Loyalty to Influencer
Brands
When Daniel Wellington approached social
media influencers and celebrities to help market its products, it quickly
trended amongst consumers who wanted to be associated - in some small way -
with their role models’ lifestyles. The power of both the influencer and social
media is capable of changing consumer brand preference.
So, what happens when a product belongs to
an influencer? E.g. brands like Kylie Cosmetics (Kylie Jenner), Ivy Park
(Beyonce) Goop (Gwyneth Paltrow), dUCk scarves (Vivy Yusof) and Naelofar
(Neelofa)? Not only do followers of the celebrities get direct information
about the product but they get the same “lifestyle” as their favourite
influencers.
The moment consumers get to say “Hey, I’m
using a product from this famous celebrity’s brand,” they enter the
influencer-follower community and become loyal to said brand. In turn, this
builds a strong image for them.
The bigger the celebrity, the higher the
likelihood of the brand growing exponentially thanks to consumer loyalty due to
the brand’s “face” rather than the brand’s product. Large corporations such
Coty Inc and LVMH know this, and have jumped on the bandwagon of collaborating
or acquiring “influencer” brands long before the pandemic as they see value in
having a two-pronged strategy -- business-to-consumer (B2C) and
direct-to-consumer (D2C) -- to capture a wider market.
With Covid, a significant
number of consumers have changed their purchasing patterns to reflect the
times. Despite wanting to still look and feel good, not all of them are willing
to sacrifice their financial well-being for the luxury of influencer brands.
Enter drugstore brands that have now become close alternatives.
In the realm of social media, the slightest
wrong posting e.g. a biased opinion on a social issue, can cause a PR
nightmare. So what happens when a reputable company like Coty Inc is faced with
not only a global pandemic that has resulted in a drop in sales for its newly
acquired D2C product, but also negative press on the founder and “face” of said
D2C product?
__________
Kylie Jenner Cosmetics Deal has Delivered Promise and Peril for Coty
Beauty giant worried
about social-media star’s personal life, but Covid has been the real problem
On
the cusp of a deal to acquire one of the hottest new names in makeup,
directors of beleaguered beauty giant Coty Inc. had some unconventional
concerns.
Will
sales fall if the chief executive decides to have another child? Can
a 22-year-old social-media star reliably stay out of trouble? What
role will her mother play?
Last
year, Coty was hatching a plan to pay $600 million for a controlling
stake in the cosmetics startup founded by “Keeping Up with the Kardashians”
star Kylie Jenner, a move aimed at reviving a beauty business dependent on
drugstore staples like Cover Girl and Max Factor.
Coty
directors ultimately decided Kylie Cosmetics’ metrics—$200 million in annual
revenue with fewer than a dozen employees and virtually no ad
spending—outweighed their worries. Also, persuasive were reassurances from Ms.
Jenner’s mother, Kris Jenner, who helped launch the company in 2015 and led
negotiations.
A
year after closing the deal, Kylie Cosmetics has both bolstered its new parent
and dealt it some blows—though none that the company initially anticipated.
The
deal gave Coty a hot brand with social-media savvy and a new skin-care line, a
segment women have recently been spending more on.
When
Coty announced the deal in November of 2019, executives said the plan was to meld
Kylie’s wide appeal and bare-bones business structure with Coty’s reach and
capabilities in manufacturing and research and development. Company executives
said they planned to eventually take over production of Kylie makeup and expand
the brand both geographically and into the fast-growing and lucrative skin-care
category.
Ms.
Jenner has a social-media following similar
to Nike or Starbucks, Coty CEO Sue Nabi said in an interview.
“On one side, you have Kylie Jenner knowing the next thing that people are
looking for,” she said. “Then you combine that with the fantastic machinery of
a company that is Coty.”
Peter
Harf, Coty’s executive chairman, lauded the deal in a recent call with Wall
Street analysts. “I personally think that this is a brand that could reach, I
mean, hundreds of millions,” he said. “It could very, very soon be the biggest
brand we have.”
Through
a spokeswoman, Kylie Jenner and her “momager”—or mom-manager—Kris Jenner, both
declined to comment.
But
fallout from the coronavirus pandemic hobbled Kylie Cosmetics’ production this
summer while giving birth to trends that analysts say could hurt the brand’s
sales.
Without
disclosing figures, Coty executives have said sales of Kylie Cosmetics were
depressed this year by Covid-related supply-chain disruptions. The company said
sales of Kylie Skin—which launched in early 2019 and includes face
moisturizers, body scrubs and serums—tripled in the quarter than ended this
October, compared with the same period a year earlier. Coty said Kylie Skin
reached $25 billion in sales in 2019.
A
third-party estimate indicates that excluding Kylie Skin and in-store sales,
revenue fell significantly in 2020.
The
acquisition also faces another challenge: a lawsuit filed in June by the
private-label manufacturer that makes and distributes Kylie Cosmetics products.
Oxnard, Calif.-based Seed Beauty LLC claims in the suit that it played a key
role in fueling the company’s early success and alleges that Ms. Jenner shared
trade secrets with Coty as part of the deal.
Coty,
whose brands also include Clairol hair dye, OPI nail polish and a stable of
luxury fragrances, foundered since acquiring dozens of beauty brands from
Procter & Gamble Co. in 2016. Coty stock has lost 70% of its value since
that deal, and the company last year took $4 billion in write-downs on the
P&G business.
Kylie
Cosmetics came on the company’s radar as it sought an acquisition that would
provide growth potential and entry into the world of influencer-fueled,
direct-to-consumer beauty.
In
talks with Coty, Kris Jenner played the role of deal maker, working closely
with Mr. Harf, the company’s chairman. He is one of two managing partners of
JAB Holding Co., Coty’s largest shareholder.
Coty
said last January it was installing Christoph Honnefelder, an executive with
European specialty retailer Douglas, as Kylie Cosmetics’ CEO. He resigned from
the job in June, Coty said, citing personal reasons. Mr. Honnefelder declined
to comment.
Instead,
Coty installed its head of luxury brands to run Kylie Cosmetics. As it
continued to build up the newly acquired unit, Coty also raised its bet on the
Kardashian-Jenner clan. In June, Coty said it would pay $200 million for about
20% of the makeup brand owned by Ms. Jenner’s reality-star sister, Kim
Kardashian West, KKW Holdings LLC.
Ms.
Jenner was 18 when she started Kylie Cosmetics, selling nude lip liners and
lipsticks promising the look of fuller lips. She had previously acknowledged
using fillers to augment her lips amid controversy over her look. Kylie
Cosmetics’ first products were $29 “lip kits,” which pair a pencil and matte
liquid lipstick to make lips look fuller.
Ms.
Jenner amassed a legion of loyal customers such as 24-year-old Kristi Murguly,
who says she owns between $8,000 and $10,000 worth of Kylie Cosmetics products.
Products are sold online, in department stores and at specialty retailers such
as Sephora. Kylie Cosmetics and Kylie Skin lines are pricier than most
drugstore mainstays, with offerings that include $12 lip gloss and $24 face
moisturizer. Pricey limited-edition bundles are popular among loyalists who,
like Ms. Murguly, spend hundreds of dollars on a new release.
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