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Profiles

Elevation Labs

By Eric Peterson | Jun 10, 2020

Bioscience & Medical Cannabis & Hemp Consumer & Lifestyle Colorado

Company Details

Location

Denver, Colorado

Founded

1995

Ownership Type

Private

Employees

600

Products

Skincare, haircare, cosmetics, and other personal care products

President and CEO Michael Hughes is guiding the beauty care contract manufacturer to new heights with a focus on clean and green.

Elevation Labs has come a long way in 25 years.

Chemist Doug Rooney and real estate developer Gary Voigt co-founded the company in 5,000-square-foot space in Idaho Falls, Idaho, as Northwest Cosmetic Labs.

"They started it in 1995 and were producing shampoos and conditioners and body washes in a very tiny office with four people," says Hughes. "It's just grown exponentially in the years since then."

Today the company operates out of a 178,000-square-foot building on 10 acres in Idaho, and recently doubled its footprint in Colorado to 160,000 square feet.

Private-equity firms Clearview Capital and Brookside Mezzanine Partners acquired the manufacturer in 2014. Hughes worked for Procter & Gamble for 18 years before his recruitment in 2017.

"What attracted me to this opportunity," he says, "[was] these companies had great entrepreneurial spirit, great speed of trying out new ideas, but they also need systems to be able to help them -- leadership systems to operational discipline to ERP system implementation. That's some of my experiences in a larger company. I'm trying to merge and fuse the best of the big-company systems with the small-company entrepreneurial spirit, and I think we're really getting the best of both worlds and that's showing up in our results."

In 2018, the company acquired Colorado Quality Products in Denver, and the combined company rebranded as Elevation Labs to help unify the combined business.

Founded by Andy Pointon in 1999, Colorado Quality Products had a long collaborative relationship with Northwest Cosmetic Labs prior to the acquisition. "Culturally, we just felt like it was a perfect fit," says Hughes. "Our values and how we treat customers -- our mission is to deliver phenomenal customer experiences every day -- they had that exact same mindset."

As the combined company has expanded, Elevation Labs' business model has remained relatively static: formulating and manufacturing skincare, haircare, color cosmetics, and other personal care products largely for premium brands.

"We don't consider ourselves private-label," says Hughes. "It's all custom formulation. We work with about 200 brands across the whole beauty spectrum, a lot of indie brands and more recently some of the larger brands more on the high end of things. . . . Everything we produce, we custom develop. We do not produce stock formulas at all. It's all uniquely formulated for that customer."

Customers are undisclosed and keep their relationships with Elevation Labs secret under non-disclosure agreements, but tend to be greener than the norm. "Our evolution recently has been towards the cleaner, more natural space, even organic space," says Hughes. "That's why we found Colorado Quality Products to be such a natural partner for us. They were further ahead in the natural space. In Idaho, we had the FDA experience as well, so we wanted to marry those two sets of experiences. Now everybody has all those capabilities."

The top three product categories are high-end skincare, natural haircare, and color cosmetics. "We've got huge demand and influx in both the skincare and haircare spaces for cleaner formulas," says Hughes. "From sunscreens to baby products to organic haircare, we've seen huge growth in those areas."

The diversity of products requires a far-ranging supply chain. "Our raw materials come from all over the world," says Hughes, citing packaging from China, ingredients from the U.S. and Europe, and natural ingredients from South America. "With our recent crisis, we're starting to look to diversify that and look more at U.S.-based supply-chain solutions. I think that will evolve over time, but it's very much a global supply chain and we help our customers manage that."

Elevation Labs now has about 400 employees in Idaho and 200 in Denver, up from 67 at the time of the Colorado Quality Products acquisition. Both divisions have similar manufacturing capabilities, but color cosmetics are made exclusively in Idaho while CBD-infused products are handled by the Colorado operation due to a friendlier regulatory stance. "We've started to work with very select partners on CBD products in our Colorado facility," says Hughes.

He describes a "synchronicity" between the two divisions. "We have leveraged spikes and troughs in both divisions to move customers' businesses back and forth, and done that pretty effectively," he explains. "Our ultimate goal is to have two times the capacity to our forecasted demand so that we have extreme flexibility in getting our customers their product on time, and we've done an excellent job of that."

To maintain that flexibility in Colorado, Elevation Labs acquired the former Scott's Liquid Gold building in northeastern Denver in late 2019, and moved into the 160,000-square-foot facility in spring 2020. The company was just days away from signing a new lease at its previous facility in Aurora at the time.

"I call it the luck of the Irish," says the Emerald Isle native of the company's new home for its Colorado division. "I literally couldn't design a better facility from a space standpoint, from a size standpoint, the equipment that was being underutilized by the former company was exactly sized right for what we need. It really was a hand-in-glove fit for where our company was growing towards."

"We are really finding opportunities to leverage the larger tank size and higher-speed lines," continues Hughes. "We've traditionally done very short runs and small runs and have been very flexible for a high diversity of customers, and we have that in both divisions. We're now getting the opportunity to really leverage the larger scale and attract larger customers to do longer runs."

Hughes says the company has seen growth in the "healthy double digits" in recent years, and Colorado saw an uptick of about 30 percent in 2019. He says he expects the Colorado division to hire about 100 new employees in 2021.

"We have been investing and keeping a pace with our growth so we can keep delivering phenomenal experiences," he says. "Because we differentiate ourselves on the service we provide our customers and the innovation we help them with, literally we have to be selective about what customers we take on, because we are growing so fast with the customers that we have. It's all good problems to have."

Challenges: "Managing the volatility of demand" is a big one, says Hughes. Some customers, namely direct-to-consumer and multi-level marketing brands, "are doing very well," he explains, "while others are struggling," especially if they are dependent on brick-and-mortar retail. "There's a huge amount of complex volatility for us to manage against and pivot towards."

Hughes credits his team for navigating choppy waters of COVID-19. "The cooperation and attitude of our employees has been astounding," he says. "I feel totally blessed that we have such an amazing workforce that goes above and beyond."

Opportunities: "The clean and natural space in beauty is growing disproportionately to the overall industry," says Hughes, citing a 3 to 5 percent rate for the broader market and 8 to 12 percent for natural products. "We are very well-positioned to be a leading manufacturer and innovator in that space. I don't see that trend reversing for years to come. . . . People really want to know what they're putting on their skin or in their hair, and they want to know it's good for them from a health standpoint and good for the environment.."

The ethos dovetails into operations. Hughes notes that all of the facilities are powered 100 percent by renewable energy.

Needs: Along with 100 more employees to continue to scale in Colorado, Hughes says Elevation Labs will "continue to invest in larger and higher-speed equipment," but notes that automation is difficult because of the necessity for numerous different packaging shapes and products. "You can't over-automate that," he observes, while noting that the company's quality control is a good fit for machine vision.

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