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The first subscription - Cornerstone

“Maa Paal” (Madam - milk!) - my childhood wake up call in Chennai, India. I clearly recall two businesses, both quenching my hunger for growth  - Aavin run by the Tamil Nadu Dairy Development Corporation Ltd, serving variations of milk and The Hindu,  the national newspaper, both delivered direct to my home –  I woke up to a world running on a subscription based model.

Years later I am witnessing this subscription based model proliferate into other industries and become an integral part of the ever evolving mankind. I am no exception and through Cornerstone, this model has become an integral part of my life too – as a customer and as an investor. However, investing in Cornerstone was an exciting journey and we found some interesting facts along the route.

The global subscription market:

There has been a substantial shift in the global market. From online checkout in 1999, the subscription model has significantly evolved from after 2012.  Major players in the market have moved from products to services.

Gartner (Zuora 2014) has projected that by 2015, 35% of the global 2000 companies will generate revenue through subscription based services and revenue models. Needless to say, the customer sentiment has substantially shifted, catalysing this shift in paradigm.

Changing customer sentiment:

  • A recent survey of 293 business executives in 2014 (Zuora) across the US, UK and Australia suggested that:
  • 4/5 businesses are currently seeing changes in how their customers prefer to access their services;
  • 51% are integrating new pricing and delivery models such as subscriptions, sharing and rental goods and services; and
  • 40% of these companies are implementing subscription services as part of their core business.

Managing customer success in subscription economy: Source - Revenuewire:

  • From a EU perspective, based on the ecommerce Europe report:
  • There are 95 million e-shoppers (out of the estimated 161 million people) spending a total of EUR 177.7 billion;
  • The average spending per e-shopper is at EUR1,864; and
  • 5% of this spend is for goods of which the estimated sale of online sale of goods is 9.5% of the total retail sale of goods.

Subscription model penetration:

  • The subscription model, as a horizontal, has prevailed for many years with varying magnitude of penetration across different verticals:
  1. Global television subscription revenue is expected to amount to about $215.1 billion in 2015 (Source - statista: global online music subscription revenue in 2015)
  2. Global online music subscription revenue is expected to amount to about $1.5 billion in 2015 (Source - statista: global online music subscription revenue in 2015)
  • From an EU perspective, the penetration of the subscription model is fast growing.
European B2C online market 2014
Source - 2014

This relatively untapped subscription model within FMCG has seen the rise of firms like Dollar shave globally. Men’s grooming, on a subscription model, had very limited competition in the EU offering a significant opportunityfor Cornerstone. In addition, the behavioural patterns of men towards grooming and health has substantially changed, quite evident from the increased uptake of various products we see currently.

The men’s grooming market:

  • The men’s grooming market is large and expanding, the current market for 2015 is at $20.3 Billion with expected growth of with an expected growth of 12 % Y-O-Y.
  • Male grooming market in UK is at £1.03 billion (Telegraph).
  • Online shopper’s rank product availability, free shipping and price as the most important features.
Global trend segmentation break up of men buying toiletries online
Source- 2014

Important attributes for buying grooming products online

Source- 2014

The exam question - How have the other players faired?


Company start date - 2011

CEO - Jeffrey Raider

Geography of operations - US

Revenue - $ 75 million

Key points:

  • Spent $100 million to buy Feintechnik, a nearly 100-year-old German company and factory that makes the shaving products Harry's sells.
  • $207.5 million in 3 rounds

Dollar shave club:

Company start date: July 2011
CEO: Michael Dubin

Geography of operations: USA, Canada, Australia

Revenue: $ 60 million: 2014, triple its revenue for 2013
  • Year 1 sales : $4 million, year 2 sales : $19 million, year 3 sales : $65 million, year 4 sales : on track $ 120 million
Key points
  • Covers 8.8 % of market share in US
  • Price range from $1 -$9
Notwithstanding the US market, the market in the UK alone was quite significant  -  Brands of men's blades ranked by sales value in the United Kingdom in 2014 (in million GBP - uk:Toiletries_Cosmetics_Industry_Guide 2014):
  • Gillette : 249.9
  • Wilkinson Sword : 66.9
  • Bic : 16.2
  • King of Shaves : 1
  • Super- Maxx : 0.5
  • King of Shaves / appeared to be a slightly tired and gimmicky brand with minimal challenger credentials. Despite being in the market for around 20 years
  1. They haven’t ever made a significant breakthrough;
  2. They are a cost-led proposition rather than a quality-led one, a concept which just hasn’t taken off in the UK; and
  3. Their core business is also retail.
  • is a discovery-led proposition selling one-off product samples and exclusively aimed at women in the UK. Their men’s box (trialled last Christmas) didn’t appear to have worked well.

In addition, there were quite a few factors which attracted us towards Cornerstone.

  • The CEO, Oliver Bridge, had a commendable attitude and had is ex- Private equity with expertise in the FMCG space.
  • The Founder of Charles Tyrwhitt (£50k) and ex-Vice Chairman of PwC (£40k) are investing in this round.
  • The Global subscription market is clearly on the rise with an expected CAGR of 12%.
  • Cornerstone have recently won the Shortlist Men’s Grooming Award for the “Best Razor” competing against Gillette, Wilkinson, Phillips, Braun and Remington.

As a serial investor, I couldn’t help, but opt into my first subscription to a subscription based business with Cornerstone. I have enjoyed the ride thus far with cornerstone, both as a customer and as an investor and I hope it persists - a clean shave and consistent growth.  

- Prem

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