Black beauty brands and consumers: Where do we go from here?

| Podcast

More than 11 percent of all beauty customers are Black—and yet Black brands account for a mere 2.5 percent of total beauty industry revenues. In this episode of the McKinsey on Consumer and Retail podcast, Ulta Beauty CEO Dave Kimbell joins McKinsey senior partners Tiffany Burns and Kristi Weaver to discuss the pain points that Black consumers and entrepreneurs encounter in the beauty industry, as well as the steps that beauty retailers and others can take toward greater racial equity. An edited transcript of their conversation with host Monica Toriello follows. Subscribe to the podcast.

Monica Toriello: If you live in the United States and are a user of beauty products, chances are you’ve been in an Ulta Beauty store or have visited Ulta Beauty is the largest beauty retailer in the country. It has more than 1,300 stores across 50 states and employs more than 45,000 people. Today, we’re pleased to have the CEO of Ulta Beauty as one of our guests.

Our topic today is Black representation in the beauty industry. We’ll be talking about the experiences of Black consumers when they shop for beauty products and the experiences of Black entrepreneurs and Black professionals in the beauty industry. McKinsey has just released a report on this topic, and I encourage you to read it and watch the accompanying videos, which really do help bring the report findings to life. Two of the authors of that report are with us today as well. I’ll briefly introduce everyone, and then we’ll get into it.

Dave Kimbell is the CEO of Ulta Beauty, which had $8.6 billion in sales in 2021. Dave took on the CEO role in June 2021, but he’s been with Ulta Beauty since 2014, when he joined as chief marketing officer. Dave has had a long career in retail and consumer goods. His past employers include Procter & Gamble, PepsiCo, and the household-products company Seventh Generation. Ulta Beauty recently reported Q1 results, and they were very, very strong. Congratulations, Dave.

Kristi Weaver is one of the authors of McKinsey’s recent report on Black representation in the beauty industry. She’s a senior partner based in Chicago, and she leads McKinsey’s work in the beauty sector in North America. She advises companies on a range of topics, including organizational design, transformation, postmerger management, and category strategy.

Another of the report’s authors is Tiffany Burns, a McKinsey senior partner based in Atlanta. She leads McKinsey’s work on retail stores in North America. She also leads what we call “10 Actions,” McKinsey’s efforts to fight racism and achieve greater racial equity for Black Americans. Thanks to all three of you for your time today.

Pain points and challenges

The report was a huge research effort, involving surveys conducted among more than 7,000 Black beauty consumers, a focus group with 110 Black consumers, visits to more than 100 retail stores, geospatial analysis of store locations, interviews with a couple of dozen beauty industry insiders, and more. Which of the report findings were most surprising to each of you? Tiffany, as not just one of the report’s coauthors but a Black beauty consumer yourself, maybe you can start.

Tiffany Burns: Of the different elements of the Black consumer shopping experience, the individual pain points and challenges weren’t surprising. What was surprising was when you put it all together in an end-to-end experience. It makes you say, “Wow, for a Black beauty consumer or founder, it’s really challenging.”

It’s already so hard to be an entrepreneur in general, and then we layer on top of that those added challenges for the Black beauty entrepreneur—that was one of the things that made me step back and say, “We all know there are things we can do to make it better, but in aggregate, it is quite a challenge.” The need to make the Black experience in the beauty industry better is definitely something that I got a lot more focused on after seeing it framed that way when we were putting the report together.

Kristi Weaver: Absolutely. The inequity across the journey for Black consumers at every moment—from marketing to accessibility to availability to sales experience—was very shocking and enlightening to me personally.

I also thought what was quite interesting was, from a Black founder perspective, the inequity in terms of financing and ability to raise capital. But then you see the success of Black brands versus non-Black brands.

Finally, the 4 to 5 percent representation of Black professionals in all the large beauty houses, retailers, and other industry constituents was very startling. Obviously, those are the people making decisions about which brands are going to be in stores, which brands are supported in product development, and so on. Those were the three things that were the most enlightening to me.

Dave Kimbell: We and others in the industry have been studying this topic for a while, but what this report did so well was to bring together, as Tiffany said, the combination of pain points and challenges. The individual aspects—whether that’s marketing or product availability or the sales experience—are areas that we’ve been aware of and have been working hard on, but to get the comprehensive view that this report brings and the insight from both industry leaders and consumers was really powerful.

