Revlon, the 90-year-old multinational beauty company, has filed for Chapter 11 bankruptcy protection in the US, weighed down by debt load, disruptions to its supply chain network and surging costs.
The beauty company said in March 2022 that logistical issues hurt its ability to meet customer orders. It also said it was hindered by rising prices on key ingredients and persistent labour shortages.
It is clear that Revlon experienced industry-wide supply chain challenges and higher costs. BH cosmetics, a LA Based and well-liked cosmetics line among junior and aspiring make-up artists recently filed for bankruptcy with having debts of 23,5 million dollars. Becca cosmetics, a 20-year-old innovative and high-quality make up, who had one of the best-selling highlighters in the United States confirmed that it faced an accumulation of challenges and together with the global impact of COVID-19, it had to make the decision to file for bankruptcy. This goes to show that even well-liked and innovate brands are struggling.
Interestingly however, Revlon’s share price increased news of its bankruptcy was made public and on 22 June Revlon’s share price rose 418% from June 13 record-low. This turn of events can be described as a classic short squeeze. In its simplest form, a short squeeze is when institutional investors short the stock (bet that the value of the company decreases) of a company (usually a house hold name) that has fallen into administration. Retail investors typically member of the public rather than a business, long the stock, which means they maintain “long” security positions in the expectation that the stock will rise in value in the future. This then forces the investors who shorted the stock to buy-in their investment in order to avoid greater losses. Revlon’s share price has decreased somewhat closer to its record-low low. So, what is the real value of the company and is this the end of Revlon as we know it?
It has been reported that the company has secured $375 million in additional debt which will allow them an attempt to restructure the company’s debts and secure its future. It is likey that Revlon has secured ‘Debtor-in-possession financing’. Debtor-in-possession is a special kind of financing meant only for companies that have filed for bankruptcy protection under Chapter 11. It allows the company to raise capital to fund its operations as its bankruptcy case runs its course. And Debtor-in-possession financing is unique from other financing methods in that it usually has priority over existing debt, equity, and other claims.
Companies that file for bankruptcy can also be bought-out by other companies. In June, Reuters reported that Reliance, an Indian multinational conglomerate company, was considering a buy-out of Revlon. it has also been reported that Reliance is set to acquire Walgreens Boots Alliance. So, it seems that Reliance is building up its personal care portfolio and Revlon, being a 90-year-old house-hold name, may just be the right fit.
Why Revlon and why now?
Unlike one of its main competitors, L’Oréal, Revlon focused on creating brands rather than acquiring. While L’Oréal acquired competitors like Maybelline, Lancôme, and Garnier, and Bourjos, Max Factor, Rimmel were acquired by Coty, the company which bought Kyle Cosmetics, Revlon launched the likes of Flesh Beauty.
Revlon said that “Flesh Beauty was a brand centred on diverse marketing and products designed to entice younger customers.”
Vogue business, However, said this was a failed attempt by Revlon to take on Fenty Beauty by Rihanna.
Flesh Beauty was a failed attempt by Revlon to take on Fenty Beauty by Rihanna.
Vogue Business
Shortly after its launch, Flesh Beauty was dropped from its exclusive retailer because there was here was no real understanding of what it means to be a true inclusive brand and thought process and marketing techniques were very outdated.
Perhaps if Revlon had acquired well-liked brands in ordered to take out competition and gain access to their intellectual property, it would have a better place in the market. Having innovative and high-quality products won’t save a brand from falling into bankruptcy, or administration as we say in the UK. And other reason why Becca cosmetics failed is because it faced a massive identity when Instagram and social media marketing first became a thing.
Social Media is defining global beauty standards and is led by powerful beauty influencers. Cosmetic brands are no longer using celebrities to endorse the products. Consumers want beauty influencers that actually know about the products they are using. James Charles for example became the first male ambassador for the renowned brand CoverGirl and he is known to be futurist and daring. He has 23.9 M YouTube subscribers and is said to be the best influencers to promote products to Gen Z.
Revlon, however, recently collaborated with Megan Thee Stallion. While the pop star definitely appeals to a younger audience, she is not a beauty blogger and consumers are savvy to the fact she probably doesn’t know anything about the product she is endorsing.
And while celebrity endorsements may have worked for the likes of Rimmel when it collaborated with, Kate Moss, that was in 2001 and it doesn’t work anymore. Not for beauty brands anyway. Interestingly, Kate Moss has become the face of Zara’s new collection. This is a good fit because Kate Moss is an icon and known for her social life and chic outfits. The collection has been inspired by nights out in Paris and is shot by David Sims, a renowned British photographer and director. The collection is selling celebrity status, which Kate Moss is qualified to do.
So, who was buying Revlon products if not the 23.9 M subscribers of James Charles? Being a 90-Year-old brand, it is likey that its main customer are the aging population, and perhaps younger people that haven’t got a real interest in cosmetics. Also, being a drug store brand, it may attract general passers-by and people with a small budget for make-up.
Unfortunately though, a McKinsey report shows that whiles in-store shopping accounted for up to 85 percent of beauty product purchases prior to the COVID-19 crisis, footfall has been down due to COVID and WFH, and this would have reduced any loyal clientele that Revlon may or may not of had.
So, as well as in competition with its direct drug store competitors and younger brands, skin care and aesthetics have become a much-loved consumer trend.
Shifting consumer attitudes about wellness, beauty, and healthy aging, have increased skin care and aesthetic treatment awareness and there has been an increased demand for invasive and non-invasive skin treatments.
A McKinsey report shows that consumers are spending more on a. healthy foods and b. personal care products which includes skincare and aromatherapy over make-up.This highlights that although the cosmetics industry is bouncing back after its decline during pandemic and consumers are creatively experimenting with colour cosmetics, if cosmetic companies, like Revlon, cannot keep up with the fast-beauty trends, which includes skincare, to reflect the fast-paced, hyper-connected world of today, they are going to fail.
The future of cosmetics will be interesting to see unfold. There seems to be trends and cosmetics brands coming and going every day. However, while this seems to be a challenge for brands, I wonder if it will be a great opportunity in the Metaverse.
I imagine that consumers will be able to buy a different shade of lipstick, dazzling eyeshadow and various contouring pallets and apply it to their avatar in a second. I know that I would buy and wear a lot more. And why not, make-up isn’t for covering up imperfections. It’s for making you feel colourful and creative. The reason I don’t buy or wear make up now is because I don’t like the feel of it and I have little patience when applying it. I imagine cosmetics brands will gain a lot more consumers with my feeling towards make up in the metaverse and do considerable better than they are now.
Will Revlon’s make up make it to the Metaverse only time will tell.
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