CONFIDENTIAL CONFIDENTIAL CONFIDENTIA L...by Spanish group Puig in US-based fragrance concern EB Florals—or setting up programs to nurture new companies through advice, funding and

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It’s no secret that beauty M&A is heating up. But there is another trend that is picking up steam: the seeding or

incubating of small cosmetics players by major multinationals. Recently, this has taken the form of groups buying a minority stake in a small company—such as the investment by Spanish group Puig in US-based fragrance concern EB Florals—or setting up programs to nurture new companies through advice, funding and infrastructure. AmorePacific for example, just announced that it has partnered with start-up accelerator FuturePlay to launch an incubator initiative aimed

at developing startups in the beauty sector. Earlier in the year, French group L’Oréal said it invested in UK-based Founders Factory, a digital incubator, becoming its exclusive partner for investments in beauty tech start-ups worldwide.This approach has many benefits for multinationals. It allows them to explore and test

a new market trend at a relatively low cost and with little risk to their core business. And at a time when the prices for acquiring young companies are at an all-time high, such a strategy also gives the majors an early partnership with what could become the winning brands of tomorrow. This seeding trend combined with the frenzy of acquisitions shows that increasingly,

the market’s major players are having to look outside their companies for new ideas and for growth.

Sowing the seeds of growth The buzz 2News roundup

Netwatch 6 Social media monitor

Interview 8 Revlon svp international, responsible for Revlon/Arden integration David Carvalho & Elizabeth Arden brand president global JuE Wong

Insight 10 Coty

Show review 14 Cosmetic360

Store visit 17Dove pop-up store, Paris

Oonagh PhillipsEditor in [email protected]

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At a glance...

Strategy

Estée Lauder Companies (ELC) is to acquire US-based make-up brand Too Faced for $1.45bn, making it the group’s biggest acquisition to date. The deal is part of ELC’s strategy to boost its presence in the fast-growing make-up category, build its business among millennials and increase the group’s reach in specialty-multi distribution channels. Launched in 1998, Too Faced is currently owned by private-equity company General

Atlantic. It is among the top eight make-up brands in the specialty-multi channel in the US, according to ELC, and is expected to generate net sales of more than $270m in 2016, a growth rate of more than 70% over 2015. Too Faced has developed a strong following among millennials on social media and boasts more than 7.3 million followers on Instagram. Too Faced is led by co-founders Jerrod Blandino and Jeremy Johnson, and ceo Eric Hohl.

ELC executive group president John Demsey will add Too Faced to the roster of brands he oversees. The acquisition is expected to close in December 2016.The announcement comes just a few weeks after ELC revealed that it would acquire

US-based color brand Becca Cosmetics, and is part of the growing trend for major multi-nationals to buy color brands with a strong social-media presence—in July, French group L’Oréal said it would take over color cosmetics brand IT Cosmetics for $1.2bn. The move is also the latest in a string of acquisitions for ELC over the past three years,

which have included By Kilian, Le Labo, Editions de Parfums Frédéric Malle, Glamglow and Rodin olio lusso.

US flavor and fragrance company IFF is to acquire Germany-based Fragrance Resources for an undisclosed sum. The transaction will be funded by existing resources and is set to close in January 2017. It is expected to add around $75m in revenue in 2017, excluding transaction costs. Family-owned Fragrance Resources was founded in 1987. It has facilities in Germany, France, China and North America.

UK-based packaging company Collcap, and Spain-based packaging manufacturer Quadpack Industries SA have merged. The new, combined group will keep the Quadpack name. Quadpack’s office in Barcelona, Spain will continue to be the new group’s global headquarters, while Collcap’s office in Leek, Staffordshire, will become the center of the group’s UK operations. Collcap founder John McDermott will become a Quadpack Industries board member. Earlier in 2016, Quadpack Industries acquired injection-moulding company Rinaplast, which was rebranded Quadpack Plastics. Quadpack generated sales of €61m in 2015. n n n

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n Estée Lauder Companies to acquire Too Faced

n IFF to acquire Fragrance Resources

n Kate Spade signs fragrance license with The Premiere Group

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n n n US-based lifestyle company Kate Spade & Company has signed a global license with The Premiere Group for the development and distribution of kate spade new york fragrances. The Premiere Group will take on the development and distribution of the existing fragrance business built under the kate spade new york brand. These fragrances include Walk on Air and Live Colorfully, and are available on katespade.com, in the brand’s stores and in more than 2,300 selective stores in the US. The Premiere Group has already begun distributing kate spade new york fragrances in the US, and will expand the products internationally in fall 2017 and in travel retail in spring 2018. The Premiere Group is the prestige division of Perfume Center of America, Inc, a distributor of fragrance products in North America.