What it means to be a Black brand

Monica Toriello: As you’ve all said, the report really brings out the relentlessness of the pain points at every stage of the process for Black consumers. They have to travel farther than White consumers to get to beauty products; when they get to a store, they often can’t find the products they need, either because the store doesn’t carry those products or they’re out of stock; store employees aren’t likely to be knowledgeable about Black beauty products, because most of the store employees aren’t Black; and on and on.

The experience of Black founders is also very challenging. Let’s talk about what it means to be a Black brand. A brand can be Black founded, and it can be Black owned. A striking piece of data in the report was that, among the 45 Black beauty brands you identified, only nine are not Black owned. But those nine brands account for 82 percent of the total revenue of Black brands. Kristi and Tiffany, what do those statistics mean?

Tiffany Burns: We want to see products that are for Black consumers being provided by Black founders. When we saw that statistic you shared, Monica, it made it clear that some of the major Black-founded brands that people think of as being Black led really aren’t.

However, on the flip side, we also do want Black-founded brands to exit. We want Black entrepreneurs to have the same opportunity for wealth creation as all entrepreneurs have. We want them to be able to start a business and grow the business, and if there’s a buyer who they think can do more to take that business to the next level of growth, we want those entrepreneurs to exit. We want to help close the racial wealth gap. So an exit isn’t a bad outcome; sometimes, it makes sense.

We want Black entrepreneurs to have the same opportunity for wealth creation as all entrepreneurs have.... We want to help close the racial wealth gap.

Tiffany Burns

One thing that was surprising was that there really isn’t a good understanding among consumers on who owns what. Some consumers thought they were supporting a brand that was Black led, since it was Black founded, when that wasn’t the case—so a little bit more transparency there would be helpful. But I don’t think we want folks to say, “We want products targeting Black consumers to continue to be owned and driven by Black founders,” because an exit could be a good thing.

Black founders are sometimes challenged when it comes to thinking about those exits because they can be penalized by Black consumers, who say, “This was a Black brand, and now it’s not anymore.” I think we want all Black kids to grow up and believe that they could start a business and they could exit without being punished by the community that supported them. Some of those emotional connections that Black consumers have with Black brands can turn into a bit of a challenge when those transitions take place. So it’s a pretty complicated topic, but it’s good that we’re talking about it.

Kristi Weaver: It’s important to have role models of Black leaders who have founded a brand, but it’s also important to have role models of Black leaders who have founded and exited. In many cases, those founders are still playing roles with the large consumer goods organizations—whether playing an informal role or running the business. As Tiffany said, there’s potential consumer disconnect, since most Black consumers want to support Black-owned brands, but I don’t think we should cast a negative light on Black founders who have exited, so long as those brands continue to meet the needs of Black consumers.

It’s important to have role models of Black leaders who have founded a brand, but it’s also important to have role models of Black leaders who have founded and exited.

Kristi Weaver

Monica Toriello: Dave, is Ulta Beauty making distinctions among businesses that are Black founded, Black owned, and Black led? Say more about how retailers should be thinking about those distinctions, if at all.

Dave Kimbell: We look across the spectrum. I want to reiterate the importance of what both Kristi and Tiffany just talked about: we cannot create a disincentive for Black founders to do what they think is right for their business and for themselves. It’s hard to be an entrepreneur. I’m fortunate in this role to have met many entrepreneurs; beauty is a great industry for entrepreneurs, broadly speaking. I look at Richelieu Dennis, founder of SheaMoisture, and the impact he’s had after partnering with Unilever and giving back to the community in ways that are extending the impact.

Ulta Beauty supports businesses across the spectrum. The reality is, most of the time when a brand sells to a strategic partner, that brand has become very established. Those are the biggest and strongest brands—the ones that have had the biggest impact. Those are the brands that the Unilevers of the world and others are going to be the most attracted to. We support those brands, and we find ways to continue to grow them. But the real work has to happen at the entrepreneur stage when a brand is just starting out. We’re doing a lot in that space to set up programs to make sure smaller brands are getting a great start and can be the next big brand.

Working with Black entrepreneurs

Monica Toriello: Kristi and Tiffany, in the report, you say that among the most important changes for retailers to make is to be able to work with small entrepreneurs. Talk a little bit about what that means. What, specifically, do companies have to do?

Kristi Weaver: The way a retailer partners with a small brand is quite different from how it partners with a midsize or large brand. There’s more to it than just the distribution and how many stores will carry the brand. It might even be things as basic as how to think about modifying the ingredient profile with contract manufacturing or how to get the branding and the branding proposition. Founders may not realize the magnitude of going into 1,300 stores and may think that they have the inventory and the supply chain. But then they face challenges, and it creates availability issues, resulting in a vicious cycle.

