Why Rhode’s $1B Acquisition Is the Smartest Entrepreneurial Move of the Decade

“Why Rhode’s $1B Acquisition Is the Smartest Entrepreneurial Move of the Decade”

When news broke that Rhode, the skincare brand founded by Hailey Bieber, was being acquired by e.l.f. Beauty for $1 billion, I was stunned. Not for many reasons other than Rhode has quickly become a dominant force in the beauty industry, with sales skyrocketing and a devoted cult following of over 3.2 million followers. My first thought? This felt like an early exit—maybe even a business misstep, towards the missing out of opportunities which would probably ensure more than simply a billion for its CEO. But then, I reconsidered my perspective, diving slightly deeper within the socioeconomic landscape that surrounds us, and within the business aspect of it all, perhaps this wasn’t a risky move, but rather one of the most strategically brilliant decisions in recent beauty business history.

Originally launched in 2022, Rhode quickly capitalized on Hailey Bieber’s well-known passion for skincare and her effortlessly clean, glowing look—an aesthetic she has perfected over the years. With her radiant, tanned skin, subtle freckles, and iconic lip combination, famously showcased in past makeup videos, all contribute to her authentic beauty persona. Interestingly, her signature lip look was inspired by her mother’s use of lip liner and lipstick, adding a personal, nostalgic touch that resonates deeply with her fans, which eventually created the inspiration for the launching of her Peptide Lip Tint and the iconic Lip phone case, owned by thousands.

  Leveraging Hailey’s massive and dedicated following, the brand tapped into a ready-made fanbase eager to emulate her lifestyle of Bieber herself. And the epitomy of the clean aesthetic model, was now easily attainable, motivating fans to purchase the very same product she used and endorsed, thus creating an instant trust and authenticity that fuelled the brands rapid growth over simply three years, establishing itself as a major player in the ever-revolving competitive skincare market almost overnight.

But Rhode isn’t just a brand rooted in the aesthetics of the beauty industry — it’s a brand driven by intention. At its core is a deep commitment to women and mothers around the world, championed through the Rhode Future Foundation, which pledges a minimum of 1% of sales to advancing women’s careers and empowerment. Yet the brand’s mission doesn’t stop there. Sustainability is not a surface-level initiative, but a foundational value woven into Rhode’s DNA, shaping its identity and guiding its long-term vision from the inside out.

                  Build upon the ideology that one shall have a qualitative number of products rather than simply one of all, the ingredients, formula and packaging of the brand promotes the idea of individuality and products that work for all. Recreating the staples of the beauty industry and reinventing the need of the consumer to match the now and here rather than solely the things that have worked within the industry of the past.

Rooted in the philosophy that quality should outweigh quantity, Rhode champions a curated approach to beauty, favouring fewer, better products over excess. From ingredient selection to formula development and packaging design, every detail reflects a commitment to individuality and universal efficacy. By reimagining some of the industry’s staples, the brand isn’t just following the tradition of the past but rather reshaping the norms of beauty, creating products that meet the needs of today’s consumer, here and now, rather than relying solely on what has worked for people in the past.

So, with $212 million in net sales over the past 12 months and a strategy that continuously boosts the brand’s appeal alongside products that consumers are eager to buy, why would Hailey Bieber sell Rhode to e.l.f. Beauty for $1 billion?

The clear answer is that e.l.f. Beauty can significantly accelerate Rhode’s growth thanks to its vast resources and industry expertise. Partnering with this major makeup brand will open doors to wider retail distribution, including Sephora stores, increase production capacity to match a makeup giant, and enable the brand to expand globally at a much faster pace. This approach, however, marks a strategic shift from Rhode’s original ideology of inclusivity and a limited product offering. So why change a formula that clearly works?

While remaining the Chief Creative Officer, Hailey Bieber has maximized the brand’s potential by capitalizing on its current momentum. This strategy ensures that, at a time when the economy remains relatively stable and any recession is still on the distant horizon, growing the brand’s strength and scale will help secure its survival in the event of a future financial crisis.

Evidence suggests that during the 2008 financial recession, makeup sales declined by 3%, falling to $8.38 billion in 2008 compared to the previous year. This represents a drop of approximately $260 million, highlighting that in times of financial crisis, consumers are less inclined or able to spend on makeup. Whether this reflects a shift toward wearing less makeup or simply a greater reliance on existing products, the data underscores how beauty consumption patterns change in response to economic instability.

Contrary to the well-known “lipstick effect”, which is a theory that lipstick sales tend to rise during economic downturns as consumers turn to small, affordable luxuries to lift their spirits and maintain a sense of normalcy, the data from the Great Recession tells a different story. According to market research firm Kline & Company, lipstick and lip gloss sales in the U.S. actually declined by 5.3% during this period. This unexpected dip suggests that even beauty’s most symbolic “recession-proof” product wasn’t immune to the financial strain consumers faced, perhaps indicating a broader shift in spending habits or a reprioritization of essentials.

Based on all the information above, it is clear that the idea of selling a brand which main product is lipstick and lipstick packaging, was a genius move, that will ensure the survival of the brand, the expansion of its audience as well as the availability of creation of new products based on the Rhode brand archetype.

However, even the media coverage the brand has received following Rhode’s acquisition by e.l.f. Beauty has served as a powerful, unpaid marketing campaign. This highlights the effectiveness of Rhode’s marketing strategy in generating impactful yet organic press that not only boosted the brand’s visibility but also reinforced its position as a rising force within the beauty industry. The result?  a worldwide buzz, all without spending a dollar on traditional advertising, and $800 million in cash and stock, with an additional $200 million contingent on Rhode’s future growth over the next three years.

Considering the data above, selling a brand whose core product centers around lipstick and its packaging was a strategic and forward-thinking move. It positions Rhode not only for long-term survival in the face of potential economic downturns but also for significant growth. Through this acquisition, the brand gains access to a broader audience, greater resources, and the infrastructure needed to expand its product range, all while staying true to the Rhode brand archetype and its original vision.

Eventhough entrepreneurship has long been associated with holding on, building big, and owning every part of your empire, smart entrepreneurs know that the greatest power lies not in owning everything, but in timing. Selling a company at its peak, when metrics are glowing, the brand narrative still feels fresh, public perception is on an upward trajectory, and the product line is still lean with just a few power players, like the cult-favourite Pocket Blush in Toasted Teddy and the iconic Peptide Lip Tint—isn’t a sign of failure. It’s strategy in its purest form.

Particularly in a market where consumer loyalty and celebrity endorsements shift faster than a TikTok trend, timing is everything. Add to this the looming threat of an economic downturn on the horizon, with inflation and consumer spending tightening, and the stakes become even higher. In this context, securing a $1 billion exit now isn’t just a financial win—it’s a strategic move that ensures the survival and potential growth of the relatively youthful Rhode brand. Rather than risking the unpredictability of the market, the acquisition provides Rhode with the resources, stability, and infrastructure of an established giant like e.l.f. Beauty, giving it a stronger foothold to navigate the upcoming challenging times while continuing to innovate and expand its product offerings.