Is Hailey Bieber’s Rhode Beauty Brand Worth $1 Billion?

e.l.f. Beauty last week agreed to acquire Rhode, the skincare and cosmetics line created by fashion model and influencer Hailey Bieber only three years ago, for up to a whopping $1 billion.

Rhode sales reached $212 million for the year that ended March 31 on just 10 products and solely through online DTC selling.

The deal earned widespread media coverage because of the value of the deal and because it involved a celebrity — one who’s married to a bigger celebrity, former teen pop heartthrob Justin Bieber.

A New York Times article from earlier this year, “Celebrity Moguls,” chronicled how film and music stars were moving beyond just being spokespersons for brands to entrepreneurialism because “a side hustle offers insurance against the fickle entertainment industry.”

However, few recent celebrity-founded brands have reached billion-dollar status, including Ryan Reynolds’ Mint Mobile, Jessica Alba’s Honest Co., Kim Kardashian’s SKIMS, Rihanna’s Fenty Beauty, and Kylie Jenner’s Kylie Cosmetics.

Some are questioning the celebrity’s benefit from the Rhode sale.

“Celebrity is probably the most influential value-add to the sale,” said Leila Deravi, an associate professor of chemistry and chemical biology at Northeastern University, about the Rhode transaction in an article in the college’s newspaper.

However, she attributed Rhode’s success largely to marketing, with Bieber as the brand’s spokesperson. Deravi said, “She has this ‘clean girl’ aesthetic that people seem to resonate a lot with. It’s unique to celebrity-backed lines, because typically brands are all about more makeup, more glam, more glitz.”

Her skincare regimen videos have built her a social media following of 55 million on Instagram and 15 million on TikTok. The brand ranks No. 1 in earned media value amongst its skincare peers, with less than 1% of Rhode’s social media content being sponsored.

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Korinne Wolfmeyer, an analyst covering the beauty and wellness space for Piper Sandler, similarly believes the focus on wellness — including marketing its products around skin health — offers more opportunities to support a lifestyle approach to beauty for Rhode than lines such as Kylie Cosmetics and Selena Gomez’s Rare Beauty that prioritize cosmetics.

Wolfmeyer told The New York Times, “There is obviously a lot of white-space potential and it does resonate with the younger consumers. I think that’s very appealing.”

Rhode is also seen benefiting from pricing its products lower than many prestige competitors, a similar strategy to e.l.f.’s approach at the mass level.

Bieber will remain with the company as chief creative officer and head of innovation, with Rhode’s CEO Nick Vlahos also continuing in that role, alongside co-founders Michael Ratner and Lauren Ratner.

The acquisition is expected to help e.l.f. expand into the prestige beauty market, bolster its skincare offerings, and reach younger consumers. e.l.f. will also benefit as Rhode enters wholesale selling, launching at Sephora this fall.

When asked by an analyst on e.l.f.’s quarterly analyst call why he’s confident that Rhode isn’t a “high-flyer celebrity-backed brand” that quickly peaks but has a long-term growth trajectory, e.l.f. CEO Tarang Amin cited the quality of Rhode’s products, its community engagement, high repeat rates, and only 20% aided brand awareness in the U.S. 

He also called scaling to $212 million in annual sales on just DTC selling “incredible,” noting that only 26 of nearly 1,000 beauty brands tracked by Nielsen do more than $100 million in retail sales. Finally, he said Bieber’s vision for the brand gives him confidence in Rhode’s growth potential. Amin said, “Hailey is well beyond a celebrity. She’s one of the most thoughtful founders I’ve ever met, has great instincts, a desirable aesthetic.”