuing.
Tim Smallbone
And our digital team have been engaged as well in lots of work on the way in which we approach our consumer and the internal wiring of the business.
Elliot Isaacs
Well, that's right, because, you know, a lot of our kind of human infrastructure, if you like, was built around the professional channel. And whilst that is an incredibly important channel that we continue to invest in, the pivot to D2C during COVID and the continuation of that meant that we wanted to really invest in it rather than sort of passively taking the tools that were available to go to market through digital channels. And yeah, Inflexion really helped with that. Alex from the team has been really deeply involved — he even comes to board meetings and him and Jan have really helped with sourcing tools, helping implementation, guiding our CFO on what best practice is and drawing from the rest of the Inflexion portfolio actually and their best practices of, you know, other consumer businesses that you have. It's been really game changing that.
Tim Smallbone
You've highlighted in your story, starting with watching Panorama back when you were 12, any number of change moments, inflection point moments along the way with the partnerships that you'd signed, etc., and then us joining. But for you personally, there's been another inflection point because since we've invested, you've stepped down from the leadership position of the company. Was that originally part of the plan of why you invited Inflexion as an external investor?
Elliot Isaacs
Yeah, I think so. I feel that when you love something so much, you kind of just continue forever. And I felt like I had another chapter of my life story that I wanted to live out. And this was an opportunity for me to do that. And one of the actual great things about doing this with Inflexion is I really felt I could have my cake and eat it because I was invited in as a non-exec. And so I felt like I could keep a hand in, I could still add value in the areas that I felt I really could add value. And I could watch it. It's like watching, I suppose it's like watching a child go to university or whatever. They still bring home their laundry, right? But you get to have a bit of distance. And I think that's been, I think, the best bit, being able to pursue other adventures, but still keep round the table.

Tim Smallbone

And if you think back to that very original adventure walking through the Himalayas back in the early 20s, could you ever have imagined it work out like this?

Elliot Isaacs

No, I would have had no clue.

Tim Smallbone

It's been a journey.

Elliot Isaacs

It has.

Tim Smallbone

Thank you so much for sharing it with us and thank you, Tom. Well, that's it for this episode. My thanks to Elliot and Tom for joining me. Remember to subscribe to Inflexion Point wherever you get your podcasts so you don't miss an episode. And of course, you can check out our previous instalments too. Thanks for listening.

About the episode

Inflexion Point tells the story of Medik8, the science-led skincare brand that grew from the back of a pharmacy into a global name, and how it built a business on the belief that consumers want results. Host Tim Smallbone is joined by founder Elliot Isaacs, who started out mixing formulations in a space known as the Shed, and Tom Pemberton, the Inflexion Head of Consumer who led the 2021 investment. They reflect on the moments that shaped it: the childhood memory of customers queuing for a treatment that actually worked, the CSA philosophy built around vitamin C, sunscreens and vitamin A, the breakthrough of Crystal Retinal and the moat built around it, and the move into professional skincare that opened the door to global distribution. Along the way, they talk full vertical integration, the pivot to direct-to-consumer that carried the business through COVID, becoming a B Corp, and why Elliot brought Inflexion on board to take some personal risk off the table and take the brand to the next level.