E.l.f. Beauty Earns 17 Consecutive Quarters of Positive Growth
- Chaileedo Press
- May 25, 2023
- 5 min read
E.l.f Beauty cosmetics is teen’s favourite brand, according to Piper Sandler Survey, Spring 2023.
On May 24, E.l.f Beauty announced its full fourth quarter and fiscal year 2023 results. The company reported a 78% increase in net sales for the fourth quarter of fiscal 2023 and a 48% increase in net sales for fiscal 2023.
And, this is the 17th consecutive quarter of positive growth for E.l.f Beauty - How did E.l.f Beauty achieve it?
Ranking to No.3 US mass cosmetics brand
E.l.f Beauty reported a significant increase in net sales in the fourth quarter of 2023, up 78% to $187.4 million. And, for the full 2023 fiscal year, E.l.f Beauty's net sales increased 48% to $578.8 million, with GAAP net income of $61.5 million in fiscal 2023 compared to adjusted net income of $91.8 million. elf said the growth was driven primarily by retailers and the e-commerce channel.
For fiscal 2024, E.l.f Beauty expects its net sales for fiscal 2024 to be in the range of $705 million to $720 million, an expected increase of 22-24%.
E.l.f Beauty is said to cover two categories: colour cosmetics and skincare. Meanwhile, in the past 12 weeks ending 25 March 2023, E.l.f Beauty's market share in colour cosmetics has increased significantly. E.l.f Beauty rose to third place in the mass cosmetics category at 9.5%, with Maybelline (17.7%) and L'Oréal at 12.8% in first and second place respectively, according to E.l.f Beauty's financial report.
And in the skincare category, E.l.f Beauty's growth rate was quite impressive. According to E.l.f Beauty in its financial report, skincare consumption rose 12% year-on-year in the last 12 weeks to 25 March 2023, while E.l.f. Skin was up 55%.
"Our outstanding results in fiscal 2023 underscore the power of the e.l.f. brand and the world class team at e.l.f. Beauty," said Tarang Amin, e.l.f. Beauty's Chairman and Chief Executive Officer. "We grew net sales by 78% in Q4, marking our seventeenth consecutive quarter of net sales growth. We gained 270 basis points of market share in the quarter and increased our ranking to the number three U.S. Mass Cosmetics brand for the As we look ahead, we believe we are still in the early innings of unlocking the full potential we see for e.l.f. Beauty. "
(Chart: E.l.f. Beauty 17th consecutive quarter of growth)
Applying Gen-Z marketing + affordable makeup
Publicly available information shows that E.l.f. Beauty can date back to 2004. It is now part of e.l.f. Beauty Inc. The company's main brand. E.l.f. Beauty was founded in 2013 as a cosmetics company focusing on eye, lip and face makeup.
It is understood that since its founding, E.l.f. Beauty has been operating mainly through online channels, with "affordable" as its label. It has launched low-priced version of M-A-C Extra Dimension Skinfinish Highlighter, Fenty beauty Contour. Most of the products are priced below $10. With its low-price tag, it has managed to gain a foothold among the young consumers.
Most of E.l.f. Beauty best-selling items are priced at less than $10, including a number of foundation, concealer, loose powder and other primer categories that are priced higher by other brand. The most widely known was its $3 E.l.f. Lip Lacquer.
Based on this, E.l.f. Beauty became Gen Z's most popular beauty brand. Gen-Z media company Kyra's "2022 Gen Z State of Beauty Report," a survey of 1,000 participants between the ages of 18 and 25, found that E.l.f. Cosmetics ranks as the top makeup brand that respondents use daily, bumping Maybelline from first place last year into second place in 2022.
"There's a direct relationship" between which brands have gone viral on TikTok and which ones are ranked most highly with Gen Z, said Marina Mansour, vp of beauty and wellness at Kyra.
"E.l.f. has been fearless with their approach to TikTok," said Mansour. "They have been really bullish on the platform, and that's reflected."
E.l.f. Beauty is the first brand to run its own online challenge campaign on TikTok. E.l.f. Beauty has launched a brand challenge on TikTok, inviting users to post short videos and collaborating with artists to create an original song about it. Over 3 million users posted videos in 6 days, with over 1 billion views, making e.l.f. the number one platform for beauty search on TikTok. According to E.l.f Beauty's financial report, four videos about its products on TiktTok have reached billion-level views.
Key factors for e.l.f. such as low prices and high quality, a brand story and good use of online marketing are maintaining growth in the makeup market for 17 consecutive quarters despite the global pandemic.
Failed in Chinese market
Although very popular in the international market, E.l.f. Beauty's strategy of using the same low prices in China has not worked.
According to a previous announcement from its official flagship shop on Chinese e-commerce platform Tmall, E.l.f. Beauty temporarily left the Chinese market on March 31, 2023 and took down its entire shop on March 15, 2023. The brand's decision to exit China is "due to the adjustment of its global strategy and objective factors".
It is reported that E.l.f. officially entered Tmall in April 2018 and announced its presence in Vipshop in June 2019. CHAILEEDO found that E.l.f. Beauty has accounts on mainstream Chinese e-commerce/social platforms such as Tmall, Douyin (Chinese version of TikTok) and Xiaohongshu, and that E.l.f. Beauty also did live streaming on Douyin.
Most of E.l.f. Beauty international business is sold through third-party retailers such as superstore chains Ulta, Walmart and Target, so e.l.f. is also present in some offline beauty collection shops in China.
On the eve of the flagship shop's closure, CHAILEEDO entered E.l.f. Beauty's Tmall flagship shop and found that only two of its products achieved monthly sales of over 1,000 units, which is 10 Shade Eyeshadow Palette" and Baked Highlighter. The monthly sales are 4000+ units and 2000+ units respectively.
Of the 92 products listed on the brand's flagship shop, only five products sold over 1,000 units in total, with the highest being the Daily Dew Stick priced at 89 yuan ($12.6) per unit, which sold nearly 9,000 units.
The retreat of E.l.f. Beauty is the result of a huge change in Chinese consumers' consumer awareness, the rise of national brands and the innovation and transformation of Chinese marketing platforms. A combination of factors has led to a lack of consumer loyalty to some overseas make-up brands. People will have different needs due to changes in fashion trends. This means that make-up brands need to update and iterate quickly to keep up with changes in market demand and aesthetic trends in order not to be forgotten by consumers.
The local Chinese make-up brands are seeing an explosion. For example, Judydoll and Joocyee has announced its 2022 results for the first time, showing that the company's annual sales reached 1.76 billion yuan ($249 million), an increase of nearly 30% year-on-year. The company's annual sales exceeded 1 billion yuan ($141.5 million), and was among the Top 5 of Tmall's Chinese makeup sales and Top 2 of Douyin's Chinese makeup sales in 2022.
According to another public report, FunnyElves, an innovative makeup brand that was spotted and invested by Winona’s parent company, has seen its online direct channel turnover grow 180% year-on-year during Chinese 618 promotion in 2022, and its annual omni-channel GMV broke 500 million yuan ($70.7 million).
It can be seen that in recent years, as the Chinese cosmetics market continues to improve, local Chinese make-up brands are better able to adapt to the needs of Chinese consumers. Although international brands represented by E.l.f Beauty are able to shine in the international market, they still need to understand more about the Chinese market play in order to occupy the Chinese market.
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