Part 2: Lights, Camera, Business: Bridging showbiz and business

Jul 31, 2024

Part 2: Lights, Camera, Business: Bridging showbiz and business
Part 2: Lights, Camera, Business: Bridging showbiz and business
Part 2: Lights, Camera, Business: Bridging showbiz and business

In recent times, celebrities have evolved from mere endorsers to active co-creators, investors, and owners of their brands, using their fame to drive diverse business ventures. While we have talked about how their entrepreneurial flair is revamping the market space in our previous blog, here we dive into the expanding influence of celebrity brands across various sectors, exploring whether these new players can coexist with established giants or disrupt traditional loyalties to the point of obsolescence. Could investment or acquisition be the key strategy? Let’s dig in.

The Sectors Leading the Charge

The main sector that has hit the jackpot with celebrity endorsements is beauty and personal care, thanks to the massive influence and reach of famous faces. A report shows a staggering 57.8% sales increase for celebrity beauty brands from 2022 to 2023 has been reported by NielsenIQ hitting the $1.1 billion mark for the first time.

Why Beauty? The Influence of Beauty Enthusiasts

At the forefront of this trend are beauty enthusiasts and consumers from large, young, diverse, high-income households spending an average of $1,003.64 annually on beauty and personal care.

While celebrity-endorsed brands traditional brands like Loreal, Maybelline, and Bobbi Brown were always cherished, the wave of celebrity-owned brands has undoubtedly altered how the industry functioned. Female celebs like Rihanna have played a critical role in solidifying the beauty and personal care space as market frontrunners by fostering consumer loyalty through authenticity and personal connect, something established brands can’t fully match.

By daring to go against the monotonous, Fenty Beauty’s launch in 2017 was legendary, with over 40 foundation shades (now 50). Her focus was on breaking barriers and embracing inclusivity and diversity. The “Fenty Effect” that became a global movement influenced many brands (niche, established, and those in between), and they were left with no choice but to buckle up and match the trend. Following suit, Estée Lauder expanded its Double Wear foundation line to include over 60 shades, reflecting a broader industry trend towards change, inclusivity and catering to diverse skin tones, thereby meeting new consumer expectations.

A New Paradigm in Consumer Loyalty: Celebrity Brands vs. Established Giants

The gush in celebrity-driven brands is striking a direct challenge to long-established industry giants. As consumers increasingly seek authenticity and resonance, traditional metrics of brand loyalty and leadership will be challenged, creating a competitive marketplace where the old and new must constantly evolve to stay in sync with ever-changing consumer expectations.

There’s a puzzle to be solved: Should established brands compete directly with such fresh, dynamic and burgeoning entities or strategically align with them through investment or acquisition?

Both will likely coexist, but the balance of power will shift. Established brands will need to innovate and adapt, incorporating elements of personal branding and authenticity into their strategies. Meanwhile, celebrity brands will continue to leverage their unique position, offering consumers a mix of personal connection and product quality.

Investing in or acquiring celebrity brands can offer several benefits for established companies. Firstly, it allows them to tap into new customer bases and demographics that might have been elusive. Celebrity brands come with built-in fan bases that can be leveraged to expand market reach and boost sales. We talk about Rihanna’s Fenty Beauty again. LVMH’s investments in the trendsetter brands enabled the luxury conglomerate to diversify its product offerings and capitalize on the singers’ massive appeal and brand equity.

Now established brands could either compete directly to stay relevant or focus on cobranding a partnership. To appeal to the tech-savvy and trend-conscious consumers swayed by Kanye West’s Yeezy Line, Nike invested heavily in R&D to create groundbreaking products like its Nike Air technology and self-lacing sneakers.  On the other hand, Adidas partnered with Kanye West and leveraged his influence while integrating Adidas’ expertise in sportswear. Its prime focus was on forming strategic partnerships to co-create products, commingling the appeal of the celeb with the established giant’s quality and distribution network.

Secondly, these acquisitions can infuse a sense of modernity and relevance into traditional brands. By aligning with trendy, up-and-coming labels, established giants can refresh their image and stay in tune with contemporary consumer preferences. This strategy can be particularly effective in industries like beauty and fashion, where trends evolve rapidly, and consumer tastes are ever-changing.

