Three short years – and post-pandemic ones, no less — that’s all the time it took Hailey Bieber and her team to build a Gen Z favorite, billion-dollar skincare and “hybrid” makeup brand and find a buyer. All the while, Glossier, the Selena Gomez-founded Rare Beauty and several other super-hyped industry darlings seeking exits couldn’t.
Bieber is retaining her roles as Rhode co-founder, chief brand officer and head of innovation, while also adding the title of strategic advisor to e.l.f. Beauty. The annals of beauty history are chock-a-block with brand founders who talked a big game about sticking around once their companies were bought, but eventually hit the bricks once the acquisition excitement wore off and the reality of a powerless future sank in.
You’ve got to wonder what the top guns at Merit and Kosas, two other beloved, skin-forward makeup brands that have reportedly also been deal-shopping, were thinking when news broke that the publicly traded, Oakland, California-headquartered e.l.f. Beauty snapped up Rhode.
Billion Dollar Payday
Under the terms of the agreement, e.l.f. will pay an initial $800 million for the Beverly Hills-anchored Rhode ($600 million in cash, $200 million in shares), with an additional $200 million earnout kicking in over the next three years if the brand continues to perform as it has since its 2022 debut.
But that’s the billion-dollar question, right? Will it continue to perform? For the moment, Bieber is retaining her roles as Rhode co-founder, chief brand officer and head of innovation, while also adding the title of strategic advisor to e.l.f. Beauty. The annals of beauty history are chock-a-block with brand founders who talked a big game about sticking around once their companies were bought, but eventually hit the bricks once the acquisition excitement wore off and the reality of a powerless future sank in.
Rhode’s Tiny (But Mighty) Product Portfolio
So just what is e.l.f. getting after ponying up so much coin? Certainly not a vast product portfolio built up over decades of R&D and firmly tested in the retail world. Nope, although it’s headed to Sephora in the U.S. and Canada this fall, Rhode is purely DTC and comprises a minuscule product portfolio, none of which exceeds $38. The lineup includes a handful of makeup offerings (Pocket Blush, Peptide Lip Tint, Peptide Lip Shape), skin beautifiers (Pineapple Refresh cleanser, Peptide Glazing Fluid, Glazing Milk, Barrier Restore Cream, Barrier Butter, Peptide Lip Treatments), one juggernaut ancillary (a Lip Case that houses both a phone and one of the brand’s Peptide Lip Treatments) and many, many duos and sets that parse and bundle that tiny cache of products every which way.
Rhode, which nods to Bieber’s middle name, is steeped in results-oriented, easy-to-understand science. Following a North Star of “edited, efficacious and intentional” products, it’s not about slavishly following a 10-step skincare routine or plunking down in front of the makeup mirror for a multi-step sesh.
Why so focused and streamlined? Because the Rhode girl is busy. The Rhode girl has lots and lots of Snapchats, TikToks and IG Reels to scan and get inspo from. And clearly, the brand capitalizes on trends Bieber ignited long before she even had her own line of products, namely the whole “glazed-donut skin” phenomenon. The former model and wife of troubled music wunderkind Justin has been a beauty junkie for years, with a popular “Who’s in My Bathroom?” YouTube channel and a brand ambassadorship with BareMinerals makeup dating all the way back to 2018.
Mega Social Clout Moves the Merch…for Now
Without question, Bieber is a singularly beautiful human – about as aspirational as aspirational gets. Factor in her starry family lineage (she’s the daughter of Stephen Baldwin and niece of Alec), wildly famous husband, stellar fashion sense and a BFF list packed with Kendall Jenner and both supermodel Hadid sisters (Gigi and Bella), she also has tremendous social media clout.
How big is her following? Try nearly 55 million on Instagram and another 15.4 million on TikTok. Numbers like these have helped generate $212 million in DTC-only sales – on the Rhode website and its TikTok and Instagram accounts — for the 12 months ended on March 21.
Still, as rosy as the Rhode picture looks now, there’s a cautionary tale in the form of Kylie Jenner that the upper management of e.l.f. would be wise to heed. Remember, in 2019 when Coty scooped up a 51% stake in Kylie Cosmetics for $600 million? That brand is currently a shadow of its former self, Jenner’s relationship with Hollywood It Boy Timothée Chalamet and 393 million Instagram followers (yes, you read that right: 393 million) notwithstanding. Kylie kinda crashed. Will Hailey too?
Way for e.l.f. to Save Some Fiscal Face?
Combing through my own personal writer archive for The Robin Report, I see that when I last weighed in on e.l.f. – in September 2023, just after it had snapped up the affordable-clean skincare brand Naturium for $355 million in cash and stock — it was in a highly enviable place. As in 18 straight quarters of growth at the time of publication.
Today, e.l.f., while still outperforming a good chunk of the market, isn’t quite the on-the-rise, wannabe mega-conglomerate it once was. Less than two years ago, it was leaning into clean and wellness with the acquisitions of Well People and Naturium, and the incubation of Keys Soulcare, a mind, body and spirit brand crafted in collaboration with 15-time Grammy winner Alicia Keys.
While Rhode doesn’t overtly market itself as clean, a term that has become increasingly meaningless, there’s definitely a wellness-centric, self-care vibe in the messaging. And for sure, whatever Bieber is communicating is resonating with Rhode customers; the handful of pop-ups the brand has staged in New York and L.A. have been packed to the rafters.
Without a doubt, e.l.f. Beauty chairman and CEO Tarang Amin is banking on a similarly stellar turnout as Rhode makes the leap to brick and mortar this fall. If and when that happens, e.l.f. Beauty’s own recent mini-decline will be less of a focus.
In a damning take on the corporation’s 18 percent dip in April and overall downward trajectory, Yahoo Finance described e.l.f.’s stock as “extremely volatile,” with 47 moves greater than five percent in the last year alone.
Although tariff proposals surely played a role in last month’s stock decline, an even bigger drop – 27.4 percent — occurred after e.l.f. disclosed disappointing fourth-quarter 2024 results. After the Rhode announcement, e.l.f. stock jumped in a positive direction for the first time in quite a while. Let’s hope, for Amin’s sake, that uptick takes.
