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Beauty companies have made the millennial consumer a key target. Many brands are going out of their

way to attract 18 to 34 year olds on social media—with varying degrees of success—and are looking at how to better design, market and even price their products to appeal to these consumers. However, analysts say that while brands are making

efforts when it comes to millennials, there is a disconnect at the point of sale. They maintain that traditional beauty stores are not attractive enough to bring in these

consumers, and that millennials do not feel at ease shopping in a perfumery or a department store. Young consumers are either buying elsewhere (for example, online or in branded standalone stores) or are simply not buying beauty at all. This criticism has seen some retailers look to open more youth-friendly stores

complete with interactive elements and digital features. The problem however, is that these special features are usually only to be seen in key flagship doors, while many of the local perfumeries do not get the same treatment and continue to have a tough time attracting the young consumer.

The millennial maze The buzz 2News roundup

Netwatch 7 Social media monitor

Interview 8La Prairie Group vice president of travel retail Laurent Marteau

Insight 10Prestige retailing in Italy

Store visit 13 Grupo Boticário’s The Beauty Box flagship, São Paulo, Brazil

Oonagh PhillipsEditor in [email protected]

www.bwconfidential.com The inside view on the international beauty industry January 21 - February 3, 2016 #124

News headlines daily on www.bwconfidential.com @BWCbeautynews

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Strategy

Coty will not take over the fragrance licenses for Dolce & Gabbana and Christina Aguilera as part of its acquisition of P&G’s Specialty Beauty business. “The licensors […] did not provide their consent within the specified timetable, and in accordance with the transaction agreement and in the interest of staying on track with the transaction, it was agreed that these brands will not transfer upon completion of the merger,” Coty said in a statement. Coty’s assumption of debt from the P&G Specialty Beauty business will be adjusted

downwards, the company added. The transaction is still on schedule to close in the second half of this year. As announced previously, discussions with 10 of P&G’s fragrance brand licensors have

been successfully concluded, meaning those licenses will pass to Coty as planned. They are: Hugo Boss, Gucci, Lacoste, Bruno Banani, Escada, Mexx, James Bond, Gabriela Sabatini, Stella McCartney and Alexander McQueen.

MacAndrews & Forbes, through which US businessman Ronald Perelman owns 77.6% of beauty firm Revlon, is looking for “strategic alternatives” for the company, according to an SEC filing. According to the filing, no specific plan has yet been formulated.Revlon saw a reported sales drop of 3.3% in the first nine months of 2015 to $1.39bn.

In 2014, the first full year in which its sales integrated those of The Colomer Group, revenues grew 1.7% on a pro-forma basis (adjusted to take the acquisition into account).

LVMH has put its resources behind a new sustainable well-being brand, called Cha Ling. The group will give Cha Ling financial backing and develop its products at its La Rûche laboratory in France. The Sino-French brand is based on an exclusive type of tea called Pu’er, from forests in China’s Yunnan province, which is renowned for its anti-oxidant properties. Its concept is based on sustainable sourcing of ingredients and has a focus on overall well-being inspired by traditional Chinese medicine.Guerlain president Laurent Boillot is also Cha Ling’s president, although he explains

that the brand is an independent entity incubated by LVMH, rather than a new brand in the luxury-goods house’s stable. “Its vocation is to be a global brand, not a brand for the Chinese market,” Boillot adds. The brand has been four years in the making, he says.Cha Ling launched exclusively at Le Bon Marché in Paris on January 8 with a permanent

space, as well as a larger pop-up store running from January 11-23. The line consists of a range of 22 face and bodycare products as well as a fragrance, and also includes a n n n

Stay informed with our daily news headlines on www.bwconfidential.com

n Coty not to take over D&G and Christina Aguilera fragrance licenses

n Revlon owner seeks strategic alternatives

n Douglas ceo Henning Kreke is to step down

n Retailer BHV Marais to open a store in Dubai, UAE this September

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n n n candle, ceramic objects and a selection of teas. It offers massages and meditation solutions. The core products in the line are a cleansing powder, a serum, a massage cream, a steam tablet and a rejuvenating mask, with prices ranging from €20 for the steam tablet to €150 for the Infusion Serum or Massage Cream.Rollout plans for Cha Ling include French e-commerce, to launch on January 25, and

a boutique in Hong Kong’s Harbour City mall set for January 27. Boutiques in Paris and Hong Kong could also be on the cards further down the line, as well as a store in China in 2017 and Chinese e-commerce, Boillot says.

