Hailey Bieber, AI and fast launches: how e.l.f. Beauty is winning

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1:55Tarang Amin:or dick on America's corporate boards, than entire populations of underserved. I love the fact that 76 % of our team are women, 74 % are Gen Z, millennial, 44 % are diverse. We just posted our 28th consecutive quarters of net sales and market share gains. The composition of our team is the biggest competitive advantage we have.

2:21Bob Safian:That's Tarang Amin, CEO of Elf Beauty. Even if you're not into the beauty space, Elf is a fascinating business. I wanted to talk to Terang because he's deploying unexpected disruptive practices that are really working in today's marketplace. From speed of product development to AI experimentation to teaming up with Haley Bieber. Elf's choices, as Terang explains, it flow directly from the company's values. Even if some of those values seem out of vogue, like sustainability or diversity, how he applies those values to partnerships with everyone from Sephora and Target to Dollar General and H &M.

2:59Bob Safian:Well, it's a study in principles with nuance that directly reflects our current environment. So let's get to it. I'm Bob Safian, and this is Rapid Response.

3:16Bob Safian:I'm Bob Safian. I'm here with Tarang Amin, CEO of Elf Beauty. Tarang, thanks for being here. Well, thank you for having me. I have to ask about Elf's Super Bowl ad featuring Melissa McCarthy. Did it end up having the impact you hoped for? How do you know? I mean, Super Bowl ads are expensive.

3:36Tarang Amin:Yeah, well, it had absolutely the impact we wanted. We're known for moving at the speed of culture. We saw a great cultural moment with Bad Bunny performing at halftime. I think he came on SNL about four months ago, telling everyone they had four months to learn Spanish. So it was a great jumping off point for us to get Melissa and actually do that satire. And the response has been amazing, not only in the U.S., but it also ran on Univision in Mexico. And the amount of responses we've gotten from Mexico and throughout the Latin community and even broader has been terrific.

4:10Bob Safian:Any pause? I mean, there are some folks who, including, you know, the president, who kind of pushed back about a Spanish-language halftime show. and you went all in with the ad. Did you have any concerns about that?

4:24Tarang Amin:No, we don't. We're for every eye, lip, and face, and that includes the Latin community that we celebrated, and the spot was really fun. It's kind of elf at its best of really being able to take advantage of the moment and espouse what we had. From the moment that ad ran, we saw an immediate pickup on sales. So it did great both culturally as well as to our sales, and so we're going to continue running it.

4:50Bob Safian:It's been about 10 years since you took Elf Public. Recently announced strong earnings, helped by your billion-dollar acquisition last year of Haley Bieber's Rode brand, expected to bring in, I don't know, 260 or so million dollars in sales this year or more. What's it been like having Haley as a business partner?

5:10Tarang Amin:Well, you know, Haley's terrific. A lot of people know her as a celebrity, but I consider one of the most thoughtful founders I've ever met. Her vision for that brand and what she's been able to do with her partners is just nothing short of spectacular. I mean, this is a business that went from zero to 212 million in net sales in less than three years, direct to consumer only with just 10 products. I'd never seen a business like that. And the level of consumer fervor of the brand is unlike anything I've seen. I mean, people will camp out literally overnight, wait 14 hours in line for an event that Haley's not even at.

5:47Tarang Amin:They're buying into the entire lifestyle of the brand, the entire products. We just launched the brand into Sephora North America a few months ago. The biggest launch Sephora America's ever had. Number one brand in Sephora. We just did the same with Sephora UK. That launch was five times bigger than anything else Sephora UK has ever seen. And this week, we're actually taking the brand to Mecca in Australia and New Zealand.

6:11Bob Safian:Does partnering with Rode, does it sort of have impacts or you have discussions about Elf's brand positioning? I mean, Haley arguably has the cultural cachet, almost of a luxury brand, right? And you're moving into Sephora. But Elf, I mean, you're in$11 ,000 general stores, right? How do you think about that brand positioning for Elf as you move forward?

6:37Tarang Amin:Our vision is to be a different kind of beauty company. The way we do that is we build brands that disrupt norms, shape culture, and connect communities. And even though Rode is entry-level prestige, it's incredibly accessible relative to the quality of the products they have that compare to products that are priced way more. So we love being able to democratize that access to beauty, whether it be Elf, which sells for$7.50 versus Prestige at$30, or whether it be Rode that sells in the upper 20s relative to products that are over$100.

7:11Bob Safian:Affordability is a topic that's much talked about right now. It sounds like that's always been your, I mean, I don't know, 75 % of your product portfolio is$10 or less, right? Like, that's not by chance. And that's not necessarily, in your mind, like down market.

