Is Rhode Worth $1B? E.L.F. (and Anne) Think So 👀
E.l.f. is betting big on Hailey Bieber’s skincare brand, Rhode, with a $1 billion acquisition that could reshape the beauty M&A landscape. This coverage is powered by Omni Talk's Fast Five sponsors: A&M Consumer and Retail Group, Simbe, Mirakl, Ocampo Capital, Infios, and ClearDemand — all trusted names in transforming retail.
For the full episode head here: https://youtu.be/rJh3sY4_BsU
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Transcript
Elf Beauty last week.
Speaker A:Can't wait to get your thoughts on this.
Speaker A:Agreed to buy Hailey Bieber's Road, which I had to ask Ann, how you actually say that because it's Rhode, whose trademark look is it's glossy, dewy skin, AKA glazed donut.
Speaker A:Also something I had to ask Ann about that I learned from you yesterday.
Speaker A:So for.
Speaker A:And they acquired it for $1 billion.
Speaker A:Again, according to Bloomberg.
Speaker A:In RD, Alpha's betting on a premium range containing just 10 main or hero products, including Pocket Blush and Glazing Milk, which blur the boundaries between skincare and makeup.
Speaker A:This look, this looks like a good fit with Elf selection, which is more focused on cosmetics and is cheaper.
Speaker A:For example, Elf's average price point is about $6.50.
Speaker A:And.
Speaker A:I didn't know that.
Speaker A:Yeah, compared with almost $9.50 for mass market cosmetics brands.
Speaker A:Whereas Rhodes average in is about $29.
Speaker A:So a significant increase.
Speaker A:But Elf is also paying a pretty polished price for Road, also known for its sleek, minimal package.
Speaker A:I can't take credit for that.
Speaker A:I got to give credit to Bloomberg for that one.
Speaker A: st of: Speaker A:And that if you include the additional $200 million payable based on road performance over the next three years, multiple is actually 4.7 times.
Speaker A:So, and my question for you is this.
Speaker A:Do you think ELF will see the long term payoff it hopes from acquiring Road?
Speaker B:You know, I think that it's hard to say whether or not that will be.
Speaker B:No one has the crystal ball.
Speaker A:However, they're hedging.
Speaker B:I think this is a really good move.
Speaker B:No, I'm not hedging.
Speaker B:I think this is a really good move from alf.
Speaker A:I'm gonna start bringing prune shears to the, to the.
Speaker A:To the podcast every time you hedge.
Speaker B:Well, I mean, I think I'm just making a, a reasonable analysis of this.
Speaker B:Of this, considering both sides of the story.
Speaker A:It sounds like you.
Speaker A:Sounds like you're leading one way, though, so I'm curious to hear what it is.
Speaker B:Yeah, I mean, I'm certainly not hating this as much as the Bloomberg reporter who wrote this article is, but.
Speaker A:Oh, you think they hated it?
Speaker A:You think the Bloomberg reporter.
Speaker B:I think that they were not positive on this and I certainly is a big crisis.
Speaker B:Yeah, I mean, it's a, it's a lot of Money going into a category that hasn't seen a lot of growth.
Speaker B:I mean you have other beauty like we'll say influencer, celebrity led beauty companies that aren't doing as well.
Speaker B:Cody had to sell Kylie cosmetics because it wasn't or sorry not Kylie Kim Kim Kardashian's makeup line and fragrance line because it wasn't doing as well like there.
Speaker B:This has not been the time for celebrity inspired brands.
Speaker B:However, I think that ROAD is is different here.
Speaker B:If you look at Haley's Bieber's involvement, true involvement, we had this discussion yesterday in the creation of, of each of the products.
Speaker B:She's been very specific to only be releasing a small number of products.
Speaker B:I mean I think that this stands a better chance than some of the others would.
Speaker B:And it's the reason why ELF is buying Road Over.
Speaker B:You know Selena, Selena Gomez's rare beauty or makeup by Mario or another one.
Speaker B:I know you, I know you know all the names that I'm talking about right now, Chris.
Speaker A:But, but I actually do know those.
Speaker A:In fairness to me, I actually do know those.
Speaker B:I just didn't know ROAD well.
Speaker B:But I think that the, the benefit here is really going to be on elf's side.
Speaker B:However, I think they're going to learn a lot from this premium line.
