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e.l.f. Beauty, which prides itself on selling affordable makeup and skincare products, is taking a step downstream by opening up distribution to Dollar General.
On the company’s second-quarter analyst call last week, CEO Tarang Amin said e.l.f.’s products will be available at a “subset” of Dollar General’s locations later in November in a test of the brand’s rollout potential across the dollar channel. The move fits e.l.f.’s mission to “democratize access” to beauty.
“Our mission is to make the best of beauty accessible to every eye, lip and face. And the accessibility is quite important to us,” Amin said on the call. “Dollar General’s stated strategy of serving the underserved fits perfectly. If you think about 80% of their stores are in rural areas with less than 20,000 consumers. Previously those consumers only had access to some of the legacy mass brands. And so, our ability to bring them access to the best of beauty we think works really well.”
e.l.f.’s largest three customers are Target, representing 25% of sales in its latest fiscal year; followed by Walmart, 17%; and Ulta Beauty, 16%.
The brand’s value proposition has been a key pillar to its success, which includes average price points for e.l.f.’s product at about $6.50 currently, compared to nearly $9.50 for legacy mass cosmetics brands and over $20 for prestige brands.
A second pillar is its “holy grail” innovation approach, which focuses on making products usually available only in the prestige market accessible at mass for a fraction of the price. Examples, according to its recent 10-K report, include e.l.f.’s Power Grip Primer at $10 versus a prestige item at $38 and the Halo Glow Liquid Filter at $14 versus a prestige item at $49.
The formula helped drive 40% revenue growth in the latest quarter, making e.l.f. the fastest-growing U.S. color cosmetics brand in both units and dollars among the top 20 brands across both mass and prestige. Particularly popular with Gen Z, e.l.f. ranks as the No. 1 U.S. color cosmetics brand in unit share and the No. 2 brand in dollar share.
At Dollar General, e.l.f. products will be displayed on end caps, and the product assortment will not be modified versus other accounts.
“We're bringing our best products, our ‘holy grails,’ to the dollar channel,” Mandy Fields, SVP and CFO, told analysts. “And we feel great about the assortment, about the presentation, the merchandising that we'll have as we enter the Dollar General stores.”
When asked about risks to brand equity, Amin said e.l.f. also works at the prestige level, noting that e.l.f. has ranked as the No. 1 brand on both units and dollars at Sephora Mexico since its October launch. He said, “From an overall brand equity standpoint, what we find is e.l.f. is highly elastic. We can play in value. We can also play in prestige.”