Shea Moisture And The Need For Black Venture Capital Firms
It’s been a long held belief that the solution to our problems of oppression and discrimination in America is through the creation of Black businesses.
In some respects, I agree. Black businesses tend to hire more Black employees. Black businesses also tend to be located predominately Black communities, which contribute to the overall economic development of a neighborhood.
But the theory of Black economic empowerment also has its challenges. In particular, what happens when the Black community can no longer support the needs of the business itself?
This question came to mind recently when I read about how private-equity firm Bain Capital LLC is taking a minority stake in Sundial Brands LLC. If the name Bain Capital sounds familiar, that is because it is a global investment firm co-founded by former Massachusetts governor and Republican candidate for president Mitt Romney. Yeah, that guy.
And if the name Sundial Brands doesn’t ring a bell, perhaps you’ll recognize its product lines: SheaMoisture and Nubian Heritage. Yup, those people.
According to the Wall Street Journal, Sundial Brand, which is a family-owned business founded in 1992 in Harlem by Liberian and Sierra Leonean immigrants, is hoping that this buy-in will “broaden” its customer base. As the paper reports:
“Sundial’s sales have been largely in the U.S. and the products are predominantly purchased by African-Americans. Bain’s investment is aimed at boosting growth by targeting a broader market that isn’t defined by ethnicity, said Ryan Cotton, a Bain managing director. The investment also will allow some existing shareholders to cash in, a person familiar with the matter said.
Expanding beyond Sundial’s core customer base may require a balancing act. Earlier this year, Sundial’s SheaMoisture brand drew criticism from some of its African-American customers on social media after the company put out a meme on Twitter with the image of a Caucasian toddler. “We will make sure we are serving our core customers while engaging with a broader audience that’s interested in natural products and healthier ingredients,” Mr. Dennis said.”
Detailed terms of the investment have not been disclosed. However, in a statement published on PRNewswire, Sundial CEO and co-founder Richelieu Dennis assures that the business will still remain majority family-owned and operated “including board, management and day-to-day operations.” He also said that in addition to helping the company expand its customer base, the partnership will also “drive Sundial’s social entrepreneurship model.” That model includes supporting a women-focused co-op in Ghana and an entrepreneurial distribution program, which operates throughout the US and parts of Africa.
Dennis further states about the deal:
“Our love of people has always been our motivation and our competitive advantage,” said Dennis. “While we have been presented several opportunities to be acquired by multinational corporations, we are most excited that our collaboration with Bain Capital fulfills our commitment to remain an independent family-owned and operated company with a purpose-driven business model that puts community at our core. Our consumers have always been partners with us, and now they can continue to walk with us on this journey. We recognize that African-American women have long been at the forefront of the natural hair and body movement that has created the dynamic cultural shift that we see today. It is exciting for us to see how Naturalistas have now empowered women from all backgrounds to embrace their natural beauty. In addition, they have compelled multinational beauty brands and retailers to acknowledge and be more respectful of their needs. Our family has understood this since 1912 – the value of listening to underserved consumers and delivering on their unmet needs. We are moving forward to build Sundial into a global family-owned-and-operated consumer brand of which they can be even more proud.”
In spite of Dennis’ assurance, Shea Moisture and Nubian Heritage now join a growing list of Black businesses, particularly in the health and beauty realm, which have either been partially or fully acquired by multi-national corporations or Wall Street investment groups. And with its emphasis on “expanding” its customer base, as opposed to finding ways to appeal more to its existing customer base of primarily African American women, there’s no telling what those brands will look like – and how those brands will support the community – in the future.
Still, I can understand their predicament.
A business’ first objective is to stay in business. And unfortunately, there is only so much sustainable growth, which can happen within the Black community. Not only is there competition from other Black-owned hair care companies, but then those businesses have to compete with multi-nationals with large marketing dollars and access to miles of shelf space as well as technology, in particular YouTube, which helps people to make their own organic products.
The reality is, in order for the Black economic empowerment theory to work, we need Black-owned venture capitalist firms whose jobs are to provide financial and other support to Black owned companies. Without that sort of dedicated investment, Black-owned businesses will continue to be swallowed up by the system.
So in addition to encouraging our folks to start more Black businesses, we need to also be promoting the idea of Afro-centric investment clubs, which can support these businesses (while also supporting us) as they make their marks out in the global economy.