Beautycon

The future of Beautycon, whose beauty festivals are billed as meccas of cultural relevance where brands can connect IRL with a new generation of beauty-obsessed, digitally native consumers, is at a crossroads.

The company has hired investment bank Ohana & Co. to seek additional investment, WWD has confirmed.

Beauty festivals — think professional trade show meets Coachella — have become prevalent in the last five years, largely thanks to Beautycon, founded in 2013, which was one of the first.

At a time when Millennials and Gen Z are increasingly shopping online and looking for experiences to fill Instagram feeds, Beautycon’s chief executive officer Moj Mahdara has aimed to apply the fandom experience found at events like Comic Con to beauty brands and influencers.

Beautycon in particular has drawn thousands of attendees — 20,000 at its 2018 festival in New York, according to WWD — and in the past two years retailers have launched festivals of their own, including Australia-based Mecca’s Meccaland and Sephora’s Sephoria in 2018, and in June, QVC’s Beauty Bash.

But industry executives are grappling with whether beauty festivals, Beautycon’s primary source of revenue, are really the effective marketing vehicles they were initially perceived to be, raising questions over Beautycon’s future direction even as it seeks more funding.

Tibi Pre-Fall 2020

The scene at 2019’s Beautycon LA.  Stewart Cook/WWD

For the past few years, many of the beauty industry’s biggest brands have flocked to participate in Beautycon’s mega-events in Los Angeles and New York, hoping to engender Gen Z consumers with product samples, influencer meet-and-greets and Instagram-ready photo ops.

However, sources close to the company say that despite a purportedly thriving Los Angeles festival, Beautycon has been plagued by missteps over the past year, including an attempt at experiential retail that is said to have not met revenue expectations and a New York festival that sparked social media ire from attendees.

Sources blame the internal company culture, established by Mahdara, who excels at communicating both Beautycon’s ethos of cool and her own personal brand to the public, but is said to lack operational expertise. The company is said to see repeated staff departures and annual layoffs consistent with the close of its festival season. A recent round of layoffs in September, following the Los Angeles festival in August, is said by sources to have affected up to 70 percent of Beautycon’s staff.

But Mahdara, who has been Beautycon’s ceo since she invested in the business in 2014, contested any notions of trouble within, including reports from sources about the company’s pattern of regular layoffs and the most recent round in September.

Mahdara confirmed that a round of layoffs did happen in September, but described them as “more of a re-org than a layoff.” She refuted the reports that the layoffs affected up to 70 percent of the company. She did not reveal the exact number of jobs or percentage of the organization laid off, but did say the cuts took place across “multiple departments” to “prioritize efficiency.”

“It’s been a gradual shave-down throughout the year — some in January of last year, some in March, April, June, that’s it. It’s been a gradual fine-tuning,” she said. “It’s truly about pivoting the business toward our goals…the market [has] changed and people want to bet on the now versus the future, which means all eyes are on commercially viable businesses.” 

Mahdara said that source reports alleging that the company consistently lays off workers after the close of its festival season are not true. “We don’t do ‘mass layoffs.’ Generally, the number of employees is seasonal and grows around the time of the events and decreases after the events,” said Mahdara. “We also had layoffs when we discontinued new side ventures that we did and then decided they were not as relevant to us as the core festivals. Finally, we also have people who leave or we let go when we need to tighten the belt to be profitable.”

Sources say that this current round of fundraising has been tough for Beautycon, marked by speculation around its long-term potential for profitability. Mahdara contested these reports as well.

“We are legitimately in the best state we’ve ever been in, in regards to fundraising,” she told WWD. “We’ve raised over $20 million from venture capital and family offices and we’ve graduated now…everything is pointing in the right direction. It’s positive.”
Mahdara told WWD that Beautycon’s festivals have “always been profitable,” and that revenue has grown annually at about 50 percent a year. Next year, she said, Beautycon is projected to grow 100 percent. Mahdara did not offer details as to what specifically will drive that growth next year.

Tibi Pre-Fall 2020

The scene at Beautycon New York 2018.  Andrew Morales/WWD

Claims by sources who spoke to WWD on the condition of anonymity conflict with Mahdara’s account of the company’s financial state. One source close to the company said Beautycon is “not yet profitable, but has significantly cut its losses,” while others insist it continually loses money and lays off employees whenever it needs to curb expenses. These sources say Beautycon’s festivals are its primary source of revenue, but the money they generate is not enough to cover its operating costs.

