You could say it is a reflection of the times we live in, but when you look back over the past 10 years probably the biggest success story in Yorkshire business wasn’t anything to do with coal mining, or steelworking, or any of the traditional industries the region has been associated with. Given how decimated such industries have been in the recent past, that is perhaps not surprising.
But this story doesn’t concern financial services either, the other industry that has really made an impact particularly on the Leeds area in the past few years.
No, this story is all about the way today’s women choose to style their hair. Over the past few years the trend has been for ever straighter, more silky locks. And if there is one product that has helped millions of women not just in Yorkshire, not just in the UK, but all around the world achieve that look, it is the GHD hair straightener. The success of the Leeds company behind GHD, Jemella, has been there for everyone to see.
Sold to private equity house LDC for £55m in 2006, it was sold again two years later to Montagu Private Equity for £160m. Martin Penney, its managing director during both of these buyouts, was named Consumer Products Entrepreneur of the Year in the national Entrepreneur of the Year awards run by Ernst & Young, and has since graced many a motivational business event with an inspiring speech about his story.
Its proved beneficial for the two other co-founders too – Robert Powls, a man with a long history in hairdressing who first came across a version of what became the GHD styling iron in Korea, and Gary Douglas, the owner of a tool-hire company who wisely choose to join Penney and Powls in investing £15,000 into the venture way back in 1999. Penney is now rumoured to be worth £62m, while Powls made £15m, and now lives in a house in his beloved south of France and has a yacht moored off Monaco.
But of course time passes, and so does business. Powls left the business shortly before the first buyout, and Penney has since parted company with it too, although he remains chairman of the other business he founded, the environmental consultancy OHS.
So it’s all the more surprising to discover, that, at the age of 63, Powls is preparing to sally forth back into the world of hairstyling all over again, with a new venture called Cloud Nine.
His stepson may be doing the day-to-day management of the new venture, but it is Powls who is very much in the design driving seat. What’s more, he is also using Propaganda, the marketing agency he initially worked with for GHD. It stopped being GHD’s marketing director shortly after the LDC buyout. And he is using the same Korean manufacturer that made GHD.
Given the house in France, given his yacht – most of all given his age – one is only inclined to ask Powls a simple question: Why? Powls chuckles quietly, and puts it down to his long career in the hairdressing business, going right back to working with Vidal Sassoon in the 1960s. It was that experience, he says, which led him to realise just what a useful product the styling iron he came across was going to be. He was shown it by a business associate he met who worked for RedKen, another hairdressing success story, in the late 1990s. Up to that point the prototype had been developed by his associate and a Mr Ok Nam Cho, president of Unil Electronics in Korea.
“Cho had got the idea from catalytic converters,” he says. “But it was still a bit too unwieldy.
I shrunk the product down to the width of an iron.
It was being manufactured by Cho, with the guy from RedKen doing sales in the USA and me in the rest of the world.” In hindsight what really made GHD successful in the UK was the decision to sell it only through hair salons, and not on the high street.
The idea was that the brand had added cachet. Women felt they were getting something no one else knew about, and hairdressers felt they could exalt their expertise in recommending it too. There is an argument about who exactly cameup with this idea, which has since been lauded by all and sundry in the world of marketing.
Powls insists he did, but whatever the reality is, Julian Kynaston, founder of Propaganda, who put it into practice, says it made perfect sense. “Robert knew that at the time he did not have the resources to take on the likes of Babyliss in the open market,” he says. Initially, however, sales were low. Powls says hairdressers were used to selling tubs of mousse for £5, but not electrical items for £85. It was only when he went to visit his old friend and hairdressing expert John Frieda at his salon in London that things took a dramatic upturn.
“He wanted me to talk to the beauty editor of the Evening Standard who was there, just for 45 minutes while he was with a customer. So I told her about the product. She tried it out there and then and burst into tears. She said: ‘I have been trying to straighten my hair for 40 years and this is the first time I have done it.’ “On the Friday evening we had half a page in the Evening Standard.
The first edition went out at 1pm and by 5pm that day we had 500 callers, all coming through to my house in Ilkley.
By the end of the weekend we had had over 5,000 calls. I had half the village of Addingham working for me.” That obviously couldn’t do, so the company moved first to new headquarters Powls sourced in Silsden.
“Our sales were 500,000 in the first year, six million in the second, 13 million in the third and 39 million in the fourth,” he says.
By then Penney was managing director and Powls was chairman and in such a role he spent many months abroad, setting up an operation in Australia and meeting the manufacturer in Korea. But that, for Powls at least, is where the Jemella and GHD story ends.
He and Penney had a falling out, which eventually involved lawyers and he left the company, although he and Douglas remained significant shareholders until the first buyout to LDC. As part of the settlement he agreed not to work in the industry for three years.
So it is only now we have Cloud Nine, a company which along with producing a range of hair straighteners produces the Theo, a hair styling tool Powls himself designed that comes with its own thermostat. It was in fact, Cho the Korean manufacturer who first contacted Propaganda about setting up a new hairstyling company.
