Celebrity Beauty Brands Aren’t Guaranteed Money Makers Anymore

Rihanna’s pause during the Super Bowl halftime show to blot her nose with a $36 powder from Fenty Beauty was a powerful nod to the fact that her makeup company — not her music — has made her one of the richest female performers ever. Fenty’s worth $2.8 billion, according to a 2021 Forbes estimate. Dozens of celebrities have tried to replicate her success, but very few have come close.

More than 50 celebrities and influencers — from singer Lady Gaga to tennis phenom Naomi Osaka — have launched cosmetic, haircare and skincare brands in just the last three years, according to a Bloomberg News tally. The US beauty industry is particularly alluring due to high operating margins and the daily-use nature of many products. Like other parts of the consumer sector, the boom was also fueled by cheap digital advertising and all the money sloshing around the economy due to low interest rates.

But rates have surged, fears of a recession linger and consumer preferences have changed. Post-pandemic shoppers are more interested in skincare than makeup. They’re also more discerning and increasingly considering a brand’s quality and authenticity — or the lack thereof — thanks to the flood of product reviews on platforms like TikTok and Reddit. A celebrity’s backing doesn’t matter to a majority of female shoppers, according to a Bloomberg Intelligence survey of 650 cosmetics and skincare users in January.

Companies are reeling. In January alone, Kristen Bell shut down her CBD skincare line Happy Dance; Sephora stopped selling the brands of TikTok celebrities Addison Rae and Hyram Yarbro; and Ariana Grande paid $15 million to buy the physical assets of her company, r.e.m. beauty, from Forma Brands, whose big bet on celebrity influencers through Morphe Cosmetics soured and pushed it into distress.

In 2020, more than a third of Morphe Cosmetics revenue came from brands associated with celebrities and famous YouTube beauty influencers. The eyeshadow retailer severed ties with James Charles and Jeffree Star due to inappropriate online conduct. Attempts to shore up the bottom line with Grande’s r.e.m. beauty and other influencer collaborations ultimately proved futile when Forma filed for Chapter 11 bankruptcy on January 12.

Many celebrity-backed brands are trying to reposition themselves as beauty trends have shifted during the pandemic to favor a so-called “clean girl aesthetic,” which has consumers trading in lipsticks and eyeshadow palettes for elaborate skincare routines.

Even established pillars of the industry are seeing the tide turn. Estée Lauder reported that skincare brought in more than twice as much revenue as makeup in 2022.

Some celebrities are going to great lengths to adapt. Shortly after Kim Kardashian filed for divorce from the rapper formerly known as Kanye West in 2021, she closed down her makeup company KKW Beauty, which thrived on the 2010s trend of a heavily contoured face. In June 2022, she introduced her skincare line SKKN.

Her younger sister, Kylie Jenner, similarly launched Kylie Skin in 2019, four years after Kylie Cosmetics lip kits took off. Even still, direct-to-consumer sales through the website for both Kylie Cosmetics and Kylie Skin are down about 80% in the US from the beginning of 2017, according to Bloomberg Second Measure data. A representative from Coty Inc., which owns 51% of the company, says the decline is due to their focus on in-store sales at Ulta and Macy’s, where Kylie products are carried, as well as expansion into international markets.

Deciem Inc., the incubator behind The Ordinary skincare brand, has leaned into the science behind beauty products, with simple packaging and stripped-down marketing. In an unflinching Instagram post, Deciem drew a sharp distinction between their company and those led by celebrities, calling into question whether actors, singers, athletes and influencers possess the technical skill to formulate effective products.

“Our scientists aren’t celebrities. And (most) celebrities aren’t scientists or beauty experts,” the company wrote on its Instagram profile.

The goal for many of these brands, like other startups, is to get acquired by a larger company for a big payout. However, Coty’s $600 million purchase of a majority stake in Kylie Cosmetics in 2019 is the only celebrity beauty brand acquisition in North America since 1994, according to data compiled by Bloomberg. Investors have grown skeptical that new celebrity brands will pay off, given how saturated the market is.

“I’ve honestly looked at some brands that were being created in the last year where my advice to the creators was, ‘Don’t name that celebrity as a founder or a co-founder,’” said Rich Gersten, co-founder of True Beauty Ventures, a personal care and beauty focused investment firm.

Big companies are scooping up skincare brands as a way of acquiring innovation and adding younger customers — just not the brands tied to stars: Estée Lauder bought Deciem for $1 billion in 2021; Unilever acquired Tatcha LLC, a Japanese skincare company, for $500 million in 2019; and L’Oreal purchased sustainability-focused Youth to the People Inc. for an undisclosed sum in 2021.

Faced with dwindling interest from traditional venture capital funds, celebs are relying more heavily on beauty incubators to create their brands. At least 22 of the celebrity beauty companies identified by Bloomberg were brought to market this way. Incubators like SOS Beauty, which manages brands like Summer Fridays, provide a vast array of retail connections, access to capital and expertise on product development. While each partnership is different, the incubators often hold an equity stake.

“We’re either 50-50 partners, or a version of that,” according to SOS co-founder, Dustin Cash.

The brands doing well with investors, retailers and consumers are those in which the celebrity projects authenticity and the products perform well at a price point that matches the quality.

“The more invested and more hands-on the celebrity is, the better the outcome,” said Cash. “The thing that everybody is looking for these days is authenticity.”

A Bloomberg News sentiment analysis — which categorizes text based on whether the content is generally more positive or negative — of the popular subreddit r/BeautyGuruChatter, with more than a million members, found Drew Barrymore’s Flower Beauty and Selena Gomez’s Rare Beauty had the highest proportions of positive comments on posts about the brands, out of twelve celebrity brands analyzed. Brad Pitt’s Le Domaine and Grande’s r.e.m. beauty scored the lowest.

“It just feels like [Selena Gomez] connects with the products and really promotes them and has this love for her brand where I’m like, ‘Okay, this feels really authentic,’” says Sadie Simonett, 26, while shopping at cosmetics brand Glossier’s new Manhattan store.

With each new launch, there’s a growing sense of exasperation within the beauty industry. When Pitt, the Oscar-winning actor, announced his new skincare line last year, a group of six beauty entrepreneurs lambasted the 58-year-old actor in an open letter on Notanothercelebritybrand.com, which has since gone offline.

“You, dear celebrities, have NO experience in this industry,” the entrepreneurs wrote to Pitt. “If this industry is an industry that you truly want to be a part of, then invest in or partner with us.”

That’s exactly what some other stars are doing. Tennis player Maria Sharapova joined sunscreen company Supergoop! as an investor in 2014, according to a representative for the company. Supergoop’s founder, Holly Thaggard, said when Sharapova joined that the star wouldn’t be the face of the brand but would help fund product development and serve as a “megaphone” to reach a larger audience. The company was valued at $700 million when Blackstone bought it in 2021, and the following year it received more funding from actor Hugh Jackman and golfer Michelle Wie West, among other famous names.

Some investors agree with a Sharapova-like approach.

“Have a celebrity post all day long as a consumer of something, but as soon as you call it ‘founded by a celebrity’ — for us it loses interest,” said True Beauty Venture’s Gersten. “What we’ve seen with a lot of the celebrity brands is the bullseye on your back.”