In 2008, a then 37-year-old Indie Lee endured multiple health crises. Born Lisa Swengros and called Indie Lee, short for “Independent Lisa,” a blog she wrote, Lee was diagnosed with rheumatoid arthritis after her feet and hands became extremely swollen and a subsequent MRI revealed she had a brain tumor, which a successful craniotomy removed. The crises caused her to reevaluate the beauty products she was slathering on her skin and launch namesake clean skincare brand Indie Lee two years later using natural and organic ingredients.
At the time, clean beauty was in its infancy, and Indie Lee’s competitive set was small, but the category would soon go on to attract many brand founders, some also with health crises that precipitated their moves into it. In the years since, clean beauty exploded, and a few brands went on to achieve headline-grabbing exits (Famille C acquired Ilia and Pai, and Amorepacific acquired Tata Harper, for example), while countless others sputtered and shuttered.
Beloved for its CoQ-10 Toner and Brightening Cleanser, Indie Lee looked at one point like it could join the strategic exit parade and end up in the cradle of a beauty conglomerate. In 2017, Ancora, an investment firm formed by beauty industry veterans Lori Perella Krebs and Nicky Kinnaird and private equity firm Winona Capital, bought a majority stake in the brand thinking that was a possibility. While Indie Lee assembled notable distribution—it’s in 2,000 locations at retailers such as Ulta Beauty, Bluemercury, Nordstrom, The Detox Market and Credo—a splashy sale to L’Oréal, Estée Lauder or its ilk didn’t happen, at least not yet.
Indie Lee could still have a bright future. It’s now been taken over for an undisclosed price by American Exchange Group, a brand holding company with fashion and footwear labels in its portfolio that ventured into beauty last year with the acquisition of incubator HatchCollective. Indie Lee is joining HatchCollective, renamed AX Beauty, as part of American Exchange’s growing beauty division. With a little love, American Exchange believes Indie Lee can rev up consumer enthusiasm for its staples and forthcoming releases.
To get an understanding of what’s next for Indie Lee and American Exchange, Beauty Independent spoke to Lee and Josh Kirson, head of business development at American Exchange, about the state of Indie Lee, plans to grow it, what American Exchange is eyeing for future beauty deals, and Lee’s efforts to strike a work-life balance following another surgery to remove a brain tumor.
After acquiring Hatch, what kind of brands were you looking for, and how were you evaluating them to fit in your portfolio?
Kirson: We had a very strong private-label business, a large digital presence. We had some mass distribution, but we really never played in the prestige market, and we thought the trend in the marketplace leading towards clean beauty was very important. That really wasn’t our company’s core competence. After the transaction, we’ve really worked hard to migrate our existing business more so into clean.
On top of that, we really thought that a prestige brand with distribution in Ulta, Credo, Bluemercury and so forth was a good complement to our portfolio of brands. It’s a totally different class of trade. That was our thought process on acquiring Indie Lee, and we’re really excited that it happened.
How’s Indie Lee going to be run within the company?
Lee: The team was shrinking, but what was really incredible was that AX really offered anybody who was on the team to be a part of it, which was really very special. Some people had already started to get other positions.
Kirson: We brought over five full-time employees into AX Beauty. We extended offers for the majority of the team, but what Indie Lee specifically needs is to help amplify her voice and message in the market. By rolling Indie Lee into the AX Beauty organization, we’re able to use our internal resources within marketing, product development, digital to amplify Indie Lee the brand and Indie Lee the individual as well.
AX is working to recapitalize Indie Lee. What does that look like?
Kirson: Being in the prestige market, it’s very challenging to expand and grow just by an organic approach. What we have found when we were doing our due diligence on Indie Lee is that the Indie consumer is very loyal, and it spans across gen Z, millennial, gen X.
Lee: We see people start in and average order value could be $80, but when you start to see the repeats, it’s way over $100. We’ve had customers that have been repeat every quarter, every six months almost for the past 13 years. The amount of people that stay with the brand, whether it’s one product or adding in more, is unbelievable. In terms of LTV and growth, it’s incredible the loyalty that we see. We hear it from the retailers, too.
