Sunday, April 21, 2024

Carlyle's BeautyCounter Foreclosed

It took three short years for The Carlyle Group to run BeautyCounter, with its $1 billion valuation, into foreclosure.  Founder Gregg Renfrew will buy back the company carcass from Carlyle, despite having remained with Beautycounter in various roles under private equity underwriter (PEU) ownership.

Four days ago Beautycounter terminated its agreement with independent sellers, legally known as brand advocates.  When Carlyle purchased the company it had more than 65,000 independent sellers in North America.  Their termination notice stated:

The company is shutting down its operations and intends to wind-down and dissolve in the near-term.

Of course it invoked its confidentiality clause.  

Glassdoor is already full of scathing assessments of Carlyle's horrific ownership of BeautyCounter.  I can't imagine what will be added in the near future.  Who can beat the following employee review?

If your idea of career fulfillment and growth looks like a hellish Groundhog’s Day experience where you attempt to climb a hill during a toxic mudslide with zombies on the attack, Beautycounter may be a good workplace fit. If you are a competent, sane, and hard-working individual who values competency, sanity, integrity, and ethical leadership, think thrice before joining this “company.” Good news is, you’ll probably never have the opportunity because judging from the ever-ending promotion cycles and constant, ill-planned layoffs, the company will be lucky to survive through 2024. 

Beautycounter’s products are the self-proclaimed cleanest in the industry (and they are decent products to the credit of the R&D and product development teams), but its culture is as toxic as it comes. 

Working here feels like a dystopian version of The Office meets The Hunger Games, where a cult of mean girls in positions of power or nepo friends of the founder desperately swirl, spin, cling, and claw onto anything they can do to help save this flailing and failing not-MLM-MLM at any cost. For the past few years, it’s been a revolving door of mostly freshman C-Suite executives who attempt to turn the business around, only to fail miserably due to political roadblocks or their own ego and ineptitude, leaving a confusing mess in their wake for the brand and its employees. 

The culture is the ugliest intersection between cutthroat corporate antics and the wild startup west. Everyone in leadership wants power and control, and no one wants to take any ownership or accountability. The bright light is there is/was a small cohort of amazing and well-liked VPs and Directors who brought legitimate experience, fresh energy, and strategic thinking to the business, only to be blocked by their vertical’s C-Suite sponsor at every chance, creating a negative trickle-down effect. Almost all the aforementioned middle-senior management got laid off because they challenged the system or left on their own accord because they had enough. 

Noting that while all companies have problems and it’s tough to be in the C-Suite, there have been four C-Suite turnovers since the start of the pandemic, and with the exception of the current CTO, a 100% C-Suite turnover since May of 2023. You don’t need to be a math major to know those stats are not great. But worse became worst when the board and ex-CEO, Marc Rey, decided to part ways in May, and they appointed an interim CEO who has an HR background, came from the board of directors, and is a former employee of The Carlyle Group (the private equity firm that acquired Beautycounter in 2021). Holy conflict of interest, Batman! 

She is an unseasoned, delulu nepo-friend-of-the-founder executive who thinks that love is going to save the business and has made the short-sided, desperate decision to bring back the megalomaniac, one-hit-wonder founder to help bring this brand to its mid-2000s glory along with a slurry of ex-employees who were instrumental in creating the foundational problems that plague this company to date. Seems like her rose-colored glasses are too thick to see the world has changed. 

After a multi-million dollar company all-in in Santa Monica, she ruthlessly made the decision to have two rounds of layoffs in a three-month period, including many super smart, engaged, and talented folks and ascending and promoting the worst offenders and performers. The problematic fire-and-ice duo that was the CMO and CCO both mysteriously “stepped down” from their roles shortly after. I can only imagine there will be a fourth layoff round of the year once a few high-profile tech projects get off the ground. 

All in all, this place might have an admirable mission on paper, but they are not a legitimate business. It’s a scary sorority of unserious privileged people cosplaying professionals. Everyone else will churn or be kicked out as soon as possible.
Another employee offered:'s been a mess for quite some time. We have no resources. We have no empathy. We have nowhere to go without fear of retaliation or getting on someone's bad side. B-Corporations especially should not be able to act this way. Good intentioned people beware...they only care about what you can produce. Even when you do, you may wake up to a pink slip due to business being down...right after a multi-million dollar company conference.
So much for fast-track growth...    Business of Fashion reported:
Operations will be paused for two weeks, and Beautycounter will officially relaunch on May 1; existing retail partnerships, like those with Ulta Beauty, will remain intact.
Sounds like a supply chain disruption.  Carlyle has an AI tool for that.
... transforms the way organizations identify and manage risk, reduce cost and increase resilience across their supplier and third-party ecosystems. 
Will they market it to those 65,000 former brand advocates?

BeautyCounter's carcass may fly higher without a PEU around its neck to weigh it down.  Then again, PEU ownership may have inflicted a mortal wound.

Update 4-23-24:  Jay Sammons left Carlyle and BeautyCounter for SKKY Partners with Kim K.  Axios reported lagging fundraising for the fund which has 20% carried interest.

Global Cosmetics News reported BeautyCounter "regains independence" and is now free from Carlyle.
Update 7-10-24:  NYT reported how Carlyle's PEU playbook backfired at BeautyCounter.  Carlyle trashed the multilevel marketing pay structure turning 60,000 sellers into 35,000.  The technology improvements did not hold up under use as updated loyalty reward information and address repopulation failed.