Rare Beauty

Rare Beauty sells colour cosmetics — liquid blush, brow gel, foundation, highlighter, lip — and, since December 2023, a small body and fragrance line. It owns the brand, the formulas' specifications and the customer relationship on social media; contract manufacturers make the product, some of it in South Korea according to the company's chief impact officer. For its first five and a half years it sold in exactly two places: its own website and Sephora, which carried it as an exclusive from launch day in September 2020. In February 2026 it added Ulta Beauty's 1,500-plus American stores, the first retail expansion in the brand's history.

The structure underneath is the standard prestige-beauty model, and it matters to say so because the celebrity tends to hide it. Most of the money arrives through a retailer at a wholesale price, which means Rare Beauty gives up roughly half the shelf price and in exchange does not pay to bring the shopper into the store. The brand's own job is to make the shopper walk to its fixture rather than the one beside it. That job is done by three things: Selena Gomez's audience, a hero product that earned its own word of mouth, and a cause the company funds from revenue rather than from a press release.

The cause is the part worth analysing rather than admiring. The Rare Impact Fund receives one percent of the brand's sales and has a stated goal of mobilising $100 million for youth mental-health services; by September 2026 Gomez said it had raised about $30 million and the fund said it had backed 30 partner organisations. One percent of sales is a real cost — on the roughly $400 million of annual sales that trade estimates attribute to the brand, it is about $4 million a year — and it is the reason the mission reads as a commitment rather than a slogan. My read is that it functions commercially as a retention mechanism: the chief impact officer has said customers arrive for the products and stay for the mission. That is a claim, not a measured repeat rate, and the company does not publish one.

Rare Beauty's moat is a brand with two legs, and the analysis is about which leg is load-bearing. The first is Selena Gomez, who has one of the largest social audiences in the world and an unusually credible public history with mental health. The second is the product, specifically Soft Pinch Liquid Blush, which went viral on TikTok in 2022 on the strength of a property people could demonstrate on camera — one dot covers a cheek. Bloomberg reported the brand had sold about $70 million of blush in a single year, which is the closest thing in the public record to proof that the product was doing work independent of the founder.

That combination is rarer than it looks. Celebrity beauty usually fails because the founder's attention is the product, and attention moves on in about three years. Rare Beauty's hero product was good enough to be recommended by people who did not care who made it, and the cause gave the brand a subject other than its founder. Both reduce the dependence on Gomez; neither removes it.

The distribution leg is the honest weakness. For five years the brand's reach was whatever Sephora's reach was. That bought a premium shelf and a captive customer, and it also capped the brand at Sephora's footprint, which is why the growth curve flattened after 2023 on trade estimates. Opening Ulta in 2026 widens the moat in the narrow sense of more doors, and narrows it in another: the exclusivity that made Rare Beauty special to Sephora is gone. Narrow is the right width. The brand is defensible, not protected.

There is little capital to allocate in the usual sense, which is itself a choice. Rare Beauty did not take a famous venture round, did not open a store estate, and did not try to own manufacturing. The capital-light model kept the founder's stake large, which is why Bloomberg's 2024 estimate put most of Gomez's $1.3 billion fortune in the brand.

The interesting allocation decisions are three. The first is the one percent: committing a share of revenue rather than of profit to a cause, which means paying it in a bad year as well as a good one. The second is the 2024 sale process, run through Goldman Sachs and Raymond James by Bloomberg's account, which was paused when buyers would not pay the price — the decision not to sell at a lower number is a capital allocation decision with the founder's own wealth. The third is the 2026 decision to give up Sephora exclusivity, which required no money and spent something harder to value: the brand's status as one of Sephora's signature exclusives.

I rate the record well, with one reservation. Everything visible has been disciplined. What I cannot see is how the business has used its cash between 2021 and now, and a company that does not publish leaves analysts grading only the decisions it chooses to announce.