Kirson: You look at my mother’s cabinet, for example, there’s a lot of brand loyalty in an older demographic, and as you start sliding down the scale of the age gap, you see a lot of item loyalty. So, if you open up my wife’s cabinet, my sister, my niece, there’s a lot of item-driven products in that assortment of product.
With Indie Lee, it’s really important that we have hero SKUs and then we’re launching NPD (new product development) to bring in additional brand loyalty rather than just selling an item here, an item there and not driving any incrementality into the brand. A big focus on our side for the recapitalization is a really big focus on NPD.
That doesn’t just mean let’s come up with a new face wash or let’s come up with a new item. It’s really driving into problem-solution-oriented items by clinical testing, consumer feedback and looking at IRI and Nielsen data on what is trending and really developing product with purpose so we are offering the consumer an assortment of product that could be used together, but also strong individual items that are hero SKUs that people will be proud to have in their cabinet.
Also, when they walk by the shelf, for example at an Ulta, they say, “Wow, Indie has this really successful toner,” which is complementary to this new NPD that we’re rolling out to store, and it’s backed by clinical testing and full transparency because it’s all about better-for-you, clean-oriented product.
It’s not enough to just say, hey, I’m clean. The market is trending so everybody needs to be clean. More so than just being clean, it’s all about transparency with clinical backing to solve a certain problem. A lot of the capitalization is going to be driven towards NPD testing of items, ingredients, and then rolling that back into it for a larger audience is going to be vitally important.
Indie has been in business for a significant amount of time. It’s sold millions of units worth of product, but there hasn’t been much NPD driven into the brand over the last year, two years. We need to get people excited, our existing base, but also expand our reach by saying, hey, we have hero SKUs that we’re introducing to the brand that we can get behind, and we’re confident that it’s filling a white space, not just for our retail partners, but also for new consumers that we’re introducing the brand to.
How was Indie Lee funded? What were your plans for the brand when it did the deal with Ancora?
Lee: I started by selling my jewelry and emptying my 401(k) and going into credit card debt. That was in 2008, 2009 when I was going through surgery the first time and post-surgery. Then, we did a little bit of friends and family when we were short money. In 2017, we were invested in by Winona Capital through Ancora.
Back then it was so different. The goal was you get invested in, you grow it, and then you get a strategic and you plug into them. Believe it or not, that wasn’t necessarily my dream. I was going to keep it open and see what happened with the brand. For me, it was finding a home for the brand and for myself to continue to grow connection and the brand, not just in skincare and potentially other verticals, but really bringing empowerment and education.
What does healthy living look like? Because for me it’s not just the brain surgeries, it’s all my seven-plus autoimmune diseases, and how do we bring this advocacy for people to take care of themselves? So, when approaching this, it was really looking for somebody who saw what my vision was and said, “We want to do this with you.” That is exactly what AX is for me.
Kirson: From our side, there is no brand without Indie. We made that very, very clear. Indie is an integral part of our organization, not just at Indie Lee, but also as a sounding board. Indie is a pioneer in clean beauty. We don’t have the historical knowledge that Indie does, so adding Indie to our executive team is a huge asset for us as we grow AX Beauty’s portfolio.
What was it like for you to run Indie Lee prior to the acquisition?
Lee: We had Ancora as a partner who was really running it, and I was really more face forward, obviously involved with NPD, retailers and eventing, but I think every brand unless massively funded has felt the economic change from COVID on forward, and Indie is no different. It became more and more challenging and the cost to play with some of the retailers became more and more expensive. Everything became more and more expensive.
So, it was really challenging to grow the brand and amplify the voice because the cost was getting really difficult. It’s been across almost all beauty brands. I mean I haven’t talked to founders and independent retailers who aren’t feeling it.
What do you tell other founders navigating this market?
