What Happened to Beauty’s Billion-Dollar Brands?

0:07Hello and welcome to The Debrief from the Business of Fashion where each week we dig into our most popular BOF professional stories with the journalists who bring them to life. I'm senior correspondent Sheena Butler-Young. And I'm executive editor Brian Baskin. Today we're revisiting the billion dollar beauty brands that took social media by storm and changed the way we shop for makeup, from Glossier to Huda Beauty and Pat McGrath Labs. Many of these brands seemed destined to take their place alongside MAC, Estee Lauder, and other giants. But now some are facing setbacks that they didn't see coming.

0:39And to help us unpack this, we're joined by BOF's beauty correspondent, Daniela Morissini. Daniela has been following these brands closely, breaking the news recently that Anastasia Beverly Hills' main investor wants out of a brand it once valued at as much as$3 billion. Hi, Daniela. Welcome to the Debrief podcast. Thanks for having me back. So Daniela, can you walk us through the meteoric rise of brands like Anastasia Beverly Hills, Glossier and Morph. They were all such disruptors in the 2010s. What did the beauty landscape look like at the time and why were these brands so effective in snapping up market share and at times even carving out new market share?

1:19So these were some of the first brands in the beauty industry that really benefited from the kind of the direct to consumer boom that we saw across fashion and we saw across lifestyle and other segments. They were really quick on social media. They were quick to use it as a marketing tool, as a recruitment tool, as a community building tool. You know, these are the kinds of brands that are always talking about community. And on top of that, really quick on building out a good e-commerce presence. And I think prior to that, nobody really thought about indie beauty brands. It wasn't really a conversation that people were having.

1:48Of course, that's not to say every single brand was owned by Estee Lauder or L 'Oreal or something like that. But social media and that kind of perfect storm of YouTube and Instagram and e-commerce, all of that created this really fertile ground for brands to actually breakthrough and come to market and then scale very, very quickly. There were a handful of independent brands, you know, here and there, but generally speaking, it was really, really dominated by, you know, the big conglomerates and their brands at their level of scale. So I think there was beginning to build a little bit of a desire for founder led brands, you know, for brands that had a little bit more personality brands that could kind of do for beauty, what people were starting to see maybe in fashion or in other areas of, you know, lifestyle brands or tech brands, even where there was more of an emphasis on the founder and this sort of personal journey aspect to brand building.

2:37And we're kind of lumping these brands together, but they're actually in very different places in the beauty market, different trends, different categories even, right? Absolutely. I think Anastasia Beverly Hills was really known for this high glamour, very Maximus look. I mean, Sheena, you'll probably remember the Instagram brow. It was a real defined look of the era and they were known for these very dramatic brows, very dramatic kind of cut crease makeup that's a kind of smoky eye on steroids. I think that's the best way I can describe it and contouring and things like that. Whereas for example, yeah, a glossier is much more about your skin, but better.

3:10No makeup, makeup, you know, healthy skin. I remember the Kardashian era of Instagram makeup. I associate that with Anastasia Beverly Hills. I don't know if it's correct, but I feel like that was the look very full on glam. Oh, absolutely. And the founder, Anastasia Sora, was really good friends with the Kardashian. She has a high end brow salon. I believe it's in Los Angeles. And they were definitely people that were coming in and having treatments with her. So yeah, that's a good comparison. So then why does a drunk elephant, which also came up in this period, is another one of these self-started indie brands, they get a nine-figure payout from a huge international beauty conglomerate.

3:46And these other brands seem to miss their window or a couple have even had financial trouble. I think drunk elephant is actually such a good example of a brand from that era that's had a different fate because I think what Drunk Elephant did differently is they really worked with Sephora. A lot of the other brands really wanted to build up their D2C presence. I remember at the time that Anastasia got that really big private equity investment, she told Business of Fashion at the time that she wanted to use some of the funding raised to build out her D2C presence. Drunk Elephant, on the other hand, really worked in step with Sephora and Sephora helped grow the brand and they really invested in their in-store presence.

4:23I think that helped them reach a lot more consumers a lot more quickly. And it helped kind of demystify and explain the brand a little bit, right? If the retailer's working with you on some beautiful shelf display and they're giving you exclusive events and pop-ups and promotions, it's much easier to get the brand across to consumers and get it understood. But this was a time when retailers were seen as a bit unsexy, right? Everybody wanted to be a D2C brand. Danielle, can you walk us through a few of those moments where a brand like Glossier or Amorph had their big billion dollar moment, like the moment that they became the brand of that era?

