For most of its first seven years, Olaplex was the hair care brand that could do no wrong. Cult favourite products beloved by both stylists and consumers led to TikTok viral fame, culminating in a September 2021 IPO that valued the company at $13.6 billion.

Times have changed. Sales have moderated and competition has increased, both from legacy brands and new lines trying to grab a piece of the hair repair segment. Olaplex’s stock is down about 75 percent since its IPO.

On Feb. 9, Olaplex was sued by a group of 28 customers in California who said they suffered hair loss and damage after using the brand’s products. The complaint also accuses the company of false advertising.

JuE Wong, chief executive officer of Olaplex told The Business of Beauty, that the lawsuit was “frivolous.”

“As a brand we will survive, but what bothers me is the misinformation,” said Wong. “What about the people who believe in us and are now highly stressed and anxious and completely confused. We had to set the record straight.”

Whatever the merits of the suit, it strikes at the core of what made Olaplex a hit: a passionate community that felt driven to build the brand up and now, in some cases, tear it down.

Olaplex is hoping to regain control of its story with a marketing campaign emphasising the science behind its formulas. New products are on the way, including a dry shampoo that hit the market in January. International distribution is meant to make up for slowing growth in the US.

But above all else, Olaplex needs to recapture the connection it had with customers.

From Disruptor to Incumbent

Founded in 2014 by husband and wife Dean and Darcy Christal with technology developed by chemists Craig Hawker and Eric Pressly, Olaplex is known for its patented ingredient, Bis-Aminopropyl Diglycol Dimaleate, which it says restores broken bonds caused by hair colour, chemical straighteners and blow drying.

The brand’s products quickly became a fixture in salons, where stylists explained the products’ benefits to their customers (celebrity hairstylist Tracey Cunningham is among the brand’s paid ambassadors). At-home versions of its No.2 Bond Perfector and No. 4 Bond Maintenance Shampoo went on sale in 2018, and can be found today practically anywhere beauty products are sold, from Violet Grey to Amazon.

Olaplex’s salon-at-home branding made it a big hit during the Covid-19 lockdowns, and on TikTok, where by July 2021 videos with the #Olaplex hashtag had been viewed over 317 million times. The company went public that September. Net sales in 2021 hit $598 million, more than double the previous year.

Like most other brands that went public around the same time, Olaplex has struggled to sustain that level of hype. It’s no longer the newest or fastest-growing prestige hair care brand on the market, or on TikTok: that title now belongs to K18, a two-year-old brand that has adopted a similar salon-meets-retail strategy and tech-focused marketing

“We don’t see ourselves as a competitor to Olaplex … we’re a biotech company,” said Suveen Sahib, K18′s co-founder and CEO. The line crossed the $150 million sales mark in 2022 and is an active target of strategic buyers.

Brands that Olaplex disrupted, including L’Oréal Group’s Redken, have also introduced bond-building products of their own.

“These brands clearly don’t have the patents that Olaplex has, but I don’t think the consumer cares,” said Korinne Wolfmeyer, senior equity research analyst, beauty and wellness at Piper Sandler. “They’re no longer the dominant player in the market.”

She said Olaplex will struggle to grow at its previous pace – or maintain the profit margins – routinely above 60 percent – that attracted investors in 2021.

In October 2022, Olaplex lowered its sales guidance for 2022 to just over $700 million, from its previous forecast of around $800 million. It said sales grew by 9 percent in the third quarter, with the slowdown coming from both salons and its own channels. The company’s stock price fell by more than 50 percent that day.

Wong said the company has always predicted that its growth would slow after doubling in 2020 and 2021.

“Everybody was down on us when we had a business update last year, guiding to a lower guidance than what we [previously] announced,” Wong said. “But we had to be realistic.”

Fourth-quarter and full-year results are due out on Feb. 28.

A Community Fractured

Olaplex’s powerful mix of ingredients won it fans and cult status when it was used in the hands of stylists, but as it gained a wider audience, some customers are now claiming Olaplex is damaging their hair.

Mark Lipton, professor emeritus at Parsons School of Design and The New School, said Olaplex is seeing a common downside for brands that emphasise community.

“Be careful when social media is your primary marketing channel,” he said.

In May 2020, the European Union categorised butylphenyl methylpropional, better known as lilial as “reprotoxic,” meaning that it could adversely affect fertility and fetal development. The organisation ruled that all cosmetics containing lilial must be pulled from shelves by March 1, 2022. Olaplex stopped using the synthetic scent in 2021, but customers and TikTok creators complained that the brand was on the wrong side of product safety issues. Others wondered if products made before 2021 were still on store shelves. Olaplex was then hit with a lawsuit in Canada for not disclosing that lilial was associated with fertility-related health risks.

Facebook groups, including “Olaplex Hair Loss/Hair Damage?,” which has 7,200 followers, began sharing negative experiences about the brand’s products, including hair loss and scalp issues.

“Olaplex was marketed as free from harsh chemicals,” said Amy Davis, the lawyer representing the plaintiffs in the California lawsuit. “They tell people that it’s safe for everyday use for all types of hair and that it is scientifically proven to prevent hair damage and to repair hair damage.”

On Feb. 15, Wong took to social media to defend the brand, speaking directly to its 3.2 million followers across platforms in a single-shot post that emphasised the brand’s safety. A series of videos from the brand followed, emphasising Olaplex’s patents and its human repeat insult patch tests, a standard clinical test used to predict allergies in personal care and pharmaceutical products. Olaplex conducted the tests via independent labs, Wong said.

“All beauty products, including ours, have to meet regulatory compliance,” said Wong, who stated that hair loss and breakage are not caused by Olaplex. “People are going through a lot … Covid, stress, the economy, we need to be really careful to assign blame to products.”

The brand remains the most talked-about haircare brand on social media, with earned media value, a measure used to quantify the value of social media content, holding steady in 2021 and 2022, according to CreatorIQ.

However, it received 81.3 percent negative comments between Feb. 13 to Feb. 19, according to Deborah Etienne, data analyst and researcher at Brandwatch. Many users argued that Olaplex should have never made its products available for at-home use, and that influencers were at fault for spreading misinformation.

“Misinformation on social media, TikTok, Instagram and Facebook, is to blame,” said Cunningham. “Anyone can say anything on social media and people just believe it to be true.”

The Road Ahead

Olaplex has a game plan to move forward.

In January, Olaplex launched its first aerosol product, the Nº.4D Dry Shampoo, expanding its assortment and opening the door for more aerosol products like hairsprays and volumisers.

As Olaplex’s growth moderates in the US, Wong plans to ramp up international distribution. In 2021, 58% of net sales were generated in the US and approximately 42% of net sales were international. For the period ended Sept. 30, international sales increased by 27.8 percent, compared with declines of 4.3 percent in the US.

Reconnecting with the Olaplex community will be the brand’s biggest hurdle.

Overcommunicating to customers in all mediums — marketing messages, customer feedback and social comments — will be key, said Lipton.

“Olaplex seems to have powerful product[s] that you can’t just make up how to use [them], so relying on QR codes or websites to tell your story isn’t enough,” he said. “You have to relay that you care about [customers] hair and health often, while teaching.”

Striking the right tone will also secure trust.

“There is a tightrope you have to walk as a leader,” he said. “I’m not saying [Wong] should take any responsibility, but there is a place to empathise with consumers and understand what they’re going through, even if Olaplex isn’t at fault.”