Packaging manufacturer HCP has been acquired by investment firm Baring Private Equity Asia, a source at the company has confirmed. Baring bought the firm from TPG Capital Management for a reported $775m, according to press reports.

Elizabeth Arden Red Door Spa is continuing to hone its on-demand services offer with a second acquisition in the space. It has announced the purchase of CitiMani, an on-demand nail care service in New York. The move follows the November purchase of in-office beauty and grooming services firm Manicube. CitiMani will be incorporated into the firm’s new on-demand services division, headed by Manicube founders Katina Mountanos and Liz Whitman. CityMani offers private and small group manicure parties.

Beauty sampling service and retailer Birchbox has launched its second private-label line. Called Arrow, the make-up and skincare line is inspired by the athleisure trend, with products designed to be lightweight, long-wearing and refreshing for use during and after physical activity.The vegan line launched on January 7 with three products—Revive Cooling Cheek Tint,

Boost Color Enhancing Lip Balm and Protect Aluminum-Free Deodorant, as well as a make-up bag, and is also available as a starter kit. Prices for the individual products range from $9 to $18. Later this spring, five further products will be added to the line: a facial mist, mascara, cleansing wipes, a tinted serum and a tinted brow gel.

Results

Germany’s Beiersdorf reported a 6.4% increase in preliminary 2015 sales, to €6.69bn. In organic terms, the company’s sales grew 3%. For the consumer business segment, which includes the firm’s beauty brands, sales grew 6.5%, or 3.6% on an organic basis, to €5.55bn. Beiersdorf said its growth had accelerated in the second half of the year. Its core brands Nivea, Eucerin and La Prairie contributed to growth in 2015. Consumer division sales in Western Europe increased 1.7% to €2.28bn, while in Eastern Europe they fell 3.5% to €535m. In North America, the division’s revenues increased 22% to €426m, and in Latin America, they rose 4.1% to €650m. In Asia, Africa and Australasia, sales grew 15.1% to €1.65bn.

Anglo-Dutch group Unilever reported sales of €53.3bn for 2015, a 10% increase year-on-year, boosted by a positive currency impact of 5.9%. The company saw underlying sales growth of 4.1%, ahead of its markets. Operating profit for the year fell 6% to €7.5bn, while net profit dropped 5% to €5.3bn. n n n

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n n n Sales at its personal care division rose 13.2% on a reported basis to €20.1bn. Like-for-like sales for the division grew 4.1%, with exchange rates accounting for 7.6% of growth and acquisitions for 1%. Unilever said growth for the division improved compared with the previous year thanks to innovations from its core brands and its extension into more premium segments. The company bolstered its position in prestige skincare in 2015, acquiring Kate Somerville, Dermalogica, Murad and Ren.

People

Douglas ceo Henning Kreke is to step down and become chairman of the retailer’s supervisory board. Douglas has already begun looking for a new ceo. Kreke has been ceo of Douglas since 2001, and has overseen its transition from a diversified retail group to become Europe’s biggest perfumery chain, its delisting from the stock market and two takeovers. Douglas was sold to CVC Capital Partners last year, with the Kreke family maintaining a 15% stake.

Estée Lauder Companies (ELC) has named Sue Fox vice president and general manager of its travel retail business in Europe, the Middle East and Africa. Fox was previously general manager of ELC’s South African business, and was also in charge of expanding its business in Sub-Saharan Africa.

Sampling specialist Arcade Beauty has named Peter Lennox as its new ceo. Lennox will replace Serge Jureidini, who is leaving the firm. Lennox has spent many years in the packaging industry, although his most recent position was as an operating partner at AEA Investors, a mid-market private equity firm.

US skincare brand Rodan + Fields has named Diane Dietz president and ceo. Dietz was most recently chief marketing officer and executive vice president at retailer Safeway and spent nearly 20 years at P&G. She replaces Lori Bush, who announced plans to retire in December. Bush will remain on the company’s board of directors.