4:55What did it look like? Well, I can give you a personal example, actually on Anastasia Beverly Hills. So I remember visiting Vancouver in Canada, and this would have been, I'm gonna say 2015. So right at the height of the brands kind of really starting to pick up steam. And I'm from the UK, and we didn't have the brand in the UK at that point, or if we did, it was online only. You couldn't go in store and try it. And I remember the first thing that I wanted to do when I got to Vancouver was go to Sephora and try the dip route and just try the liquid lipsticks and try everything on my hand. And at that point, I was working as a beauty assistant in a magazine.

5:28I was getting products all the time. They were in the office. You could play with them. But I really, really just wanted to try this one. Such was the grip that it had on me. Glossier was like that for me too. I feel like you were either a Anastasia Beverly Hills full glam or you were a Glossier girly and you wanted to be natural and embrace your beauty that was natural to you and not adding on a lot. Am I right about that? Was that Glossier's thing? I think so. I mean, to be honest, I wanted to try them all. And I think to come back to your original point about when they actually really hit this inflection point, I think for Glossier is when they started getting meme accounts made about them, right?

6:01These were brands that were having entire meme pages dedicated to them. There was people at home creating content, you know, riffing on the brand. There's like the Boyfriends of Glossier account where people share pictures of, you know, bored looking husbands and boyfriends in the stores. And, you know, these just goes to show just how much these brands were actually starting to tap into a wider cultural zeitgeist, you know, aside from just beauty shoppers. I feel like brands, they recognize that, that this isn't going to last forever. You know, the meme accounts will get stale and people move on to the next one.

6:29And I'm sure they didn't take this lying down. I mean, tell us, what did Anastasia Beverly Hills try to do to stay fresh? Because I'm sure they must have seen that this full glam moment wasn't going to last forever. So I think they've done a few different things. One thing that historically had really worked for them was social media influences, right? The gram was growing at sort of a 64 % growth rate between 2014 and 2017. And they were using Instagram mainly for that. And that was a really tested formula for them. So I think they continued to invest in that. I think they continued to try and track down new influencers to work with and try and invest in big, splashy events.

7:04I mean, I'm not sure that they were doing press trips in the traditional way, but they were definitely doing a lot of events and gifting and things like that. As time went on and the trends evolved, they definitely did continue to evolve their product offering and put out some kind of lighter and fresher products. But I think by the time they started to do that, there had already been so many indie brands that had come in and were starting to offer a similar offering that it was getting harder to stand out. I imagine it also must be very difficult if you're known for one thing to try to pivot to something else or expand.

7:34You worry you're going to cannibalize that hero product you have. They're still doing plenty of business with the 2012 brow that they were offering. So why move into this new uncertain market? I think the brows is such a central part of it because of course the brand started you know being spun out of this brow salon it's kind of hard to if you weren't interested in beauty at the time to just how distinctive this brow look was but of course all trends changed and it very quickly gave way to this much more they call it a laminated brow it's like a very fluffy much more natural looking brow I don't think they were perhaps fast enough getting some products out that would give you that look, that softer, fluffier look versus their super high glamour.

8:13It's kind of like a graduated ombre effect. What about Morph as a brand? Like they seem to, so we talked about Glossier having a little more of a fresh face look, Anastasia Beverly Hills being full-on glam, and then Morph, what happened there? What was their big selling point and how did that wane? So this was a brand, again, the influencer thing really comes into it, but they did lots and lots of collaborations with influencers. So you could get the Sheena Butler Young palette or the Brian basket mascara or something like that. That was a big seller. I remember that one. Yeah, huge, huge, huge, huge.

8:45And it was a more affordable price point, if I remember correctly. They did also open up their own stores as well. So they had a bit of a physical presence as well. And this is just a really another good example of the dangers of influencer marketing, because they did a few collaborations with some high profile influencers. And unfortunately, those influencers had scandals, which kind of dented the popularity of the brand, which is always a little bit difficult. But I think the other thing about influencer marketing from this era to remember is to quote the great philosopher Fat Joe, yesterday's price is not today's price.

9:18And influencers, what they want to be paid for collaborations, what they want to be paid for posts is always going up. And the saturation of the influencers is always increasing. There's always more of them. It's harder to know who to pick to actually reach your audience. So we talk about the influencer saturation, but there's also the beauty brand saturation that's happening. It's very hard to pivot when every time a new brand comes out, they seem to have captured something else that you could pivot to, right? Yeah, absolutely. And to be clear, it wasn't just indie brands that were having these kinds of issues.

