One thing is clear as soon as the interview begins - Gavin Rae is ready to talk.
After 13 years of working away from the limelight at Cloud Nine, the chief strategy officer of the Harrogate firm, is happy to share his fascinating journey from global phenomenon GHD to setting up a challenger brand following a boardroom split.
“The sad story about GHD is that the three founders didn’t particularly get on after a while, which is often the story when there’s success and money on the table and it became a fractious environment,” he says.
It was 2001 when the Yorkshire start-up business revolutionised the way UK women styled their locks with the launch of its first ceramic hair straightener.
GHD was the brainchild of Rae’s stepfather - former hairdresser Robert Powls - who created the brand on the kitchen table at home after finding a company in Seoul in South Korea, which had invented a process of creating a hair straightener with a wafer-thin ceramic heater.
Powls realised he was onto something and joined forces with Gary Douglas and Martin Penny to create GHD, initially selling to hairdressers before realising there was a huge consumer market opportunity.
By the end of its second year its trading company, Jemella Limited, was turning over £12m, four times what it had originally forecast. By 2004, turnover was up to a staggering £37m.
GHD was very much a family affair, with Rae’s brother, Martin, joining the company as general manager and Rae, a ‘proud salesperson’, setting up a distribution company to sell the products.
For Rae, it felt like a natural fit. The brothers were immersed in the world of hairdressing from a young age. Rae says would walk from school to the staff room of the salon where his mother worked. “It was an exciting and cool place to go and I loved it,” he says. “In the late 70s and early 80s punk rock was still around and everyone was wearing crazy hair colours.”
While his brother decided to work directly for the GHD, Rae - after various stints working in the building and kitchen sectors - set up a regional distribution company to sell the straighteners.
Powls, the Rae brothers and Douglas left the GHD in 2006 when Penny effectively bought them out in an MBO backed by Lloyds Development Capital for £55m. GHD was sold again 11 months later to Montagu Private Equity for an incredible £160m.
For three years, the family stayed clear of hairdressing. Rae, who describes that time as ‘dreadful’ tried his hand at property investing but admits “it’s not for me”.
But then the original Korean manufacturer contacted the family after GHD decided to move its manufacturing to China, and asked if they wanted to create a new venture together as a partnership.
“At first we said no because we didn’t want to create a ‘me too’ product.” says Rae. “But the point of difference was the temperature control. The real test of a quality hair straightener is whether it works at a low temperature. We asked hairdressers to try it out and the feedback was positive.”
So Powls and the Rae brothers had a meeting. “It felt like a huge challenge to go up against the company my family founded but creating businesses is what we do,” Rae says.
Martin became chief executive, building the company, and Rae became chief strategy officer, building the brand. “I’ll tell anyone who asks that Martin is the boss,” he says.
“We’re yin and yang. He’s very smart when it comes to operations, I’m a little more gung-ho when it comes to ideas and pushing the boundaries. I embrace failure, if we don’t try, we don’t know.”
Armed with a new product and vast experience, they set up a small office in Ilkley, used their contacts to create a hair distribution network, and contacted salons to persuade hairdressers to buy their new product.
“I went back to what I used to do in the early days of GHD and got in my car with a box of products in the back of the boot to sell them,” Rae says.
The early days were a struggle because hairdressers were so attached to their GHDs. “Of course everyone said ‘I don’t need you,” says Rae.
They also received a cease and desist letter from GHD within a week of launching, forcing them to withdraw their initial marketing campaign.
One of the biggest differences between launching GHD and launching Cloud Nine was the internet. It was in its infancy in 2001 so it relied heavily on the hairdressing network.
Cloud Nine had an online presence right from the start and social media was also a gamechanger. It is currently building five or six in-house studios at its headquarters to keep up with demand for constant new content.
Cloud Nine’s sales grew steadily and organically with no outside investment and its growth outperformed the hair straighteners market.
Today, Cloud Nine employs 66 people. Turnover doubled between 2017 to 2020 to £26m. It is expected to be substantially higher in its 2021 accounts, which are currently in audit. Earnings before interest and taxes is expected to be more than £10m.
Group turnover is about 65 per cent of GHD’s turnover. Although it sells a whole range of products, across the globe as well as the UK, the majority of sales still come from straighteners.
But the important thing, says Rae, who has three teenage daughters, is that customers have choice. “We want people to be the best version of themselves.”
Cloud Nine’s current focus is on improving its core range of hair styling products.
Sustainability is also key. It has launched a hair tool recycling service with the aim of taking millions of products out of landfill.
It has a subscription policy where customers can rent instead of buy their product for £79 a year, which Rae says helps to manage the lifecycle of the product.
Customers can also choose to have their products delivered in eco-packaging.
He adds: “We’re the challenger brand. That’s the reality of what we do and we try harder because we’re number two.”