Flavor and fragrance firm Symrise is bolstering its recently extended Cosmetics Ingredients division with two new members of staff. Arnaud Bellon has joined the firm as senior vice president, global head of botanicals and colors, while Caroline Baptiste has been named global product manager for actives. n n n

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n n n German firm Henkel has announced a replacement for ceo Kasper Rorsted, who is to leave the company on April 30. He will be succeeded by Hans Van Bylen, the current executive vp of Henkel’s Beauty Care division and a member of the firm’s management board. Henkel said it would name a new head of the beauty division in due course.

Retail

French department store BHV Marais, owned by Groupe Galeries Lafayette, is set to open a store in Dubai, UAE this September. The 6,000m2 (64,500ft2) outlet in The City Walk Mall will recreate the identity of BHV’s historic store in the Marais in Paris. It will be positioned as a lifestyle store combining home and fashion with a broad range of price points, and will include a beauty department. The Dubai store will be BHV’s second international outpost—its franchise partner ADMIC, based in Lebanon, already operates a BHV store there, and is also in charge of Galeries Lafayette’s store in The Dubai Mall.

LVMH-owned beauty retailer Sephora has created Sephora Accelerate, a program through which it intends to support early-stage beauty businesses created by women. The program is part of a broader social strategy, called Sephora Stands, being implemented by the company in the Americas. The Accelerate program is intended to counter a lack of funding, connections and

business instruction for female entrepreneurs. Some 10 places are available on the year-long program, with the aim of supporting 50 businesses by 2020. The cursus includes a bootcamp at the retailer’s San Francisco headquarters, a mentor program and potential funding.As part of the Sephora Stands initiative, the retailer will also implement free confidence

classes in its stores for women facing life transitions, as well as a philanthropic fund, Sephora Stands Together, to support employees confronted with unexpected events like natural disasters or family emergencies.

Swiss skincare brand Rivoli has unveiled a new exhibition, Organic and Mineral by artist Marion Catusse, at its Beauty Art Gallery concept store in Geneva. The company says that the space has been transformed into a “cabinet of curiosities” for the exhibition. Catusse mixes the roles of scientific researcher and artist by experimenting with the chemical reactions between different materials to create imaginary cells on materials including glass plates and resin blocks.

Launches

Swedish retailer H&M is adding to its beauty offer with a line of organic beauty products under its Conscious brand, through which H&M already offers sustainable and organic fashion collections. The Ecocert-labeled line consists of around 30 different face, body and haircare products, with packaging made from recycled materials.The products will arrive in stores offering the H&M Beauty line this month, priced from

€5.99 for an aluminum-free deodorant to €9.99 for a body cream. n

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

Social media monitor

The new shop-in-shop for Korean e-tailer Peach & Lily in Macy’s Flushing, Queens store in New York has been a hit, say bloggers. The small space is described as bright and pretty, and the products are said to be displayed well. The store is also liked for the skin diagnostic services it offers.

The much-hyped Lip Kit by Kylie Jenner, which was reportedly an immediate sell-out, received mixed reactions among bloggers. Many expressed disappointment with the colors and packaging design.

The trend for portable and mini-sized beauty items is set to continue, according to beauty bloggers. Popular formats on the blogs include multi-tasking make-up wands, refillable roll-on scent bottles, perfumed jewelry and gadget-inspired products like the Portable USB Travel Shaver (pictured) by travel beauty brand Flo Accessories.

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La Prairie continues to step up its focus on the travel-retail market. Laurent Marteau, who joined the Beiersdorf-owned firm in September 2014 as its first vice president of travel retail, updates BW Confidential on the brand’s progression in the segment

Signature service

How did your business perform in 2015?We are performing better than the market. Our sales in sell-out terms are up 7%, whereas we estimate the market to be at +2-3%. All of our regions are positive. Asia is continuing to perform very well for us, up 9%. Korea performed very well in the first half, but with MERS things were difficult; however, since October, business has picked up again. In the Middle East, our sales are up 5%, which is well above the trend in Dubai. In the Americas, we are up 9%, while the market is either flat or negative. In Europe, our sales are up 1%, whereas we believe the market is performing at -1 to -2%.

