Kylie Jenner’s $600 million deal proves the power of celebrity beauty brands

Money maker.
Money maker.
Image: Reuters/Carlo Allegri
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Nov. 30, 2015, was a more significant day in the beauty business than anyone knew at the time. It’s when reality-television star Kylie Jenner, known in part for her enhanced lips, released three shades of a packaged set of lipstick and lip liner she called Kylie Lip Kits.

The launch, which sold out in moments on her website, laid the foundation for Kylie Cosmetics, Jenner’s beauty company. Today, 51% of the business was bought for $600 million by Coty Inc., owner of labels such as CoverGirl and Max Factor. The transaction values Jenner’s business at $1.2 billion.

The deal highlights how powerful celebrity has become in the beauty industry. In the past, consumers turned to the brands themselves for information and guidance on what to buy. But social media and e-commerce have upended that paradigm. Young shoppers today often follow favorite personalities online for advice about the best products, opening an opportunity for celebrities to step in with their own brands.

Jenner launched her company at the start of a boom in influencer beauty businesses. It grew quickly with the help of her online presence—at present, she has 151 million followers on Instagram—with sales reaching $420 million (paywall) in its first 18 months.

Several of beauty’s big success stories in recent years have similarly come from women who were famous online before launching lines of their own. Emily Weiss built her following through her beauty blog, Into the Gloss, before creating Glossier in 2014, now valued at $1.2 billion. Makeup artist Pat McGrath gained an audience on Instagram before starting her label in 2015. It’s also estimated to be worth more than $1 billion (paywall).

The success of these companies has helped give rise to a slew of beauty labels from influencers and celebrities. In recent years, for instance, stars such as Rihanna, Lady Gaga, and Victoria Beckham have launched beauty lines. Gwyneth Paltrow and Jessica Alba sell beauty products alongside other items at their companies. In September, Vogue put together a comprehensive list of all the celebrities preparing to launch beauty brands, including Hailey Bieber, Cardi B, Millie Bobby Brown, and Kendall Jenner, Kylie’s older sister.

These brands, with influential founders and an understanding of how to connect on social media, have been stealing market share from some of the more established players in the business, even if few may achieve the level of success of Kylie Cosmetics. “This is where the growth of the market is,” Pierre-André Terisse, Coty’s finance chief, told the Wall Street Journal.

Coty has been hit by these shifts, struggling with weak sales, including an 8% year-over-year decline for the fiscal year ended June 30. In July it revealed a plan to restructure its operations and was rumored to be interested in scooping up Jenner’s company for months.

In its announcement of the acquisition, it said the deal would be a “key milestone in Coty’s ongoing transformation.” It will use its capabilities in manufacturing and distribution while “Kylie and her team will continue to lead all creative efforts in terms of product and communications,” leveraging her reach on social media. The companies plan to expand the brand globally and launch new products.