A Q&A With Matthew Moulding, Founder of The Hut Group

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LONDON — Matthew Moulding may be the mastermind behind The Hut Group, a billion-plus pounds tech company in the beauty and wellness space, but he’s not one for a Silicon Valley cliche.

The 48-year-old Moulding, a self-made entrepreneur whose net worth is approaching 1 billion pounds, according to The Sunday Times of London Rich List, not once during an hourlong interview drops the words, “lean in,” “disrupt,” “learnings” or “synergistic.” He doesn’t preach about the importance of “community,” nor does he appear to have the messiah complex that’s so common among the tech businesses founders.

Serious, soft-spoken and—by his own description—risk-averse, the muscly Moulding (he’s a major fitness fan) is not made in the mold of the showy, party animal British entrepreneur (see Richard Branson, Philip Green and Richard Caring) or the stereotypical tech founder, although tech has always sat at the heart of The Hut Group, whose holdings include Lookfantastic.com, Glossybox, Espa and Christophe Robin.

From the beginning, the straight-talking Moulding insisted that all tech be developed in-house by the Manchester-based group, which is why a large chunk of revenues come from supplying know-how to outside brands.

Originally from Burnley, in Lancashire, northwest England, Moulding studied industrial economics at Nottingham University, started his career as an accountant for Arthur Andersen, and then worked as a finance director for the mobile phones group founded by one of Britain’s wealthiest men, John Caudwell.

Keen to explore selling on the Internet, he used a windfall from work to start The Hut Group in 2004 with a business partner.  British retail giants Stuart Rose, former chairman and chief executive officer of Marks & Spencer and Terry Leahy, former Tesco ceo, were among his early investors. Today, Moulding and THG management are the largest single shareholders, while KKR and Balderton Capital hold significant minority stakes.

BlackRock Funds is among the smaller investors in the company, which turned over 1.14 billion pounds in 2019, a 24 percent uptick on the previous year. Some 66 percent of sales generated internationally, with some of the fastest growth coming from Asia. EBITDA rose 22 percent to 111 million pounds in the same year.

The Hut Group also has a portfolio of hospitality businesses, including two high-end hotels in Manchester and a health club and spa in Cheshire, England. It is a multifaceted investor: Two years ago, it acquired Language Connect, a language translation and localization services company, to help it build web sites and businesses in markets worldwide.

The Hut Group began selling games and electronics online, eventually moving into beauty and wellness when Moulding realized he could generate hefty margins, and make a difference in the industry, enabling brands large and small to spread their reach; developing and marketing new products, and offering back office services to companies of all sizes.

He’s not out to save anyone’s soul or rescue a troubled world. His goals include getting products into consumers’ hands—quickly, and at scale, untangling knots in the supply chain, solving problems and helping THG’s people to shine – and share the wealth. More than 20 percent of THG’s share capital has been awarded to employees since the group was founded.

While a stock market listing may happen at some point, Moulding said he has zero interest in selling his stake the in company, and moving on.

“We haven’t ever even sold a building, never mind the business!” he says. “What else would I do? All I intend on doing is just building The Hut Group into something that stands out over the foreseeable future, and I don’t see an end to that.” Here, Moulding talks about his strategies, his vision for the beauty and wellness businesses, his appetite for future acquisitions and his new fleet of Hut Group planes, which are meant for speeding up deliveries, and not for jetting to Barbados.

What was your original vision for The Hut Group?

Matthew Moulding: The reality is I didn’t have it all figured out. I don’t believe many people when they say they had an idea at the start, and it’s the same idea today. I wanted to get into the Internet, and I wanted to launch an online business. It was a retail-focused business at the outset. I didn’t know anything about the Internet or retail. I didn’t even know about the category we went into—entertainment—CDs, DVDs and games. Back in 2003, when I originally was thinking about this, entertainment was a very big category. The dot-com bubble had passed; things were gaining pace on the Internet. I chose TheHut.com as a name back then, because it was general, and I never really intended to stay in entertainment. Quite quickly it became clear that to scale a business in that sector, using other people’s technology was just going to be unworkable. It was too expensive. Within weeks of launching, we recruited two developers and started to build our own technology so we could replace the platform we were using. By mid-2005, we had our own live platform, and the cost effectiveness was off the charts.

Why did you decide to move out of entertainment?

