Israeli cosmetics firm turns mud into money

It’s a scorching hot day at the Dead Sea. The afternoon sun beats down on the rocky hills and quicksand pits that surround the still, gray-blue body of water, which is flanked by Israel and the West

MITZPE SHALEM, West Bank – It’s a scorching hot day at the Dead Sea.

The afternoon sun beats down on the rocky hills and quicksand pits that surround the still, gray-blue body of water, which is flanked by Israel and the West Bank on the west and Jordan on the east. As its name implies, there’s little life in the Dead Sea.

The water’s extraordinarily high salt content prevents fish and aquatic plants from living in it. There isn’t much action outside the water either, except for a few emaciated camels trudging along the side of the road.

At first glance, it’s hard to see much economic potential in this parched, dusty landscape. But up the hill and across the narrow highway that hugs the Dead Sea, an Israeli company named Ahava (Hebrew for love) has built a small cosmetics empire out of the region’s elemental resources: salt and mud.

About 20 years ago Ahava was little more than a stand hawking bottles of body scrub to tourists. Today the company sells its moisturizing lotions, exfoliators and mineral masks in more than 30 countries, generating sales of nearly $150 million a year. In the U.S., its largest and most profitable market,

Ahava has signed distribution deals with the likes of Lord & Taylor, Nordstrom and beauty-supply chain Ulta and has poured millions of dollars into an advertising campaign aimed at wooing American consumers.

Ahava has come a long way from its modest origins at the Dead Sea, the lowest point on Earth. But major challenges remain. Will global consumers flock to an Israeli lifestyle brand despite the polarizing impact of the Israeli-Palestinian conflict? And what happens to Ahava’s business model if the Dead Sea runs dry?

It all began in 1988, when Ziva Gilad, a local spa technician, noticed female tourists bottling mud to take home. That sparked the idea for Ahava, and Gilad, along with partners from four nearby kibbutzim (communal settlements), got to work.

They started small, selling plastic bottles of mud and salt crystals to tourists at the Dead Sea and, later, in stores throughout Israel. The venture was successful, raking in nearly $1 million in revenue its first year. But early on, Gilad and her partners knew that Ahava needed to become an international company if it wanted to grow.

“The future of any cosmetics company can’t be in Israel,” says Yacov Ellis, Ahava’s CEO, who came aboard in 2003 to help build the company into an international brand. “There are only seven million people in this country.”

By the mid-1990s, Ahava was exporting its products to Europe and the U.S.

It wasn’t until the early 2000s, however, that Ahava started to pour the necessary resources into marketing, advertising and branding abroad. These efforts caught the attention of an American investment firm, Shamrock Holdings, which is owned by the Disney family.

Last year Shamrock acquired a nearly 20 per cent stake in Ahava.

“Thousands of tourists come to the Dead Sea for the spas and the treatments,” says Igal Litovsky, senior vice president at Shamrock. “Ahava was uniquely positioned to capitalize on the area’s natural resources and translate them into an export product.”

Litovsky, who now sits on Ahava’s board, says his role is to help Ahava strengthen its position in the U.S. market.

He has high hopes for the company, which he expects to double or triple in size within four years.

Ahava’s founders and investors aren’t the first to see profit potential in the Dead Sea. At more than 300 metres below sea level, the salty body of water has been touted for its therapeutic powers for centuries. It’s believed that Egyptian ruler Cleopatra and the Queen of Sheba both bathed in the Dead Sea to keep their skin looking young and beautiful.

More recently, the sea has been the subject of numerous research studies on therapies for skin disorders, heart and lung problems, and other conditions.

What makes the Dead Sea so special?

Scientists believe the answer has a lot to do with the water’s extremely high concentration of such minerals as magnesium, sodium, phosphates and bromides – which Ahava says work together to create a compound that can hydrate skin and slow its aging process.

According to Ahava, it’s the only cosmetics company licensed by the Israeli government to mine raw materials at the Dead Sea – which means its competitors have to buy their mud and salt from the company.

In 2008 Ahava bought a 50 per cent stake in its exclusive U.S. distributor, now called Ahava North America, giving the company more control over where its products are sold in the U.S. and Canada.

“We’re not L’Oréal; we’re a small company, so we need to be really smart about where we invest our money,” Ellis explains.

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