The Beautycounter controversy has caught the eye of the beauty industry, involving various parties from beauty advocates to private equity firms. Central to the issue is Beautycounter — a company famous for its focus on clean beauty. The controversy arose from surprising actions taken by the Carlyle Group, a prominent private equity firm, as they sought to acquire a significant share in this billion-dollar brand.
In this article, you’ll find all the facts about the Beautycounter controversy, backed by sources from Business2Community. As we explore this issue, we want to help you make informed choices about your connection with the brand and understand the impact of growing control that investment firms have over beauty companies that cater to consumers.
Beautycounter Controversy – Key Facts
- Beautycounter, a “clean beauty” brand, was acquired by the Carlyle Group in April 2021, which led to a decline in sales and an increase in consultant dissatisfaction.
- Marc Rey was appointed CEO in February 2022, leading to controversial changes in the compensation model for sellers.
- Founder Gregg Renfrew is attempting to revive the brand through a new venture, G2G, following Beautycounter’s foreclosure, but faces financial and operational challenges.
The Story of the Beautycounter Controversy
The Beautycounter controversy centers around the company’s abrupt closure following its acquisition by the Carlyle Group. In early 2024, it was revealed that Counter Brands, Beautycounter’s parent company, was facing severe financial difficulties, leading to its liquidation. Founder Gregg Renfrew’s efforts to relaunch the brand under a new company (G2G) added to the uncertainty, with many questioning the future of Beautycounter and its products.
What is Beautycounter?
Beautycounter, founded in 2013 by Gregg Renfrew, emerged with a mission to create “clean beauty” products that prioritized safety and sustainability. The brand gained popularity through its commitment to transparency in ingredient sourcing and formulation, positioning itself as a leader in the “clean beauty” movement.
Beautycounter operated a direct sales model, leveraging a network of independent consultants who spread the word about its clean formulations through personal recommendations and social media. The company also sold its products through its website and retailers such as Sephora and Target.
@laurenettlinger trying @beautycounter makeup for the first time. It’s perfect for makeup that just looks like pretty skin, ya know? #cleanbeauty #makeup #beauty #beautycounter
Over the years, Beautycounter achieved significant milestones, including widespread recognition, a loyal customer base, and multiple notable partnerships. Beautycounter won three of Allure magazine’s Best of Beauty awards, including for its Lip Sheer in Twig (2014), Dew Skin Tinted Moisturizer (2015), and Lengthening Mascara (2016).
In 2016, Beautycounter expanded its portfolio by acquiring the global assets of NUDE Skincare, Inc. and NUDE Brands, Ltd. from the Bernard Arnault-owned LVMH, bringing figures like Ali Hewson and her husband Bono into the fold as investors and board members.
By 2018, Beautycounter opened its first physical store in Manhattan, followed by a second location in Denver in 2019.
The company was recognized for its forward-thinking approach, being named #1 on the Fast Company’s Most Innovative Companies list in 2019 and #48 on CNBC’s 2020 Disruptor 50 list.
Continuing its mission for ethical practices, Beautycounter released the documentary Transparency: The Truth About Mica in February 2020, spotlighting its commitment to responsible sourcing.
At its peak, the company had 60,000 sellers and generated $395 million in sales in 2020. Despite its impressive growth and accolades, Beautycounter soon encountered challenges that led to a spiral in its upward trajectory.
The Carlyle Group’s Acquisition of Beautycounter
On April 13, 2021, the Carlyle Group acquired a majority stake in Beautycounter, valuing the company at $1 billion. Carlyle Group is a US-based private equity and asset management company and is one of the biggest super-funds in the world.
The partnership aimed to accelerate Beautycounter’s growth by enhancing brand awareness and supporting its omni-channel business model.
Shortly after Carlyle acquired the brand, sellers began to depart and Beautycounter’s sales began to decline. This marked a startling downturn for the company, which had experienced significant month-on-month sales growth for several years.
The board, under Carlyle’s control and inclusive of Renfrew, became increasingly worried and opted to appoint a new CEO with a strong background in the mainstream beauty sector. At that time, executives from Carlyle attributed the sales decline to the waning enthusiasm among sellers as pandemic restrictions eased, leading them to pursue other opportunities.
