E.l.f introduced Wednesday it’s going to purchase Hailey Bieber’s Rhode for $1 billion, in a blockbuster deal that brings Gen-Z’s buzziest model into the fold of the business’s most disruptive conglomerate.
Because it was based in 2022, Rhode has shortly turn out to be the darling of the worldwide magnificence market, celebrated for its high-tech but accessible skincare formulation and its aspirational inventive. In its newest fiscal yr ending in March, the model generated $212 million in internet gross sales from simply 10 merchandise, together with hits like its Pocket Blush and Glazing Milk essence. This month, Rhode introduced it’s going to launch in all Sephora US and Canada shops within the fall, and in Sephora UK by the tip of the yr.
E.l.f., in the meantime, has grown quickly for the higher a part of a decade, due to its popularity for high-quality merchandise at ultra-affordable costs. Whereas E.l.f. was initially referred to as a “dupe” model when it launched in 2004, it has stunned many within the business by rolling out a gradual stream of modern new merchandise, at a velocity to market and value level few rivals have been capable of match. Gross sales have grown for 25 consecutive quarters.
That charmed run is exhibiting some indicators of damage, nonetheless. On Wednesday, the corporate reported gross sales of $1.3 billion for the fiscal 2025 yr, up 28 % — the quickest tempo of any massive magnificence firm, however a far cry from the greater than 77 % improve it logged in fiscal 2024. In its fourth quarter, gross sales rose simply 4 % from a yr earlier. Adjusted earnings earlier than curiosity, taxes, depreciation and amortisation elevated 26 %.
In an unique interview with The Enterprise of Magnificence, E.l.f. chairman and chief government Tarang Amin stated the 2 manufacturers recognised the “energy” of becoming a member of forces.
“What we noticed in Rhode was one other like-minded disruptor,” he stated. “I see Hailey as rather more than a celeb, she is without doubt one of the most considerate founders I’ve ever met. She has unbelievable intuition, a fantastic aesthetic that’s completely resonating together with her neighborhood.”
Amin known as that neighborhood “fervent” and cited the response to the model’s latest Los Angeles pop-up, which noticed some clients camped out in a single day in line to attend, as proof that customers aren’t simply shopping for Rhode merchandise however into the rising way of life model.
Bieber will proceed in her capability as Rhode co-founder, chief model officer and head of innovation, in addition to act as a strategic advisor for E.l.f. The remaining Rhode group, together with co-founders Lauren and Michael Ratner and CEO Nick Vlahos, beforehand of The Trustworthy Firm, will be a part of E.l.f. Magnificence. Below the phrases of the settlement, E.l.f. has agreed to pay $800 million for the model — $600 million money and $200 million in shares — with a possible $200 million earnout based mostly on the model’s progress over the following three years.
“From day one, my imaginative and prescient for Rhode has been to make important skincare and hybrid make-up you should utilize each day,” Bieber stated in a press release. “Simply three years into this journey, our partnership with E.l.f. Magnificence marks an unbelievable alternative to raise and speed up our means to succeed in extra of our neighborhood with much more modern merchandise and widen our distribution globally.”
The Rhode to E.l.f.
Amin stated that E.l.f. and Rhode approached each other, and had been in discussions for the reason that fall. (Vlahos and Amin previously labored collectively at Clorox.)
“She may have simply gotten extra money from personal fairness or another person, however she cares about constructing this model for the long run,” Amin stated.
Rhode’s success has come even because the celeb magnificence increase has pale. Manufacturers like Ariana Grande’s R.E.M. Magnificence and Woman Gaga’s Haus Labs have confronted headwinds. Because the variety of labels fronted by well-known faces has grown, customers have turn out to be more and more sceptical, seeing many celebrities and influencers as missing authority or an genuine curiosity in magnificence.
Bieber, for her half, has lengthy been a magnificence lover and labored with traces like Bareminerals nicely earlier than her launch of Rhode. She additionally usually promotes different traces, together with giving a callout to indie line Ami Colé’s mascara for her latest Vogue cowl alongside her cult Peptide Lip Therapies.
