People
Presented in partnership at the Beauty Independent Dealmaker Summit NYC
The large beauty strategic has had the same routine for decades: regular acquisitions and expansion into burgeoning sectors, letting scale work its magic. In the 2020s, brands, influencers, and celebrities have been able to connect directly with manufacturers to rapidly stand up challengers that eat into the strategics’ market share. Add to that inflation, tariffs, and escalating consumer demands from beauty, and there’s a sense that growth is a harder ask now for the larger strategics, while smaller companies are hitting a scale wall they cannot climb. Tangential to traditional beauty companies are vitamin, mineral and supplement (VMS) and wellness companies that are increasingly becoming a single industry with beauty. They face the same challenges of even fewer scaled strategics in a highly fragmented space.
Increasingly, the need has arisen to 1) cost out, 2) re-organize for efficiency and agility, and 3) review brand portfolios to carve out components that don’t serve the whole i.e., the potential and actual sales in the past year of Too Faced, Smashbox, and Dr. Jart+ (ELC); Fenty Beauty and KVD Beauty (LVMH), CoverGirl, Rimmel, Sally Hansen, and Max Factor (Coty); and Clean & Clear, Maui Moisture, and OGX (Kenvue).
Everyone is trying to get the formula right for both the consumer and the ever-changing market. At every step of growth in the Beauty, Health, and Wellness industry, the challenge is different, but segmentation reveals the key advantages and disadvantages at each step:
- At the top, large strategics (i.e., L'Oréal, Unilever) may not be as agile as smaller players in a shifting environment, but they have scale and leverage that they can use with retailers, and an established platform to plug brands into for hypergrowth. That said, acquisition by a levered platform often faces challenges of brand dilution and loss of agility.
- Mid-size strategics (i.e., Coty, Puig) are typically caught in the middle. They’re not nimble enough to pull off sharp pivots nor heavy enough to demand terms with retailers and suppliers. They also may face a less mature operation and likely haven’t truly built out best-in-class structures.
- Indie brands can move fast with the shifting tides, have little leverage to play with, but have their brand, customer and growth.
Look closely, and this breakdown doesn't capture players across the spectrum of size. Between the scaling brands and giants lies a new player: enter the neo-strategic (approx. $500 million-$2 billion in revenue). By this, we mean a modern platform built to systematically acquire, scale, and grow brands with speed and digital fluency while keeping the brand edge intact. Where the established strategics are steeped in legacy, this newer player still has its roots intact, driven by a founder mindset.
Several companies and PE funds have attempted to become this new player with a small, nimble structure. What resulted were failed acquisitions and brands that never reached their full potential. The platforms didn’t have enough of the right formula on either growth trajectory or operational foundations. They tried to tackle too much. What this tells us is that the neo-strategic model needs to be designed intentionally, hitting the sweet spot of a set of brands with soul and an underlying state of operational rigor.
However, once established, there is still a question that remains: how does the neo-strategic then break through to the next scale i.e. mid-size and large strategic? Can these companies break through the low billions in revenue and become the next international strategic player?
The key decisions
To understand how or why some companies can break through, we analyzed the evolution of scaling companies in this space.
We found that there are four key pivot points where value is created or destroyed as beauty companies grow. In the move from DTC to omnichannel. From single to multi-brand. Through category expansion. And domestic to global. Miss any of the decision trees and the brand stalls, gets stuck, or is acquired at a discount.
Neo-strategics need to balance brand power and essence with the operational efficiencies of a united company. They need to execute the channel strategy while eyeing channels for expansion. And then there are meaty decisions to be made about whether to establish dedicated manufacturing or remain asset light, how independent to keep brand identities and media presence, how to determine and treat IP ownership, which retailers to partner with and how those relationships should work, and maybe one of the most challenging, whether to expand internationally.
What e.l.f. can tell us about the neo-strategic playbook
E.l.f Beauty’s history is one to be studied, having been independent, then private equity-owned, and now public. It has demonstrated a path to becoming a neo-strategic. During its growth, e.l.f. did something that companies too focused on “the now” misjudge. They ramped up their investment in marketing as a percentage of revenue, rather than taking profit out of the business. In addition, profits and efficiencies gained from scale were re-invested in G&A and infrastructure to build a strong operational foundation.
