The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
Welcome to BoF's Beauty Newsletter, featuring members-only analysis and the week's top news from the front lines of the global beauty business. Subscribe here.
NEW YORK, United States — Someone who has yellow skin riddled with holes seems like an unlikely candidate to front a beauty brand. And yet… SpongeBob Squarepants just launched his first makeup collection.
Like Kylie Jenner and Drew Barrymore before him, the anthropomorphic sponge who lives in a pineapple under the sea had a little help: Nickelodeon parent Viacom hired HipDot, a Los Angeles-based company that develops beauty brands, to create SpongeBob’s line of eyeshadow, lip gloss and sheet masks.
HipDot is a new entrant in the booming world of brand builders, the often anonymous companies that create beauty lines, fashion collections and other products for celebrities, reality television stars and influencers. These firms handle everything from product development to operations, marketing and retailer relations. Most are only known to beauty industry insiders, even though in terms of sheer volume they sell more makeup than many of the brands on display at Sephora.
“What we found in working with a lot of these influencers and celebrities is that frankly they just didn’t have a lot of interest in running the brand itself, so we answered that call by developing services in our business around helping support a brand,” said Dustin Cash, who co-founded SOS Beauty with Charlene Valledor in 2017 and has developed lines for Jen Atkin, Patrick Ta and others.
It’s a business model that has exploded in recent years, as everyone from celebrity facialist Shani Darden to Lady Gaga aspires to create the next blockbuster beauty brand à la Fenty Beauty or Kylie Cosmetics. But starting a beauty brand isn’t easy; a shoddy product or a buzz-less launch can kill an influencer’s new business before it starts. That’s where companies like HipDot and SOS come in.
HipDot started in 2017 as a platform selling third party indie makeup brands. But co-founders Jeff Sellinger and Mo Winter, who worked together at Disney and shopping awards app Shopkick, soon made the switch from wholesale to brand building. Samantha Lim, a veteran of Milk Studios and Pat McGrath's beauty brand, joined when HipDot pivoted.
Like other brand incubators, HipDot handles much of the legwork involved in launching new beauty products. It will create products, find manufacturers, devise a marketing plan and develop a distribution strategy. This year, it received $2.5 million in seed funding from Foundation Capital, Founders Fund and Ludlow Capital. The company launched its first product, a line of eyeshadow palettes under its own name, in March, and also created a glitter palette for artist HeyRooney for Pride Month.
The goal is to develop brands with celebrities (which by their definition can include fictional characters like SpongeBob) and influencers capable of appealing to loyal niches of beauty consumers. Up next for HipDot is a deal with a “major celebrity musician,” whose brand will launch later this year, Sellinger said.
“When you think of an incubator, you might think of someone that is small and has the capability to grow larger, but a lot of what we look for, they have the opportunity to be large right from the beginning,” said Sellinger.
We noticed a significant increase in influencer and celebrity requests once Kylie Cosmetics was launched.
HipDot and other incubators have no shortage of potential collaborators. Influencers are looking to step off the Instagram or YouTube treadmill and build their own businesses. Rihanna and Gwyneth Paltrow showed movie stars, musicians and athletes that they can generate big returns if they do more than slap their face on the box.
They typically need outside expertise; not every celebrity can marshal the resources of Lady Gaga, who developed her beauty line, Haus Laboratories, with an in-house team. Cash said it takes between $3 million and $7 million to launch and support a prestige brand through the first couple years.
“We noticed a significant increase in influencer and celebrity requests once Kylie Cosmetics was launched. It has become almost a full-time job to field incoming inquiries,” said Scott Kestenbaum, senior vice president at Maesa, which developed Flower Beauty for Drew Barrymore and hairstylist/influencer Kristin Ess’ line of hair products.
Success is not guaranteed. Maesa worked on Eva Mendes’ makeup line, Circa, which launched in 2016 at Walgreens but shuttered in 2018. Determining which celebrities to work with requires understanding how much that person interacts with their fans and whether or not the products seem true to them. HipDot’s approach includes finding founders who love makeup or have a unique perspective on beauty as well as an engaged community (think: Lady Gaga’s little monsters and Rihanna’s navy.) Just being well-known or having millions of followers or fans is not enough.