Consumer products company Edgewell Personal Care has acquired UK-based men’s grooming and skincare products company Bulldog Skincare for an undisclosed sum. The transaction was funded from operating cash. Bulldog Skincare was founded in 2006 and operates in 14 markets and is distributed in some 17,000 doors. Its largest markets are the UK, the US, Sweden and South Korea.

Korea-based AmorePacific has partnered with startup accelerator FuturePlay to launch an incubation program, with the goal of nurturing startups in the beauty and healthcare sectors. Called AP TechUP+, the program aims to help startups to secure stable business partners. AmorePacific says that it will provide financial resources for startups along with employee mentoring, in-house infrastructure and follow-up investments. FuturePlay will manage the planning and administration parts of the program, and will also be responsible for identifying and nurturing startups and developing patents.

Brazil-based Natura is to put an end to its direct-selling operations in France. The company’s direct selling business in France, which counts 1,100 representatives, will close by December 31, 2016. The focus in France will instead be on three main channels: Natura stores, e-commerce and beauty specialists. Natura stated that direct sales in France account for just 2% of the cosmetics, fragrance and toiletries market, compared with 30% in Latin America.

Results

L’Oréal reported a 3.6% increase in third-quarter sales to €6.15bn. On a like-for-like basis, sales rose 5.6%. For the first nine months sales were up 1.6% to €19.05bn (+4.7% like-for-like). The Luxe division reported a 9% increase in sales for the quarter (+9.3% like-for-like) to €1.86bn. The Active Cosmetics division also saw n n n

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n n n solid like-for-like growth of 6.5% (+4% on a reported basis) to €425.7m for the third quarter. L’Oréal said that the Consumer Products division is outperforming the market, driven by growth in make-up, the global rollout of Ultra Doux by Garnier and a strong business in North America. The consumer division reported a 4.7% increase in sales on a like-for-like basis (+2.1% on a reported basis) to €2.86bn for the quarter. In terms of region, the group highlighted that it is seeing good growth in North America (third-quarter sales rose 8.2% to €1.76bn), while its business in Western Europe is growing faster than the market, except for France, where the environment remains sluggish.

Estée Lauder Companies (ELC) posted net sales of $2.87bn for its fiscal first quarter 2017, a 1% increase compared to the same quarter the previous year. On a constant currency basis, net sales grew 2%. Net earnings came in at $294m, down 5%. The group said that most product categories were unfavorably affected by the strength of the US dollar in relation to most currencies. During the quarter, the company recorded restructuring and other charges of $31m ($20m after tax), linked to its recently announced Leading Beauty Forward initiative. Skincare net sales stood at $1.10bn in the quarter, down 1%, impacted by foreign currency translation and lower skincare sales from the Estée Lauder and Clinique brands. Net sales for the make-up category saw a slight increase (less than 1%), at $1.17bn, while fragrance net sales rose 7% to $442m.

Japanese group Shiseido’s net profit grew 135% to ¥37.2bn ($359.8m) for the first nine months of 2016, largely due to the gain on the sale of intellectual property rights of the Jean Paul Gaultier fragrance business and the sale of land at the company’s former Kamakura factory. Operating income for the period grew 17.1% to ¥38.7bn ($374.3m). Shiseido’s consolidated net sales for the first nine months of 2016 fell 1.3% (+5.4% on a local currency basis) to ¥622.7bn ($6.02bn), impacted by the appreciation of the yen and foreign currency exchange rates. Shiseido saw growth across all regions excluding EMEA, where sales fell 22.7% (-13.3% on a local currency basis) to ¥58.2bn ($562.9m), impacted by the termination of the license agreement with Jean Paul Gaultier. Shiseido’s Japan segment, which accounts for 49.1% of business, reported a sales increase of 4% to ¥305.5bn ($2.95bn).

Retail

Korean beauty brand Too Cool For School opened its first US flagship at the end of October. The 750ft2 (69.7m2) boutique is located in SoHo, New York, in American artist Keith Haring’s former art studio. The store will carry 11 of Too Cool For School’s skincare and cosmetics lines. These include collections not previously available in the US, such as Rules of Skincare, McGirly and Artify. Too Cool For School is sold in Sephora in the US and in Canada. The brand has 39 standalone stores in South Korea and locations in Malaysia, China and Japan. Next year, Too Cool For School plans to develop further in Europe, where it is sold at retailers including Selfridges in London and Galeries Lafayette in Paris.

Beauty retailer Sephora has introduced two new bot-powered beauty tools available on Facebook Messenger in the US: Sephora Reservation Assistant and Color Match. Sephora Reservation Assistant enables consumers to book an appointment for a makeover at n n n



n n n Sephora stores across the US. Customers tell the bot which store and service they want, then receive the closest dates and times. Sephora teamed up with automated messaging platform Assi.st for the tool. Meanwhile, Sephora teamed up with augmented reality technology provider ModiFace

for Color Match, a shade matching addition to the Sephora Virtual Artist bot. Color Match scans photos and then suggests a matching lipstick shade available at the retailer. Matches can be virtually tried on and purchased from Sephora’s e-boutique.