Their 2025 acquisition of rhode has been highly instructive: rhode broke out of the typical celebrity founder model to go from launch to a near ~$1 billion price tag in three years flat. What was different about how rhode grew? E.l.f.’s CEO cited rhode as a “fast-growing brand” in the deal announcement—indeed, it had no physical stores at that time—adding that leadership were excited by rhode’s ability to “break beauty barriers.” Hailey Rhode Bieber was different from other celebrities in her approach to makeup itself, coining “glazed donut skin” for the look that her products could achieve, arriving early to peptide lip gloss, and finding new ways to showcase the product and brand (iPhone cases, for one) to her 11 million followers.
E.l.f and rhode are complimentary in what they bring to the table for each other. E.l.f. brought the platform, a strong product development engine, and a customer base won with a low price point, focus on customer experimentation, promotion through user-generated content, and inclusiveness. Rhode brought a new brand and international recognition with Hailey.
Together, e.l.f and rhode crossed the $1 billion revenue mark. Now they may face one of the biggest challenges since e.l.f made the decision to close all of its stores back in 2019: How it will execute its international expansion, including building the required infrastructure (headcount, distribution partners, potential additional co-manufacturer relationships/sites, etc), without running out of money, maintaining its brands’ identities, and without bloating its cost structure. The challenge comes full circle.
The watchouts
Independent and emerging brands may have a lot of momentum and hype, but there are key challenges to their value longer-term:
- Commoditization pressure: Proliferation of lower-priced “dupes” is eroding differentiation and pricing power.
- Premature retail scaling: Expanding into retail before supply chain and inventory systems are mature can lead to stockouts, damaging retailer relationships and long-term customer retention.
- Unstable demand generation: Heavy reliance on paid media and influencer marketing without strong repeat purchase behavior creates volatile demand, especially as social trends shift rapidly.
- Weak brand defensibility: Lack of a clear brand story, positioning, or niche increases the risk of becoming a commoditized SKU in a crowded market.
In the commercial and strategic space, the rationale needs to be crystal clear to avoid underperforming assets, watching out for:
- Fragile fundamentals at entry: Acquiring brands with weak margins, inconsistent growth, or limited defensibility without a clear value creation plan.
- Overestimated synergies: Underappreciating the complexity of integration across systems, culture, and operations, leading to delayed or unrealized synergies.
Add to those concerns, operational execution risks, especially with carved out brands, (TSA gaps carveouts, supply-chain disentanglements, undefined SOPs), legal and IP risks, talent attrition, and on.
So, who’s the next potential neo-strategic?
Tomorrow’s most valuable acquisitions are pushing their growth while professionalizing with the right board advisors. When the time comes, they need the right strategic partnerships in place, a plan to manage their balance sheet and a clear answer to "why now and why us." Strong EBITDA and cash management reflect solid operating performance and are the clearest indicators that a company can survive the push to international expansion and build enough inventory to service customers
Depending on the source and composition of the neo-strategic (i.e., indie brands, PE-owned, carved-out entities), the company will lose or gain leverage from different parts of the P&L that will impact how the company can gain an edge.
The bottom line is to build around a clear consumer need, not just a trend. Beauty growth is increasingly driven by perceived value, efficacy, and relevance, so a sharp proposition matters more than broad brand hype. Complement the growth with strong operational fundamentals that avoid negative impact on customers, consumers and the cash that is needed for growth and the formula to build the next neo-strategic looks ready to launch.
***
The bottom line:
- The neo-strategic beauty company (approx. $500 million-$2 billion in revenue) is a modern platform built to systematically acquire, scale, and grow brands with speed and digital fluency while keeping the brand edge intact. It sits between independent or scaling companies and larger strategics.
- E.l.f. is the best example of a potential neo-strategic with its acquisition of rhode. The company is at a notoriously challenging stage of the growth paradigm, where it must support brand identity, channel strategy, and international expansion without overspending.
- There are four key pivot points where value is created or destroyed as beauty companies grow: 1) In the move from DTC to omnichannel, 2) from single to multi-brand, 3) through category expansion, 4) from domestic to global.
The AlixPartners Beauty, Health, Wellness practice partners with the full universe of BxHxW players—global strategics, indie darlings, specialty and mass retailers, PE-backed platforms, and manufacturers—to craft a fresh trajectory.