7:30Tarang Amin:No, it's not. In fact, the insight that we had, I mean, I've been CEO for 12 years, was Elf always had really great price products. $1,$2,$3. People couldn't believe that we could do it at those price points. The insight we had, though, was why not target the best products in beauty, put our e.l.f. twist on it, introduce it at incredible value. One of my favorite products right now is we just introduced the soft satin concealer. The only other thing like it in the marketplace is priced at$32. We introduced ours at$5. So it is quite intentional and it is a real advantage of ours.

8:07Bob Safian:I mean, a lot of your products have been sourced from China. You've only had to raise prices a handful of times in the last two decades. But last year was one of them, in part due to Trump's tariffs. With the chaotic tariff environment, does that impact how you approach that? Did you have any sort of wake-up moments over the last year?

8:31Tarang Amin:Well, I'd say it's over the last few years. We've been subject to tariffs since 2019, the first round of Trump tariffs at 25%. Currently, I think our average for this fiscal year is 60 % tariffs. If somebody told me we'd have 60 % tariffs, I wouldn't believe it. But we use the same balance plan we did in 2019. We did take prices up by$1 on our products. We also continue to diversify our supply chain as well as diversify our business. I just talked about the rapid growth we have internationally. which isn't subject to tariffs. So if you look at our manufacturing footprint today, yes, China is still the majority, but we also have operations in the US, in Thailand, Italy, South Korea.

9:15Tarang Amin:So it really is having this well-diversified supply chain to meet the global demand that we have amongst our brands.

9:22Bob Safian:Elf is particularly popular among Gen Z and millennial customers. I know that three quarters of your staff is also in their 20s and 30s. Are there things that you think leaders misunderstand about the younger generations as shoppers, as employees? Well, I think the thing people

9:41Tarang Amin:misunderstand is they tend to try to look at the differences between the cohorts versus what the similarities are. The unifying element across all three of those generations is how do we connect with them? How do we engage with them? I remember a few years ago, my CMO came to me and she said, we have to be on TikTok because that's where Gen Z is. And my response is, well, if that's where Gen Z is, absolutely, we need to be on TikTok. Now, what's TikTok? This was a few years ago. So I'm always learning. I'm always seeing new platforms. We're the first beauty brand with our own channel on Twitch.

10:17Tarang Amin:We also have the number one branded experience right now on Roblox. So we consciously seek out where are they living, what are they doing, how do we engage and entertain them. They also care for what the company stands for. So the fact that we're double certified, cruelty-free by both PETA and Leaping Bunny, the fact that we formulate ELF Clean, which means we don't use 2 ,100 ingredients in our formulations when the FDA only bans, I think, 11 ingredients from cosmetics formulations, the fact that we're vegan. Also, the only beauty company that's Fairtrade certified means a lot to the community that we serve.

10:55Tarang Amin:They care about the values behind a company as much as how great their products are.

10:59Bob Safian:And when you look into sort of where you want the brand to meet your customers, how much are you talking about, you know, AI platforms? I mean, OpenAI is now accepting ads. Are you thinking about moving into those spaces or does that make you wary?

11:18Tarang Amin:No, I'd say we're naturally curious, always looking at different platforms, always looking to get experience. Our first time on TikTok, we had no idea what we were doing, but we were curious and we looked around. We're like, wow, there's a lot of music on TikTok. There's a lot of dancing. Why don't we just commission our own song? So we commissioned our own eyes, lips, face song, did a hashtag challenge. I think that's something like three or four billion views. By the time people were copying us on TikTok, we were already partnering with Simon Cowell, the co-founder of American Idol, to create a rock band on TikTok.

11:55Tarang Amin:And we had a challenge for a makeup artist to accompany the group around the world. That ended up doing 15 billion views. So I'd say we're always curious, always looking for like, how can we disrupt? Where can we go? And I'd say the same is true with AI. Our initial focus on AI is how can it enable our team to do even better? So AI has enabled our community managers to be able to communicate and basically handle 100 % of the DMs that come in. It's allowed automation in areas that, frankly, people don't really want to do over and over and over again. And so we really look at it as an enabler of how can we better connect with the communities we serve.

12:36Bob Safian:And you're not worried that getting closer to AI resources will in any way put off any customers who might be more wary about it?

12:46Tarang Amin:Well, I'd say that's always experience-based. We're going to do some things and we're not afraid. We're always testing and learning. We're not afraid of failing somewhere and basically learning from it and keep moving. People often ask me, what mistakes have you made? And my response is usually, you mean since this morning? We're constantly trying things. We're constantly messing up.

13:09Bob Safian:Do you find consumers are more loyal to brands or to retailers or to influencers these days? How do you look at that ecosystem?