9:51I think another one from that era is Becca Cosmetics, which Estee Lauder bought and ended up shuttering it, I think, sort of within four or five years. This was another influencer, not founded, but led brand. They had, you know, a lot of those kinds of famous faces attached to it. And actually Estee Lauder launched another brand called the Estee Edit. And this was fronted by Kendall Jenner. And this was meant to be their kind of more indie feeling brand, even though it wasn't really an indie brand. And again, they ended up shuttering that a few years after as well. Is this just sort of the circle of life for beauty brands?

10:23I mean, how many of any origin last beyond the trend cycle that made them big? I mean, that is the multi-billion dollar question. I think there are some that are doing better than others. And it sounds like such a cliche to say it, but it's the ones that are maybe growing a little bit slower. They're not having this initial huge rush and then a massive drop off. Because Sheena's right, there are just so many brands now. And so many of them, because of what we were talking about earlier, the ability to go to market very quickly, find an audience very quickly. you know, those barriers to entries have been removed.

10:53You can get a critical mass of consumers of fans and you can build up an aesthetic for your brand quite quickly. Making it stick is more difficult, especially because we're all just so spoiled for choice. You know, you go on TikTok and there's 50 brands fighting for your attention. You go on Sephora, there's another 50, right? Yeah, it's funny. We just ran a story about denim brands from the 2010s, completely different category, fashion, not beauty. But I mean, the parallels are so similar here where, you know, jeans kind of come and go like the silhouettes and the brands that everyone's into.

11:24But I mean, very similar to what you just described, the ones that kind of took this slow and steady approach and said, hey, we're going to gradually pivot to other categories, open a few stores, but we're not going to go insane and blow everything on marketing right off the bat and put all of our faith into one trend. Those are the ones that are still around and the others kind of flamed out like we've seen with some of the beauty brands we're talking about. Yeah. Yeah. And I think also, you know, this first crop of brands we're talking about, they really created this idea of the founder led brand in beauty.

11:51You know, this idea of, if not an actual famous founder, a founder who could be super charismatic and ideally super photogenic as well. Right. So I think people were very interested in the founders of all these different brands. People wanted to know about their personal stories. You know, it was the girl boss era, right? You know, there was a lot of interest in not just the brand, not just the company, not just the products, but the individual founder as well. So I think there is also possibly a degree to which the brands that had a founder, the brand was maybe not built too much on the founder or the founder had, you know, expertise as a makeup artist or some other kind of professional qualifications helped bear out the brand and add a little bit more credence to it.

12:28So I want to talk a little bit about what course correction can look like for a brand. So Glossier has done a few things. One thing I think is interesting is that it's leaned very heavily into social impact. So they have this grant program for Black founders and they've doubled down on it this year, like expanding the categories of people that can apply in the wake of so much pushback against diversity, even at the legal level. I think that's a good example of finding a way to resonate with your customers, a new way to resonate. And I think that's resulted in people wanting to see Glossier stick around.

13:01What do you say, Danielle, around course correction, something like slowing down or maybe leaning into being socially impact driven. Is that helpful? For sure. And I think another thing that Glossier did early on that helped them, even when there's ebbs and flows of trend cycles, is they got a physical presence really quickly. They didn't just exist online. So even though they were very much led by digital culture, I mean, I can't remember how quickly they opened the first New York pop-up or store after, you know debuting the brand but they were very present in bricks and mortar and in real life quite quickly and I think that helps kind of enmesh them and establish themselves with more the kind of quote-unquote middle American consumer just like a general shopper versus someone who's like a die-hard beauty fan another thing I will say about Glossier is on Friday last week I was on a Christmas shopping day and I went into the Glossier store in Covent Garden just out of interest.

13:56It was rammed, wall to wall. It was absolutely rammed. And with kids as well, with teenagers and some kind of harried looking parents as well. But that store was absolutely packed out. And that was really interesting to me that it was still so full of young people, many of whom would have been so young when the brand launched that they probably would have been in, I don't know, middle schools or even younger. But in terms of the actual course correction thing, I think they kind of went back to their why. They had to give up a little bit of the, okay, We're not going to be direct to consumer anymore.

14:26We are going to go into Sephora. We're going to go into Space NK. We're going to let go of that because that's not serving us anymore. But we are offering something that people do really want still, which is we're doing these kind of skincare and makeup hybrids that's come back in fashion, right? So they were kind of able to let go of something that wasn't working and then really go all in on something else that was working. I think that's really the key here is Glossier really was one of the poster children for that DTC era of we're going to do it alone and we don't need wholesale and cut out the evil middleman.

