Stephen Flatt purchased Upper Canada Soap in 2003 with his brother after the company, established in 1969, went bankrupt.
Peter Power/The Globe and Mail
The “fast beauty” industry is known for innovative skin and hair products that can be developed quickly and affordably with mass-market appeal. For Upper Canada Soap, exporting such items to countries around the world is the key to volume sales.
“We’re bringing them to market in a bigger way,” says Stephen Flatt, president of the Toronto-based bath, beauty and wellness company, which creates these so-called “beauty hacks” and sells them to retailers as “affordable luxuries” for mid-range consumers.
The company started in 1969 as Upper Canada Soap and Candle Makers Corp., its official name, wholesaling premium personal-care products to gift retailers in Canada and the United States. It grew into a $20-million business but faltered when it expanded into vases and other tchotchkes.
Story continues below advertisement
The company went into bankruptcy and was bought in 2003 by Mr. Flatt and his brother Joel, a silent partner. The two had entrepreneurial roots, with a grandfather who started The Oshawa Group, a food wholesaler and grocer that was sold in 1998.
“We love retail; we love product, and we love figuring out what makes consumers tick,” Mr. Flatt says.
He rebuilt Upper Canada by focusing on soaps, lotions and bath accessories, which were mostly made in China and exported, especially to the U.S. In 2008, with the recession and the arrival of Bath & Body Works in Canada, “the business really got punched in the gut,” recalls Mr. Flatt.
Around that time, he learned from a buyer at The Bay that cosmetic mirrors were extremely popular. Upper Canada bought Danielle Mirrors and expanded into a beauty-products company.
Today 60 per cent of revenues come from beauty and skincare accessories, 20 per cent from wellness and 20 per cent from bath-and-body items, he says. “Pivoting along your journey is probably the most important thing you can ever do.”
With headquarters in Mississauga, Ont., and an office in London, England, the company has 110 staff, about two-thirds in Canada, representing just 10 per cent of its market. It exports to as many as 20 countries, with 60 per cent of sales in the U.S. and the rest in the United Kingdom, Europe, Australia, New Zealand and the Middle East.
Revenues from exports overall have grown about 60 per cent in the last four years, Mr. Flatt says. The company sells about 2,000 products under 20 brands, from reusable makeup-removing cloths to jade facial rollers and hot-cold therapy products.
Story continues below advertisement
“We look for mass appeal, but then we’ll dress it up or dress it down,” depending on the market, he says.
For instance, he says an item sold in plastic packaging in drugstores in North America might be found in a gift box with a magnetic closure in upscale shops in Sweden.
“Every country has its own retail complexion, and you have to cater to that,” he says.
Online sales are the weakest part of Upper Canada, he notes, representing just 3 per cent of revenues. Mr. Flatt feels “stores are here to stay,” but he’s looking for the right strategy to “solve the e-commerce riddle, not only on a domestic basis but on a global basis.”
David Soberman, a professor of marketing in the Rotman School of Management at the University of Toronto, says not being heavily dependent on e-commerce can be a blessing because sales on platforms like Amazon cost money and favour large companies with cut-rate pricing. It makes sense for smaller firms to open online storefronts country-by-country, which means “you don’t face competition and people develop a real loyalty.”
Dr. Soberman says it’s smart for exporters to sell a range of products within a category like beauty. It’s efficient and “means that the relationships that you have are valorized.”
Canadian companies “have started to develop their own intellectual property and market to the rest of the world,” Dr. Soberman says. “Upper Canada has been very innovative and come up with products that work well.”
The Upper Canada Soap Company sells about 2,000 products under 20 brands, from reusable makeup-removing cloths to jade facial rollers and hot-cold therapy products.
Mr. Flatt says exports are critical because “Canada is too small” and “very slow to adopt new ideas.” He also notes the country has been “quite far behind” in its recovery from the COVID-19 crisis.
The pandemic led to booming sales of soaps, sanitizers and wipes in 2020 for Upper Canada, which then dried up by early 2021. One large U.S. retailer rejected an order of six truckloads of handwash after they passed over the Canadian border, which meant the company not only lost revenue but paid duty twice. Another stuck Upper Canada with 1.5 million canisters of anti-bacterial wipes. Mr. Flatt gave away 500,000 to shelters and charities but the rest went to landfills.
The supply-chain crisis raised the cost of a container coming to Toronto from China to $28,000 from $3,500, while one going from North America to the U.K. rose to $25,000 from $2,000. Meanwhile, the disconnect between orders and lengthening shipping times led to “bubbles” of stock.
Having customers worldwide “gives you the ability to shift your inventory to where it is needed,” Mr. Flatt says. For example, while hair turban towels are not selling well in North America, they’re in demand in the U.K.
Upper Canada’s newest product category is sexual wellness for women “because sexual health is all part of a woman’s beauty routine,” Mr. Flatt says. It includes a collection of vibrators under the Natural Glow brand developed by his daughter Laura, a product manager.
Mr. Flatt’s objective is to double the company’s revenues in five years. His big growth effort will be in Europe, a lucrative market that brings challenges given different regulations in each country.
His main tip for firms like his is to be well-capitalized “so that you can withstand the ups and downs of business.” Another is to “know what makes your company unique and resist the temptation to go too far out of your boundaries.”
With inflation and a possible recession ahead, consumers are looking for necessities rather than “nice-to-haves,” he says, although “people will always want to try new things.”