13:21Tarang Amin:Well, I'm a little biased because I spent 35 years in the consumer branding space. So I would say it's always about brands. And brands can be anything. Some influencers have their own brand, and that's a brand people believe in. Retailers have their brand, and that's a brand people believe in. I remember there's a quote from a former CEO of one of the big consumer companies that said, there's no such thing as a tired brand. There might be tired brand managers, but not a tired brand. And so it's our duty to continue to refresh and make sure that brand has meaning for people.

13:56Bob Safian:And whether your brand is in Dollar General or Sephora, which you mentioned, or TikTok shop, all across, you're modulating it differently in each of those channels based on those brands? Or are you like, no, we're ourselves wherever you find us? Well, it's a combination.

14:16Tarang Amin:Elf is always Elf. I don't care if you find it at Dollar General or at Sephora. Elf is Elf. But then we will figure out what each retailer wants and how they win. A great example is Dollar General. We surprised a lot of people when we went to Dollar General. But the thesis was really clear. Many of their stores are in rural areas with less than 20 ,000 people where you have to drive 20 miles for your beauty products. So we found them to be beauty deserts. And we said, you know, if we introduce Elf, we can serve a population that isn't currently being served. Not only was it the most successful launch Dollar General has ever seen, but 60 % of the people who buy Elf at Dollar General have never bought cosmetics at Dollar General.

14:57Tarang Amin:So we're happy to be in Dollar General. We're happy to be in Sephora. We're the number one brand by far at Target, which was our first customer. I think we have over 20 % of their entire category. We also find us at Ulta Beauty, at Walmart. Amazon's one of the fastest growing customers we have. We tend to be agnostic in terms of where someone buys or experiences Elf. We wanted to make sure that we're accessible, though.

15:21Bob Safian:So you just launched your first fragrance in partnership with H &M. This is a new area, I guess, where you could have more accessibility. But also trends move so fast today. You know, you're talking about TikTok at speed. When you make a choice, like fragrances or really any new product, how do you know what's a long-term commitment? Or is everything sort of, as you say, I could decide by the end of the day that it was a mistake?

15:53Tarang Amin:I remember the days where you used to try to come up with a concept, make a product, make up a whole bunch of it, and hope people came to buy it. That's not our model. Our model is going to our community and seeing what they want. And one of the things my CMO does is she terrorizes me by taking me on TikTok Live every once in a while. She's not even very nice about it. She'll say, all right, you got the big boss here. Tell them what you want. And our community isn't shy. I remember last year I went on one of those TikTok Lives and, you know, looking at the chat and the community was like, hey, there's this prestige bronzing drop.

16:28Tarang Amin:We love it, but we can't afford 38 bucks. Help us out. And then it'd be like 20 more chats after that. Like, no, no, boss, man, we want them now. Like I said, I leave that call a little traumatized. I'll call my head of R &D and tell her, like, please tell me. We have a three-year pipeline. We have bronzing drops on the pipeline. She says, we have it. I'm like, oh, thank God. When are they coming out? She's like 18 months. And I'm like, oh, no, I cannot get yelled by our community on something they want. We introduced them six months later. So our model is one where we already know there's demand because our community is asking for it.

17:03Tarang Amin:And so fragrances were something you were hearing from the community? Our community has been asking us forever of, when am I going to see an L fragrance? Now, we don't have expertise in fragrance, so this is a great opportunity to partner with H &M. So we did a limited time drop of three high-end fragrances, and the response has been terrific. And so we'll take those signals and say, okay, should we be in the fragrance business longer term? Let's see how it does. And we'll take that and we'll keep moving.

17:31Bob Safian:Your career is in consumer products and brands writ large, but it sounds like you've had to do a lot of study yourself about the specific areas of beauty to know what's different and what can move the needle.

17:46Tarang Amin:I would say nobody ever accused me of being a makeup enthusiast as a 60-year-old male. But I have an entire team of passionate enthusiasts. And I do a product review every two weeks. And I make it an open ticket. Some people are horrified. Wait a minute. These are our nuclear codes. How are you letting anyone in the company who wants to be there? I'm like, I'm letting them in. First of all, if anybody beats us with one of our ideas and we're too slow, I want to make sure we keep our elf speed. But second of all, I want the insights that come from our team that represents our community. So I go to that product review and all I'm doing is asking open-ended questions.

18:24Tarang Amin:Tell me what's so great about this concealer. Like, hey, why do we got to charge$5? Why can't I charge a little bit more? Why can't I charge$7 for it? You just told me the prestige item was$32. And the number of responses I get, the level of engagement I get, frankly, makes me smarter every day.