The beauty industry is growing and increased from $438 billion in value in 2020 to $511 billion in 2021, according to one new report.
New brands are appearing in the skincare and makeup space all the time, many of which are owned by actors, musicians and other celebrities. Kylie Jenner’s Kylie Cosmetics started in 2015, and Rihanna’s Fenty Beauty, founded in 2017, are two well-known examples of beauty brands started by A-listers.
More recently, Harry Styles, Ariana Grande, Addison Rae and others have announced their own companies in the space, prompting some pushback that there are too many celebrity beauty brands.
“Marketplace” host Reema Khrais spoke with Cheryl Wischhover, a freelance beauty reporter, about the business of celebrity-owned beauty brands. The following is an edited transcript of their conversation.
Reema Khrais: So Cheryl, I was at Sephora the other week, picking up some usual stuff and getting a gift for a friend. And I remember I had to get help because I was just so overwhelmed by all the options. I was seeing all these celebrity beauty brands I hadn’t seen before. And I’m curious — you cover this topic — do you also feel like sometimes there are just too many to keep up with?
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Cheryl Wischhover: Yes. It’s almost a weekly occurrence that I get a press release for someone new launching a brand, for sure.
Khrais: So why has this become the new norm? Why are there so many celebrity beauty brands out there?
Wischhover: There are less barriers than ever right now to be able to launch a beauty brand. And that’s not only for celebrities, that’s for anybody. And I think celebrities have gotten away from doing just straight beauty spokesperson type thing, you know, face of Maybelline. Which they still do, but I think they think that it’s more authentic to not shill someone else’s product and to have your own. I also think you can potentially make more money. And also beauty right now is no longer as niche maybe as it used to be, a lot more people are interested in it. So for all those reasons, I think brands are really attractive.
Khrais: That’s so real. I just started using moisturizer every day just because of social media, because I’m seeing all these like Tik Toks and Instagrams. So how does this work, exactly? How do celebrities go about making a beauty brand?
Wischhover: A lot of them utilize beauty incubators. There are dozens and dozens of these incubators now who can provide manufacturers who can help with finding packaging, who can even provide, you know, executive teams, and then they will work with the celebrity to sort of talk about their vision and how they want the thing to look. And then they take it and do kind of the work. What I find very interesting is that in the last couple years, the agent side of it have kind of gotten involved. Like CAA has invested in a beauty incubator of their own so that they can like funnel their clients right into that. Beauty incubators are by far the sort of biggest vehicle right now.
Khrais: Right, that’s so interesting. So I want to get more specific, like what is it about the beauty industry that makes it especially lucrative?
Wischhover: Beauty has a really, really high margin, like huge margin. So I interviewed a beauty founder whose brand no longer exists several years ago, and she sort of walked me through the process of what a lipstick actually costs to make. And she said it was about $2.50. And if you go to you know, Sephora, it’s $30, $40. Even, you know, $18 is like a huge markup. And celebrities, if they are big enough and have a big enough social media platform, they don’t have to do traditional advertising, which saves a huge amount of money. So that’s even more profits.
Khrais: Right. And from a consumer’s perspective, you know, how do you think seeing all these celebrities rush to become beauty moguls impacts their willingness to buy from them?
Wischhover: Yeah, so that’s a question I have asked a lot of sources that I’ve spoken to and I get mixed answers on this. I think people are influenced to an extent but I also think there’s a lot of fatigue happening. I think the situation where celebrities are feeling like it’s more authentic to have their own brand is now feeling like, “oh, OK another brand,” you know.
Khrais: Right, like is it authentic?
Khrais: Do you see a slowdown in new celebrity beauty lines anytime soon?
Wischhover: Honestly, no. I think it’s gonna be interesting to see who actually gets these sort of big exits you know, like a Kylie. Everyone points to Kylie Jenner, you know she sold a majority stake for $600 million and then sold the rest of it to Coty later. You haven’t really seen that happen with any other celebrities yet, although it’s early days, you know, it often takes like five years to a decade to grow a brand so it’s really hard to say. But I don’t think it’s gonna stop honestly.