Founded in Los Angeles in 2011 by Marina Curry and Jonathan Burford, Beautycon was originally a small conference for influencers.  Recognizing that young consumers were increasingly looking to a diverse range of YouTubers over celebrities for beauty inspiration, Mahdara invested in the company in 2014 and turned the festivals into the consumer-facing events they are today.

Prior to Beautycon, Mahdara founded three companies outside the beauty industry — two digital creative agencies and an entertainment consultancy — over the course of a decade. Her second company, Exopolis, was sold in 2010 to Austin Ventures for an undisclosed amount, according to Forbes. Now Mahdara touts Beautycon as a company that reflects the future of beauty and the way today’s young consumers want to shop for it. The company’s messaging emphasizes diversity, inclusion and community — core values that speak directly to Gen Z.

“It’s the programming, the curation — it’s what makes everything awesome in life,” Mahdara said in a 2018 interview at the festival in New York when asked what makes the Beautycon experience unique. “Why do you go to Coachella when you can see Beyoncé on tour? It’s the story, the community feeling that people get…when you walk in here, you get people who feel the same way about themselves and this industry in beauty.”

Mahdara herself is the primary promulgator of Beautycon’s messaging, and she speaks frequently in the media and at conferences, often about the need for wider representation in the beauty industry.

“People want to be educated, they want to see their friends there and they want to see people who look like themselves represented in products and materials,” Mahdara said to WWD in that same interview at the 2018 festival in New York. “We’re pushing the industry to be — rather than their ‘spray and pray’ version of inclusive — actually inclusive of women of all body types, age ranges, ethnicities, religions.”

Beautycon’s festivals are punctuated by celebrity appearances, ranging from Paris Hilton to Cardi B to Hillary Clinton and Megan Thee Stallion. Most patrons are Gen Z or their parents and chaperones, hoping for free samples or a chance to see a favorite YouTuber in the wild.

In the past few years, many of the industry’s biggest brands and retailers have taken part in Beautycon, paying anywhere from $13,000 to $1 million to build elaborate, Instagram-ready set-ups. Glossier, Ulta Beauty and Maybelline were just a few of the 300 brands on display last August at the Los Angeles Convention Center.

Most recently, Mahdara has talked about expanding the company further into experiential retail. Last year, she launched Beautycon Pop, a retail pop-up fashioned after “experiences” like the Museum of Ice Cream and Color Factory.

Beautycon Festival Day 2, New York, USA - 07 Apr 2019

Cardi B at Beautycon New York 2019.  Andrew Morales/WWD

Since 2014, Beautycon has received money from a menagerie of investors, which sources say number close to 100. Mahdara would not confirm a specific number of investors, but those that are publicly known include some major companies and high-profile individuals, such as L’Oréal, A&E, Hearst, BBG Ventures, C Ventures, Demi Moore, influencer Bethany Mota, Jay Brown of Roc Nation and more recently, Richelieu Dennis, the founder of Sundial Brands, through his New Voices Fund, which is a joint venture with Unilever.

Now, per Mahdara, the company is hoping for another investment to finance the next stage of its life, hence the hiring of Ohana & Co. to explore options.

“[Beautycon] has established itself as a leading brand in the beauty festival category, which is a very important category for beauty brands to interact with consumers as well as influencers,” said Laurent Ohana, senior adviser with Ohana & Co. “Brands today are looking to find more ways to have a direct connection to consumers, and to supplement what they are doing online, they need to have something experiential.”

In the past two years, beauty festivals resembling Beautycon have proliferated. At one point, sources told WWD, Sephora entered due diligence to buy Beautycon, but ultimately backed out and later launched Sephoria, in 2018. Said a spokesperson for Sephora: “Sephora conducted a formal RFP for production partners for its Sephoria concept, but they ultimately decided to go with a different partner other than Beautycon.” Sephora’s production partner for Sephoria is Mosaic, an events management company. A Beautycon spokesperson said it could not comment on speculation.

