Valuing High-Growth and Insurgent Consumer Brands

Introduction

Some of the most expensive consumer acquisitions are of brands that have barely begun to earn money. They grow quickly, carry a strong identity with a particular group of shoppers and often sell mainly online or through a handful of retailers. A buyer cannot value such an insurgent brand on today's earnings, because those earnings say little about what the brand will become once it has national distribution, better purchasing and a large company's marketing behind it.

e.l.f. Beauty's purchase of rhode, the skincare brand co-founded by Hailey Bieber, shows the pattern. e.l.f. agreed to pay $800 million at closing, made up of $600 million in cash and $200 million in shares, plus a potential $200 million earnout tied to growth over three years, and said the closing price represented about 3.8x rhode's last-twelve-months net sales of $212 million, according to e.l.f. Beauty's announcement. This article explains why such brands are valued on revenue, what scarcity is worth, how strategic synergies justify the price and how deals are structured around the uncertainty.

Revenue Multiple

Enterprise value divided by revenue, usually last-twelve-months or forward revenue. It is used for fast-growing businesses whose earnings are small or depressed by reinvestment, because revenue is a more stable base than early-stage EBITDA, but it says nothing about profitability on its own.

An insurgent brand often reinvests most of its gross profit in marketing, hiring and new products, so its EBITDA is small and volatile. A multiple of that EBITDA can look absurd, which is why buyers and bankers quote revenue multiples instead. The catch is that revenue multiples ignore margins: two brands at the same revenue multiple can be worth very different amounts if one earns a 75% gross margin and the other 40%. Bankers therefore look through the revenue multiple to gross profit and to the margin the brand could reach at scale, using the drivers set out in what drives consumer and retail valuation multiples.

Gross profit and the margin at scale

The gap can be large. At 4x revenue, a brand with a 75% gross margin is priced at about 5.3x its gross profit, while a brand with a 40% gross margin is priced at 10x. The first has far more room to fund marketing and still reach a healthy EBITDA margin; the second must cut costs sharply before it earns a return. Bankers therefore build a view of the steady-state margin the brand can reach at scale, often using the margins of established peers in the category, and value the brand on what it would earn at that margin.

Growth itself changes the multiple. A brand doubling its sales each year will reach a given level of revenue far sooner than one growing at 20%, so a buyer looking at forward revenue may see a much lower multiple than the trailing figure suggests. The question is whether the growth will last once the brand reaches a wider audience.

Brands with genuine momentum are rare. In any category, only a few insurgents break through each decade with a loyal following, strong sales velocity on shelf and a clear identity. When one is for sale, every large company that lacks a growth engine in that category takes a look, and the competition pushes the price above what the brand's own forecast would support. That scarcity value is the same force that lifts precedent multiples for established brands, explained in consumer precedent transactions and brand premiums, but it is stronger for insurgents because large companies struggle to build such brands themselves.

Scarcity also has a defensive side. A large company may make a defensive acquisition of an insurgent partly to stop a competitor from owning it, or because the brand is already taking share from its own products. The price then reflects both what the buyer gains and what it avoids losing.

The most important reason strategic buyers pay up is that the brand is worth more in their hands. A large consumer company can lower the brand's cost of goods through scale purchasing and manufacturing, cut duplicated overheads and, above all, put the brand in front of far more shoppers through its distribution and retailer relationships.

Synergy Capacity

The additional value a particular buyer can create by owning a business, through lower costs, wider distribution or cross-selling, compared with the business on its own. Buyers with larger synergy capacity can afford higher prices, so the price of an insurgent brand is often set by the buyer best placed to scale it.

Celsius Holdings made the logic explicit when it agreed to buy the energy drink brand Alani Nu for $1.8 billion, including $150 million of tax assets, a net price of $1.65 billion. It described the price as less than 3x Alani Nu's 2024 revenue of $595 million and about 12x fully synergized 2024 EBITDA of $137 million, and expected $50 million of run-rate cost synergies within two years of closing, according to Celsius' announcement.

Cost synergies versus revenue synergies

Not all synergies deserve the same weight. Cost synergies, such as cheaper ingredients, packaging and freight, are largely within the buyer's control and usually arrive within a year or two. Revenue synergies, from wider distribution and new markets, are where most of the value in an insurgent deal lies, but they depend on retailers, consumers and competitors. Investors typically give less credit for revenue synergies, so bankers present the two separately and show how much of the price is justified by cost savings alone. A deal that only works if the revenue synergies arrive in full carries far more risk than one that cost savings already cover.

Because so much of the value lies in future growth, buyers and sellers often disagree about the price. Deal structure closes the gap. Earnouts pay part of the price only if the brand hits growth or profit targets, as in rhode's potential $200 million over three years and Alani Nu's potential $25 million earn-out based on 2025 performance. Stock consideration keeps founders invested in the combined company, and minority stakes let a strategic buyer take a position first and buy the rest later. How these structures work in detail is covered in buying insurgent brands: minority stakes and earnouts.

The risk in an insurgent deal is that the growth reflects a moment rather than a lasting position. Bankers test it from several angles: whether repeat purchase rates are high or growth depends on new customers; whether sales on retailer shelves are matched by consumer sell-through rather than pipeline fill; and whether the brand's following extends beyond its first audience. Moving from online sales into stores, as rhode planned with its first in-store partnership with Sephora, tests a brand's economics in a new channel, a transition explained in DTC and Amazon: how brands sell direct and online.

Valuing the range of outcomes

Because the outcome is so uncertain, bankers rarely rely on a single forecast. They build scenario analysis: a case in which the brand keeps growing quickly and reaches peer margins, a middle case, and a case in which growth fades after the first wave of distribution. Each scenario gets a discounted cash flow value, and the probability-weighted value is compared with the price. If the deal only clears its cost of capital in the strongest scenario, the buyer is paying for the founder's plan rather than for the brand.

For a coverage banker, an insurgent brand's value lies in the gap between what it is today and what the right owner can make it. The job is to identify which buyers can close that gap fastest, and to make sure the price reflects their ability to do it rather than the brand's momentum alone.