When big brands partner with big retailers, there are top-to-top conversations. I think smaller brands might need the reverse of that—counseling and wisdom of what it’s going to take to partner with a large retailer. The dialogue may need to change. I’m sure that Ulta Beauty and other beauty retailers are doing some of that today. There needs to be a different capability set among the merchants and other folks in the organization than when partnering with large brands.

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Tiffany Burns: Monica, your question was more about the retailers, but I want to say something about the needs of the founders. We’ve been having a lot of conversations with founders to figure out how we can bring McKinsey capabilities to bear around specific areas like sourcing, ingredients, and pricing. We’ve learned that founders need one-on-one guidance on how to, in a sense, get their house in order—how to go slow in the beginning to go fast in the future.

If we’re able to say, “We have history to know that if you go from x to y over a certain period of time, it’s too fast, and maybe we should walk down this path instead.” That’s not always what an entrepreneur wants to hear; they’d rather hear, “You’re in this many doors on this many shelves.” But sometimes, that’s setting the business up for failure. The coaching and the one-on-one advice are critical.

Dave Kimbell: For a long time, we’ve recognized the need to support emerging, smaller brands. What’s different here, and what the report highlights, is the added complexity that Black entrepreneurs face. That’s where the distinction is. Yes, we know how to help small businesses, but you have to layer in the Black founders’ unique challenges—the limited access to capital, the network constraints, the lack of access to insights, higher or unclear expectations from merchants—that are highlighted in the report.

We need to ask ourselves, “What do we need to make sure we’re doing for Black entrepreneurs?” We launched our accelerator program specifically to help address that. We’ve invested in programs like the New Voices Fund to bring capital in. The focus here—on top of helping support small brands, which I think we do a decent job at—is on what else we need to do for the Black community so they can have more great success stories.

‘It’s good business’

Monica Toriello: The report makes clear that stakeholders need to take many actions to reach greater equity for Black beauty consumers and brands. Do you think there are areas in which the industry has made good progress over the past few years? On the flip side, which problems seem to be the hardest ones to solve?

Dave Kimbell: I do believe that we’re making progress as an industry. That’s encouraging, but there is still a ton more that all of us need to do. The elevation of focus over the last two years is creating some positive change. I see it in the brands we carry, the assortment, the investment and focus on giving Black entrepreneurs more opportunity to drive greater impact and success, and the representation of Black beauty in marketing and communications so everyone can see themselves and feel represented in this highly emotional and really important industry. I do see change.

But it’s also clear to me that, as this report highlights, there’s a lot more that has to happen. One area that I think is critical to continue to invest in is the in-store experience. I can, in my seat, directly control what’s in our advertising, for example, so we can make change pretty quickly on that. I can, with the Ulta Beauty team, expand our assortment and make choices there. What is more challenging—just because it involves millions of touchpoints across our 1,300 stores and all of our competitors’ stores—is to ensure that every experience is reflective of what we want it to be, that everybody feels valued and is welcomed.

One area that I think is critical to continue to invest in is the in-store experience.... We want every single Ulta Beauty associate—we have about 44,000 of them—to deliver an experience that’s up to our expectations, that’s inviting and welcoming and encouraging.

Dave Kimbell

We want every single Ulta Beauty associate—we have about 44,000 of them—to deliver an experience that’s up to our expectations, that’s inviting and welcoming and encouraging. We want them to be well trained to deliver a great experience to every guest. The report shows that’s not true enough of the time for our Black guests, so that is an area that we’re spending a lot of time, a lot of training, a lot of education on, to make sure that every new employee—and we have new people starting at Ulta Beauty every single day—understands and reflects our values. I see that as an always-on activity that we have to focus on. It’s a top-of-mind focus for me.

Kristi Weaver: We highlighted four actions in the report, and we called those out intentionally because they’re the hardest. Putting more Black brands on the shelf, as Dave said, is an action that, collectively, the industry can rally to achieve.

I’m excited about the amount of incubation activity and investment that beauty retailers and others are putting into Black-owned brands. The notion of incubating and growing at least 500 Black beauty brands is ten times what we’re seeing today. That will take the action of the collective industry.

Minimizing the occurrence of “beauty deserts”—this will also take the collective action of the industry. You could argue that some Black communities are not just beauty deserts but retail deserts. How do you collectively move the retail industry?

