This week, I take a look in review at 2023 and how specific instances signified or influenced changes in the beauty industry. Happy holidays, everyone!
Another year, another series of monumental shifts and moments in the beauty industry.
Some of these shifts and moments were harbingers and reflectors of changes in areas ranging from the influencer economy to the DTC world. Meanwhile, others were early predictors of a future ripe with opportunities to alter the industry.
Without much further ado, Glossy presents the five biggest moments for beauty in 2023, arranged chronologically. These were selected based on the attention they garnered and the significance of each to the industry.
- Forma Brands files for bankruptcy
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Forma Brands, the owner of Morphe, kicked off 2023 with a bankruptcy filing that signaled a significant shift in the beauty industry. The news was an expected outcome and the coup de grâce on a two-year saga that began in 2020 and included an abrupt closure of all of its Morphe stores earlier in January. In Aug. 2019, private equity firm General Atlantic made a reported 60% acquisition of Morphe, valuing the business at $2.2 billion. In August 2020, Morphe announced it would be bundled under the portfolio company Forma Brands, a new incubator, accelerator and “curator of next-generation beauty brands” owned by Forma and its parent company General Atlantic, according to a press release.
At the time of its January filing, the narrative was that mega-influencer partnerships with people like James Charles and Jeffree Star had negatively impacted the brand and its sales, among other business missteps. In the end, Forma Brands’ new owners purchased the company for $690 million, with a brand portfolio including Morphe, Morphe 2, Lipstick Queen, Jaclyn Cosmetics and Born Dreamer, the latter of which is a fragrance partnership with TikTok influencer Charli D’Amelio. Most recently, in November, Forma laid off 23 positions as the company continued its turnaround strategy, which included outsourcing work to agencies to supplement in-house tasks within creative and marketing.
- Glossier expands to Sephora
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While Forma Brands’ bankruptcy spelled the end for the mid-2010s heyday for mega YouTube beauty influencers, Glossier’s expansion to Sephora in February showed that DTC-only business models were effectively dead. The news of the launch in July 2022 came as Glossier has dealt with considerable restructuring since the beginning of that year. That included laying off its tech department in a pivot away from a vaguely understood community-focused platform, introducing a new CEO as founder Emily Weiss stepped down, naming its first celebrity brand ambassador, Olivia Rodrigo, and selling select products through discount store TJ Maxx.
The DTC environment had been steadily eroding over the past five years as online advertising became more saturated and expensive, venture capital dollars subsidizing brand expenditures dried up, and brands ran into revenue growth brick walls that only wholesale retailers could alleviate. When Glossier was founded in 2014, it quickly became an indie beauty darling with its millennial-pink color scheme and refreshing no-makeup makeup look. But over time, Glossier lost its glossy-ness. Whether due to the emergence of Gen-Z yellow, the lack of clean beauty products from the brand or the emergence of brands catering to youthful trends, there was a falling out between younger consumers and Glossier. And as the company continued to shun retail, the DTC beauty disruptor became the stalwart.
- Amyris files for bankruptcy
Amyris was once touted as the next “L’Oréal of clean beauty,” through a mix of aggressive acquisition and development of brands like Biossance, Rose Inc., JVN hair and baby-care brand Pipette. But this all came to a halt as the company’s costs ballooned and the brands ran into supply chain and vendor payment issues, ultimately leading to Amyris’s bankruptcy filing in August. Becoming the L’Oréal of clean beauty was a grand and sweeping vision that John Melo, then-CEO, was particularly bullish about after assuming the executive role in 2007, when Amyris was focused on biofuels. By 2012, the consumer-facing vision was on a path to reality. But on June 26 of this year, Amyris announced that Melo had resigned from his role as CEO and president, effective immediately. Han Kieftenbeld, CFO of Amyris, was appointed interim CEO.
Following the bankruptcy announcement, all of the portfolio brands have either closed or are going through a fire sale. Biossance, which Glossy reported in March 2021 would earn $160 million in sales that year, was bought by THG for $20. Meanwhile, Rose Inc. sold for $2.5 million, JVN Hair for $1.25 million and menopause brand Stripes for $500,000. Francisco Costa, the former Calvin Klein designer, bid to pay $350,000 to take over his namesake brand, Costa Brazil. Before this, Amyris planned to close the brand.
- TikTok Shop opens
It’s not every day that the consumer world finds a new sales channel. After the flameout of Instagram Shop, a phoenix rose from the ashes with a new approach to online sales. And that phoenix is TikTok Shop. TikTok Shop, as opposed to Instagram Shop, is decidedly a content creator-led endeavor rather than brand-led, which speaks to the preeminence it is expected to have in online shopping. As a platform programmed for videos to go viral, brands can opt to allow anyone to create a video and earn a commission, creating a veritable army of sales associates in their wake. After months of testing, TikTok Shop formally opened in September.
Brands are already jumping on TikTok Shop, lest they be left behind. Tarte, Benefit, The Ordinary and Estée Lauder are just a few that are devising strategies related to influencer gifting, livestream shopping, and owned brand videos that support TikTok Shop efforts. Yet, while brands are seeing immediate sales traction, TikTok Shop is expected to lose more than $500 million in the U.S. this year, according to The Information. This is based on TikTok’s heavy investment in hiring, building a delivery network and subsidizing merchants that offer double-digit–percentage discounts and free shipping.
5. Kering Beauty buys Creed
Kering Group has been beefing up its beauty efforts since February with the formalization of a beauty division, and the Creed acquisition for a reported $3.8 billion in October was the company’s first big beauty acquisition. Creed has a storied, albeit dubious, history, and a strong fanbase. Overall, luxury fragrances experienced a 13% revenue increase year over year in the third quarter, according to Circana data. More recent, early holiday sales show that fragrance is still a top-gifted item. Sales are off to a strong start in the fourth quarter, with dollar sales through December 2 up 12% year-over-year and, as of December 18, were already almost on par with total fourth-quarter sales generated in 2022. Jefferies investment banking analysts recently pegged niche fragrances as strong targets for 2024 M&A deals.