How do you explain this performance in a largely morose market?We have continued to increase our focus on specific services where customers can have a treatment or massage or a make-up touchup before traveling. We offer this free of charge, and realized that as soon as the customer sits down, we have a 70% sales conversion rate. In all the points-of-sale where we have implemented this new focus we are easily 10 points above the market. We have compensated for the market morosity and currency devaluation thanks to this. Even in markets where we should be very impacted, like Switzerland, where we are very strong, we are still flat in sellout, whereas a lot of our competitors are at -10% to -15%. Where we have not implemented it, we are more in line with the market trends.

What are your plans for the rollout of such services?We have rolled them out to about 50% of our distribution now, which represents around 200 doors. We intend to implant it everywhere. We have to continue training our salespeople, which was a major investment for us in 2015, and look at how our counters are designed and put in place consultation areas in our points of sale. We do this systematically now in all of our new doors and renovations. These were two major areas of investment that will continue in 2016. Within the next two years, we should have finished renovating all our points of sale and training all our sales people.

What are your priorities for 2016?We will continue to invest massively in training and merchandising. We’ll also look more closely at our distribution. We think we have opportunities in Asia. Our distribution there is relatively limited, and we will try to have a more diverse footprint in Asia and target Chinese customers in the various Asian markets. Japan, for example, is a market where we do not have a strong presence, so we are looking at expanding our presence in Narita, Kansai and Haneda airports. In Southeast Asia, Chinese people are traveling more, n n n

La Prairie Group vice president of travel retail Laurent Marteau

“

”La Prairie Group vice president of travel retail Laurent Marteau

What concerns us the most is the difference between sell-in and sell-out. Our sell-out is excellent, but our sell-in is behind because operators have looked closely at their stock levels due to the market morosity



Inte

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w La Prairie Group vice president of travel retail Laurent Marteaun n n and there are two or three interesting projects that have been developed by operators [like DFS] that combine culture and shopping. We will look at China, beyond Beijing and Shanghai, and work with CDFG to grow our distribution in regional airports.

How are changing Chinese travel patterns affecting you?Chinese passengers from different cities are very different. It is no longer just those from first-tier cities who are traveling; it’s also those from second- and third-tier cities. Many of them are discovering the world of luxury cosmetics and fragrances for the first time; they have never been in contact with the brands on the local market. In five years’ time, their number is expected to triple. A Chinese traveler is a sales opportunity. We haven’t seen any slowdown on the local market, where our sales are up 20%, and in duty free, we are up 35%. Chinese travelers have also been responsible for growth in Paris, Japan and Thailand in 2015. Chinese people are destined to travel more—only 4% currently travel. We don’t know yet where they will travel. In Los Angeles and Vancouver, even at JFK or Toronto, it is the Chinese who buy the most skincare, it’s not North Americans. In lots of airports where Chinese people are present, they have become the biggest customers.

How is travel-retail consolidation impacting business?People are concerned, as they want to know how operators will manage to be reactive, because the bigger an organization, the slower it moves in general. If you look at Dufry, which is now the biggest player, it has said it wants to preserve aspects of business that were done well elsewhere, and that will be a good thing. It is still learning from Nuance, and will learn from World Duty Free too. I think this will be beneficial. But we need to see how things go with the integration. It needs to keep staff and maintain motivation levels, rebuild teams and rebuild operator dynamism. It is important for the future of travel retail. Of course, it will have financial implications on both sides, and that is when we will really see if it is retail or profit that comes out on top. In our discussions, we are trying to highlight that the higher the [retailer] margins, the less the brand will invest. Those who push for higher profits get less vital support from the brands.

What other challenges do you foresee over the coming year?We would like to see currency fluctuations calm down. That was the biggest challenge of 2015. As a Swiss brand, we report our results in Swiss francs, and our parent company reports in euros, so that hasn’t helped. If you look at Russia, Japan and Australia, which were the most expensive countries two years ago, they are the least expensive countries today. We are obliged to apply different pricing policies. It hasn’t been easy, and it has created difficulties for the operators, as they have had to try to adapt quickly. What concerns us the most is the difference between sell-in and sell-out. Our sell-out is excellent, but our sell-in is behind because operators have looked closely at their stock levels due to the market morosity. It would be good if things could stabilize. We hope 2016 will be calmer, with fewer fluctuations. n

s La Prairie has seen better conversion rates in travel retail since introducing specific treatment and massage services at the point of sale

