Four months after BH Cosmetics released a makeup collaboration with one of the biggest pop stars of the moment, Gen-Z favourite Doja Cat, the vegan and cruelty-free brand filed for Chapter 11 bankruptcy protection, closed their operations and put their assets up for sale for at least $4.3 million.

The news marks a stunning fall for a company that was generating $55.8 million in annual revenue before the pandemic, counted Ulta as a retailer and had never had any significant public scandal.

In its bankruptcy filing, BH Cosmetics cited an “extremely competitive retail environment,” a decline in makeup sales during the pandemic and the lacklustre performance of recent celebrity-fronted collaboration lines.

Its 2021 collection with Doja Cat, which featured a set of eyeshadows, eyeliner and brushes and a similar collaboration with rapper Iggy Azalea “fell significantly below expectations, and the company was left with no clear strategy to return business to growth and sustainability,” according to the bankruptcy filing. From January to November 2021, the company generated $18.6 million in net sales, with negative adjusted EBITDA, or earnings before interest, taxes, depreciation and amortisation, of $14.4 million.

BH Cosmetics’ failure is all the more notable when considering how omnipresent its strategy is in the industry today. Since Kylie Jenner launched her instant sell-out lip kits in 2015, influencer and celebrity-led product collaborations and brands have dominated the beauty business. Today, everyone from Jennifer Lopez to Lady Gaga has launched wide-ranging cosmetics lines with distinctive packaging and distribution deals with the likes of Ulta, Sephora and Amazon.

Other major names, like Harry Styles and John Legend, are just now entering the market with beauty lines in the hopes of replicating the success of not just the Kardashian-Jenners, but also Rihanna, whose Fenty Beauty line, which has been valued by Forbes at $1.4 billion. Meanwhile, brands that have long dominated collaborations like Morphe continue to roll out products with social media stars such as the D’Amelio sisters and Todrick Hall.

But do BH Cosmetics’ challenges signal the celebrity beauty boom is past its peak?

Celebrity founders or spokespeople still draw a lot of valuable attention in a crowded market of high acquisition costs. Doja Cat, for example, gave interviews to Elle, Bustle and Allure about her BH Cosmetics line last year, and posted about it on Instagram where she has more than 19 million followers.

But both her and Iggy Azalea’s collaboration generated “very little engagement” for BH Cosmetics on social media, said Spencer Ware, the company’s chief restructuring officer. He added that BH Cosmetics’ earlier collaborations with lesser-known social media influencers were more successful because there was more dialogue with consumers about, for example, how to use the products.

“From my perspective, there needs to be very strong connectivity and commitment between the influencer, the brand, and most importantly the customer,” he said.

Indeed, after so many launches, consumers are less swayed by the celebrity endorsement than they were a few years ago, said Toni Ko, the founder of NYX Cosmetics, which she sold to L’Oréal in 2014. In 2019, she formed a beauty incubator, Bespoke Beauty Brands, which has launched brands with drag queen and Insta star KimChi and designer Jason Wu, as well as a men’s skin care brand Mai Johnson & Company.

“Overall in general, the power of collaborating with influencers or celebrities is just not as strong as it used to be,” Ko said, adding that even the appeal of new brands without celebrities behind them have lost some of the novelty with customers who once chased new lines for the sake of newness. “I still believe well-curated, smaller boutique brands or niche markets work very well,” she said.

“The power of collaborating with influencers or celebrities is just not as strong as it used to be.”

Celebrities make marketing a brand easier, but they can’t make up for an underwhelming product or distribution strategy.

“You really should be more focused on market opportunities and problems that need to be solved than whether or not you can slap somebody’s face on a product in a category that is saturated and has lots of other choices,” said Ari Bloom, founder and CEO of A-Frame Brands, which counts John Legend’s forthcoming skin care brand for people of colour in its portfolio along with other celebrity-led brands, such as tennis star Naomi Osaka’s skin care label.

Another strategy that appears to be less effective in the market now is the type of short-term collaborations BH Cosmetics banked on. For many beauty brands, the amount of investment in product development, marketing and distribution for shorter-term projects may not provide the payoff necessary to make the collaboration make sense financially. In that sense, longer-term partnerships hold more promise, even if it could mean linking up with a celebrity who may fall out of favour in a few years.

“Careers can change, bad decisions can be made, but you do have to kind of accept those risks and you also have to think about what your mitigation strategy is if that does occur,” said Bloom. “But it’s better to get in into a longer-term partnership with people than be transactional.”

BH Cosmetics’ bankruptcy also serves as evidence of the ongoing struggle that the colour cosmetics category finds itself in. In 2021, the company delayed the launch of a new skin care line in order to conserve cash for the celebrity line launches — a risky gamble when skin care continues to be the hottest category in the market. While the sales of eyeshadows and foundations picked up again for some brands in 2021 after a steep drop-off in 2020, colour cosmetics has been in a downturn from 2016 through 2020, according to NPD Group’s US data of the prestige market.

The pandemic made the business of makeup trickier on the supply side, too. Ko said much more makeup is imported to the United States from places like China, and the rising cost of shipping and tariffs, as well as shipping delays, have put pressure on some brands.

“If a company has cash flow issues, this would knock them over,” she said. “Usually, when a company fails, it’s never one thing.”