LVMH-owned Make Up For Ever opened its French e-boutique in November. The brand’s entire offer of more than 1,500 products is available on the online store, which also features tutorials, step-by-step guides and complementary product suggestions. France is the only country in Europe where Make Up For Ever has its own e-boutique. The brand has online stores in the US, China and Japan.

Data

Sales of US prestige beauty products rose 8% to $3.5bn in the third quarter of 2016, according to The NPD Group. In the make-up category, face make-up sales increased 14% during the quarter, ahead of all other color categories. Eyebrow make-up continued to see double-digit growth, with sales up 37%, while lip color sales saw a 21% increase. Sales for the nail category continued to decline, down 17%. In skincare, sun products saw a 16% increase from the third quarter of 2015, boosted

by the summer season, while sales for in-sun products grew 28%. Growth in facial masks continued to outpace the overall market, with dollar sales growing 28%. In fragrances, sales of fragrance juices grew 2% compared to the third quarter of 2015,

with increases in both women’s sales (+1%) and men’s sales (3%). The home scents market saw growth of 17% in the quarter, with growth across all segments, the largest two of which were candles and diffusers. Sales for fragrance gift sets were up 11% and home ancillary gift sets rose by 40% in the quarter.

Mascara sales in Europe are in decline. Sales across the four European markets of France, Spain, Italy and the UK were down 4% year-to-date end September, according to data from market-research company The NPD Group, notably due to lower sales of new launches. Mascara sales in France fell 8% in September, while sales in both Italy and the UK were down 5%. Mascara sales in Spain witnessed a 2% decline.

Launches

Korea-based AmorePacific has expanded its customizable cosmetics offer by launching a tailor-made moisturizer for its Laneige brand, called My Water Bank Cream. The product went on sale on November 11, in the new Laneige Myeongdong flagship store in Seoul. Consumers can have their skin analyzed by diagnostic equipment Beauty Finder in the location’s Sparkling Beauty Bar, before having a moisturizing solution made up in-store. The cream is available in forms such as Light, Moisture and Ultra Moisture. The service is available on a reservation-only basis on the Laneige website. The total service takes 40 minutes and costs KRW42,000 ($36.46). n



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Mascara sales in Europe September 2016 vs September 2015Country % changeFrance -8Italy -5Spain -2UK -5

Source: NPD BeautyTrends

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BW Confidential reports on what’s being said about beauty on social networks

Social media monitor

L’Oréal’s NYX Cosmetics New York flagship, which opened at the end of October, created a major buzz among bloggers, who praise the innovative technologies and exclusive services like the eye-catching Colorcast Wall, which they say set the store apart.

News of the closure of fashion magazine InStyle UK’s print edition has saddened bloggers. A major concern is the loss of jobs, while some question whether a purely online presence will only hinder the recruitment of more readers.

The surge in male beauty vloggers has become a topic of conversation, with bloggers expecting more, albeit still marginal, growth in this segment. They also underline the potential of new categories in beauty to target the male consumer.

Giorgio Armani Beauty’s first pop-up store in Paris has been seen as a good way to recruit new consumers. Bloggers love the chic design of the temporary store and accessibility to the brand’s full range.

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Revlon announced that it would acquire US-based company Elizabeth Arden in June in a deal valued at $870m. Revlon svp international David Carvalho and Elizabeth Arden brand president, global JuE Wong reveal their priorities at the new group

Come together

How is the integration process progressing?DC: We completed the transaction over a month ago and almost immediately after closing, we began fine tuning our integration planning, to reconfirm the synergy estimates and the opportunities to create value. We will begin implementing our integration plans early next year, after the crucial fourth quarter is behind us. We have also been working to design a new organizational structure to enable us to drive and accelerate future growth, which we expect to be able to share early in the New Year. As one company, we have more capabilities and resources to grow our combined portfolio of brands, as well as the opportunity to reach consumers, wherever and however they shop for beauty.

Will there be sizeable cuts?DC: We are making good progress and have confirmed our ability to deliver $140m in multi-year synergies and cost reductions related to the transaction.

Could the fact that the two companies operate in very different areas pose problems to the integration and running of the group? DC: We see it in a very different way. It creates the platforms for us to leverage the business of both sides, so this complementary aspect creates a broader platform for growth. Together, we are able to compete in more categories, channels and geographies. With retailers, and especially in travel retail, our position will be much stronger.