14:57And they did a hard pivot and said, you know what, I guess there's a reason all these brands are in Sephora. And I mean, in the end, that's probably what saved the company, frankly. I mean, they were in a pretty dark place a couple of years ago. For sure. And also the fact that, you know, they only ever had one perfume, right? And the marketing around it, it was almost like they were only ever going to have one. And then they were like, no, people like the perfume. They might buy another one, they might buy a different scent, we're going to release more perfume. And I think that by giving up on the D2C only thing, it probably allowed them to take a harder look at their product assortment and build out more products that people were really interested in.

15:31And also don't forget just like how fun it is to go in a Glossier store if you're their target customer, might not be fun for everybody, but the fact that they create these selfie moments and they make it super experiential, you know, these are things that we know that people are really looking for. Yeah. And it's, I was worried. I remember when I first went into Sephora right after they launched there, I was a little worried for them because you don't get that experience from a rack of products right next to a bunch of other similar kind of looking products. But I think there is a way to recreate that excitement in wholesale.

15:59And we've certainly seen that with something like Drunk Elephant, which I mean, that's their whole thing is this brightly colored displays. My nine-year-old daughter, she's drawn to it like there's a magnetic force and they don't have their own store to sell that. They can do that within the context of a Sephora. Yeah, and also the Sephora can be the replan, right? And the dedicated Glossier store can be the discovery. It's the same customer at two different points on the journey. You know, there's another an interesting attempt at evolution or rebranding or relaunching and Urban Decay with their Naked Relaunch, that iconic palette from the early 2000s, I want to say.

16:34Why is relaunching a retro product a good idea? I have to admit this one. I love that palette, but I was a little confused of why that might work for them. What does it do for a brand like Urban Decay and what are the limitations of reaching back into the vault? Well, first of all, it's a pretty surefire way to get some press, right? Like when they got rid of this palette, it was such a big deal that they hosted a funeral for it on Instagram and they had Nicole Richie read a eulogy. Like it was huge. So I think they knew they would get a bit of buzz. And if you get a little bit of buzz, it might be enough to get people to stick around and kind of revisit the brand.

17:10Right. And I remember when I was interviewing with their executives about it, something she said to me that really stuck with me was the excitement that this has caused even just within the company has been great because it's got basically all of the people who work here excited and fired up and everybody's kind of reconnecting with it a little bit which I thought was interesting I think otherwise it's a kind of tongue-in-cheek way to be like hey we're still here right like here's this product you love that made us really famous they don't want to bring it back permanently right because that would make them seem dated again but by doing it as a limited edition you can be like this is something for the fans like if you go on reddit and you search for urban decay naked ever since they got rid of it there's people being like i bought 10 of them they are still in my garage like this is the greatest palette you know there was a real love for it like if you try and do that with a product that nobody's talking about it's probably not going to have the desired effect but they did have people who really loved it and they said their i can't remember the exact percentage but their average basket size has increased a bit since bringing the palette back so people are maybe adding a few other things to their cart as well we'll be back with more of the debrief right after this

18:22so looking at today's landscape of beauty disruptors who would you say are today's versions of these breakout brands from the 2010s i mean the obvious ones that come to mind are of course road so hayley bieber's line and rare beauty selena gomez's line these are two brands that definitely have that founder led you know the celebrity founder angle but have definitely managed to get plaudits also for the product quality. There's so much hype around, you know, their in-store experiences, whether it's a pop-up or some other kind of activation. I think another one that has really proven itself is Summer Fridays.

18:54I think people saw this as, you know, oh, it's just another influencer-backed brand, but they have actually grown really well. You know, they had a majority investment from TSG earlier this year. I would also put kind of on my watch list Bioma, which is kind of similar to Drunk Elephant in terms of how it looks. It's got lots of brightly colored packaging. This is a skincare brand, but it's much more affordable. I would also kind of call out something like Naturium, which is another kind of influencer-led brand. But again, it had a successful exit. It was bought by e.l.f. And it did a really good job of making, I don't know, kind of occupying a skincare space that was both very playful and fun, but still offered serious skincare, kind of quote unquote, for the customer who was looking for that.

19:35And then, I don't know, some much smaller brands, but exciting brands, you know, these brands, especially the influencer-led ones doing, that is going to hopefully help them avoid the pitfalls of the last generation? So let's take Summer Fridays, for example, because that is one that had a transaction this year. They were very slow and steady with their product assortment. So the first product they launched with was this mask called Jetlag Mask. And the idea was you use it when you're so tired from all the jet setting you've been doing. That makes sense from two influencers because we know that they're always on press trips and they're always jetting around.

20:09So that as a product made sense. It was a product anyone with pretty much any skin type could use. And then from there, they were very intentional. You know, they did not launch 20 products overnight. And I think something that was a real boon for them is they saw this trend for like lip balms and butters and like lighter lip products. They saw that coming and they got two ranges out. There's like a lip oil and a tinted lip balm. Just a really well-timed launch that absolutely. I mean, again, I was in Space NK a few months ago and I was sort of like, clotheslined by two 12-year-olds trying to get to the lip balms at the checkout.