“

”La Prairie Group vice president of travel retail Laurent Marteau

We have continued to increase our focus on specific services where customers can have a treatment or massage or a make-up touchup before traveling. We offer this free of charge, and realized that as soon as the customer sits down, we have a 70% sales conversion rate


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The era of pessimism and austerity could be coming to an end in Italy. Political stability and the first signs of economic recovery have given Italian consumers

reason to shop again. According to The NPD Group, selective beauty retail, which is made up of 2,900 perfumeries and department stores in Italy, saw a slight increase of 0.4% in the first nine months of 2015 versus the same period in 2014; this follows four years of sales declines. The increase is higher at +1.6% if only sales of prestige brands are taken into account. “Mass brands have seen a double-digit decrease in perfumeries in the first nine months of 2015 as the channel is in direct competition with drugstores, which are booming in Italy,” explains The NPD Group Italy senior manager beauty Francesca Comis. NPD states that the five largest chains (Limoni, La Gardenia, Sephora, Douglas and

Marionnaud) as well as the country’s two main department stores (La Rinascente and Coin) generated most of the growth in prestige last year. However, while business may be better for these chains, it is nonetheless tough, with strong competition from drugstores and from budget brand Kiko, which now has 300 stores in Italy. There are around 2,000 drugstores in the country (according to industry sources this

figure could reach 3,000 in the next five years) specialized in home and personal-care products. But they also sell most prestige fragrances, which are supplied either through the gray market or directly by some beauty companies. And last year supermarket n n n

Prestige beauty retailers are facing strong competition from drugstores and standalone stores in Italy. However, prestige sales nonetheless saw a slight increase in the first nine months of 2015 after four years of decline

Italy: a return to prestige?

Prestige retailing in Italy

“Competition is tough because while about 400-500 customers shop daily in each drugstore, in an average perfumery, there are only 40-50 sales a day

”Collistar commercial director Luca Catalano


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n n n giant Groupe Auchan introduced its own drugstore format called LillaPois/Lillamoi (a test for Auchan before a possible rollout in other European markets), which already has 40 stores. “Competition is tough because while about 400-500 customers shop daily in each drugstore, in an average perfumery, there are only 40-50 sales a day,” comments Italian beauty brand Collistar commercial director Luca Catalano.

Competition & luxury formatsTo face this competition, major prestige beauty retailers are looking to transform their stores into luxury destinations and enhance their image. Many perfumeries have dropped mass brands from their stores and have given increased space to prestige lines that create a more luxurious environment. “Retailers realize they can generate more profit and give more appeal to their stores with a prestige identity,” sums up The NPD Group’s Comis. Limoni is a key example. The number-one national chain was rescued from

bankruptcy after private-equity firm Orlando took a majority stake in the retailer in September 2012. Limoni has been undergoing an upgrade over the past two years. The La Gardenia chain, which is also owned by Orlando and jointly managed with Limoni by the service company LLG (Leading Luxury Group), is also putting a firm focus on prestige. “We have restructured the network and closed 130 Limoni stores, while at the same time we have refurbished 320 stores, providing them with a new luxurious image and a series of specialist beauty services,” explains LLG ceo Fabio Pampani. About half of the Limoni stores now have a Beauty Room or a Beauty Lounge in bigger spaces, hosting skincare treatments, make-up lessons, nailcare and even hair salons and barber shops. “We think that a unique beauty experience goes further than a simple shopping experience,” comments Pampani. The emphasis on services and the new image seem to be successful and according to its ceo, Limoni has now reached profitability. However, Pampani refused to comment on the rumor that German perfumery chain Douglas could be interested in the acquisition of Limoni/La Gardenia. LLG chairman Enrico Ceccato recently said that Limoni would not change hands before 2017.While Limoni seems to be putting its house in order, other key players have had their

problems. According to industry sources, Marionnaud is suffering financial losses in the Italian market, while Douglas is also said to be relatively weak in the country—which has analysts saying a tie-up with Limoni would be a good move for the German retailer. Other retail moves that could usher in more change to the market is the entry of France’s Galeries Lafayette with a store in the Westfield shopping center which is under construction on the outskirts of Milan (the shopping center’s opening has been delayed until 2020). Also, Spanish department store El Corte Inglés is said to be looking for a location in Milan.

