Private Equity’s Next Frontier: Reshaping Direct-to-Consumer Brands

In the past decade, direct-to-consumer (DTC) brands have transformed the traditional retail landscape by eliminating intermediaries, taking control of customer relationships, and leveraging digital, data-driven flexibility. Nevertheless, as numerous DTC brands evolve, they encounter several obstacles: elevated customer acquisition costs, margin pressures, the challenge of scaling operations and supply chains, channel conflicts, and the necessity for multichannel growth. 

Private equity (PE) firms have increasingly become involved in this sector as investors and strategic operators, redefining DTC companies in ways that can enhance growth, realign business strategies, and facilitate exits.

Key Areas Where PE Reshapes DTC Brands 

PE has become a central force in the DTC ecosystem, stepping in as venture capital retreats and many brands face capital constraints.  According to Bain & Company's Global PE Report 2024, "dry powder", committed but unallocated PE capital, reached a record US$3.9 trillion in 2023, fuelling investments in consumer brands that show traction but still have room to scale.

The following are the primary ways in which PE influences DTC brands, with each area reflecting unique dynamics, growth opportunities, and potential challenges:

Capital Infusion + Scale Acceleration: 

PE provides funding that allows DTC brands to grow more quickly, broadening product offerings, boosting marketing budgets, enhancing supply chain capabilities, exploring new markets, or establishing offline/wholesale avenues that DTC-focused companies frequently overlook. With increased scale often comes better negotiating leverage with suppliers, streamlined operations, and an extended path to profitability.

Multichannel Strategy and Channel Diversification: 

While many DTC brands begin online, PE-backing often pushes brands toward multichannel distribution: selective wholesale, Amazon or other marketplaces, retail collaborations, pop-up events, or brick-and-mortar locations. The objective is to attract new customers, lessen reliance on digital advertising, reduce risks associated with algorithm changes or shifts in consumer preferences, and expand brand presence.

Operational Optimisation: 

PE firms usually offer expertise in cost efficiency, supply chain oversight, inventory control, margin enhancement, and unit economics. These enhancements are often crucial for transitioning from a high-growth but unprofitable model to a sustainable, investable enterprise.

Brand & Product Portfolio Strategy: 

PE frequently motivates brands to broaden their product lines, such as new SKUs, private labels, or extensions marketed as 'healthy' or 'clean', or to consolidate brands through roll-ups. Additionally, they may assist in refining brand positioning, optimising SKUs to concentrate on high-margin and high-velocity products, or even divesting from underperforming product lines.

Exit Strategy & Valuation Discipline: 

A key function of PE is to ready companies for exit strategies, such as mergers and acquisitions (M&A) or initial public offerings (IPO), which necessitate strict financial discipline. This includes ensuring predictable revenue streams, implementing recurring revenue or subscription models, utilising data-driven customer lifetime value (LTV) metrics, maintaining well-managed customer acquisition costs (CAC), and developing scalable business models. Furthermore, PE can aid in crafting the narrative and governance structures essential for a successful exit.

Case studies: PE at Work 

Here are several illustrative cases showing how PE (or large buyers with PE-like discipline) have reshaped DTC brands, for both success and cautionary tales.

• Dollar Shave Club: 

  
  

Created as a subscription-based online razor brand, Dollar Shave Club established significant D2C loyalty and challenged existing competitors. In 2023, Unilever divested a 65% share of Dollar Shave Club to Nexus Capital Management, highlighting PE's interest in acquiring leading DTC brands with successful business models and solid customer bases. 

This transaction emphasises how PE can elevate these brands to the next level by utilising wider distribution channels, broadening product categories beyond razors (such as personal care), and enhancing operational efficiency.

• Beautynova:

   

PAI Partners, a French PE firm, has acquired a majority stake of 51% in Beautynova, an Italian haircare company, for approximately €330 million. This acquisition exemplifies PE's involvement not just for financial gain but through a strategic platform approach. 

Beautynova has successfully tripled its sales and expanded its presence, particularly in the US and Europe, achieving an EBITDA of €30 million on revenues of around €130 million. The PE investor recognises the opportunity to scale the brand further, invest in new markets, and likely enhance production and distribution efficiencies.

• Advent International and Olaplex: 

  
  

Advent, one of the world's largest and most established PE firms with investments across consumer, healthcare, and technology sectors, acquired Olaplex, the California-based professional haircare brand best known for its patented bond-building technology. During its ownership, Olaplex's net sales increased from US$148.2 million in 2019 to US$282.3 million in 2020, approximately 90% growth. This surge reflected the advantages of PE backing: capital for expansion, strategic scaling, and operational expertise.

However, there was a downside: Profitability suffered due to margin compression, driven mainly by interest expenses tied to the acquisition debt. This situation illustrates the potential benefits of PE support, such as scale and growth, and the associated risks, like debt burden and margin pressures.

• BloomChic & L Catterton: 

  
  

L Catterton, a leading consumer-focused PE firm, invested in BloomChic, a DTC plus-size digital retailer. This illustrates how PE can facilitate data-informed product design, nimble small-batch production, and operational scaling. BloomChic leverages trend data to inform decisions on colour, fit, and style, and with the backing of PE funding, it can enhance its capacity to satisfy demand, optimise its supply chain, and expand into new channels.

• Good Glamm Group: 

  
  

Though not purely PE ownership, Good Glamm Group, an India-based beauty and personal care conglomerate, raised US$150 million in Series D, attracting investors with PE–like expectations. Its content-to-commerce model, built on a portfolio of DTC brands, is being scaled through product innovation, creator-led content, offline expansion, and tech infrastructure. Such investment shows the trend in emerging markets: DTC brands are increasingly merging content, community, and commerce under the scrutiny of investors who want durable, high growth with defensible customer acquisition. 

Emerging Trends: 

PE continues to influence the evolution of DTC brands, driving strategic innovation and operational sophistication. These emerging trends highlight how investors are reshaping the sector's growth, efficiency, and competitive positioning.

• Platform / Aggregator Model: Certain PE firms are consolidating multiple DTC brands into a single platform to share costs (logistics, warehousing, technology, marketing) and maximise synergies.

• Sustainability, Clean Ingredients, and Values: PE investors are increasingly urging DTC brands to explicitly outline their environmental, social, and governance (ESG) commitments, clean beauty standards, and refillable packaging, as consumer awareness grows, aiding differentiation.

• Global Geographic Expansion: DTC brands that have established a presence in their domestic markets are expanding into new regions; PE provides the necessary capital and local market knowledge.

• Trade-off between speed and profitability: Recent transactions appear to be more cautious; investors are looking for immediate cash flow, tighter customer acquisition cost to lifetime value ratios, considering macroeconomic challenges and increasing capital costs. Pursuing growth for its own sake is becoming less acceptable than in the past.

In conclusion, PE has emerged as a key driver of the evolution of DTC brands, providing funding for many DTC firms. Still, also driving operational rigour, multichannel expansion, sharpened branding, and disciplined exit planning, which, when done well, can help DTC brands break through growth ceilings of pure online plays, take market share, reach new customers, and become profitable.

However, the transformation is not without challenges, and the process is not without risk; it requires finding the right investor partner, protecting brand identity, controlling debt and operational complexity, and balancing growth with financial and cultural sustainability. 

For practitioners in this space, founders, PE operators, or strategists, the key question is not whether PE will transform DTC brands, but how to do so while maintaining what made the brands unique while scaling them for the future.