Some 59% of sales of the combined company are from North America. How do you see the progress of the international business for both companies? DC: Because of its size, North America it is still a priority, but our biggest opportunity is to grow internationally. The deal is very complementary geographically and that is something that we will leverage. Asia is a priority for us.

The Arden brand has been undergoing a revamp. How is this developing?JW: The Elizabeth Arden brand has just achieved its seventh consecutive quarter of net sales growth, driven by new product innovation and efforts to modernize the brand’s relevance and attract new consumers. The brand has been on a trajectory of cleaning up its distribution and we will continue on that path. It is important to focus on prestige distribution and especially the travel-retail experience because it can transform the consumer’s perception of a brand, and obviously we are also looking at the digital platform to make the brand more relevant. n n n

Revlon svp international, responsible for Revlon/Arden integration David Carvalho & Elizabeth Arden brand president global JuE Wong

Revlon (including Arden)Sales: $3bnSales by category: color cosmetics: 37%; fragrance: 27%; haircare/haircolor: 19%; beautycare: 10%; skincare: 7%Sales by region: North America: 58%; EMEA: 24%; Asia Pacific: 12%; Latin America: 6%



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n n n In 2014, Arden said that over the next five years, the brand could be number 10 in markets where it competes, are you on track? JW: This goal is still the focus and in some markets we are already in the top 10, for example in Australia, New Zealand and in Scandinavia. We are a top-five brand in the UK, and in the US we moved up two positions from number 17 to number 15 so we are on the right path. We are number-11 in travel retail, so we are slowly pushing into the top 10 and we have seen growth of 8% this past year. We have a strong fragrance and skincare business in travel retail and Revlon does color well, so there will be some key learnings that can help us grow the color category. [In travel retail] we expect to become among the top 10 as we build our color cosmetics offerings.

What else needs to be done?JW: The digital platform has helped drive relevancy and sales for the brand. We recently launched the ‘From the Desk of Elizabeth Arden’ digital campaign, which resulted in 90 million global impressions and seven million unique visitors that used the video platform, and we were able to target these users for conversion. We also had more than 58 million downloads of our Youcam make-up ad, of which 23.9% downloaded a selfie of themselves to re-post, so all of this shows that despite there being bigger brands that spend a lot more on digital, we were able to compete with the best of the best because we had a very engaging campaign as well as our partnership with Perfect Corp on the make-up app.

How will you boost your presence in Europe and Asia?JW: Our star product in Asia is our Ceramide Capsules and we are re-launching an upgraded formula next year, which will amplify our awareness among Asia Pacific consumers. In Europe, and in the in UK, which is one of our key markets, our Eight Hour Cream has done very well and is our heritage brand, so that has given us a lot of visibility. We will continue to amplify the messaging through PR, social, digital and e-commerce. In Asia, we have a very big digital footprint. In China, for example, 70% of our business

is with [Alibaba-owned online platform] Tmall, so it is through this platform that we are able to communicate with tier-one, tier-two and tier-three markets. Because Arden is focused on digital platforms, we are penetrating into tier-two markets, which is key and where consumers are looking for aspiration. Our department stores in China have been a focus as our showroom for consumers to find about our Red Door experience.

What can the Revlon brand do to capitalize on growth in make-up? DC: The Revlon brand went through a re-launch two years ago with Revlon Love is On and has been growing strongly in North America and internationally. We have two of the top-four new product launches in mass color in the US. Revlon Ultra HD Matte Lipcolor, which year-to-date September is the most successful new product innovation in the US mass color cosmetics category, according to Nielsen, and the Revlon Mascara collection, which is contributing to significant consumption share gains in the eye segment at mass retail. Travel retail has been a priority for Revlon as it gives us global exposure, and in the past two years we did more in the channel than what has been done in the past 10 years. The two big areas we are focusing on for travel retail are sets and merchandising, both of which have been significantly upgraded. n

s Revlon says the Arden acquisition will enable it to leverage strengths of its brands in R&D and at a retail level

“

”Revlon svp international, responsible for Revlon/Arden integration David Carvalho

As one company, we have more capabilities and resources to grow our combined portfolio of brands, as well as the opportunity to reach consumers, wherever and however they shop for beauty

Revlon svp international, responsible for Revlon/Arden integration David Carvalho & Elizabeth Arden brand president global JuE Wong



Having doubled its projected annual sales to around $9bn with the acquisition of P&G’s beauty brands on October 1, the market largely expected Coty to

take its time to digest the purchase and focus on organic growth before heading into further acquisitions. “Clearly one of the key things we will focus on is to improve the growth exposure of the business both from a category, category segment, channel and geography point of view. And we will put together a list of targets in due time. But the first focus really is on returning the business to organic growth and to integrate the P&G business properly and deliver the benefits associated with that,” said Coty’s chairman and then interim ceo Bart Becht during the company’s fourth-quarter conference call in August. But in the end, Coty did not waste any time, announcing the $510m purchase of

ghd on October 17. Beauty’s new number-three pure player certainly has a lot on its plate. Integrating P&G’s brands, ghd and Brazilian firm Hypermarcas’ beauty activities over such a short space of time would already be challenging, but Coty has also had its fair share of organizational struggles in recent years. In addition, it has seen difficulties achieving sales growth, raising questions over the company’s capacity to move forward as one of the industry’s biggest players.

