Morphe the Los Angeles–based makeup brand onced valued at $2 billion thanks to splashy collaborations with celebrity influencers, is shutting down all of its physical stores in the US. Its parent company, Forma Brands, this week entered an agreement to be acquired by a group of secured lenders after it filed for Chapter 11 bankruptcy.
A week after makeup brand Morphe took to Twitter to announce that it would be closing all its US stores, parent company Forma Brands filed for Chapter 11 bankruptcy. According to a statement from Forma, their assets will be acquired by investors and they will be getting about $33 million in financing from that group. As part of the sale, the company has entered Chapter 11. “This agreement is a testament to the strength of our brands most meaningful to our consumers, including Morphe and Morphe 2,” says Simon Cowell, president of Forma, in the statement. “We will have additional financial resources available to invest in our multi-category portfolio, product launches, and innovative brand and marketing strategy as we advance our vision to inspire creativity, promote inclusivity, and connect with consumers around the world through beauty.”
The question is what will happen to Morphe along with other brands associated with Forma, but industry sources have told Allure that Ariana Grande is working toward finalizing an agreement to take all operations in-house for her brand, r.e.m beauty. Those sources say Forma has never had an ownership stake in r.e.m beauty, but under a licensing agreement has overseen product development, manufacturing, and marketing.
However, the market has become crowded as a plethora of influencer-founded brands have boomed in recent years. YouTuber Michelle Phan counts more than 8.74 million subscribers and runs Em Cosmetics, a multimillion-dollar beauty brand that she first launched with L’Oréal in 2013. Influencers Tina Craig, Marianna Hewitt, and Jen Atkin have founded premium beauty labels U Beauty, Summer Fridays, and Ouai, respectively. Celebrities including Jared Leto, Kate Moss, and Brad Pitt have also been cashing in with their own skin care and makeup brand launches. A new generation of TikTok-born beauty brands, such as Refy and Youthforia, are also emerging. Part of that is due to the relatively low cost of entry: Anyone can set up a website, and many influencers and celebrities already have the relationships necessary to build a brand.
“The recent news demonstrates that having a big fan base isn’t enough,” says Anna Vale, a global beauty marketing and communications consultant and adviser. Consumers are becoming wary of misinformation, sponcon, and questionable promotional tactics. Maya Zawislak, strategic insight director at Kantar Worldpanel, agrees, questioning some celebrities and influencers who have launched beauty brands despite never indicating any interest or knowledge in the category. “Consumers are becoming savvier, putting time into researching beauty products before making a purchase and substantiating claims before buying.”
The rise of callout culture has also made celebrity bets riskier, says Olivia Tong, managing director of equity research, specializing in beauty and personal care for investment bank Raymond James. “With the internet, everybody knows everything, so if you ever did something wrong, it will come back,” she says. “That’s what happened in respect to Morphe and their key stars. They were expanding too fast and then the world and consumer expectations changed, and the key people that they’ve hitched their wagon to got into hot water because of their personal lives.” The risk is when a brand is too closely tied to a creator.
“There have been a few more success stories that are not obviously tied to a person, such as Tatcha or Drunk Elephant,” Tong says. “The average consumer doesn’t think of a person attached to [those brands].”
As the creator economy matures, more influencers will strive to launch their own brands. The trouble is maintaining relevance as their fan bases grow up, says Tong: “The beauty industry is interested in newness, so there will always be a rotation on who the next It influencer is. There will always be a portion of the market that will gravitate toward influencer brands. But people don’t like the same things that they did when they were 15.” That means some time in the spotlight before eventual churn, she says.
For existing influencer brands, the difficulty will be growing their businesses amid tough competition and higher interest rates. Larger beauty conglomerates benefit from brand awareness and bigger budgets amid a cost-of-living crisis, says Kantar’s Zawislak. “Consumers are becoming more cautious of the products they buy, and many stick to the brands they already know and love.” Around half (55%) of women globally purchase skin care items because it’s a brand they have always used, particularly during times of financial uncertainty, according to 2022 data from Kantar.
It’s an uphill climb for influencer-led beauty brands, new and old. “The benchmarks are going to get more challenging in terms of funding and getting those brands to grow beyond their first tranche,” says Tong.