Lee: I talk to a lot of them, and I always say, “Put your hat where you can handle it.” Don’t overspend and don’t overextend. There’s so much shrinkage in this indie space that those who survive will be able to flourish. On the flip side, they don’t want to be the brand or retailer that’s part of that shrinkage.
I think everybody is culling their collection if it’s a retailer and maybe not bringing the breadth of SKUs that they used to because it’s just so expensive, and brands are tightening their belt as best they can and talking to one another. How do we do this? How do we collab together? It’s a tricky space, and we know that investments are tough right now because they’re looking for profitability and that can be difficult as an independently funded brand.
Where do you see clean beauty today?
Lee: It’s a confusing space because there is no definition in clean, and that is why things like COSMOS [certification] has always been very important to us. We personally formulate to the EU directive and obviously look at COSMOS as the gold standard. You see the greenwashing, and then you also have fearmongering that goes on, too. There are a lot of apps like Yuca where people are able to do some due diligence, and you’ve seen a lot of entry into the clean market with smaller brands.
When I started, I think there were four. Now, you look at the shelves of Credo and go whoa. It’s not just here, things are coming from overseas like Sweed Beauty that aren’t just K-Beauty brands. You’re going to see consumers demand more transparency in terms of the ingredients and where brands are sourcing them. You’re going to continue seeing sustainability. That’s table stakes.
You’re going to see additional certifications, hopefully COSMOS, Ecocert and the Soil Association. It’s going to be more about clinicals and the efficacy of the product because people only have a finite amount to spend right now, and they’re going to want to know that what they’re putting on their body is not only good for them, but is also going to work.
I also think you’re going to see a slowdown in terms of the industry, which will put more pressure on clean to make sure that you’re providing highly effective products, transparency and education because you’re seeing the rise of de-influencing. So, how can a brand make sure that they’re one of the ones that are being pulled off the shelf [by shoppers]?
You’ve been open about your health struggles, including your latest brain tumor surgery. Why, and how do you think about your health and still focus on your brand?
Lee: This transaction is going to be a significant step in it. The reason why I share is because I notice when I go to events people immediately come to share what they’ve gone through, and they want that relationship.
I’m very much an advocate for, how do you help yourself when you’re managing autoimmune or chronic illness? I think it’s important to see that that doesn’t define you. So, I’m a founder, and I’m working, but I also have chronic illnesses. There’s that part of wanting to be that voice.
I felt it would be dishonest if I was going through this and if I’m a brand about transparency and authenticity, not sharing what I was going through. Why the brand has lasted is because people know they can reach out to me. I am a founder who’s actually available.
While prestige beauty has been growing faster than mass beauty, retailers in it such as department store retailers have had issues. How do you view the challenges of expanding in prestige retail settings?
Kirson: Indie Lee the brand hasn’t really supported our strategic retailing partners with internal and external marketing dollars. Product living on the shelf is a recipe for disaster without proper support and funding. Our first focus is to make sure that our strategic partners—Ulta Credo, Bluemercury, Nordstrom—are properly funded internally to market the brand.
On top of that, we think it’s vitally important for store associates to be on board with why we are developing items, what our items stand for, providing samples to them, making sure we’re driving influencers back into the prestige world in brick-and-mortar.
We don’t want to do too much. We want to keep our assortments very, very tight, and we want to fund our strategic partners on the prestige side of the business. We’re not saying, hey, let’s go after a ton of new distribution. We want to make sure our existing distribution is set up for success.
Going forward, does American Exchange expect to add more to its beauty portfolio?
Kirson: We are seeking opportunities that fit specific white space that we can roll into our organization that will be complementary to our existing portfolio. We have very strategic and long-term relationships with our retailing partners. We don’t want to be in a world where we are just duping prestige on the mass and value side of our business. As we grow our distribution channels, we want to make sure we are filling white space, and we are driving NPD into our portfolio.
Brands that we would look to seek to acquire, we want to make sure have an NPD story that is filling a specific white space that’s innovative, that’s trending, that’s a unique point of difference versus another me-too brand.
When do you think another deal could occur?