M.M.: The business scaled fast. We went from zero to 35 million pounds in sales by 2008. And it was profitable. The issue was that in 2007, Apple had launched the iPhone, and all of a sudden digital was a very meaningful threat, because the iPhone was transformational, and posed a definite risk. Our margins went down every year as digital took hold. So we used that technology to trial every other category on the Internet, and we didn’t want to expand into the wrong category. We tried everything—fresh produce, delivery products like washing machines, running machines, sweets. It was quite disheartening at one point. Outside entertainment, I wasn’t convinced that you could make money in any categories because they all have issues. Choosing your competition is key as well. We didn’t want to be competing with Amazon if we could avoid it.

The two categories that absolutely stood out were wellness and beauty. And they were two categories I really enjoyed. The fitness and nutrition side appealed to me, and you really have to be passionate about the products as well. Since the company started, I had been looking at beauty as a category. What I found with health and beauty is that they’ve got very similar customer behavior traits to entertainment. People come back very often, you’re dealing with relatively small items, it can go global. There were lots of attractive things about the business model, and I just enjoyed the sectors.

Beauty is a fragmented business with a handful of well-established major players, a sea of smaller and start-up brands and often complex distribution networks. How did you establish the relatively unknown Hut Group as a player?

M.M.: L’Oréal and Estée Lauder were hardly going to hand me a distributorship, so what I wanted to do was acquire in that space so we could get going. We’d put our technology, which was getting ever more advanced, into play while showing brands what we could do, and that we were serious about the sector. The first one we bought was Lookfantastic. I raised a little bit of money, bought Lookfantastic in December 2010. I think we paid 20 million pounds.

The profitability was low and the majority of its sales came from GHD. But, to me, the real value within Lookfantastic was the fact that they had a L’Oréal contract, and a great relationship with L’Oréal. That’s why we bought it. We went to work on nurturing those relationships, proving to the industry that we were deadly serious about investing every penny we generated in the industry, and that we could be a positive force for everybody. Since then, Lookfantastic has grown 20-fold in size. If you strip out Ghd, it’s probably grown 40-fold.

Six months later, we entered the wellness space with a bodybuilding brand, MyProtein, which turned over less than 20 million pounds in revenue. We’ve grown that business 25-fold since then, and completely changed it. It was probably a brand more synonymous with steroid users in the gym than a lifestyle brand that could appeal to all nationalities across the world.

Why is it so important for you to own your own brands and technology?

M.M.: We typically buy small brands that have got challenges. We like to show what we can do with them. At the same time, we’ve invested hundreds of millions of pounds in technology, and infrastructure like warehouses, data centers manufacturing capability. We’ve also realized the importance of product development, of bringing great products to market at speed rather than waiting out the two-year life cycle that these things sometimes take. We did a search of the U.K. manufacturers and decided to buy a business called Acheson & Acheson. There is great talent there. We are trying to embed ourselves across the industry as the go-to partner for brand. We’ve now got, if not the largest digital platform in the world, certainly one of the largest. We’re certainly the largest pure-play platform in the world with Lookfantastic. We’ll give Sephora a good run for the money in terms of who’s the biggest online.

Can you talk about your Ingenuity platform, the white label end-to-end technology and operating platform services that you offer to third party brands and retailers?

M.M.: When we speak to brands, we say, “We’ve got the biggest platform, so we can get you anywhere in the world. We can make you a success in all the different territories. If you’ve got challenges in bringing products to market, we’ve got a first class global manufacturing capability with product development throughout. We’ll help you speed up your products to market.” Everyone needs a [direct-to-consumer] solution that works, their own high growth and in demand web site where they can really showcase what they do. Typically, they’ll pick certain territories and say, ‘Can you give us a solution to serve those marketplaces?’

You can choose from a suite of services, and you can have anything you want. Every country needs its own bespoke translation and web site operation, so we’ll translate the products for you. You’ll need local courier service. It requires a lot of tech to be able to link up with all the different providers in each country. And you need different payment platforms for everywhere in the world. We can switch you on to all of those. We have Europe’s largest content studio based out of Manchester at the moment, which has just been built. What we typically do is give you all the content you need. We then have an influencer platform, our own technology, it’s called THG society, which has got thousands of influencers on it. They work on our brands, they work on other people’s brands. Typically in every scenario, we run [the sites] from start to finish. And we’ll handle the marketing for them.

We work with Nestlé, even in the U.S. with Clorox. We’ve just launched Burt’s Bees, for them. They’ve had some challenges in d-t-c over the years. After we launched for them, products which they thought would take two months to sell sold out in 48 hours. What we can do is take that risk out for them. We’ve got the machine in hand to deliver success straight away.

You have warehouses across the U.S., Europe, Asia and Australia. To service this global network, you brokered a deal with Singapore Airlines to charter flights to ship goods across Asia. You about to launch THG Air, which will operate two dedicated cargo planes that ship products internationally. Why the planes now?

