Blinded by stage lights? How to spot celebrity-backed businesses that won’t fail

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Gwyneth Paltrow’s wellness brand Goop is in trouble. Again.


Its UK arm could be shut down by the UK authorities for failing to submit its accounts and it has until 6 June to object the accusations.


READ: David Beckham is GBP5mln richer as cannabis firm sees premium stock market debut but he’s not the only Premier League star to score as an investor


It’s the second time the retailer has been threatened with dissolution, as it failed to disclose the necessary documents for the year to December 2018.


In all this, the actress’s outfit continues to be criticised for promoting health and wellbeing solutions that don’t have a scientific basis, with doctors claiming they could in fact harm people.


Meanwhile, a Texas resident is asking for damages of US$5mln after claiming one of Goop’s This Smells Like My Vagina candles exploded and became “engulfed in high flames”.


“Being a celebrity is no guarantee of business success. It does guarantee some pretty decent press coverage, whether things are going well or not, something Gwyneth Paltrow will be profoundly aware of,” Danni Hewson, financial analyst at AJ Bell, told Proactive.


“The most successful brands are based on a happy melding of celebrity and product; it can’t just be about a photo op. Consumers want to buy into a certain lifestyle but if the products they are being sold fall short, either through quality or values, then the business will struggle no matter how famous the face.”


There are plenty of successful celeb ventures out there, Hewson continued, such as Rihanna’s Fenty brand and Jessica Alba’s The Honest Company, Inc. (NASDAQ:HNST).


The latter debuted the market earlier this month with a US$412mln IPO, valuing the baby and beauty products retailer at US$1.4bn.


Alba’s brand also faced suffered reputational damage after its claims to only use natural ingredients were questioned, though it spent the last four years or so trying to solve these issues.


“What both women have in common are top-notch management structures,” noted Hewson.


“For Alba, consumer good veteran Nick Vlahos as chief executive and Rhianna’s Fenty line recently added Nike Executive Bastien Renard to its line-up. The right team is as important as the right idea. No one can do it all and mistakes, particularly ones made under the glare of the spotlight, can have extremely costly consequences.”


In fact, Canadian rapper went and co-founded spirits business Virginia Black Decadent American Whiskey with Brent Hocking, founder of Deleon Tequila.


Its drinks entered the Australian market earlier this year, though there haven’t been any updates on its IPO plans, initially announced in 2018.


Alcohol seems a prosperous market for celebs, with George Clooney selling his tequila company Casamigos to drinks giant Diageo PLC (LON:DGE) for US$1bn in 2017.


The FTSE 100 seems to like its actors, as it bought Ryan Reynolds’ Aviation American Gin in a deal worth US$610mln last year – although Reynolds was just a shareholder rather than a founder.


Reynolds seems to be a shrewd businessman, as over the years he has produced highly grossing films such as Deadpool, joined the board of Tinder owner Match Group Inc. and bought a stake in low-cost cell phone carrier Mint Mobile.


Talking about celeb investors, London has recently seen two projects backed by David Beckham taking the market by storm.


The former England and Manchester United captain is behind esports team owner Guild Esports PLC (LON:GILD) and cannabis firm Cellular Goods PLC (LON:CBX) through his DB Ventures vehicle.


DB Ventures has been under the full control of David and Victoria Beckham since 2019, when the celebrity power couple bought out business partner Simon Fuller, paying US$50mln for his 33% stake.


As well as Cellular and Guild, DB Ventures also holds Beckham’s partnerships with Adidas and his interests in a partnership with Diageo for the Haig Club whisky brand.


All these projects have solid fundamentals, one could say, making them more than a celebrity endorsement. Just don’t be blinded by the stage lights.

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