What Elf's $1 billion Rhode bet means for the future of celebrity beauty

Fashion Network

02-06-2025

But as more household names, influencers, and makeup artists entered the space, shopper fatigue began to set in. With inflation squeezing incomes, buyers became more selective. Many shifted their focus to skincare, haircare, and niche fragrances, moving away from the color cosmetics that once drove viral trends, such as contouring the face with different foundation shades.
Consequently, the market has been upended. Even some brands that, like Rhode, achieved breakout success began exploring exit strategies last year. Yet so far, no deals have materialized for names such as Selena Gomez 's Rare Beauty or Makeup by Mario — the brand launched in 2020 by celebrity makeup artist Mario Dedivanovic, best known for his work with Kim Kardashian.
Elf's acquisition of Rhode — founded just three years ago — ends a dry spell in celebrity beauty deals and could inject fresh momentum into personality-driven brands.
With Rhode, Elf is betting on a premium range featuring just 10 main or 'hero' products, including Pocket Blush and Glazing Milk — items that blur the lines between skincare and makeup. The brand complements Elf's more affordable, cosmetics-focused portfolio. Elf's average price point is about $6.50, compared with nearly $9.50 for other mass-market cosmetics, while Rhode's average is around $29.
But Elf is paying a pretty polished price for Rhode, also known for its sleek, minimal packaging. The $800 million in cash and stock payable at the close of the deal, expected before September, equates to 3.8 times Rhode's sales of $212 million in the year to March 31, 2025. Including the additional $200 million payable based on Rhode's performance over the next three years, the multiple is 4.7 times. The latter is in line with the lush deal multiple on L'Oréal SA's purchase of natural beauty label Aesop two years ago.
To justify the price tag, Elf must ensure that its new addition doesn't run out of, well, Rhode.
The narrow product range offers an obvious starting point for expansion. Elf has already launched a raft of innovations that resonate with Gen Z consumers and have helped turbo-charge its sales — a track record that bodes well for Rhode's future growth.
There is also scope for Rhode to reach a wider range of customers. The brand is already due to launch in Sephora in the U.S., Canada, and the U.K. this fall, which is a major milestone. In the long term, Elf could leverage its partnerships with other retailers — it is available in Ulta Beauty Inc. in the U.S., for example, in Douglas AG in Italy, and Boots in the U.K. — to maintain the momentum.
Assuming Elf doubles sales over the next three to five years — which looks feasible — then the acquisition multiple would fall to a more reasonable level of about two times.
However, there are risks to this trajectory, the most significant of which is Bieber herself.
So far, she has defied the broader boredom surrounding celebrity-led brands. But maintaining her relevance remains essential. Six years ago, Coty Inc. placed a major bet on the Kardashians, paying $600 million for a majority stake in Kylie Cosmetics, which Kylie Jenner founded. A year later, the company invested another $200 million for a 20% stake in Kim Kardashian's beauty business. The results have been mixed. Over the past two years, Kylie Cosmetics boosted its sales by 1.5 times, driven by skincare and fragrance launches. Meanwhile, Kardashian's underwear brand Skims bought back Coty's stake, causing a $71 million loss for the U.S.-listed company.
Bieber will join Elf as Rhode's chief creative officer and head of innovation. The company has a strong track record of connecting with Gen Z on social media, with viral moments like its collaboration with Chipotle Mexican Grill Inc. It also has experience managing celebrity and influencer-led brands: it acquired Naturium — the skincare label co-created by influencer Susan Yara and beauty-brand accelerator The Center — for $355 million two years ago, and it developed Alicia Keys' brand. Even so, Rhode's close association with its founder remains a risk Elf must actively manage.
This isn't the only challenge. Lindsay Dutch, an analyst at Bloomberg Intelligence, expects Elf's sales growth to slow this financial year following a frenetic pace of revenue expansion. The beauty boom is also fading, although Ulta said on Thursday that many consumers were turning to fragrance and body lotion as a comfort and escape from economic uncertainty. There's also the pressure from President Donald Trump 's tariffs. Elf makes about 75% of its products in China and will add $1 to all of its products globally on August 1 to reflect the levies.
With so much to grapple with already, taking a big bet on a celebrity-backed brand looks like a surprising diversion. But as any beauty enthusiast knows, there is always room for one more lipstick — particularly if it's a peptide-infused pout enhancer.