Leadership issuesThe company has struggled with its leadership. Since ceo Michele Scannavini left Coty in 2014, along with several other senior executives, chairman Bart Becht has been acting as interim ceo. Following the closure of the P&G merger on October 1, Camillo Pane has taken over the role. The former Reckitt Benckiser executive joined Coty as executive vice president of category management in April last year, and it is hoped that the appointment will ensure management stability. n n n

Just days after the completion of its acquisition of Procter & Gamble’s Specialty Beauty business, Coty sent out a strong signal that its ambition to widen its scope shows no sign of slowing with the addition of haircare tool manufacturer ghd. BW Confidential analyzes what Coty’s new scale could mean for the future of the company and the market overall

Bigger, but better?Coty

“

”Coty chairman Bart Becht

Clearly with the merger we have too many brands in the portfolio. As a result, it would be better that we rationalize some of those out. And I am sure they will be better managed by other players in the industry

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Cotyn n n The company says that its new structure, with three divisions each focusing on a single distribution channel and two or three product segments, will also allow it to have better focus. Its new structure relies on tighter decision-making processes closer to the ground, which represents a clear change in strategy.Aside from leadership issues, Coty has had a tough time producing sales growth,

and has suffered from its over-dependence on certain categories, notably celebrity fragrances and nail polish, as well as its lack of penetration in emerging markets compared with competitors.Its recent acquisitions certainly diversify the company’s portfolio in terms

of product categories, notably through the addition of professional haircare with Wella and Clairol, making it less vulnerable to category trend cycles and fluctuations than those it has been exposed to in the past. They do less, however, to re-balance its geographical dependence on Europe and North America (see factfile). “While basically we are not changing the relative importance of emerging

markets, the business in the emerging markets is substantially larger than was before,” argued Becht in September during an investor roadshow. “This is key, because that means that we have critical mass and a clear growth platform in many of these countries, which we did not have before.”Nevertheless, Coty remains underpenetrated in skincare, which analysts note is

key to expanding in emerging markets, notably in Asia, as P&G chose to hold on to prestige skincare brand SK-II. “If you are perfume and make-up-centric, you are missing out on the biggest beauty market in the world, which is Asia,” notes Deutsche Bank analyst Eva Quiroga-Thiele. Some also question the company’s logic in focusing on haircare, particularly

in the salon channel, where it has little experience. In addition, under P&G these brands have seen a lack of support for years. “I think L’Oréal was hoping for a competitor that would re-animate the whole salon business alongside it, and I’m still not convinced that Coty will be the right company to do that,” adds Quiroga-Thiele. But by bolstering the professional portfolio with ghd, Coty adds the higher-

growth segment of devices to its portfolio. “Ultimately, as portfolios fill up and [beauty players] run out of white space, [they ask themselves] are tools, equipment and accessories an interesting category,” says Steve Davis, managing director and head of beauty and personal-care practice at Intrepid Investment Bankers. “The consumer experience has changed over the past five years, and devices have become an important part of the puzzle. I don’t think the large consumer-oriented [companies] are ultimately going to be able to ignore that.”

The fragrance playFragrance, meanwhile, remains just as central to Coty’s expanded portfolio, accounting for between a third and half of its total sales, according to estimates that combine mass and prestige. The segment is struggling in many markets, and through the acquisition, Coty has taken on an even bigger portfolio of big-name fashion fragrance brands, rather than higher-growth niche and prestige labels. “The fourth quarter was encouraging, but we still have work to do from a fragrance point of view,” said Becht during the company’s conference call. n n n

“

”Deutsche Bank analyst Eva Quiroga-Thiele

It’s going to be a big job integrating these businesses, and I think it’s going to be an even bigger job trying to get P&G’s brands back into the right mind-frame, modernizing and repositioning them

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Cotyn n n He added that the company would be focusing on core brands including Gucci, Hugo Boss, Calvin Klein and Marc Jacobs.Coty also missed out on the Dolce & Gabbana license, which has gone to

