With its recent $60 million minority investment from Eurazeo Brands, Pat McGrath Labs, the cosmetics line launched by makeup artist Pat McGrath in October 2015, is poised for its next phase of growth. Opportunity lies in building out the brand’s permanent, core collection of cosmetics, an update to her previous drop model approach of releasing singular buzzy beauty products.
Combined with its initial funding from One Luxury Group, total funding for Pat McGrath Labs comes to $88 million in just over two years. According to Women’s Wear Daily, McGrath is expected to do more than $60 million in retail sales for 2018 and is now valued at $1 billion — that’s more than Forbes’ recent estimation of Kylie Cosmetics of $800 million. The influx of capital is intended to enable Pat McGrath Labs to expand its distribution in the U.S., as well as globally, Eurazeo and Pat McGrath Labs said in a statement.
McGrath’s covetable, trendy products, which are sold on her own e-commerce site, 54 select Sephora stores and Sephora.com, are announced by McGrath herself on social media. Her followers — 2 million on Instagram and 817,000 on Twitter — are encouraged to watch McGrath’s social media feeds to learn about and shop new releases, as well as receive product information. It’s a method so built into the company’s strategy that the brand spells this out explicitly on its FAQ section of its site.
There’s a palpable effect: When McGrath introduced the brand’s Gold 001 pigment makeup drops, they sold out in less than six minutes, according to Pat McGrath Labs. The demand for her one-off products has been so great — they’ve sold out seven times — the makeup artist realized she had to go even further with an unlimited core collection of color cosmetics that is available year-round to grow the business. That assortment launched last September. Some of these products are familiar: The Skin Fetish highlighting kits, which initially debuted as a limited-edition drop in 2016, were one product that made it into the core assortment this past June. With the permanent collection comes a greater push in Sephora doors — the brand will be at 90 stores this September — and increased capital suggests that Pat McGrath Labs will gain even more brand recognition and market share.
Eurazeo’s investment in an expert like McGrath — versus, say, the industry’s current preoccupation with influencers or celebrities à la Jenner — suggests a potential shift.
“Today’s consumer is armed with a lot more knowledge than they were 10 years ago, thanks to digital channels; therefore, they are highly discerning and are looking to experts to help them make purchasing decisions, opening up new opportunities for makeup artists,” said Hannah Symons, Euromonitor International beauty and fashion research manager.
Jill Granoff, CEO of Eurazeo Brands, alluded to this concept and McGrath’s “authentic and innovative” aesthetic in the company’s statement: “We’re excited to combine our experience of building global beauty and fashion brands with Pat and her team’s unmatched creativity and passion.” Eurazeo Brands has previously invested in Farfetch and Moncler.
Of course, the makeup artist-founded brand model isn’t exactly new business in beauty. Former artist-turned-magnate Bobbi Brown founded her namesake cosmetics line in 1991, investing just $5,000 of her own money. The brand was acquired by Estée Lauder Companies four years later, and Brown left the line at the end of 2016 when the company hit $1 billion in earnings. Shiseido-owned makeup-artist-founded brands like Laura Mercier and François Nars’ NARS Cosmetics are other industry success stories. Even celebrity influencer Kim Kardashian West launched a KKW Beauty collaboration of lip glosses and eyeshadow palettes with her makeup artist Mario Dedivanovic, as a way to iterate her brand in April 2018. KKW Beauty had only launched eight months prior.
As Pat McGrath Labs prepares to scale globally, its founding story and strategy position it for growth.
“When we started, we went after the first generation of founder brands: Bobbi Brown, François Nars,” said Bluemercury founder Marla Beck of her company’s strategy. “There are so many entrepreneurs creating new products and brands in beauty every day, but it’s still a founder-based industry,”