M.M.: I’d wish we’d done it earlier, although this isn’t a cheap foray. It’s a major exercise. The reason we needed our own planes is just based on capacity. When passenger planes were running, it was already constrained for us because we’d been growing in Japan, China, Korea and Taiwan on a serious scale. There was just not enough capacity for what we needed and we had to take control of that. When you add to that coronavirus, which then grounded all passenger airplanes, which carry 90 percent of the cargo across the world, then you have a serious shortage of capacity. The Singapore Airlines partnership was locking down a very scarce resource. We might be doing one with AirAsia as well, to give you an idea of the scale we have in that territory. Whilst we have that Singapore Air deal, we actually launched two of our own A330 planes. They’re actually in livery at the moment being spray-painted, so that’ll be in the skies pretty soon.

How do you leverage the all-important data that you gather?

M.M.: What we’re trying to do with that data is just make the experience better for the customer. We feed it back to the brands to try and give them an idea of how we think things should be developing or changing. Lots of these big tech giants have been criticized about how they use data. I, for one, have no issue with a web site giving me what I want to see in the best possible journey. Obviously, everyone’s time is precious and you want to make it work. So it is what we do with data. We don’t have listening devices, but we do have a mine of information that we can share with brands on how they can do things better.

Are you looking at similar companies, competitors and other tech giants, and modeling yourself on anyone?

M.M.: To be brutally honest, no. I admire what everyone else does. All we’re trying to do is fix problems. Everything we’ve done has been around fixing problems. Fundamentally, if you’re serious about scaling to become a very large business, there are always problems that need fixing. We are very passionate about that. We don’t look at all the other players in the market and try and emulate what they’re doing. We’re looking at our business, and how best to serve the customer. And if we can fix our problems, then it’s going to make the business stronger every year.

Where do you want to take The Hut Group in terms of size and scale?

M.M.: I don’t have a specific target. I think if you have a target, that’s essentially as good as putting the business up for sale. I genuinely have no interest in that whatsoever. I focus on what the next challenges are, and what’s stopping us from being a very big business. It’s always very tempting when people try and buy you. You can say, “I’ll sell, and I’ll do it again.” But I’ve never met anyone who does it again. It’s really hard to do it multiple times at such a large scale. All I intend on doing is building The Hut Group into something that stands out over the foreseeable future. I don’t see an end to that. I don’t think about it. So, billions and billions of revenue is your answer. But how many billions and billions?

WWD: Would you IPO the business?

M.M.: I’m proud of getting this far in a private arena because that, in itself, is very rarely done. Even the big U.S. tech giants, the vast majority were public by this scale. There will come a point, no doubt, when some of the investments I want to make will be incredibly large. There will be big numbers, and trying to do those investments in a private arena becomes ever more complex. The short answer is that I will always be open to consideration of that. So far, I’ve been lucky enough to find some great partnerships in investors.

WWD: What about future acquisitions? What do you have planned?

M.M.: Beauty brands for sure. We are there to invest in brands across the industry. We’ve got a relatively small portfolio today, nothing like the scale of the big houses, so there’s lots and lots of road for us to invest in small beauty brands, big beauty brands, hair care brands. We’re very passionate about brands, and we think that we can make a massive difference to them. We have a large M&A team that is constantly trying to find brands. I’d be disappointed if we didn’t do more in that space.

On top of that, tech is something we’re always invested in. Where we have a need, we will obviously build in-house. But sometimes, you know, you just go and buy some tech. Then there’s infrastructure. We would be very keen on infrastructure assets, warehouses, cargo airlines. Infrastructure is a very, very broad term. We’ve got a couple of hotels, which is part of our influencer model, part of showcasing our brands. They are a real marketing asset to us.

We’re also looking at sports nutrition, and brands across the nutrition space, such as snacks and bars, and other add-on categories where we can gain some expertise. We’ve got a wide-ranging approach to it, which doesn’t mean we’re going to do everything, but we’ve got a clear view on what we need to do to further the group.

Did you always know you’d be an entrepreneur on this scale?

M.M.: You always dream, don’t you? But, actually, did I ever think I would? No. I don’t take big risks if I can avoid it, although it might look to the outside world that I’m taking huge risks every day. What I’m doing is what I genuinely believe I need to do because a bigger risk is round the corner. In setting the business up, I just was passionate about it. There was something that I felt was deliverable. I happened to have had a really big bonus, so I had some money to put to work. I’d been through a painful separation. I felt like I needed to kick my life on a bit. That’s why I did it. The brutal honesty is it looks great from the outside, but for the first five years, it was the worst, most painful thing I’ve ever taken on. I would have given it away for free.

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