Amin, though he did have P&G experience on Pantene decades ago, was at risk of adding to that storyline when he took over e.l.f. in 2014. And by 2018, it looked like that might happen. E.l.f. missed on sales and earnings numbers because, as Amin admitted, it didn’t have an answer for the impact that influencer-backed brands like those from the Kardashian clan were having on cosmetics.
But Amin then quickly engineered a turnaround, focusing on fundamentals, ramping up product development of the value-priced e.l.f. (Eyes Lips Face) and hiking spending on digital marketing. That turnaround was already well underway by last year, and the pandemic has only helped turn e.l.f. from a something of an industry oddity into a success model.
“We’ve had this incredible ability to take the best of beauty and make it accessible,” Amin says. E.l.f. customers tend to be younger and more diverse than other beauty customers. And they kept buying cosmetics, thanks in part to government stimulus, he says. “We could see a change, just as they got a few more bucks in their pockets.”
E.l.f.’s time has come
Value has been one key factor behind e.l.f.’s recent success, says Jefferies & Co. analyst Stephanie Wissink, and it helped that the company’s key external retailers and its own e-commerce operation weren’t hurt meaningfully by pandemic lockdowns. But the roots of success go much deeper, she says, and recent scanner data suggest the success is continuing.
She also credits a marketing approach, led by beauty veteran and Chief Marketing Officer Kory Marchisotto, that focuses on accessibility and self-expression when those things are particularly important.
The company began outperforming its beauty peers early last year, Wissink says. “They caught lightning in a bottle with a couple of product launches that were taken up by some very influential influencers, and I think really put the brand back on the map in terms of consumer mind share, and validated the brand.”
Then came the pandemic and unrest over racial injustice, both of which actually played into e.l.f.’s strengths, she says.
“The immediate response from almost all the beauty companies when COVID hit was that they pulled back on all their innovation and just played it safe,” Wissink says. “E.l.f. isn’t set up that way. They don’t have a play-it-safe option. Their normal mode of operation is innovate, innovate, innovate. So they just kept on innovating. They just kept powering through both on content and products. Those moments are when I think you gain a tremendous amount of mindshare.”
Its e-commerce roots also have made e.l.f. quick to try anything in digital marketing, Amin says. The brand was doing influencer marketing in the middle of last decade before many marketers had heard of it. And it launched the beauty industry’s first big hit on TikTok last year, with an EyesLipsFace hashtag challenge that still ranks as the most viral in U.S. TikTok history with more than 6 billion views and 4.5 million user generated videos. The brand followed up in April with an EyesLipsFace Magic Act campaign spawning another 2 billion views.
E.l.f. also has over 5.5 million Instagram followers, so despite the success on TikTok, Amin isn’t worried what happens there with a possible sale or government shutdown.
“As great a success as we’ve had on TikTok, we’re also strong on Instagram, Facebook, YouTube, even Amazon,” Amin says. “We hope that resolves. But we’ll test on Instagram Reels. We’re constantly looking at emerging platforms for consumers and will be led by where they’re spending their time.”
It's a mentality that has e.l.f. punching well above its weight in marketing, Wissink says. “It’s a company doing $300 million in revenue, spending 10 percent of revenue on marketing. Most beauty companies spend 35 percent of sales on marketing and are four to five times the size of e.l.f., and they’re not getting the same level of visibility. They are definitely taking that $30 million and getting more than $30 million of value out of it.”
The viral effect and all those user-generated TikTok videos play a big role in making that happen, Wissink believes.
“E.l.f.’s stock has been a little choppy of late over fear that TikTok will be banned,” she says. But she also believes the company’s history of trying other platforms will help, no matter what.
Uncertainty and opportunity
Despite the uncertainty of further stimulus, Amin sees plenty of new opportunities now, too.
The company didn’t try to buy its way out of beauty’s mega-influencer and direct-to-consumer onslaught like some bigger incumbents. But it did in February acquire Well People, a skincare brand with “clean” ingredients certified by the Environmental Working Group. While a big competitor recently put out a release about creating one EWG-certified product after years of work, Amin says, e.l.f. acquired 40 such products “in one fell swoop” with Well People.