Kirson: We don’t want to stretch ourselves too thin right now. We want to focus on our existing portfolio of business. We have a really exciting strategic launch for our brand NatureWell coming up in October, and we really want to focus on making sure Indie Lee is stable and on the path for success, then we will start actively seeking other potential opportunities. That’s not to say that, when opportunities come up, we won’t actively seek them in the short term. There’s always something we’re reviewing.
How has the acquisition of Hatch gone?
Kirson: That was a tricky acquisition. We’ve really beefed up our internal team at AX Beauty in product development, marketing and creative with people who have been there and done that and have deep experience working with retail partners. The big focus with AX Beauty is rather than selling 20 different brands to 50,000 different people, we’ve really tried to condense our portfolio to make sure we are very strategic in our assortment.
The biggest problem that a lot of beauty incubators have is that they always are chasing the pipeline order, oh this retailer is really interested in launching our brand, here’s an assortment of X amount of units, and then the organization gets stretched too thin. My personal view is we take a brand like NatureWell that had limited, but sizable distribution, and we say, how do we expand that distribution, go after a strategic retail partner and then cascade our distribution accordingly knowing that we have success at retail versus chasing a pipeline order?
We want sustainable success, and then we want to fund that entity with that has sustained success through PR, digital, NPD and our own internal staff. It’s slow and steady wins the race, in my view, not overextending yourself. So, we want to be very, very patient with our distribution and our assortment.
How many people do you have at AX Beauty, and what are the brands besides Indie Lee?
Kirson: It’s around 50 to 55 people. We have NatureWell, we have Orlando Pita, and 35% of our business is private label. We had Paint&Pedals, Lique, Found Active and Tattoo Junkie. Some of those brands have a digital presence on Amazon, but we’ve really scaled back and focused on NatureWell and our private-label business. NatureWell is in a good place with our distribution and our future for 2025, which is why we started actively looking for additional brands in different classes of trade.
Is there a unique skill set to reenergizing brands that were facing challenges?
Kirson: American Exchange our parent company has deep operational skill sets with 3PL warehouses on both coasts. We’re expanding our systems, our support staff, and we use that operational support staff to be able to provide support to all of the business entities within American Exchange.
So, when we look at a distressed asset or are looking to acquire a business, it’s very easy for us to roll that organization into our existing operation because we have immediate support to be able to help with the financial side, the operational side, the marketing, the digital side rather than having to say, OK, let’s provide X capital to build the staff and start over.
What role do you want to play going forward?
Lee: It is about balance, and what I’m absolutely loving is everybody at America Exchange [tells me] just as long as you’re healthy. They are like, that is No. 1. I am already seeing it, and it is about me putting up my personal boundaries for myself because I can’t be all, do all.
I got so busy in the business of self-care, I forgot to care for myself. That’s part of what American Exchange brings because they’re giving me a team to help with everything. My role is going to be more founder and pioneer in the industry and a thought leader within the clean living sphere. It’s getting back in front of the brand, more press, being able to meet more consumers at retailer events, which I love so much, and building our ambassador program.
At AX, there’s the potential to work with them on other brands. With NPD, what makes sense? What are things that I’m hearing out in the marketplace, whether it’s for people who have chronic illnesses or not? How do we bring these things that are going to be problem solutions?
Kirson: When we first met Indie, Indie was doing everything—IT systems, order processing. We’re removing Indie from the weeds of our business to help her stay 50,000 feet above the operations.
You mentioned self-care. Not too long ago, everyone in the beauty industry was using the term so much that people were getting tired of it, but it’s not used quite as much now.
Lee: It got overplayed. I hope that’s just it, and it’s not because of hustle culture. Everybody’s got to have their side hustle, their passive income. Everybody just feels so heavy. So, I don’t think self-care has been an active part because they feel like they have to do all things.
I’m hoping we can share ways to take moments for yourself because literally taking half an hour for yourself can make the biggest difference. It doesn’t have to be this luxurious vacation. How do we have these conversations? We’ve got to bring balance back to society. It’s missing so drastically.
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