The word tergum is Latin for skin / shield. It is with this in mind that the Spanish cosmetic and biotech company, Tergum, has set its foundation and bases its development in. Through their biotech ingenuity and expertise in vegetable extracts and antioxidants, Tergum designs skincare and hair care products that stand apart, not for any other reason than that they are effective. KITE Invest spoke with the CEO & Founding Partner of Tergum, Ignacio Cantonnet, to find out more about this excitingly natural – the Spanish olive – cosmetic line that is making its grand debut.
KITE Invest: Please shed light on the background of the Tergum team. What is the company’s expertise in skincare and hair care products prior to Tergum?
Ignacio Cantonnet: The personal care industry is ruled by marketing departments. Traditionally, success of skincare or hair care products has been strongly related to the marketing expertise of a company. The know-how of Tergum’s partners is unusual in this industry and yet results in an innovative added value. Professor Luque de Castro and Dr. Priego have over 30 years of experience in the area of analytical chemistry, with a profound knowledge of natural extracts, especially antioxidants. In my position I bring international management experience gained at companies like Eli Lilly, Fresenius Medical Care and Norsk Hydro. This mixture of personal and scientific experiences came together and formed in Andalusia.
This southern European region is the biggest producer of olives, the most powerful natural source of antioxidants and the cradle of olive oil for 2000 years; a juice with a lipid profile very similar to that of human skin. This combination of scientific expertise, management experience and cultural wealth was the origin of Tergum.
KITE: Tergum’s skincare products claim to have antioxidant capacity, impact cell repair and potential prevention of malignant cell processes. Please explain how Tergum’s skincare products can claim such regenerative and preventative components? What institutions have certified these claims?
IC: At Tergum we offer much more than just marketing, we deliver facts. That is why our communication is based on scientific evidence instead of on marketing trends. When we claim that our products have certain beneficial properties, the small print does not refer to a “study” in which a dozen users were paid to use a product during a couple of weeks and then were asked about their satisfaction.
Instead we ask a renowned independent institution, the National Research Council (CSIC) to evaluate our products. They conducted an Oxygen Radical Absorbance Capacity test with our Maximum facial serum, concluding that it has an unsurpassed antioxidant capacity: 474,600 μMol TE/g (Vitamin C achieves 300 μMol TE/g in the ORAC scale). That is a final product that surpasses over 1,500 times what others just include as minor ingredient. Encouraged by this result, a biomedical institute (IBIS) that belongs to CSIC proposed a series of tests to determine the beneficial properties of Maximum for human skin. First, they conducted an Oxidative Stress Test with human skin cell cultures and realized that the use of Maximum reduced oxidation by up to 50% and had vasodilatory properties. Furthermore, they studied the effect of Maximum on cell proliferation and cell death processes, discovering its significant impact on cell repair and prevention of malignant cell processes. The conclusions, signed by the investigators that conducted the studies, can be found at our website.
In the end it’s more than marketing and R&D.
KITE: How would Tergum compare itself to skin care lines like Dr. Hauschka? What competitive characteristics of Tergum’s product and company make it stand apart, and from other companies that use olive oils?
IC: Cosmetic companies have very large portfolios in their attempt to meet the expectations of as many customers as possible. They need to be present in hundreds of thousands of retail points to have a chance of competing, what deals to a big cost of stocking/merchandising. The rotation of those products is very low and the expenditure in advertising is pretty high. And thus, it is a profitable business. This is only possible with an extraordinary margin. If we have a look at the ingredients, we realize that most of the companies share suppliers, what deals to scarce technological differentiation. Taking into account that ingredients must be listed in descending order of concentration and that the expensive ones are up in the marketing campaigns but low in the ingredient lists, we begin to understand the attractive margins.
We cannot compete in this market and we do not need to. Our technological differentiation and effectiveness allow us to have a very short portfolio. We do not compete with the existing products/companies; we enhance them with proven beneficial properties. A customer can stick to his/her favourite cream and maximize it with the beneficial properties that only Maximum offers.
KITE: This past January, Tergum began selling two main products through a distributor in Andalusia. What is the company’s short-term business plan in terms of expanding? Does the company want to expand to the rest of Europe, the world?
IC: While retailers are attracted by high margins and marketing expenditure, beauty professionals pay attention to powerful products. Since they make over 90% of their revenues out of their services, they want to have the best tools to guarantee for excellent treatments and customer fidelity. We offer professionals biotech-based cosmetics that enhance treatments both in the clinic/salon and at home. Customers do not have to give up on the cream of their choice, to which they are emotionally linked to by its texture, aroma, packaging or company image. Now they can maximize it with biotechnology and natural ingredients.
KITE: Why did Tergum decide to start with only one distributor?
IC: We think that everything has its maturation time. It took us over 30 years to get the technological and managerial expertise to get here. Tergum was established in 2010, it has taken us 5 years to bring this concept to the market. Now we want to make sure that we know how the model works at its best before replicating worldwide.
KITE: What is the market value of Tergum’s products? Who is Tergum’s clientele?
IC: We know that prescribers are the most credible way of bringing our innovation to the end customer. We also know that word of mouth is very powerful with our products. Now it is the time to accelerate and replicate our model addressing top beauty professionals, distributors, journalists and bloggers. The biomedical institute asked for permission to publish the results of the last study and we agreed with the condition that a press release should be directed to Spain’s general media. This will be done in May and as a result, the two biggest distributors to pharmacies and drugstores are interested in stocking Maximum.
KITE: Tergum is currently focused on increasing equity in order to accelerate growth, and moreover with the business plan to focus on publicity and personnel as a method to speed up the market entry. Is Tergum seeking funding? If so, how much, what are the parameters and the return on investment?
IC: We are seeking funding to accelerate our growth. We need 2 million Euros to deploy a strategy with progressive milestones, starting in Spain in 2015 with the organization of events in the main cities (Madrid, Barcelona, Valencia…). In 2016 we will deploy the same model in Europe´s biggest cities and start jumping to Asia, Middle East and America. Return on investment, as expected in the high margins cosmetic market, will exceed an annual 25%.
KITE: Why is Tergum a good investment?
IC: Tergum brings innovation in the terms that the cosmetic market is expecting: exclusive technology + natural products + effectiveness. With a clever competitive position: not competing against but complementing successful products. But what really makes Tergum a good investment is a strong team that combines scientific excellence with international management experience.