The Australian beauty retailer Mecca organizes Meccaland, which drew 10,000 attendees to its inaugural event in Melbourne in 2018. It moved its event to Sydney this year, quadrupling the amount of space and doubling brand presence, up from 25 brands last year. Sephora also grew Sephoria, adding 35 more brands than in 2018, bringing the total tally to 60, and adding nine additional services. Sephora told WWD that Sephoria will take place again in 2020, but could not give a specific date for the event.

Beautycon is much larger than either of those festivals. The Los Angeles festival especially seems to be thriving, drawing 30,000 attendees and 300 brands this year, up from what The New York Times reported were 23,000 attendees and 200 brands in 2018. Attendance numbers at this year’s New York festival in April dropped, though, to 13,000 attendees and 90 brands from 20,000 attendees the previous year.

Despite the numbers, some beauty industry executives have expressed disappointment in the beauty festival model in general.

Brand executives told WWD they felt they were promised certain things by Beautycon specifically that were not delivered on, such as targeted consumer data based on a brand’s booth attendance. Beautycon chalked that up to errors on the part of a third-party vendor it has used in the past to track customer data via RFID-enabled wristbands.

“Beautycon is not a technology company, and has been very transparent about partnering with third-party vendors to provide brands with data and metrics,” a spokesperson for the company said. “Unfortunately, the vendor we enlisted did not deliver what we and our brands were expecting. We are exploring other data partners to provide this information, and are reliant on third-party resources to provide those metrics.”

For other brands, the show’s vibe wasn’t the right fit — the convention center floors were described as ultimately too “mass,” for some prestige brand executives, for instance.

At the New York festival in 2018, prestige brands were a sizable presence. MAC is said to have spent $1 million between the New York and Los Angeles festivals in 2018. Other prestige brands that appeared in New York in 2018 included Urban Decay, Anastasia Beverly Hills, Becca and Amorepacific’s stable of brands. None of these, including MAC — and except for Anastasia Beverly Hills at the Los Angeles festival — appeared at Beautycon this year. Urban Decay and MAC declined to comment when asked earlier this year why they hadn’t returned. Anastasia Beverly Hills declined to comment for this story.

Admittedly, some of the criticism brand executives have assigned to Beautycon is amorphous — a general feeling of dissatisfaction. Some said the festival was “disorganized,” and the opportunities for content creation no better than something they could do on their own.

“I don’t feel comfortable commenting on things that are not specific to our clients,” said Mahdara. “Our priority is to make sure our clients are happy. We get a lot of feedback from clients and we will look back to that.”

That sense of dissatisfaction is not specific to Beautycon. Some executives said they’ve been underwhelmed by their experiences with beauty festivals overall. One executive said that Sephoria attracted only two-thirds of the attendees that were expected, and while the coordination of the event was “very organized,” the executive was disappointed by turnout and unsure as to why the event did not draw the anticipated audience.

Beautycon Festival Day 2, New York, USA - 07 Apr 2019

Festivalgoers take photos at Beautcon New York 2018.  Andrew Morales/WWD

There remain many brands that are enthusiastic about Beautycon. For example, professional hair brand Aveda, owned by The Estée Lauder Cos., did three Beautycon shows in 2018 and 2019. For the brand, which has been around since 1978, Beautycon is an important way to attract the attention of younger consumers. “We’re creating a connection with a new audience for the brand,” said Barbara De Laere, senior vice president and general manager of Aveda.

However, Beautycon’s New York show this year did draw criticism from another important group — consumers. Attendees took to Twitter to call out what they perceived to be the two key issues with the festival — marquee celebrity appearance Cardi B’s late arrival, and gift bags that were deemed disappointing.

Cardi B, slated for a 2:05 p.m. interview on-stage with Mahdara, arrived at 5:15 p.m. “A b—h flew from Vegas,” she offered.

One attendee tweeted, “I bought the $200 hauler ticket, which stated that we were going to get [$200] worth of makeup!!! Where is the makeup!!?! We literally got cleaning supplies! No palettes, blush, contour, highlighter!”

The cleaning supplies in question were provided by a sponsor, Unilever’s Love Beauty and Planet, which in spring 2018 launched an extension of its brand that included cleaning products such as laundry detergent.

At the time, Mahdara responded to the gift bag conundrum on Twitter. “I know some of you are really bent about these bags,” she said. “But listen, you know we will always get this s–t right because we’re here to stay for the long term.” Mahdara promised a “gift” for those who e-mailed Beautycon’s customer service.