She can also be a savvy marketer, popularising magnificence developments like “latte make-up” and “donut glazed pores and skin” nicely earlier than she may connect merchandise to social virality. Merchandise do stay a draw, regardless of the glut of comparable choices. (Rhode’s lip therapies, although not a first-of-its-kind product, reportedly surpass direct gross sales of others like Summer time Friday’s Lip Butter Balm.) Adjoining merchandise like Rhode’s lip gloss-toting telephone case trigger a frenzy, due to Bieber’s pure cultural cachet.
The deal additionally breaks an M&A logjam within the magnificence market. For the higher a part of yr, beauty traces like Kosas, Make-up by Mario, One/Dimension and even Selena Gomez’s Uncommon Magnificence have been struggling to seek out patrons. Some would-be acquirers just like the Estée Lauder Firms and Shiseido have little money to spare, whereas private-equity companies are sceptical that buzzy manufacturers can preserve their momentum as the wonder class enters a downturn.
Together with L’Oréal and Puig, E.l.f. has remained within the hunt for manufacturers to purchase. The corporate’s final deal was in 2023, when it acquired Naturium, developed by influencer Susan Yara and sweetness model accelerator The Middle in a $355 million money and inventory deal. The Naturium deal mirrored E.l.f’s curiosity in not solely fast-growing magnificence manufacturers throughout the market (past Goal, the model was bought at status retail Area NK), but in addition in extremely influential and well-known faces. In 2020, E.l.f. incubated its first model, fronted by musician Alicia Keys; that very same yr, it additionally made its first buy with clear magnificence model W3ll Individuals for $27 million.
Amin stated all of the manufacturers in its portfolio skilled gross sales progress in its fiscal yr, with Naturium experiencing its finest yr since launching in 2019.
A New Supply of Power
Bieber’s Rhode will profit E.l.f. in a lot of methods. Will probably be E.l.f.’s first model in Sephora US, Canada and the UK (E.l.f. lately launched in Sephora Mexico), and also will improve the conglomerate’s gross margin, with Rhode’s 10 merchandise starting from $18 to $38. Core E.l.f. make-up and E.l.f. Pores and skin merchandise promote for $6.50 on common, lower than mass rivals that retail for upwards of $10 or status gamers that promote for nicely over $20. Most significantly, it’s going to give E.l.f. a stronger foothold with youthful Gen-Z customers, a fickle however essential cohort as magnificence pockets dimension shrinks.
E.l.f continues to outperform bigger rivals; its gross sales efficiency final yr, whereas decrease by the corporate’s latest requirements, is the envy of conglomerates like Coty, Shiseido and Estée Lauder, which have seen declines.
Nonetheless, the corporate faces headwinds as nearly all of its merchandise are produced in China, and are topic to President Trump’s “Liberation Day” tariffs. Final week, E.l.f. introduced through social media that it was growing costs throughout its portfolio by $1. Amin, nonetheless, pressured the agency’s supply-chain agility as nicely its worldwide enterprise, which is up 60 % and isn’t topic to tariffs.
It’s maybe E.l.f.’s digital-first roots that makes it the correct conglomerate to scale Rhode. Past its upcoming retail growth, the corporate plans to proceed its funding in advertising, which has spanned out-of-the-box Tremendous Bowl commercials and collaborations with Chipotle.
“We’ve talked about preserving our advertising charges, even on this setting, at 24 to 26 % of internet gross sales, and we’re doing that as a result of our advertising is working,” Amin stated. The numerous return on its spend has shaped a cycle of progress: “It continues to gas our outcomes, and we proceed to spend money on our personal manufacturers, and provides us the flexibility to amass new manufacturers that may proceed to gas our progress.”
Rhode, with its three years of category-shifting momentum, shall be a simple promote. Nonetheless, Amin and Bieber look ahead to rising the model in tandem.
“We’re a founder’s dream,” stated Amin. “We don’t overintegrate a model … We’re not making an attempt to alter [Rhode]. We actually search to nurture a founder’s imaginative and prescient.”
Hailey Bieber and E.l.f.’s Tarang Amin will converse collectively for the primary time at The Enterprise of Magnificence International Discussion board. Enroll right here to order your house. Full entry to The Enterprise of Magnificence International Discussion board livestream is unique to BoF Skilled All-Entry and BoF Skilled Magnificence & Wellness members.