The Handoff to a New CEO
On February 1, 2022, Marc Rey was appointed CEO of the parent company of Beautycounter, Counter Brands, LLC.
The founder Gregg Renfrew transitioned to Executive Chair and Chief Brand Officer. She was to remain focused on community engagement, brand innovation, and advocacy, continuing her work on cosmetic reform.
Rey joined from Shiseido Americas, where he was CEO and Global Chief Growth Officer. He has held senior positions at Coty North America and L’Oréal USA. A few months into Rey’s leadership, the company announced a significant change: top sellers would now work under a new compensation model that significantly slashed their commissions.
In multilevel marketing, a large portion of profits is allocated to sellers rather than being reinvested into the company or going to investors. Prior to Carlyle’s acquisition, Renfrew had devised a strategy to enhance Beautycounter’s profitability by eliminating commissions for sellers on personal purchases made by their recruits.
This compensation structure was pretty typical among multilevel marketing companies. Renfrew intended to communicate this shift to sellers and provide them with a year’s notice before the changes took effect, but the company revealed the modification in April 2022, implementing it just two months later.
The Distress of Sellers Amidst Changes at Beautycounter
When sellers began receiving their commissions for June 2022, many were shocked to see a significant reduction, with some experiencing declines of over 60% compared to the previous month. Concerned, sellers reached out to their networks and found that others were facing similar issues
In July 2022, during a Zoom call with sellers who had collectively generated millions in revenue, Rey assured them he would advocate for their interests, according to a lawsuit filed against Beautycounter, Carlyle, and Renfrew in Minnesota.
However, witnesses claimed Rey’s tone was dismissive as he downplayed their concerns. Text messages circulated among sellers reflecting their disbelief as Rey questioned the foundational principles of the company, suggesting that the focus on “clean beauty” was no longer appealing.
Ultimately, sellers’ pressure led to the retraction of a proposed new compensation plan. As some sought to supplement their income through other opportunities, they were met with warnings from Beautycounter regarding nonsolicitation agreements. These agreements, often hidden in the fine print of policies, became a point of contention in a separate suit filed against Beautycounter in California by the sellers.
As turmoil unfolded at the company’s upper levels, significant shifts followed. By the end of 2022, both Renfrew and key contacts left, leading to a $65 million infusion from Carlyle and Rey’s decision to invest in technological upgrades and partnerships.
Despite a general rise in the prestige beauty market, Beautycounter’s sales continued to decline, leading to Rey’s resignation in May 2023 and Mindy Mackenzie stepping in as interim CEO, marking a turbulent period for the brand.
The CEO Reinstatement and Closure Announcement
In January 2024, Beautycounter hosted a conference for its top sales representatives at the Four Seasons Resort Oahu at Ko Olina in Hawaii. The company had around 35,000 sellers, nearly half the number it had when Carlyle acquired the brand, according to an insider.
However, founder and former CEO Gregg Renfrew surprised attendees by announcing her return to lead the company again, a decision made by Carlyle in hopes of reviving sales and boosting morale.
Since August 2023, Carlyle had been searching for a buyer, transferring control of the company to Bank of America and JPMorgan Chase in mid-March, indicating a complete abandonment of what had been a $700 million investment, now valued at zero.
By April 2024, the company entered foreclosure, with Renfrew acquiring the Beautycounter brand and assets from the lenders for a few million dollars.
The announcement regarding the closure of Counter Brands sent shockwaves throughout the beauty community, particularly resonating with brand advocates and loyal customers. On May 6, 2024, Gregg Renfrew took to Instagram to share the distressing news, which was met with confusion and concern from those invested in Beautycounter’s mission.
View this post on Instagram
The abrupt nature of the announcement left many advocates feeling uncertain about their future roles, leading to a wave of emotional reactions across social media platforms as the community grappled with the implications of the brand’s closure.
The Leaked Email and Advocate Fallout
In April 2024, a confidential email intended for brand advocates was leaked and circulated on Reddit, sparkiing backlash within the network.
This email outlined the abrupt termination of advocates’ roles and left many feeling blindsided and betrayed, stating “You will receive payment of all accrued and unpaid commissions through the termination date, and you shall otherwise have no further rights to any bonuses, commissions, or other compensation following the termination date.”
