Rebrand, sell or close?
Those are the options facing the growing number of struggling beauty brands, whose challenges were exacerbated by a year without social functions or offices, eliminating hope for the quick bounce back the industry longed for.
Recently, a few have chosen the final option. In late February, The Estée Lauder Companies announced it would shutter Becca, a makeup brand it acquired just five years ago. Then this week, Lauder said it would close Rodin Olio Lusso, the makeup, skin and body care line best known for its facial oils that it acquired in 2014. Though its website will close on April 19, the brand will live on in some small way through limited collaborations with Jo Malone London that will roll out in the autumn.
For strategic groups, closing a company should be a last resort, only after an owner determines that it would be too expensive to refresh it or if it’s part of a larger portfolio where another brand could sell to the same demographic with legacy positioning and bigger revenues.
“It’s less about how the brand is performing at that very moment and more, ‘Where do we see it going that we can’t accomplish with other brands in our portfolio?’” said Katie Thomas, head of the market research firm Kearney Consumer Institute.
Such was the case for Becca. Lauder also owns Too Faced – a sexy color line that’s neither founder or influencer-dependent. Best known for its “Better than Sex” mascara, the brand accomplishes exactly what Becca was meant to: appeal to Gen Z and younger Millennials in a way that Lauder-owned brands Clinique, the namesake Estée Lauder brand and La Mer don’t.
Thomas noted that Becca’s size – it’s far smaller than other Lauder labels like Bobbi Brown and MAC – also probably played into the decision to close it. The same goes for Rodin Olio Lusso. But closing instead of selling may signal that Lauder sees some worth in the brands.
“Perhaps Lauder chose to close down Becca and Rodin because they saw value in some of the product formulas that could be repurposed into other Lauder brands — as opposed to selling them off for nominal value,” said Gersten, adding that not selling eliminates potential competition.
Market fit can also be an indicator. In March, Shiseido said it would shutter skin care brand Waso’s business in Japan, where the conglomerate is headquartered, four years after a splashy launch. Designed to attract Gen-Z consumers, the entry-level prestige skin care line has already stopped brick-and-mortar distribution in Japan, and e-commerce operations will wind down by the end of 2021, though it will live on in other markets.
A Shiseido spokesperson said that while Waso “has been very well accepted” with “significant success” in Europe, the Middle East and Africa and the US, it failed to gain the same traction in the Japanese market. Because of the success it has seen outside of Japan, Shiseido is zeroing its focus on Waso there, with plans to debut a refresh later this year to even better align with western beauty values, emphasising environmental consciousness and “full transparency.”
“It just might make sense elsewhere,” Thomas said. “Not every brand is expected to be a global brand, not every brand can extend overly far. It’s the ability to admit just that.”
Still, the fact that a multi-billion-dollar beauty behemoth is willing to shut down something that was recently valuable to them is proof that a company needs more than a slew of influencer collaborations to build a long-lasting brand.
“Not every brand is expected to be a global brand, not every brand can extend overly far. It’s the ability to admit just that.”
Becca was in high demand when Lauder bought it for about $200 million in 2016. A series of best-selling highlighters, created in partnership with Jaclyn Hill, an early beauty vlogger, put Becca on the Millennial map. The brand became “cool” overnight, and collaborations with Chrissy Teigen, Khloé Kardashian, and most recently, “Euphoria” star Barbie Ferreira, followed.
A lack of direction and a clear brand vision plagued Becca as it matured and tried to find its footing without a celebrity promoting it. Building this foundation would just be too costly. Plus, Lauder already has a hit on its hands. It announced the acquisition of Deciem in a $2.2 billion deal in February (Lauder took a 29 percent stake of Deciem in 2017). Deciem is the parent company of The Ordinary, a cult brand with affordable serums and peels that became wildly popular with TikTok’s Gen-Z users last year.
“The specific product that’s your star will only take you so far,” added Thomas.
But before considering closure, experts suggest exploring other options, such as selling a struggling brand at a loss to get some of the money back or investing in a re-brand. While the latter is more of an upfront investment that can require bringing in a new creative lead or chief executive to reimagine products, overall messaging, distribution and content strategy, there is potential for greater reward if the turnaround works.
Sometimes, packaging gets a radical facelift and other times, traditional logos are brought back. In 2019, MAC Cosmetics and Bobbi Brown underwent re-brands to better connect with a younger generation of customers. The same was said to be in the works for Becca, but a refresh never materialised. The Estée Lauder Companies declined to comment.
“[Companies] probably ask, ‘How much is it going to cost me to turn this around and what can I get for it if I sell it versus the cost of just disposing it?’” said Richard Gersten, founder and managing partner of True Beauty Ventures. “That is the financial side of it. There should also be a non-financial side to it.”
On that side, brand value plays a big role. For instance, after sales for KVD Vegan Beauty (formerly Kat Von D Beauty) tumbled in recent years, LVMH’s beauty incubator Kendo invested heavily in giving the tattoo-inspired makeup range a facelift. In March, Kendo unveiled a new KVD Beauty, the third iteration of the makeup brand it started with celebrity tattoo artist Katherine Von Drachenberg in 2008.
With LVMH as a parent company, Kendo could have just as easily ceased operations and cooked up a new makeup brand. But a compelling “brand story” – an edgy, tattoo inspired colour brand with a strong vegan and cruelty free stance and a handful of “hero” products – made KVD Beauty’s turnaround a priority.
A relaunch of a founder-centric brand – without the founder – can be successful if executed well, said Audrey Depraeter-Montacel, Accenture’s beauty business lead.
“They [Kering] decided to change from Yves Saint Laurent to Saint Laurent to make sure it’s not attached, or less attached, to the person Yves Saint Laurent,” she said of Kering’s Saint Laurent makeover under Hedi Slimane nearly a decade ago. “What does it mean for the next generation to think about this brand? [Companies have] to make sure it’s a long-term brand – it has to create a value in itself not linked to the founder.”
For Gersten, optics are just as important. Tengram Capital Partners, where Gersten was formerly a partner, bought RéVive from Shiseido, because he didn’t want Shiseido to close the brand, a high-end skin care range created by Dr. Gregory Brown, a plastic surgeon. The purchase came just a year after the Japanese beauty giant acquired Laura Mercier and RéVive for approximately $260 million in a two-for-one deal. Tengram installed a new executive team to help grow the brand and increase current distribution, which was mostly luxury department stores at the time.
“If I’m the founder and I’m going to sell a business to Lauder, I might say, ‘This thing could be shut down in three years, my baby could be put down in three years,’” Gersten said. “Do I really want to sell to them or sell to someone else who might have more patience?’”