A mixed bag for regional playersAside from the big players, some regional and inter-regional chains like Pinalli and Rossi are performing well, as are some independent perfumeries. A perfumery like Thaler in Bolzano (South Tyrol) has been developing a concept store including a spa, a café-bistrot, and a home and fashion accessories department. Some enterprising retailers are also testing new formats, like beauty veteran Salvatore Pilloni who has opened Je Suis, a new perfumery in Olbia, Sardinia, where after scanning a loyalty n n n

”

“Mass brands have seen a double-digit decrease in perfumeries in the first nine months of 2015 as the channel is in direct competition with drugstores, which are booming in Italy

The NPD Group Italy senior manager beauty Francesca Comis


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n n n card, sensors allow a direct dialogue with the client’s smartphone. But in general, smaller players have suffered from Italy’s tough economic climate.

“The smallest perfumeries are unable to adapt to change and will keep closing in the coming years,” comments Collistar’s Catalano. These closures are inevitable as Italy has the highest ratio of perfumeries per inhabitant in Europe. While sales may be improving, the market is set to remain tough for both the country’s bigger and smaller players. n

Limoni and La Gardenia (LLG) Stores: 550 (350 Limoni & 200 La Gardenia) LLG has a 50% share of the national chain market and 22% of total prestige beauty retail. Two Limoni flagship stores were opened in Milan in 2014 and two in Rome in 2015. A third one will open soon in Milan and one in Cagliari (Sardinia) this year. In December 2014, La Gardenia acquired Beauty Point, which operates 27 perfumeries.

MarionnaudStores: 130The retailer opened five new stores in 2015, all of them in shopping centers. Industry sources indicate losses of €10-15m in the last three years.

Sephora Stores: 129The LVMH-owned retailer opened only one new store in 2015, in Naples. In 2014, Sephora focused on opening stores in train stations of key Italian cities: Milan, Rome, Turin and Florence.

DouglasStores: 122The retailer opened two new stores and refurbished one outlet in 2015. The retailer also closed 10 stores between 2014 and 2015. Boosting online sales is key for Douglas. The retailer is aiming to increase its online business from 5% of sales today to 10%. The retailer may consider acquisitions to increase market share.

CoinStores: 48Coin opened its high-end concept Coin Excelsior in Rome in April 2014 and another in September 2015. However, its Excelsior store in Verona closed at the beginning of this year. The Excelsior stores’ beauty departments feature areas for niche brands.

La RinascenteStores: 11 (with a beauty department)The retailer will open a flagship store in central Rome in the near future.

Italy’s key retail players


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The Beauty Box flagship

l Opened: November 2015l Location: São Paulo, Brazil

l Size: 76m2 (818ft2)l Special features:

New, better-lit merchandising units, broader shelving,

interactive totem

Brazil’s Grupo Boticário launched its first flagship store and a new look for its The Beauty Box retail nameplate in the Morumbi Shopping mall, São Paulo

last November. The 76m2 (818ft2) store, which is the 34th outlet for The Beauty Box, aims to provide an easier shopping experience through clearer, better-lit merchandising units, broader shelving and more space between product stands. The boutique also features an interactive totem, where consumers can access

more than 5,000 products through the retailer’s e-commerce site. Consumers who can’t find what they are looking for in store can order online and have their products delivered without extra taxes and without shipping costs. The totem also provides access to The Beauty Box blog, product information and product tutorials.Grupo Boticário launched The Beauty Box retail concept in 2012. The retailer

sells more than 100 brands, including local and imported lines in a range of categories from fragrance, make-up and skincare to haircare and men’s grooming. It also has its own brand, Produtinhos da Beauty, with more than 120 skus for body, bath, hair and accessories The retailer now has 10 stores in São Paulo city, seven in São Paulo county, six

in Rio de Janeiro, four in Minas Gerais, five in Curitiba (Parana State) and two in Brasília. Last year, the retailer began a pilot project housing The Beauty Box in clothing retailer C&A’s stores. The company says the project has been a success so far, and more units are planned for this year. n

Grupo Boticário launches a flagship store for The Beauty Box

A new look for The Beauty Box





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s The new flagship aims to provide an easier shopping experience through clearer, better-lit merchandising units, broader shelving and more space between product stands

s The store houses a range of local and imported brands, as well as its own brand Produtinhos da Beauty

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