20:44These are such popular products. So is it innovation? Is that one of the biggest factors in keeping a brand relevant for the long term? Is it staying innovative? And then how do you figure out how to do that in such a crowded space? I think product innovation is obviously very important, especially if it's sort of like a textural thing or maybe a scent thing, something that you're offering that can have a performance quality that nobody else can offer or can't offer in the same way. Otherwise, I think it's around having some kind of clear aesthetic that you can be associated with that is not too exclusive.

21:14But also you need to be known for the quality of your products as well, because that is what will bear you out through those kind of leaner times where maybe the trend cycle is not so much in your favor. If you are known for having quality, lasting value for money, whether it's$5 or$50, however much your product costs. But also, you know, just those little touches we were talking about with Glossier, is it the store experience? Is it the scent of their product? Is it the packaging? All those little extra things that make it feel a touch more special. And I think it's having it feel organic when you're getting into a new category or launching a new product.

21:46I mean, Glossier, you know, one of the reasons they were in such a dire spot a couple of years ago was they launched Glossier Play, this sub-grant that people just didn't think made sense. You know, if you're that core Glossier customer, getting something that was sort of antithetical to that didn't make a lot of sense. And now, as you pointed out, Zaniella, they're doing really great with fragrance, which was a much, much clearer evolution from the core line that they had. Yeah. And I think Summer Fridays, again, is such a good example of this because when they've experimented into more kind of cosmetic type products, because they're a skincare brand, it's been very gradually.

22:18So like they have a tinted sunscreen, this lip balm that they offer is, you know, technically it's a balm, not a lipstick, right? So those are kinds of things that feel intentional and feel like a natural extension of their core offering. All of these brands are probably doing it, but there's probably significant value in market research, not just responding to trend, but actually knowing your core customer and where you want to go. Yeah. And also knowing where they're shopping, you know, because as much as being a direct-to-consumer brand is still a very attractive thing, of course, you're protecting your margins a lot more if you can get everybody to come to you directly.

22:49Knowing where your customer is and where they want to shop and what they want out of the retail experience, I think, can make a really big difference. And also don't forget the retailers can give you a lot of insights about, you know, there may be coming in to buy one thing and then they're actually adding another thing to their basket because they saw this other thing, right? Like all these like granular insights that you may not get otherwise. And also knowing what's performing, you know, what other brands, you know, what are your competitors doing in that space can help you level up a little bit.

23:13Just to tie things off here. I mean, what would we say are the key lessons to learn from that last generation with the very mixed track record that maybe some of these up and coming brands that you were talking about need to keep front and center as they're looking to scale in the years ahead. I will start, I think I will maintain that wholesale is the key differentiator here. I think this idea of going it alone is completely dead. If even Glossier is wholeheartedly embracing Sephora, everyone has to do it. And that's just part of launching a brand 101 at this point. I would say do not lean too heavily on influencers.

23:51I think being so trend reactive is the cause of death and many a brand tombstone, not to be morbid, but I think that's a big pitfall to avoid. Daniela? I think it's something that's very difficult to do, but you're probably going to be as a brand getting your most attention, both from consumers and investors or acquirers during your fat years. And you need to be ready for the lean years because they're going to come. And I think a lot of the businesses we've looked at, there was a sort of an assumption that the business would always continue to grow at the rate it was or that the digital marketing they were using would always remain cheap and that the influence of partners would always remain loyal.

24:28So I think it's about having a little bit of forward thinking and agility, because I do understand that when the D2C boom happened, it probably did feel like a revolution in so far as, wow, people are never going to go into these stores again. And of course, that turned out to be wrong. So I think there's a little bit of hedging that has to go on and assuming that no matter how well things are going, there will be a competitor snapping your heels around the corner. There will be some kind of fluctuation or reversal in the trend and just making sure that you're keeping your strategy and your product assortment broad enough to weather that.

25:02Daniela, thank you so much for joining us and sharing these insights on what's happening with these billion dollar beauty brands. Thank you for having me. Be sure to check out Daniela's articles, how Anastasia Beverly Hills lost its footing and Urban Decay's naked relaunch is a hit. Now comes the hard part. Available at businessoffashion.com. You've been listening to The Debrief, produced by Olivia Davies, edited and mixed by Eric Bria. I'm Sheena Butler-Young. And I'm Brian Baskin, and we'll be back next week with another episode. Follow us wherever you get your podcasts.