Estée Lauder, De­ciem Head To Court

● Lauder filed for in­junc­tive relief in Canada, seek­ing to have Bran­don Tru­axe re­moved as the head of De­ciem.

WWD Digital Daily - - Front Page - BY AL­LI­SON COLLINS

As early as Fri­day morn­ing, De­ciem founder Bran­don Tru­axe may be out of a job.

On Fri­day, De­ciem and the Estée Lauder Cos. Inc. are head­ing to a 10 a.m. hear­ing in the On­tario Supreme Court where a judge will de­cide whether or not to sign Lauder’s re­quest for an in­junc­tion that would re­move Tru­axe from his roles as chief ex­ec­u­tive of­fi­cer and board mem­ber at De­ciem. The hear­ing could also be ex­tended and ad­journed.

Lauder, which owns 28 per­cent of De­ciem, filed the in­junc­tion forms Wed­nes­day af­ter­noon, ask­ing for co- ceo Ni­cola Kil­ner to be ap­pointed the sole head of the com­pany. Ear­lier in the week, Tru­axe pub­licly called for De­ciem’s

clo­sure. Ac­cord­ing to court pa­pers, he also sent out an e-mail blast Mon­day fir­ing Kil­ner and chief fi­nan­cial of­fi­cer Anand Khan­zode.

On In­sta­gram, Tru­axe said, “This is the fi­nal post of De­ciem, which will shut down all op­er­a­tions un­til fur­ther no­tice, which is about two months…Please take me se­ri­ously…Al­most ev­ery­one at De­ciem has been in­volved in a ma­jor crim­i­nal ac­tiv­ity, which in­cludes fi­nan­cial crimes.” Lauder’s in­junc­tion also asks the court to ap­prove hir­ing Price­wa­ter­house­Coop­ers LLP to in­ves­ti­gate the al­leged fi­nan­cial crimes, on De­ciem’s dime.

On Tues­day, stores started clos­ing. Fol­low­ers of De­ciem — there are 374,000 on In­sta­gram — have seen much of the drama un­fold pub­licly on the In­ter­net. The busi­ness, founded in 2013, has built a cult fol­low­ing for its mul­ti­ple brands of af­ford­ably priced, sci­en­tif­i­cally named prod­ucts, like The Or­di­nary Vi­ta­min C Sus­pen­sion 30% in Sil­i­cone, $6.80, and Niod’s Lip Bio-Lipid Con­cen­trate, $60. De­ciem even has a fan-run Face­book group — the Or­di­nary & De­ciem Chat Room — with more than 57,000 mem­bers. Up un­til re­cently, the ver­ti­cally in­te­grated busi­ness’ big­gest prob­lem was mak­ing enough prod­ucts to keep up with de­mand.

But this year, things changed.

Tru­axe, a for­mer com­puter sci­en­tist who speaks in fast-paced, declar­a­tive blasts, has al­ways had a quirky per­son­al­ity, say many who have met him. He was known for striv­ing for rad­i­cal trans­parency (hence the prod­uct names) and for speak­ing freely, sans fil­ter.

At one meet­ing with WWD last fall at New York’s Plaza ho­tel, Tru­axe launched into his thoughts on lux­ury.

“The thing about lux­ury, when I say it’s not about price points, what I mean is it doesn’t mat­ter if it’s cheap, ex­pen­sive, af­ford­able, not af­ford­able — lux­ury ul­ti­mately has to ex­clude one thing — and that is be­ing taken for an id­iot,” Tru­axe said. “Like, love this at­mos­phere, hate this cof­fee. It is hor­rific, it is ac­tu­ally one of the worst cof­fees I’ve ever had in my life. But you’re not fooling me — I’m ac­cept­ing that I’m ba­si­cally pay­ing rent for the en­vi­ron­ment.”

At that point, Tru­axe and Kil­ner were in town to talk about the brand’s launch on­line with in the U.S. and Canada. It was a big deal, as the launch rep­re­sented De­ciem’s first ma­jor move into the U.S. mar­ket, and un­der­scored Sephora’s will­ing­ness to ex­per­i­ment with dif­fer­ent price points. The Or­di­nary, De­ciem’s low­est-priced of­fer­ing, was planned as the first of sev­eral De­ciem brands to launch with the pres­tige re­tailer.