Beautycon CEO Moj Mahdara

Beautycon CEO Moj Mahdara.  Stewart Cook/WWD

Issues with delayed celebrities and disgruntled responses to gift bags are surely not anything new for any event. But sources say that some of the issues at the New York festival that consumers complained about on Twitter are indicative of Beautycon’s company culture.

Several former Beautycon employees who spoke to WWD on the condition of anonymity said that complaints about the gift bags could have been avoided had Mahdara signed off on the contents. Instead, ex-employees point to the gift bag dilemma as an example of her relative lack of experience in organizing such festivals. “She didn’t have the experience of doing this before, so she delegated to the point of absolution of responsibility — [and when something goes wrong] she starts the screaming and yelling and the negative spiral downturn,” a former employee said.

Sources also told WWD that another marker of Beautycon’s company culture is its habit of not paying third-party vendors, a claim that Mahdara denied. “We’re a business. We’ve been in business for five years. We are always wanting to make sure that people get paid, and we stand by paying our vendors,” she said.

However, WWD obtained records of two lawsuits filed this year by third-party vendors looking to collect payment from Beautycon. One suit, filed by Rock Steady Productions, sought $43,986.58 in damages. Another suit, filed by TS2 Holdings, a talent recruiting firm used by Beautycon to hire five executives in 2018, sought $48,000 in damages, over half the placement fees it said Beautycon was contractually obligated to pay. When asked about the lawsuits, Mahdara said both had been settled, and would not comment further due to confidentiality agreements.

Sources told WWD that the crux of Beautycon’s internal culture is Mahdara, who they described as “narcissistic,” “blame-deflecting,” and known to provoke employees to tears.

Mahdara did not specifically rebut any of the above claims, but acknowledged that her management “style is inspiring to some and not to others.” She said, “I know I am not an easy boss. I work really, really hard. I demand 100 percent from myself and I expect everyone I am working with to do the same. I have never asked anyone to work longer or harder than I do daily. Look, for me, every day I’m balancing passion, expectations and communication.”

Festivalgoers line up for freebies and a look inside Sally Beauty's booth at Beautcon LA 2019.

Festivalgoers line up for freebies and a look inside Sally Beauty’s booth at Beautcon LA 2019.  Stewart Cook/WWD

While some brand executives who spoke with WWD and had heard about the recent layoffs were uncertain as to whether the company would hold festivals in 2020, Mahdara confirmed Beautycon’s dates for New York and Los Angeles next year — Aug. 1 and Aug. 2 at the Los Angeles Convention Center, and Oct. 31 and Nov. 1 in New York at the Javits Center. The Los Angeles Convention Center confirmed the dates for 2020, but the Javits Center could not be reached.

Mahdara also noted that a 2020 date has been set for Tokyo. Beautycon Tokyo launched in 2019 — sources say the event in Japan is licensed by Beautycon and produced by C Channel.

With industry rumblings that beauty festivals have not delivered in the way executives have expected them to, Mahdara is plotting the future of Beautycon to be more varied. While festivals are still key, she said, Beautycon plans to launch a commerce arm of the company, driven by a retail pop-up she said will be opening in a 25,000-square-foot retail space next year.

Beautycon Pop, which launched in November 2018 in L.A., consisted of themed rooms, some of them sponsored by beauty brands, such as Amorepacific’s Laneige.

But sources say the pop-up fell short of expectations. Reported by WWD in September 2018, Beautycon Pop was to be open six days a week, except for Tuesday, with tickets to be sold for $35 during the week and $45 on weekends. Industry sources projected attendance at 20,000, which would put ticket sales at $800,000. But attendance was so low, sources said, Beautycon shuttered Pop during the week and lowered ticket prices to $25. What’s more, sources say that Pop’s revenue was marginal compared to what it was expected to do.

A company spokesperson said the above reports are “incorrect and that the revenue generated by Beautycon Pop exceeded the event’s costs,” although the company declined to give specific financial details.

Said Mahdara, “We learned a lot from Pop, and are happy with its financial performance and the amount of interest.”

WWD reported at the time of Beautycon Pop’s launch that it was looking to expand to Miami, Atlanta and Chicago for 2019, and internationally to Singapore, Japan, China and South Korea. None of these expansion plans have come to fruition yet.

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