And then the actions that I’m the most excited about are increasing the number of Black employees to at least 15 percent and potentially creating 60,000 new jobs. I think Dave and the team at Ulta Beauty are in a prime position to lead that shift, but it will take the industry at large to be successful.

As the leader of the North American beauty practice for McKinsey, I talk to CEOs across the beauty industry—everyone from large consumer packaged goods manufacturers, large beauty houses, and beauty retailers to contract manufacturers and ingredient suppliers. There’s clearly broad recognition that this is an opportunity.

Tiffany Burns: Many of us are asking ourselves, “Are we in a moment, when there’s all this understanding, or are we in a movement? Is progress going to be sustained or not?” It feels like we’re in a movement. Consumers are saying they want to buy products from Black founders and from people of color in general. Retailers want people to shop in their stores, so they’re going to need to carry the products that people want. We also know that we’re going to see growth in the Black consumer segment over the next ten years. Underneath it all, it’s good business. So this is not just a good thing to do—it’s a good business thing to do.

As for why it’s hard to get impact here, Kristi and I always say that when it’s a cross-functional problem, it’s really hard. This is a cross-industry problem, which is even harder. It involves getting all the actors together and aligned because, again, it’s an end-to-end journey.

If I’m a Black founder, and I have access to data but I don’t have investment, then I don’t make it through the funnel. We have to figure out how to pull all the stakeholders together, get an equal level of aspiration, and get folks coordinated if we really want to move the needle. That’s the hard work. The fact base and aspiration are there; now, it’s a matter of coordination and turning it into outcomes.

Clarity and commitment

Monica Toriello: In the past two years, many companies have made proclamations about social justice. They’ve hired chief diversity officers or diversity, equity, and inclusion [DEI] advisers. They’ve launched a plethora of DEI initiatives—and some have had more impact than others. What advice would you, Dave, give to CEOs about how they can truly make a difference on this front?

Dave Kimbell: I’m not going to claim to have all the answers. I’ve been CEO for a year, so I’m still learning from everyone else. But I do believe the change we’ve made—and the evolution that we’ve been on—is to firmly embed this throughout our culture and our team, to make sure everyone recognizes the importance of driving positive change in the world around us, and specifically in this key area of opportunity with our Black consumers.

I believe that if we get the team behind it, and we’re driving with focus, clarity, and commitment, we’ll still make mistakes—we won’t get everything right, and we’ll have to redirect—but our momentum will push us into a positive place that will continue to help every one of our guests discover the possibilities that lie within them through the power of beauty, which is what our mission statement is all about.

Monica Toriello: Tiffany and Kristi, how do you advise CEOs on this topic? What’s your one main message for CEOs?

Tiffany Burns: Have big aspirations. There are lots of challenges, and there’s lots of potential, but we won’t get there unless we start with a big aspiration. But then, break it down so you can put wins on the board and really have an impact. There needs to be an engine of getting things done, even if it means starting small against that big aspiration.

Also, continue to be in a peer set or in a group to challenge your thinking and keep the aspiration high. How do you stay accountable? That’s one of the reasons we like the Fifteen Percent Pledge. It’s the idea of “we’re saying what we’re going to accomplish, and here’s how we’re making progress against that” while continuing to challenge yourself.

Kristi Weaver: Starting with the aspiration and breaking it down into actions is important, but I also find you can’t be great at everything. Should you focus on your recruiting and hiring, which you can control? Should you focus on monetary investments, which you can control? Start with things you can control and try to be excellent at those.

The other thing I would encourage is having folks who will challenge you—like you’ve done, Dave, by bringing in Tracee Ellis Ross as your DEI adviser—and continuing to bring together competitors, peers, and others to exchange thoughts and ideas. This is a topic in which there is really no degree of competitiveness. If everyone advances, the collective industry wins. And we’ll know we’ve been successful when we’re not talking about products just for Black consumers but about products that meet the needs of Black consumers and can be applicable to all consumers.

Dave Kimbell: Beauty is so much about self-expression; it’s not about the superficial. And if you believe that—which we do—then, inherently, beauty is diverse. It has to be—because every individual brings their own expression to the world.

We joined the Fifteen Percent Pledge. We doubled the number of Black-owned brands in our assortment last year. We’re adding many more this year and making sure that they not only arrive at Ulta Beauty but thrive at Ulta Beauty. There’s so much opportunity ahead, and I’m glad we’re on this journey. We’re committed to driving change. I’m grateful that this report has helped identify and focus effort, both for us and across the industry, to drive even more positive change going forward.

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