“The U.S. is go­ing to be­come our big­gest mar­ket, there’s no ques­tion about it,” Tru­axe said at the time. “Sorry — un­less it’s a com­plete fail­ure.”

Shortly after it launched with Sephora, De­ciem pulled out of the re­tailer, cit­ing pay­ment is­sues. In In­sta­gram com­ments, the brand sug­gested it had plans to launch into Ulta Beauty, which sources have said was po­ten­tially slated for early 2019. A spokesper­son for Ulta Beauty said De­ciem is not launch­ing there.

Tru­axe’s er­ratic be­hav­ior started ear­lier this year. He pulled out of a WWD Dig­i­tal Beauty Fo­rum, send­ing Kil­ner in his place in­stead, and started post­ing er­rat­i­cally on In­sta­gram. The posts were com­prised of in­ter­nal e-mails, an an­nounce­ment that he was chang­ing his ti­tle to “worker,” and dis­con­tin­u­ing a line of prod­ucts, Esho, that the com­pany had been work­ing on with a doc­tor based in the U.K. Be­hind the scenes, he’s sent spurts of e-mails, oc­ca­sion­ally copy­ing ed­i­tors on mostly in­co­her­ent notes to em­ploy­ees, the in­vestor com­mu­nity and Lauder ex­ec­u­tives.

This week on his per­sonal In­sta­gram ac­count, Tru­axe has posted shaky videos show­ing his in­ter­ac­tions with ho­tel em­ploy­ees in Am­s­ter­dam. In one, he ap­pears with a five o’clock shadow, and says his room has been bro­ken into and re­quests a dif­fer­ent room. In an­other video, posted 14 hours later, he’s sport­ing a full beard and ask­ing ho­tel em­ploy­ees to call the po­lice. Thurs­day morn­ing on the De­ciem ac­count, he un­veiled Lauder’s law­suit.

In court pa­pers, Lauder al­leges that Tru­axe’s ac­tions, both on so­cial me­dia and as the head of the com­pany, are “caus­ing ir­repara­ble harm to De­ciem’s busi­ness, and chaos and con­fu­sion for De­ciem’s em­ploy­ees, cus­tomers, con­sumers, sup­pli­ers, land­lords and other stake­hold­ers.”

“This is not only caus­ing ir­repara­ble harm to the Estée Lauder Cos­met­ics Lim­ited’s in­vest­ment in De­ciem, but it is harm­ing Estée Lauder’s rep­u­ta­tion be­cause Estée Lauder has an eq­uity own­er­ship in, and there­fore an as­so­ci­a­tion with, De­ciem,” Lauder added.

Beauty ex­ec­u­tives and those in the in­dus­try were hes­i­tant to talk on the record about De­ciem, but all ques­tioned Tru­axe’s re­cent be­hav­ior, and ex­pressed con­cern. Sim­i­larly, pub­lic melt­downs are un­heard of in beauty, but they have hap­pened in fash­ion — John Gal­liano was ousted from Dior after a video of his an­ti­Semitic rant sur­faced in 2011, for ex­am­ple.

In­dus­try in­sid­ers noted that even with Trauxe’s out­bursts, and even if he is re­moved from the busi­ness, it’s likely De­ciem has enough scale to sur­vive.

The busi­ness is said to have hit the $300 mil­lion sales mark over the sum­mer and hits on sev­eral key trends in beauty — trans­parency and value.

One source noted that shut­ting down the stores is likely to have a big­ger im­pact than the Lauder suit. “If [the con­sumer] can’t go and buy his prod­uct, they will move onto the next shiny ob­ject. We all know there is no short­age of new, shiny ob­jects in beauty.”

Stephen Ka­plan, De­ciem’s for­mer cfo who quit after Kil­ner was fired in Fe­bru­ary (she re­joined in July), said in an e-mail that he is “not sur­prised” by cur­rent events. “I hope that Estée Lauder can in­stall a com­pe­tent man­age­ment team, and with this in place, I be­lieve that De­ciem can con­tinue to be a very suc­cess­ful com­pany.”

In­side a De­ciem store.

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