Acknowledging the potential impact of Alia Bhatt's Ed-a-Mamma, which grew ten times in less than a year of its launch and clocked a valuation of Rs 150 crore, RRVL acquired a 51% stake in the brand. This is classic proof of how Reliance's strength from supply chain to retail to marketing when blended with Alia Bhatt's fame, authenticity & ideation, led to a successful brand.

A prime example of this strategy in action is Coty's acquisition of a majority stake in Kylie Cosmetics. By investing in Kylie Jenner's brand, Coty not only gained access to a younger, more engaged audience but also benefited from the social media prowess and personal branding that Jenner brings to the table. This move allowed Coty to rejuvenate its portfolio and compete more effectively in the fast-paced beauty market.

In 2017, George Clooney and Rande Gerber made headlines in the alcobev domain, when they sold their tequila brand, Casamigos, to the spirits giant Diageo for a staggering $1 billion. This high-profile deal highlighted the massive value and potential of celebrity-backed brands in attracting lucrative investments and acquisitions in the alcoholic beverage industry. This success also inspired a wave of celebrity-backed tequilas to enter the market over the past few years, such as LeBron James with Lobos 1707, and Kevin Hart with Gran Coramino.

Engaging followers is essential for influencer marketing. A strong connection is more important than sheer follower numbers. Celebrity brand owners achieve this by sharing content that is emotionally resonant and entertaining. For instance, Chef Gordon Ramsay, known for his engaging cooking tutorials, frequently uses his product line in demonstrations, reinforcing authenticity and trust.

Kim Kardashian's approach with Skims is another prime example. By sharing images of herself and her circle wearing Skims and involving her followers in product development, Kardashian fosters a sense of community and inclusivity. This not only provides valuable consumer insights but also ensures that customers feel integral to the brand, enhancing loyalty and trust.

Endorsement Challenges and Controversies: What Can Go Wrong

While the perks are evident, investing in celebrity endorsements comes with challenges and risks that can be mitigated by launching their brands.

  • Lack of control over product quality and marketing strategies, leading to potential misalignment with their brand values. For example, Taylor Swift faced criticism for endorsing Diet Coke, which clashed with her public image of promoting health and wellness.

  • Public scepticism often stems from celebrities' historical lack of commitment to endorsed products. Notable examples include Akshay Kumar promoting Vimal Pan Masala despite advocating for fitness and health.  Authenticity is crucial; celebrities must genuinely use and invest in their products.

  • If a company faces controversies, the celebrities endorsing their products may have to bear the brunt of their reputation and actions. Ellen DeGeneres faced backlash after endorsing CoverGirl due to the brand's animal testing policies, contradicting her advocacy for animal rights.

  • Celebrities may receive substantial fees for endorsements, but these are often one-time payments or contract-based. Contrarily, launching their brands allows for continuous revenue streams and higher profit margins by eliminating the middleman.

  • Working on somebody else’s schedule and timeline is something nobody appreciates. Celebrities often need to participate in marketing campaigns, shoots, and appearances as dictated by the endorsing company, which can conflict with their schedules.

Amidst all of the above, for all types of brands, product distinction remains crucial to stand out in a crowded market, because consumers are quick to notice when it is lacking.

What’s next?

As celebrity brands continue to rise and make waves across industries, their impact becomes undeniable. In our next blog, we’ll dive into how these brands can shake off the "just a gimmick" label and instead be recognized for their top-notch quality, and product distinction. Get ready for insights on turning scepticism into success and more!

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USA

Market Xcel Data Matrix

5741 Cleveland street, Suite 120, VA beach, VA 23462

SINGAPORE

Market Xcel Data Matrix Pvt. Ltd.

190 Middle Road, # 14-10 Fortune Centre, Singapore - 188979

NEW DELHI

17, Okhla Industrial Estate Phase 3 Rd, Okhla Phase III, Okhla Industrial Estate, New Delhi,

Delhi 110020

Market Xcel Data Matrix © 2023 (v1.1.3)

USA

Market Xcel Data Matrix

5741 Cleveland street, Suite 120, VA beach, VA 23462

SINGAPORE

Market Xcel Data Matrix Pvt. Ltd.

190 Middle Road, # 14-10 Fortune Centre, Singapore - 188979

NEW DELHI

17, Okhla Industrial Estate Phase 3 Rd, Okhla Phase III, Okhla Industrial Estate, New Delhi,

Delhi 110020

Market Xcel Data Matrix © 2023 (v1.1.3)