Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Celebrities are no longer content to simply be a spokesperson for a brand. They want to own it, too. With social media allowing stars to connect directly with consumers, everyone in Hollywood seems to be hawking booze, snacks, make-up, shapewear or nappies.
Hailey Bieber, fashion model, influencer and wife of the pop star Justin Bieber, is among the few that have managed to create a side hustle and secure a 10-figure exit from it. She has sold her beauty brand rhode — famed for pushing the “glazed-doughnut” dewy skin trend — to drugstore make-up staple e.l.f. Beauty for up to $1bn. It is an eye-popping sum for a company that was launched three years ago on the back of two skincare products and a lip gloss.
Bieber’s success highlights the two-front battle that global consumer brands are fighting. American shoppers are trading down to cheaper private labels for everything from pasta to toilet paper. But at the same time they are attracted to higher-priced items from upstart brands. Companies that sell mid-price brand name products are losing out. Procter & Gamble, Colgate-Palmolive, Kraft Heinz and WK Kellogg have all reported declining sales volumes in their most recent quarter.
Insurgent brands — fast-growing upstarts with at least $25mn in annual revenue — accounted for a disproportionate share of the growth in consumer goods last year. They took 27 per cent of the growth in food, more than 32 per cent of growth in non-alcoholic beverages, and 45 per cent of the growth in personal care, according to Bain & Co, the consultancy that coined the insurgent label.
This makes them a fertile hunting ground for larger companies looking to buy their way to expansion. While deals such as T-Mobile US’s acquisition of actor Ryan Reynold’s Mint Mobile for $1.3bn make for good headlines, most big acquisitions involve non-celebrity upstart brands. Think Rao’s pasta sauce and Alani Nu energy drinks.
In the case of rhode, which has built a direct-to-consumer business with $212mn a year of revenue, e.l.f.’s swoop is as much as about tapping into the brand’s loyal following among Generation Alpha — those born after 2010 — as it is about diversifying its own supply chain away from China.
In an industry where “it” brands often fade as quickly as they appear, a concentrated bet on a celebrity-backed brand is not without its risks. Adidas and Gap had to terminate their partnership with Kanye West after the rapper now known as Ye made antisemitic comments. The value of Jessica Alba’s Honest Co. has shrunk from more than $2bn following an IPO in 2021 to under $500mn. But if the consumer giants can’t incubate an insurgent themselves, they have little choice but to shop for them at high prices.
