In the past few years, the beauty industry has gone from unicorn mania to an oversaturated, underperforming mess. And the most recent wave of shutdowns in color cosmetics is proof. These aren’t just under-the-radar brands quietly exiting. These are brands with impressive backers, distribution at Sephora and Ulta, founder buzz, and even celebrity firepower. So what went wrong?
Disenchantment in Color Cosmetics
In the last few days, we’ve been on calls with strategic buyers, LPs, bankers, and beauty founders, and the word that kept coming up was "disenchantment." In 2021 and 2022, the beauty sector saw massive valuations and M&A interest. Investment bankers were shopping some of the buzziest names: Summer Fridays, Makeup by Mario, Rare Beauty, Merit. Yet the recent acquisition of Rhode by e.l.f. marks one of the only true exits to hit headlines.
Turnaround Playbooks (And Why Most Brands Don’t Qualify)
The typical turnaround goal: take a brand to 75-80% margins and a 10%+ profit line in 3-4 years. But even if a brand looks promising on paper, most buyers can’t justify the time or spend to fix something they believe won’t align with market timelines.
A typical turnaround playbook includes:
Cutting non-essential retail doors and leaning into Sephora as the gold standard
Exiting international markets that are draining capital
Reducing SKU count and clearing out non-performers via liquidation channels
Identifying one true hero product to anchor retail presence and brand storytelling
Rebuilding brand identity but doing it carefully (see: Voicemail Candle backlash)
But here’s the problem. If you’re a color brand, especially one that never established a hero product, you’re in a tough spot.
Color is Expensive to Scale
Unlike skincare, where a single product can serve all skin types, color cosmetics comes with added complexity. To develop a competitive concealer, for instance, you need dozens of shades. Today’s consumer expects inclusive shade ranges—and rightly so. But building and maintaining that level of inventory is near impossible for indie brands under $50M in revenue.
Skincare lets you scale with fewer SKUs. Color makes that efficiency nearly impossible.
What Happened to Ami Colé and Freck?
When Ami Colé announced its closure, the industry took notice. This was a brand with community, funding, Sephora distribution, and mission-driven storytelling. In the founder’s own words: "I hope the next chapter includes more accountability, more transparency, and a willingness to learn from what didn’t work."
And yet the feedback from other founders was revealing: brands with every strategic advantage still lose when they lose focus. As one open letter put it: "Startups are hard. But the blame is being misdirected: toward structural explanations, investors, retailers. The reality is, the brand lost its North Star. The consumer evolved, and the brand didn’t."
Freck Beauty, another beloved indie favorite, recently saw its founder step down after a quiet brand acquisition. There was no viral exit, no blockbuster acquisition—just another brand reshuffled in the background.
What Founders Need to Hear
There are lessons here for every brand building today. Not just in beauty, but in any saturated consumer category.
Aesthetics aren’t enough. If your brand is built on moodboards and influencer buzz alone, you’re at risk.
You need a moat. That can be product, community, margin, or IP. But it can’t just be vibes.
Distribution is not the win. Retail is expensive real estate, and if you're not pulling your weight on the shelf, you’ll get cut.
Understand your TAM. If your brand is built for a sliver of the market, can that slice sustain you at scale?
The business needs to scale smarter than it grows. More SKUs, more markets, more doors—none of it matters if margin and efficiency fall apart.
Founders also need to consider what they're signing up for. This industry is glamorized, but many are learning the hard way: beauty isn’t easy. And it’s not for everyone. As one founder told us, "You can’t build a product for a billion-dollar category with a million-dollar mindset."
Final Takeaway
There’s still room in beauty. But there’s less patience, less hype, and less margin for error. For every brand shutting down, there’s a chance to learn, adapt, and build smarter.
If you’re building a brand right now, here’s the hard truth: the bar is higher, the buyer is savvier, and the business model has to work. Not just on launch day, but 10 years from now.