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Exclusive: Cove Brands to acquire brands from bankrupt Amazon aggregator Benitago

Mar 28, 2024
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Illustration: Tiffany Herring/Axios

Cove Brands plans to rescue a dozen brands from bankrupt Amazon aggregator Benitago Group, CEO David Kaplowitz and CFO Bryan Kryzda tell Axios exclusively.

Why it matters: Scooping up small third-party Amazon sellers became popular during the pandemic as e-commerce activity skyrocketed, but shifting consumer preferences have cast a shadow on the model.

Zoom in: Cove Brands plans to bring former Benitago brands in beauty, wellness and home industries under one roof.

  • "Diversification always helps," Kryzda says, but "we're not going out and trying to do everything all at once."

Catch up quick: Benitago filed for bankruptcy in September after raising $380 million in equity and debt in the two years prior.

  • Per the bankruptcy filings, the company had assets and liabilities between $50 million and $100 million and about $7.5 million in cash.
  • Its brands sold more than 300 products ranging from health supplements, office supplies to beauty products.

Context: Amazon aggregators raised over $16 billion in funding over the past couple of years, mostly in 2021 and 2022, according to e-commerce research firm Marketplace Pulse.

Between the lines: Cove cut about 30 full- and part-time workers "in an effort to get the cost structure in the right place," Kaplowitz says.

  • Under Benitago, each brand had its own top manager and primarily worked in silos. Cove has given those managers more functional responsibilities to ensure they operate "as a whole rather than brand by brand," he adds.
  • "That speaks to the mindset shift to being an operating company, a consumer brands house, versus an acquiring company," Kaplowitz says.

The bottom line: Cove is prioritizing profitability and cash flow, Kaplowitz says.

State of play: Last month, rival aggregator Thrasio, which had raised around $2 billion in capital, filed for bankruptcy and said it is seeking to shed about $495 million in debt.

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