Shiseido, and could have potentially been a key earner for the company. “Some of the fragrances they have bought are obviously very strong,” says Quiroga-Thiele, citing Gucci especially. “I think Coty has that kind of thing much more in their genes than P&G ever had,” she adds, suggesting she is more confident in Coty’s ability to develop the franchise further.It is in fragrance that Coty’s new weight is putting the most pressure on the

rest of the market. Now the undisputed world leader in the category, it has an estimated share of up to 50% in some markets. When the European Commission validated the merger, it stated that the combined firm’s fragrance market share Europe-wide would be between 20 and 30%, compared with 10-20% for competitors L’Oréal, LVMH and Puig, and 5-10% for Chanel. But in certain markets, including Germany and Ireland, its share is much higher, nearer 40%, and in men’s fragrance, it also holds an even bigger share in many markets because of the weight of brands like Calvin Klein and Hugo Boss. Generally, in markets dominated more by mainstream fragrance brands, Coty’s weight is more pronounced.In this context, rivals are concerned about how they will compete, while retailers

worry that faced with such a giant, they will see their bargaining power reduced. In certain markets, word on the ground is that Coty is even thinking of setting up its own retail activities to bypass traditional distribution and improve margins.As is often the case during such a merger, industry sources report that the

parallel market has been flooded with stock from the former P&G fragrance brands, meaning products are available at a discount and brand equity for the acquired brands could be eroded. While this is likely to be a temporary blip, given the scale of the acquisition, it will take Coty some time to integrate such brands and develop new value-added products. But Coty’s fragrance portfolio is also dominated by mainstream brands, and its products too are subject to discounting and broad distribution in many markets. The company has, however, stated its intention to focus more on innovation, citing examples like the Marc Jacobs Decadence scent having performed strongly because of its creative packaging. If the company follows a strategy of focusing on fewer, more innovative and impactful launches in the fragrance category, as many in the industry are now recommending, this could be one lead for turning around its business in the category.

Brands for saleOne sure tailwind of the merger is that certain brands are set to be up for grabs again, and relatively fast. Coty has announced plans to divest brands representing between 6 and 8% of combined revenues before June next year, and most of these are likely to be in fragrance, the company has suggested. “Clearly with the merger we have too many brands in the portfolio,” Becht explained during the company’s fourth-quarter conference call. “As a result, it would be better that we rationalize some of those out. And I am sure they will be better managed by other players in the industry.” n n n

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Coty

Coty factfileKey brandsCoty Consumer Beauty: Adidas, Bourjois, Clairol, CoverGirl, David Beckham, Katy Perry, Max Factor, Rimmel, Sally Hansen, Wella Coty Luxury: Marc Jacobs, Calvin Klein, Chloé, Gucci, Hugo Boss, Balenciaga, Bottega Veneta, Alexander McQueen, Davidoff, Miu Miu, Lancaster, PhilosophyCoty Professional Beauty: Clairol Professional, Nioxin, OPI, Sebastian Professional, System Professional, Wella Professionals (ghd to be added)

New CotyNew Coty will have annual revenues of $9bn, making it the world’s third-largest beauty companySales from P&G Specialty Beauty brands: $4.4bn (source: Coty)

Sales by sector*Consumer Beauty: 49% ($4.4bn)Luxury: 33% ($3.0bn)Professional Beauty: 18% ($1.6bn)

Sales by region* North America: 32% ($2.9bn)Europe: 42% ($3.8bn)Rest of World: 26% ($2.3bn)

Coty aloneFiscal year ended June 30, 2016 sales: $4.35bn, -1% vs 2015Sales by category 2016Fragrance: $2.01bn, -8% vs 2015Color cosmetics: $1.55bn, +7% vs 2015Skincare: $693.4m, -10% vs 2015Brazil acquisition: $95.5m, growth N/A

Sales by sector 2016Consumer Beauty: 54% ($2.4bn)Luxury: 41% ($1.9bn)Professional Beauty: 5% ($0.3bn)Source: Coty

Sales by region 2016Americas: $1.66bn, -2% (+1% constant currency, -5% like-for-like)EMEA: $2.17bn, flat (+8% constant currency, +1% like-for-like)Asia-Pacific: $516.8m, -3% (+4% constant currency, +5% like-for-like)

Source: Coty*including Coty’s business, annualized sales for Hypermarcas and acquired brands from P&G, not including ghd

