what has led established beauty brands to bankruptcy

Revlon, one of the most famous beauty brands in the world, filed for bankruptcy protection, a process known in Brazil as judicial recovery, on June 16, leaving customers and beauty artists unbelievers. Just over a year earlier, in February 2021, Becca Cosmetics, a company known for ultra-pigmented highlighters, took a similar path, saying goodbye to consumers definitively after 20 years of a brilliant trajectory.

What has led consolidated brands to declare bankruptcy? The question that seems to echo in the minds of beauty aficionados is complex, but it can be answered, albeit superficially, in five topics, listed below.

Entry of digital celebrities into the beauty market

In recent years, with the arrival of brands such as Fenty Beauty, from singer Rihanna, and Kylie Cosmetics, from star of reality show and digital influencer Kylie Jenner, traditional companies lost space on shelves and in the hearts of consumers.

Supply chain issues

In the bankruptcy filing filed with US courts, Revlon’s director of restructuring, Robert Caruso, reported that there was “a shortage of necessary ingredients for the company’s portfolio.” This lack of resources would have been driven by supply chain disruptions thanks to issues like the coronavirus pandemic.

Consequently, this shortage caused intense competition for ingredients commonly used in cosmetics, which made suppliers start to ask for advance payment for inputs. “A tube of Revlon lip pencil, for example, consumes 35 to 40 components, and each one of them is essential to bring the product to the market”, claimed Caruso.

Coronavirus pandemic

Revlon has also been hampered by the lack of employees during the pandemic, as has happened at companies around the world. The brand’s sales also dropped 21% in 2020. Even with the 9.2% recovery seen last year, its revenue remains US$ 2.4 billion (the equivalent of R$ 12.36 billion) below the registered before of the Covid-19 outbreak.

The public health crisis was still the great villain of the plot of Becca Cosmetics, putting an early end to the successful story of the brand, founded by makeup artist Rebecca Morrice Williams in 2001.

In the farewell text, the Australian company’s team stated that the impact on the brand was greater than it could bear: “We had to make the painful decision to close the brand at the end of September 2021.”

According to the website WWD, the closure was part of a program to accelerate beauty conglomerate Estee Lauder, owner of Becca Cosmetics, for the crisis triggered by Covid-19. The initiative also included the closing of underperforming retail units and stores in Latin America.

At the time, Estee Lauder’s intention was to transfer Becca’s employees to other brands in the conglomerate, in order to curb unemployment rates.

Little attention to trends

Revlon’s setback began in the 1990s, when the company failed to adapt to new trends. At that time, consumers preferred lipsticks with more opaque tones, instead of the traditional bright red.

The brand has not yet been able to launch valuable innovations in recent years, keeping the ColorStay base among the best sellers.

Revlon Shares Drop Sharply After Cosmetics Giant Reports Q2 Loss

Revlon’s ColorStay Foundation is one of the brand’s best sellers Getty Images

Revlon Shares Drop Sharply After Cosmetics Giant Reports Q2 Loss

The company’s product range is extensive. Getty Images

Revlon Shares Drop Sharply After Cosmetics Giant Reports Q2 Loss

Go from makeup products Getty Images

Revlon Shares Drop Sharply After Cosmetics Giant Reports Q2 Loss

Intensive nail care nail polish Getty Images

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Lack of adaptation to international audiences

In 2014, Revlon left China after failed marketing moves and products poorly adapted to the Asian audience. The brand took, for example, to launch a BB cream, a hybrid between makeup and skincare loved by consumers in Asia and now by customers around the world.

In the same year, the company also underwent effective changes in the ranks of high-ranking employees, such as CEOs.

But there is still hope! Revlon announced that once it receives court approval, it will receive US$575 million (approximately R$3 billion) from its backers to continue production. Let’s wait for the new ones and, if all goes well, successful chapters of the brand.

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