One of the first things Montagu had done on taking over control of Jemella was to move manufacturing away from Korea to China. But why decide now to launch against GHD, a brand which both Powls and Kynaston concede they had initially thought was too dominant for any challenge to succeed? There is, it has to be said, some history there. Powls says he is unhappy about the way the story of the success of GHD has initially been told – in particular Penney’s part in it.
He claims Penney had no involvement in the venture at all for the first two years, and was only invited in by him.
But both Powls and Kynaston say the reason they see an opening for a new brand is what they perceive GHD’s lack of product development.
“The technology behind GHD is actually nearly 30 years old, whereas our technology is less than two years old, is more efficient and more effective,” says Powls. GHD itself has gone away from only selling through the salons and is now available on the high street.
Powls says that is an inevitable consequence of the company after he left choosing not to extend the product range beyond hair straighteners. It had saturated the salon market, he says, and so had to go somewhere else, even if that meant upsetting your original suppliers. With Cloud Nine he has made a written undertaking with his hairdressers that he will never put the product on the high street.
Kynaston claims that for too many years the only product development coming out of GHD has been a change in the colour of the iron.
This is something Propaganda has sought to exploit in marketing campaign for Cloud Nine that says “We don’t do gimmicks” with the word “gimmicks” spelled out in GHD’s current colours. Speaking of gimmicks, Powls says he is also quietly amazed at Jemella’s decision to move out of the Silsden offices he had found and relocate to a lavish new headquarters in Bridgewater Place in Leeds, complete with an entranceway that wouldn’t be out of keeping on the Star Trek set.
Powls says there was no need for such extravagance.
(Jemella, however, has chosen not to comment.) But he has also noticed a change in the market.
After all these years, it seems, something other than straight hair may be coming back in.
“The industry is always after something new,” he says, “and looks come and go. A style will stay if it is something that a girl can do easily, and to some extent that is what GHD achieved. But now it is changing. Girls are going for bigger, more voluminous looks, and at the moment there has been no easy way of achieving that look. Sales of straightening irons have peaked and are now actually falling.” Kynaston says this change in trends is something Propaganda had already picked up through research on another project.
“Women wanted the look, but they weren’t prepared to put up with the damage,” he says. “The salons were also very full of GHD and wanted a new product.” Both men claim Theo gives the market what it wants, because the thermostat allows you to adjust the temperature to avoid harming hair and make the more voluminous styles of today. But what about Propaganda’s role in all this? After all, Kynaston’s role in Jemella was very much more than just a marketing adviser.
He invested close to £1m in the company around the time of the LDC buyout, took a seat on the board, and allowed a management buyout to take place at Propaganda which left him with a smaller share of the agency, albeit still a majority one.
But he and the company parted company within months. He claims he soon realised his mistake when he went to his first board meetings at Jemella and saw that, despite what the company may have said in the past, with Penney now firmly in charge, it wasn’t going to invest in new products. Propaganda, in fact, had an idea that the GHD brand should eventually be extended to cover an ‘electric wall’ of products. “We always make it clear that we are paid to give our opinions and if they aren’t followed then we won’t stay,” he says. “Why else would I have left a £2m fee client? I understood as a marketer that there was little point in staying on the board of a company that didn’t want to invest in new products.
Any marketer will tell you that is a bad idea.” But isn’t he worried at what other potential and existing clients might think of Propaganda when they see the agency effectively working against its old client? He says that was exactly why he stayed out the industry for some time after parting company with GHD.
“I specifically did not do a knee-jerk reaction for that reason,” he says.
“I certainly didn’t want to hop into bed with Clairol, for example, even though they would have jumped at the chance.” He enjoyed marketing an “emotional brand” to women.
And that was why in the intervening period he has launched the Illamsaqua make-up brand which he claims is now a multi-million pound business. “But there was a four-year gap in my involvement in ceramic straighteners. Fairly inevitably GHD ended up with a marketing agency in London.” Not quite true, to be fair.
The marketing agency GHD chose after Propaganda was actually TBWA/Manchester, although the account moved again three years later to RKCR in London, after a new pitch which TBWA/Manchester went on the record to say it would not take part in. You are more or less forced to ask both men whether they are motivated by another feeling – revenge.
Kynaston admits to a bit of this. “I must admit I am getting a buzz out of what we are doing now,” he says. But Powls himself insists he does not have such thoughts. Plans at the moment are all for Cloud Nine’s expansion. “Cho is being careful and is currently running at only 20% of capacity,” he says. “We want to keep production low to increase demand. But Cloud Nine has already gone down incredibly well in Australia, where we have appointed the former managing director of GHD there. We are selling in France, Italy, Spain, Dubai, Australia, Norway and Sweden. Our projection was to sell five million products in the first year, and we are easily in advance of that.” The world of hairdressing, meanwhile will wait to see what happens.