Next is a new lifestyle brand e.l.f. will launch next year with Alicia Keys, details of which the two sides are keeping under wraps for now. But it’s billed as an “entry-level prestige” brand to be sold direct-to-consumer via as yet unnamed retailers.
That Keys, with her 15 Grammys, 92 million social media followers and New York Times bestselling biography, would choose e.l.f. was in itself remarkable.
“She’s been pursued by every major house in our space,” Amin says. What proved decisive, he believes, is a confluence of values and culture between Keys and the company.
“As successful as she is, she’s been very open about the struggles she had growing up with her own skin and the insecurities that created,” he says. “Part of her messaging is that she’s often hated the exclusionary nature of beauty, this aspect of unattainable aspirational standards. Her meaning is much deeper. It’s really about her inner beauty.
E.l.f.’s accessibility focus—“the best in beauty for every eye lip and face” as Amin puts it, goes back to its early days selling $1 products strictly online and today selling what he says is the industry’s best-selling and best-performing pore-less putty primer for $8, vs. $52 for a comparable Silk Canvas product from Unilever’s Tatcha.
Diversity pays dividends
Keys was also swayed by e.l.f.’s digs and its diversity, says Amin, born in Kenya of Indian descent. “When she came out to Oakland, she loved the fact that we’re an Oakland-based company,” Amin says. “She liked the fact that we look different in every single way. We’re in this old cigar warehouse build in the early 1900s. And the diversity of our team. Seventy-five percent of our team is female. Over 60 percent are millennial or Gen Z. Almost 50 percent are diverse. So there’s this core connection on values.”
Like other e.l.f. products, the new entry with Keys will sell online and through retailers. But e-commerce, which has set e.l.f. apart from its inception in 2004, runs the show.
While many beauty-celebrity collaborations aren’t obvious fits, the e.l.f.-Keys connection absolutely is, Wissink says. “I think this came out of a conversation, not a deal. I think it came out of an alignment of vision.”
It’s also an important strategic move for e.l.f. as the pandemic has only accelerated trends toward skincare over cosmetics and toward women using cosmetics as a form of self-expression rather than a way to validate themselves in the eyes of others, Wissink says. That e.l.f.’s branding and marketing in social media focus heavily on self-expression only helps, she says.
Besides likely swaying Keys, the brand’s history of diversity—in its employment, board membership and leadership—also helped when racial justice became a huge issue in the summer, she says.
“Consumers were calling on companies to step forward and talk about their internal diversity and inclusion,” Wissink says. “And e.l.f. has for years talked about the diversity of their employee base. There has been evidence of diversity before this moment, but when the moment hit, they were able to stand on this authenticity and say ‘we’re not making these changes because of the moment.’”
Ahead of its time
Elfcosmetics.com has been well ahead of its time in other ways, for example, by having the top beauty e-commerce site with 30 million annual visitors, Amin says.
Launched in 2004, e.l.f. was really a prototype for the wave of direct-to-consumer beauty startups that would begin flooding the market a decade later. Testing products on Elfcosmetics.com before moving them into outside retail has been standard practice at e.l.f. for years, as is using first-party data and reviews from the site to drive marketing and assortment decisions for offline retail.
That didn’t immediately set well years ago with Walmart VP of Beauty Merchandising Jody Pinson, as Amin describes it. She called him one day to say: “You guys are crazy,” as he recalls, explaining that of the 25 percent of products e.l.f. planned to remove from Walmart shelves, many were among the chain’s top-performing beauty items. Amin recalls explaining to Pinson that e.l.f.’s model was to harness customer data from its site to change retail assortments, and that it works. “That was the only time I got a call from her,” he says. “Once they saw their comps, they went, ‘OK, we get it.’”
First-party customer data also helps drive integration of product development, manufacturing and marketing far greater than anything Amin ever saw in his earlier CPG days. Even the best product-development processes at those prior companies took a couple of years. But everything happens simultaneously at e.l.f., he says, cutting development time dramatically. “I’m in a product review every two weeks,” he says. “We can go from initial idea to selling online as fast as 13 weeks.”