Hailey Bieber’s ‘glazed donut’ is a $1.5 billion gamble

Celebrity beauty is back.

Elf Beauty last week agreed to buy Hailey Bieber’s Rhode, whose trademark look is its glossy, dewy skin, for $US1 billion ($1.5 billion).

The fast-growing US cosmetics company is paying a punchy price for its donut glaze. It must continue Rhode’s pace of expansion, against a difficult economic backdrop and waning enthusiasm for products fronted by famous faces, to prove that Bieber’s business isn’t just another influencer – or entertainer-led fad.

A decade ago, Kardashian clan member Kylie Jenner and pop star Rihanna ushered in an era of celebrity-backed beauty. Amplified by social media, they connected with millions of mostly young customers. Rihanna, whose business is backed by LVMH Moet Hennessy Louis Vuitton, was also genuinely disruptive, debuting Fenty Beauty in 2017 with 40 different shades of foundation. A more diverse colour palette has now become the norm across the industry.

But as more and more household names as well as influencers and makeup artists joined them, shopper fatigue set in. As incomes were crimped by inflation, buyers became more discerning. They also turned to skincare, haircare and niche fragrance, rather than the colour cosmetics that had propelled early viral trends, such as using different shades of foundation to contour the face.

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Consequently, the market has been upended. Even some of those that like Bieber struck gold began exploring exits last year. Yet, so far, neither Selena Gomez’s Rare Beauty nor Makeup by Mario, founded in 2020 by celebrity makeup artist Mario Dedivanovic, best known for his work with Kim Kardashian, have reached a deal.

Elf’s swoop on Rhode, founded three years ago, ends the drought and could breathe fresh life into personality-driven businesses once more.

In Rhode, Elf is betting on a premium range, containing just 10 main or “hero” products, including Pocket Blush and Glazing Milk, which blur the boundaries between skincare and makeup. This looks like a good fit with Elf’s selection, which is more focused on cosmetics and is cheaper. For example, Elf’s average price point is about $US6.50, compared with almost $US9.50 for mass-market cosmetics brands, whereas Rhode’s average is about $US29.