A follow-up email from Renfrew provided more details on the transition:
As you know, Carlyle bought Counter Brands in 2021 and, at the end of that year, I was asked to step down as CEO. In February 2024, at their request, I re-joined as CEO of Counter Brands. I was admittedly hesitant to return but ultimately accepted the role . . .
She continued, “However, upon my return, the old company’s economic realities were worse than expected. It had more debt than funds to pay that debt, and Carlyle chose not to provide further funding. Simply put, Counter Brands ran out of money.”
The fallout from the leak highlighted the vulnerability of the advocate community, igniting heated discussions regarding the treatment of loyal sellers and the potential ramifications for their livelihoods. While some advocates rallied in support of one another, others expressed disappointment and anger toward the management, creating a chasm within the Beautycounter community.
The Relaunch Efforts and Future Uncertainty
Gregg Renfrew has launched a new venture, G2G, aimed at acquiring the assets of Beautycounter. However, this journey is fraught with obstacles, including financial constraints and an uncertain timeline for reinstating the brand.
Some current employees are still with the company, working to establish a completely new operation by the end of 2024. This process entails constructing every element from scratch, including technology infrastructure, product selection, and fulfillment logistics.
Recent updates from G2G to consultants indicate that it is closely reviewing all facets of the company’s community framework, product range, and earning potential. It appears unlikely that previous teams and consultants will play the same roles in the new organization.
The shifting landscape of the beauty industry poses additional challenges, further complicating the relaunch.
As stakeholders including former employees and brand advocates watch closely, the future of Beautycounter remains ambiguous, with many questioning whether the brand can successfully navigate these tumultuous waters and revitalize its mission.
The Consequences of the Beautycounter Controversy
The fallout from the Beautycounter controversy has been profound, affecting various stakeholders including consultants, distributors, and loyal customers. Many Beautycounter consultants and distributors found themselves losing significant income as the brand’s reputation crumbled amidst the turmoil.
Many individuals relying on Beautycounter products for their livelihood faced an uncertain future. One Beautycounter seller, Renee Hill, has filed a lawsuit against the company. Ms. Hill was the primary earner for her family, with an annual income of $177,000 from selling Beautycounter products; however, she now only makes $19,000. The loss of earnings has made some reconsider their future roles in an environment laden with MLM companies that may no longer provide the same support.
With the Beautycounter website undergoing changes and the potential selling of certain Beautycounter assets, it became increasingly difficult for the team to maintain control over their messaging to consumers. Many advocates have reported feeling disenfranchised, sharing concerns over diminishing profit opportunities and the possibility of losing their jobs in the process.
As discussions surrounding the upheaval continue, the brand’s trajectory remains muddied, with stakeholders pondering whether it can effectively reclaim its mission of providing clean products in the competitive beauty market. Beautycounter’s legacy and the hopes of so many people now rest on the uncertain outcome of their restructuring efforts within an increasingly challenging landscape.
As Beautycounter works towards its relaunch under G2G, the repercussions of this controversy will linger, shaping the future of how independent sellers approach their opportunities in the clean beauty sector and beyond.
What Can We Learn From the Beautycounter Controversy?
The Beautycounter controversy serves as a critical case study for business professionals, particularly in understanding the fragility of brand reputation and the potential consequences of mismanagement.
One of the lessons is the importance of transparent communication with stakeholders; when Carlyle approached Gregg Renfrew to sell Beautycounter products, the reaction from distributors and advocates highlighted a breach of trust that can have lasting effects on income and morale. Beautycounter distributors losing money illustrates the need for robust financial planning and a deep awareness of market dynamics.
As a business owner, you need to consider the ramifications on your business if you choose to bring in private equity or outside investors. While you may want to run your business in the same way, outside influences may want to see things done differently, in the same way that Carlyle wanted to change the commission structure for advocates and so undermining one of the key pillars of Beautycounter’s success.
The incident also reinforces the necessity of maintaining strong marketing materials that effectively communicate the brand’s mission while aligning with consumer values. Other brands operating in similar markets must take heed, ensuring they learn from Beautycounter’s missteps to protect their business from potential backlash and to safeguard their reputations.
Ultimately, the Beautycounter controversy serves as a poignant reminder to prioritize ethical practices and transparent relations with all stakeholders to navigate the complexities of brand management successfully.