“It can’t just be amazing products with an influencer attached,” said SOS Beauty’s Cash. “It has to be a full-on brand that’s going to potentially outlive that brand founder. That’s what we hope for when we develop brands.”
Luxury Brand Partners has incubated its own product lines since 2012 and is introducing brands from two major influencers next year. The company is best known for creating hair care lines like IGK and R&Co that feature collectives of prominent editorial hairdressers like Garren as "founders." But just having a credible expert at the helm of a brand isn't enough anymore.
“What’s heartbreaking is we’ll get people who are really well-known professionals and they’ll come to us and say, ‘We want to build a brand.’ We have to let them down lightly,” said Tev Finger, Luxury Brand Partners’ chief executive. “If you don’t have a following that’s large and that you can speak to quickly and that’s engaged with you, we probably won’t do a brand with you.”
And no matter who is fronting a brand, the product still has to measure up.
Jaclyn Hill, a beauty influencer with almost 6 million YouTube subscribers, has a track record of selling other people’s products. Finger said one of the brands his company had acquired, Becca Cosmetics, blew up after a Hill collaboration, attracting the attention of Estée Lauder, which bought the brand in 2016. But Hill’s own lipstick launch was marred by customer reports that products contained tiny, hard beads and pieces of hair. Hill ended up recalling the collection and offering refunds. She did not respond to requests for comment.
It can't just be amazing products with an influencer attached
Some of the biggest brand builders have been in the business for decades. Maesa got its start in 1997 developing private-label products for retailers. More recently it’s added celebrity brands to its portfolio, including Barrymore’s Flower Beauty in 2013 and a line for Ess in 2017. Ess’ brand is projected to top $100 million in sales this year. In March, Bain Capital acquired a majority stake in Maesa, which generates $230 million in global sales. More “notable artistic celebrity and influencer founder” brands are in the pipeline, Kestenbaum said.
Seed, which has its own labs and manufacturing facilities, owns Colourpop, which regularly collaborates with beauty influencers. It also produces Kylie Jenner and Kim Kardashian’s beauty brands. Kendo, LVMH’s beauty incubator arm, produced Fenty in 2017. Back in 2008, it launched a beauty brand with Kat Von D, then a reality TV mainstay.
“Artistic celebrities,” particularly those whose clients are influencers themselves — Kardashians, Hadids — have been a boon for SOS Beauty. In September, Jen Atkin’s haircare range Ouai received a minority investment from ACG and hired a chief executive. Celebrity facialist Shani Darden’s skin-care brand received seed investments in June.
HipDot investor Ashu Garg, a partner at Foundation Capital, said the goal is to create a platform that can develop brands as efficiently as major cosmetics companies, rather than trying to pick which influencer will become the next Bobbi Brown.
“No one influencer is either permanent in terms of their influence or has enough influence to take a disproportionate share of the market,” he said.
THIS WEEK IN BEAUTY
Affordable makeup brand Elf is getting a little more expensive. As import tariffs on Chinese goods reached 25 percent, the company has had to raise prices on its products.
MAC gets backlash in the UK for offering a skin and brow workshop for kids. John Lewis and MAC cancelled the event after parents complained that it wasn't age-appropriate.
Luxury skin care is coming for babies. Fans of Dr. Barbara Sturm's pricey skincare can now slather it on their kids.
Deciem's The Ordinary goes into wide distribution. The accessibly priced skincare brand will enter Ulta, Boots, Tmall and Selfridges.
Estée Lauder's next collaboration is with the founder's great-granddaughter. Danielle Lauder, 25, is making her debut in the family business with a 7-piece makeup collection.
Women in the UK have stopped using so many products. Almost 30% of women surveyed by Mintel say they've reduced the number of skin care steps in their routines in the past year.
Ariana's (Thank U) next perfume is here. The singer just revealed that her latest fragrance, Thank U Next, will debut at Ulta August 18.