Just five years after The Estée Lauder Companies (ELC) acquired the makeup brand Becca Cosmetics for an estimated $200 million to $300 million, the beauty conglomerate is shutting it down for good.
The move comes as businesses across the beauty and cosmetics industry has been looking to find ways to survive not only during the coronavirus pandemic but well after it. Estée Lauder has thus decided to remove brands that are no longer serving.
“This is a house cleaning that has really come out of a decade of acquisition of businesses when the industry was just booming and you could throw $300 million away to buy a smaller brand that expanded your portfolio and gave you opportunities in different channels of distribution,” said Wendy Liebmann, CEO of consulting firm WSL Strategic Retail.
“But in the end, the audience was too small to justify the kind of investment it takes now to drive profitability.”
But as the beauty conglomerate looks to clean up its portfolio of brands, Estée Lauder seems to be adding brands as well. Just this month, ELC announced its increased investment in DECIEM Beauty Group Inc., better known as “The Abnormal Beauty Company,” from approximately 29 percent to roughly 76 percent in its first phase. In the second phase, ELC is expected to fully acquire DECIEM. ELC’s move aligns with beauty brand’ efforts to meet consumers’ growing interest in skincare during the COVID-19 pandemic.
“Over the last four years, we have built a truly special long-term partnership with the incredible DECIEM team, and we are excited for what the future holds,” said Fabrizio Freda, President and Chief Executive Officer of The Estée Lauder Companies Inc.
In addition to shutting down Becca Cosmetics, Estée Lauder is following through with the closure of stores at airports and in Latin America that are lacking in performance. The company reported back in August 2020 that it would be reevaluating its brick and mortar strategy as the pandemic continued to impact consumers’ interest in shopping at physical locations for beauty and cosmetic products.
What lies ahead
Heading into 2021, the makeup category is expected to see a slight decrease in demand, with consumers gravitating toward skincare instead. According to McKinsey, the makeup segment will roughly represent 14 percent of the beauty market as opposed to 15 percent in 2019.
Estée Lauder’s revenue reportedly plummeted in the year ending June 30, 2020, within the makeup category by roughly 18 percent to $4.8 billion and it is expected to continue to drop in the first and second quarters of fiscal 2021 by 32 percent and 25 percent. ELC credits the pandemic and lockdowns to this drop as consumers are socializing less and are thus not needing to wear makeup.
Estée Lauder found interest in Becca Cosmetics as the brand offered a wide range of makeup skin tones and has established an assortment of influencer partnerships that allowed the label to attract the rising Gen Z demographic. ELC acquired Becca Cosmetics in 2016 from beauty incubator Luxury Brand Partners.
Following the acquisition, the beauty conglomerate also acquired Too Faced cosmetics for $1.45 billion.
Over time, Becca Cosmetics struggled to expand on its offerings, despite resonating well with non-Caucasians customers’ tastes in North America and Europe. The struggle became more significant as other competitors entered the space, such as Fenty Beauty, and looked to roll out products that continued to cater to the evolving demand across different demographic groups.
“Due to a combination of macro forces compounded by the global effects of COVID-19, the brand could not sustain success for the long-term,” said the company in a statement.
By September 2021, Becca Cosmetics will fully come to a close.