Speaker B:Bringing them in as you mentioned like E L F started out as a, as a high end approachable like high end beauty quality products, low price point.
Speaker B:Like they started their products I think it was at like 13 and $5 when they came out years ago.
Speaker B:So I think that the opportunity here for ELF is really to start to attract and learn from ROAD and how they might be able to start to get into the premiumization of their products because it's going to cost them more to, to produce them.
Speaker B:They talked last week at the same time they bought, they made this deal about how tariffs are going to increase the prices of their products by a dollar per product.
Speaker B:I think it allows them to start to, to start to eek into that upper echelon category and maybe they have Haley like inspire a collection or they have Haley partner with them on like a mid level collection.
Speaker B:That I think is a really important category and a really important audience to try to get after right now.
Speaker B:So people who can, who maybe can spend a little bit more than the ELF price point but aren't ready to pay $28 for a, for a.
Speaker B:The glazed donut.
Speaker B:Look Chris.
Speaker B:So I love it.
Speaker B:I'm very happy with this move.
Speaker A:But no.
Speaker A:So now you love it.
Speaker A:Okay, good to Know.
Speaker A:Good to know.
Speaker A:I don't know.
Speaker A:I mean I have no idea.
Speaker A:And I will willingly admit to the audience that I know literally nothing about the CPG beauty space.
Speaker A:So, you know, I'm not gonna have much to say here but I think, you know, listening to you talk there are a lot of things that have to be true for this to work out.
Speaker A:And every time I hear that I get a little concerned.
Speaker A:Especially when the price point is that different from what you know, the acquiring brand typically is known for and successful for.
Speaker A:So it's a different.
Speaker A:It's a different muscle that elf's going to have to use to make this successful.
Speaker A:So I think that, I think net net actually hearing you talk, I'm actually a little bit more skeptical of this working out.
Speaker A:To say nothing of the fact I have no idea how, you know, Hailey Bieber's social influence is going to continue to, you know, move forward over the next decade.
Speaker A:But which is a real factor too.
Speaker A:You have to factor that into the probability of success.
Speaker A:But.
Speaker B:Right.
Speaker A:But I, you know, my last shout out to Haley, fellow stroke survivor for getting her B.
Speaker A:And you know she got her B.
Speaker A:Like she got her to be is actually to your point, she got the Bieber and the billions.
Speaker B:So yes, I think the billions are the ones that I'd hang on to more closely than the other than the Beaver last name.
Speaker B:But.
Speaker B:But yeah, it sounds like there's been.
Speaker A:Some friction in that on that side of things too.
Speaker A:Yeah.
Speaker B:I mean apologize.
Speaker A:Yes.
Speaker A:Y.
Speaker A:I know about this stuff.
Speaker B:Oh my God.
Speaker B:I do think that like you have to give Haley credit though.
Speaker B:Like Glossier.
Speaker B:Glossier couldn't do this and they were this also a direct to consumer skincare brand not founded on a celebrity.
Speaker B:Like there is some opportunity here and I.
Speaker B:So if anyone can.
Speaker B:Can make this work, I think Haley's the right person to bet on.
Speaker B:But you're totally right.
Speaker B:There's a lot of other external factors that could impact the success of this down the road.
Speaker A:Yeah.
Speaker A:But in fairness to Glossier, Glossier probably had offers and probably either didn't take them or has chosen not to take them too.
Speaker A:Because typically with these like you know, typically with these like celebrity inspired brands, they're built to do exactly this.
Speaker A:They're built to get acquired at a high multiple very quickly because generally speaking they're run by legal teams out of la.
Speaker A:I don't know that that's the case here but I imagine somebody is playing is telling Hayley where to go and what to do and what, what products to evaluate, you know, at a certain time.
Speaker A:So, you know, you know how this works.
Speaker B:Let's just say.
Speaker B:Let's just say I bet Emily Weiss is not super thrilled right now that this just happened.
Speaker B:And of all the work she's been doing for the last, what, 10 years, she didn't quite net that.
Speaker A:Yeah, I bet she's wishing.
Speaker A:Yeah.
Speaker A:I mean, I have no idea, but I bet she's wishing she sold out a long time, potentially wishing she sold out a long time ago.
Speaker A:But then that's not true to her ethos of her brand either, so who knows?
Speaker B:But.