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n n n While the company has not yet announced which brands it will sell it has said that those under consideration are currently seeing double-digit sales declines. “In the course of fiscal 2017, we would hope to part ways with these brands and to have a tighter, more focused portfolio which we can drive harder from a growth point of view,” stated Becht. Despite Coty’s confidence—Becht

cites the integration of Hypermarcas, acquired in late 2015, as testament to its ability to smoothly fold new activities into its portfolio—many in the industry say Coty will have its work cut out to return its enlarged portfolio to growth. “Right now, the business is declining 1-2% on a combined entity basis,” Becht told investors in September. The company expects sales to begin to improve in the second half of its fiscal year, which ends in June 2017. “It’s going to be a big job integrating these businesses, and I think it’s going to be an even bigger job trying to get P&G’s brands back into the right mind-frame, modernizing and repositioning them,” comments Quiroga-Thiele.There is no doubt that Coty has a

major job ahead in order to integrate its spate of acquisitions, and there are still big gaps in its portfolio, both in terms of expanding in emerging markets and further into categories like skincare, where it remains weak, as well as higher growth make-up segments, where it has added historic brands like CoverGirl and Max Factor to its portfolio. Through cost cutting, the company claims to be on track to increase its operating margin to 19.6%—Coty’s was 14.3% in fiscal 2016. Whether in the long-term its ambitious strategy will bear fruit, or whether it has bitten off more than it can chew, remains to be seen. n


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Cosmetic 360

The aisles were buzzing at the second edition of the Cosmetic 360 trade show, which focuses on innovation in the cosmetics industry, from ingredients to retail

technology. From early morning on the first day of the show, there was a strong turnout and exhibitors were for the most part positive. “We have seen lots of people who came from different countries. This is truly a show for people who want to work and exchange on a human level, which is made possible by the small size and the uniformity of the stands,” commented Alban Muller, president and ceo of ingredients company Alban Muller. Others commented on the clarity of the booths, where key innovations from each exhibitor were presented on large panels so visitors could see at a glance what companies were presenting. New features included the World Innovation & Cosmetic Cluster Summit, as well as

a new online platform and a B2B platform. The show also featured a zone dedicated to startups. The organizers emphasized the show’s aim of providing new ideas to the industry and showcasing innovation. “We want to be the international reference, and to be a show of the future and of the avant-garde […] it is also show for digital and start-ups; we are strongly looking to the future,” commented Cosmetic Valley president Marc-Antoine Jamet.This year’s edition was much bigger, with the show doubling its space to 5,000m2

(53,819ft2). The show welcomed 200 exhibitors, some 26% of whom were from abroad, as well as 4,023 visitors, according to organizers. Exhibitors came from sectors including formulation, ingredients, testing, packaging and finished products.

BW Confidential reports on what was seen and heard at the second edition of the industry trade show Cosmetic 360, organized by French industry cluster Cosmetic Valley, which took place in Paris’ Carrousel du Louvre from October 13-14

Innovation on show

Cosmetic 360Took place: October 13-14 in ParisExhibitors: 200 (26% of which were international), +33% vs 2015Visitors: 4,023 (14% of which were from abroad)

Heard in showFrench startup Picxel, which launched in 2011, presented a prototype of its Pheel booth, which uses facial recognition to analyze the consumer’s emotional reactions to different perfumes. The machine distributes a spray of perfume for the user to smell, and a camera records the reaction. The machine can recognize thirteen different facial expressions, the group claims. After the first spray, the machine narrows down its choice and proposes a new scent based on the user’s first reaction. According to Picxel founder Axel Boidin, four or five scent propositions are sufficient to establish the user’s preferences, and point them towards notes that will suit them. The machine, which aims to help retailers provide better consumer advice, won the Consumer Experience prize at the show. Created for the Musée International de la Parfumerie in Grasse, the Pheel booth does

not yet have retail distribution, but the company aims to install some 20 booths in 2017, 200 in 2018, and 2,000 in 2019. The machine can be rented for between €100 and €800 per month, depending on the

size of the screen and the number of perfumes tested. Picxel is hoping for the machine to generate turnover of €10m for the company. n n n

credit: Arnaud Lombard



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n n n French connected beauty brand Romy Paris, which was founded in 2011, presented its beauty assistant, which the brand says is the result of four years of research. Called Figure, the device is designed to provide users with personalized skincare solutions, taking into account details such as sleep, exercise, local weather and pollution levels for the user. Consumers fill out a questionnaire via the Romy Paris app (available on iOS), on their

lifestyle, habits and skin type. They can also allow the app to access their location, and collect information from Apple’s health app. The Romy Paris app then generates specific skincare from 1,000 possible combinations, based on this information. The user drops in the suggested active ingredient capsule through the top of the machine, before it is blended with a cream or serum base (these are stored in the back of the machine), and a single dose care is dispensed in seven to nine seconds.The Figure machine is currently being sold on the Romy Paris site for €590 and is

expected to hit the market in the first quarter of 2017.

Spanish cosmetics manufacturer Procoluide presented its new Swirl technology, which launched two months ago and consists of a DNA-shaped spiral inside an airless bottle (pictured). Each helix can be used to hold a separate active ingredient. The group also presented its newly launched Fab Lab, an interactive platform that aims to reduce product development time. The platform allows Procoluide clients to work on their product concept and benefit from expert support during the development of the finished product with the company.

