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Perhaps the biggest beauty news of the year came last Wednesday when E.l.f. Beauty announced its acquisition of Rhode, the 3-year-old brand launched by Hailey Bieber. The acquisition was notable for numerous reasons, but some of the bold headlines include the fact that, though a Sephora launch is coming soon, it hasn’t happened yet. Plus, the brand currently sells under ten SKUs, including its viral phone case. E.l.f., for its part, has had 25 quarters of consecutive net-sales and market-share growth. In addition to her roles as Chief Creative Officer and head of innovation at Rhode, Bieber will also serve as a strategic advisor to E.l.f. Beauty, across its portfolio, which includes E.l.f. Cosmetics and E.l.f. Skin, Well People, Keys Soulcare, and Naturium, the last of which it acquired in 2023.
On this week’s episode of the Glossy Beauty podcast, Sara Spruch-Feiner, senior reporter at Glossy Pop, and Gabi Barko, senior reporter at Glossy’s sister publication Modern Retail, are joined by Brit Starr, CMO at influencer marketing platform Creator IQ.
But first, Glossy senior reporter Emily Jensen and Spruch-Feiner chat what’s happening on TikTok in beauty this week, why Pride Month will look a little different this year, and why Huda Kattan is taking back full ownership of Huda Beauty.
Below are highlights from the episode, which have been lightly edited for clarity.
The numbers behind the brand
Starr: “[Rhode] ranked No. 1 in year-over-year earned media value growth of any U.S. skin-care company and No. 1 in year-over-year engagement growth in the same category. They’re in the top 15 U.S. beauty brands — not just skin care, but beauty brands. So again, the conversation, the content, the chatter people have had about the brand, and the way consumers have really been engaging with creators around Rhode and Hailey have been really impressive to watch. … Hailey herself is obviously a massive value driver of the brand. [She is part of the] cultural zeitgeist, she really drives the conversation. She’s epic at trend-spotting, et cetera. … But roughly only 15% of all of the earned media value created by creators about Rhode mentioned Hailey by name, and only 30% of Hailey’s own posts mentioned Rhode. So, it is a symbiotic relationship, but by no means fueled exclusively by Hailey. And I do think that there’s a scaled community around Rhode — that’s why they’re growing so quickly. Considering the strategies the brand has taken engaging with specific creators, it’s really that halo effect that is driving the value. It’s what happens beyond those engagements. When they start conversations with [someone like] Tate McRae, what happens around that? Do other people get excited about it? That’s where the value comes from.”
Can engagement on social lead to an exit?
Starr: “The first big acquisition in [this] space was back in 2014 when L’Oreal acquired NYX [Professional Makeup] at a 35x revenue multiple, half a billion dollars, which, at the time, was pretty unheard of. And it was really before all of us knew what creator marketing wasn and what it was doing, right? NYX was a pretty unheard of brand at the time. But in our data, they were very heard of. We saw the same pattern, the same behavior, even 10-plus years ago. … NYX had the same monumental rise that a Rhode would have today, [albeit during a] longer time period. There’s more weight and there’s more infrastructure around creator marketing now, so that increase, that rise, can happen more rapidly. But this is something we’ve been seeing in our data for over a decade. The same holds true with more recent acquisitions: Drunk Elephant, Youth to the People — you name it, we tend to see the conversation that creators are driving. And the way consumers engage with that conversation is really a leading indicator of value. How that conversation happens is also really interesting. Is it a couple of powerhouse players driving all the conversations, or is this truly a grassroots movement that spreads across a network like contagion? And that latter example, where it’s grassroots, tends to be where you see that kind of long-term value creation, where people are truly excited and engaged with what a brand has to offer.”
The value of value-driven beauty
Barkho: “[E.l.f. Beauty] is an interesting strategic because — maybe this is a good time to talk about price points and portfolio diversification — because E.l.f. obviously cracked the code on Gen-Z drugstore purchases, right? My first thought was: They kind of invented dupe culture — [or, if not] invented, they’ve definitely cultivated it. … I think the idea that you have this lower-price drugstore brand that’s acquiring an accessible, but a little bit more of a prestige brand is really interesting. I was on Reddit, and customers are already freaking out, like, ‘Is this going to change the formula? Is this going to raise prices?’ [This happens] any time a brand gets acquired that has a cult following. And this came, like, a day after E.l.f. itself raised its prices by $1. It’s a value-driven parent company that’s sort of growing this interesting skin-care-forward, but also value-driven portfolio.”
Bieber, the marketer
Spruch-Feiner: “She can talk about marketing. She can talk about why she picked the people [in a campaign], how she came up with the aesthetics of a certain campaign and why she’s launching a product, and she knows about ingredients. When the brand was launching, that was a big part of the chatter in the beauty community, as well. There can be a general sort of annoyance when another celebrity beauty brand comes on the scene, but [all seemed to agree] that she had earned her place. She had been doing YouTube videos for years, and she had tapped cosmetic chemist Ron Robinson, who has been part of the beauty editor and media community for years and has his own brand, BeautyStat, at Ulta Beauty. She also tapped Dr. Bhanusali, who’s a well-known dermatologist, to help formulate the products. So, she had really built her credibility.”