France-based scent company Les Parfumables presented Le Porté, a perfume funnel that can be used by consumers to test a fragrance in-store. According to the company, the funnel incites consumers to pick it up and smell it, and encourages a more immediate interaction with a scent than spraying a fragrance on a blotter. The company also claims that by smelling the fragrance funnel, consumers get a true rendition of the fragrance immediately, which is not the case with a blotter, where they will first get a smell of alcohol.

Danish company Endoca, which makes products from certified organic cannabis (hemp) plants, presented its new cosmetics range. It includes the Endoca Hemp Salve, a multi-use product which claims to work as a barrier cream, hand cream and anti-frizz product for hair, as well as providing relief for dry skin. Also showcased was a lip and skin balm containing hemp oil, vitamin E and beeswax, which claims to double as a replacement for eye cream or serum. Endoca is sold on its own website and is looking for distribution.

French company Omoye, which uses African plant ingredients and has recently signed French actress Juliette Binoche as brand ambassador, presented a new addition to its Sacrée collection: Crème Sacrée du Chamane. The anti-aging cream is inspired by a shaman’s recipe, and contains active ingredients such as silk tree and cassava root. It claims to lift and smooth the skin, as well as restore radiance. The product, which retails at €53 for 50ml, is launching in December. In France, Omoye is available in Monop’Beauty and Monoprix parapharmacies, as well as in Parisian department store Le Bon Marché. The brand plans to expand to Brazil and Korea.n n n

Cosmetic 360


n n n France-based Alkos presented two solid perfume sticks, which launched in September and are designed to be portable, and practical for on-the-go use. The Perfume Touch Up stick is a transparent solid fragrance with a light texture. It contains ceramidone, which claims to help to restructure the skin barrier. The Solid Perfume Jumbo Twist stick claims to create a soft finish thanks to its jojoba ester. It is slightly tinted with a blendable golden shimmer finish, intended to create a brightening effect.

China-based, Shanghai Jahwa-owned beauty brand Herborist, which draws upon traditional Chinese herbal medicine, presented its new Supreme Anti-aging collection. The range launched in China in September and will be released overseas next year. Prices range from €39.90 for the Facial Cleanser, to €99.90 for the Extra Control Concentrate Essence, which claims to leave skin radiant, hydrated and toned. The range also includes the Extra Control Concentrate Nourishing Night Cream (€82.90), which aims to reduce the appearance of wrinkles. n

Beauty in Travel Retail

more than 100 pages of insight and analysis of

the beauty category in travel retail

Everything you need to know about beautyin the travel-retail channel:

• Global shopper habits • Digital strategies • Online sales • Reaching millennials • Creative retailing strategies • Pricing • Performance by beauty segment • New product trends • Packaging...

Plus all the latest data, industry predictions and listingson the channel’s main players

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Dove pop-up store l Location: 108 rue Saint-

Lazare, Paris, France l Open: November 9 -

December 18 l Size: 180m2 (1,938ft2)

l Special features: A selection of products that can be personalized; store exclusives including the brand’s best-selling

products in Japan, gift sets and candles

Unilever-owned personal-care brand Dove has opened its first pop-up store globally, located in Paris.

Opened in November, the 180m2 (1,938ft2) boutique has a strong focus on customization, which Frederic Erimo, Unilever marketing director personal care France, said ties in with Dove’s social mission aimed at boosting women’s self esteem, and the idea that beauty is unique. Visitors to the pop-up store can choose to personalize one of four Dove

products: body cream, shower gel, body lotion or body scrub. Following a skin diagnosis with Dove beauty advisors to measure skin hydration levels, customers select the desired texture, fragrance and ingredients. Shoppers can then customize the packaging by choosing a name or a beauty mantra to feature on the pot or bottle. The customization process takes around 15 minutes, according to Dove, with prices ranging from €12 to €20 depending on the product selected. Shoppers can also have a name or a thought engraved on Dove’s beauty bar soap for €6, with four different scents to choose from. Also at the Paris pop-up, Dove is showcasing its Japanese facial cleansing

products: three facial cleansing mousses and the brand’s first micellar water. Products are priced at €6.50. The company says the offer responds to increased demand for Asian beauty products from French consumers. Gift sets and candles developed for the holiday season are also among the store exclusives in Paris.The pop-up store is open from November 9 to December 18. n

The Unilever-owned brand is putting the focus on personalization for its first-ever pop-up store

Dove pops up in Paris



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s The store stocks a range of exclusive items, including Dove’s facial cleansing products sold in Japan, as well as gift sets and candles created for the holiday season

s The pop-up store allows consumers to customize a selection of products following a skin diagnosis with Dove beauty advisors

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