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Star Products Still Build Companies



By Suzanne & Bob Grayson, Grayson Associates



Published July 7, 2011
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Most historians will tell you that it takes at least 50 years before you can get a true perspective on events. Sometimes it takes even longer; note the recent flurry of books on the Founding Fathers. What can practitioners in the beauty industry learn from the past? Does history repeat itself? Or has the business climate changed so much that all the old “rules” no longer count? Have we all changed so much that what was the norm years ago is ludicrous today? Think of the Hays Office, a “voluntary” movie censor group, which would allow a couple in bed only if she had a wedding ring and if there was one foot on the floor!

Now, let’s take a look at the past five decades of the industry to see what lessons can be learned as we look to the future.

Although the modern era of the beauty business began in the mid-1950s, Revlon was already there, having launched the first pigmented, non-dye nail enamel in 1937. Revlon became the top-selling cosmetic brand in the mid-1950s, driven by the huge and immediate impact of TV’s “$64,000 Question.” Estée Lauder started with skin creams, but was propelled by Youth Dew Bath Oil (1953), the high-impact/high-value, long-lasting star product (more of what she bought it for), and the GWP powerhouse.

It’s important to note that most great companies were started with single, star product and/or star drivers. Look where they all are today (see chart p. 44)! Alberto-Culver started with VO5 Hot Oil Treatment and was scooped up by Unilever this year, largely because of it latest star product line TreSemmé. Bare Escentuals’ Bare Minerals was driven to new heights on QVC by Leslie Blodgett before the company was acquired by Shiseido in 2010. Christina Carlino did the same for Philosophy, which was purchased by Coty this year.

Noxell launched CoverGirl in 1959 with a three-shade medicated makeup line. Together with Noxzema, Noxell created a winning formula. P&G usually only buys top brands and acquired Noxell in 1989.

Maybelline’s mascara business, which includes Great Lash, lured L’Oréal in 1996. Today, when you include Lancôme, L’Oréal dominates the world mascara business.

Neutrogena began as a translucent soap barin 1954, and this star that launched a thousand products landed at J&J in 1994. And if it weren’t for Smashbox’s primer authority, Estée Lauder would have never noticed! The message is: star products build traffic, brands and companies.

Before the modern era, the business was dominated by entrepreneurs who founded the industry—Elizabeth Arden, Helena Rubinstein and Francois Coty. All were essentially fiefdoms run by strong leaders. Personal rivalries added to the thrill of winning. Max Factor and Perc Westmore were the first makeup artist brands, emanating from the Hollywood glamour era.

Two powerful trends sprouted in the late 1960s and changed the face of the industry. First came the emergence of mass distribution/self-service, along with the shift from independent drug to chain drug. Second came the growing power of women working/spending and wanting/needing to look good. This burgeoning of beauty as a real business, started the third trend.


Drug Culture Impacts Beauty
In the 1970s, drug companies began acquiring beauty firms in a search for growth. The early mismatched acquisitions were doomed from the start: Lanvin-Charles of the Ritz to Squibb; Maybelline to Schering-Plough; Arden to Eli Lilly; Max Factor to Norton Simon to Playtex; Rubinstein to Colgate. The buyers simply didn’t, or didn’t want to, understand the culture and tempo of the beauty business. The buys were opportunistic, not strategic, and merely a way to get on the acquisition bandwagon.

Revlon picked up a badly distressed Factor, (what did Playtex know about beauty?) along with Charles-of-the-Ritz to fill out a double bed—in which they both promptly fell asleep. Savoring the taste of the higher margin beauty business, P&G snatched Max Factor from Revlon in 1991 and made Mr. Perelman’s day. In fact, P&G was originally after both Revlon and Factor, but the latter’s greater global presence, combined with a lack of trust in Revlon’s blue suit/buy-out management, was a deciding “factor.”Besides, look at the great gift-with-purchase: SKII technology from Max Factor Japan!

As the drug companies became disillusioned with their beauty acquisitions, they began divesting them in droves: Arden and Faberge went to Unilever, along with Calvin Klein and Chesebrough-Ponds, which ultimately ditched Prince Matchabelli, Cutex and Aziza. Maybelline was sold to L’Oréal, Neutrogena went to J&J, and Helene Curtis went to Unilever. All foreshadowed the changes to take place in the new century.

Interestingly, had a company been able to read the tea leaves, it might have been able to pluck some of the low-hanging fruit before harvest time, and would have saved millions. But here’s the anomaly.If these, essentially entrepreneurial companies were bought (too) early, would they have achieved their full potential under the heavy hand of a major company? In most cases, the entrepreneur gets a payout, a two-year contract, and a new set of golf clubs. What ultimately counts is the new set of golf clubs!


Overcoming Weakness

Now, to the current era—strategic consolidation based on perceived weaknesses in the existing product or distribution lineup, with global expansion the brass-ring of opportunity for all (see the last column on the chart). Unilever’s Alberto acquisition provides a buildable, niche moisturizing line, St. Ives, as well as strong brand names in hair care, Nexxus and TreSemmé. Oddly enough, VO5 will probably be divested, thanks to concerns raised by the US government. Shiseido’s purchase of Bare Escentuals gives it a powerful mineral line and a pipeline to QVC.Coty’s acquisition of OPI and Philosophy reduces its dependence on fragrance.And finally, Revlon bought Sinful, to get that low-price business in nails/cosmetics as well as entrée into the lower-priced/younger beauty business, which has not been fruitful in past attempts with the Revlon brand.

Whew! Note that they are all strategic buys. Now, back to the tea leaves. Looking forward five to ten years, it seems clear that the majors will focus on two strategies; true global distribution and expanding brands into new categories with lean, but full lines. That’s easy to say, but not so easy to do, as many have learned. The first strategy of course, is to enlarge the total business, and the latter is to prevent some parvenu from blocking out a niche, such as Sally Hansen in nails. And watch for crossover branding to ease global expansion. CoverGirl with little global business, will move along neatly now that it has Olay ingredients to spark recognition for both Permission-to-Believe and Permission-to-Buy. Brilliant marketing.


Stay Focused
If you are a small company and you’re mulling a buyout, on whom should you focus? Who is missing products like yours? Who can use your distribution channels? Who can use your brand to enter a new product category? You get the idea—what strategic value do you really have? But, that’s the end game. In the meantime, three exogenous factors can impact your business—shifting channels of distribution, social networking and emerging markets. Those are the basics for developing a strategy but, as you know, it’s the execution that counts.

A smaller company’s strategy must be narrow in focus; try to dominate a single idea or area. Don’t be swept away by the “global” fever—don’t dissipate your time, money and/or creative juices. Done successfully, two things can happen; a VC will invest, enabling more rapid growth and line expansion (Strivectin to Chrysallis), or a major will want your specific expertise (Smashbox), and you get to use those golf clubs. But neither will happen without that singular focus. Is that what you are doing now? So, if your goal is to be acquired, focus on some star attractions. And, ask yourself this question, every day. “What’s new and innovative about what I am doing.” Just being different—is not enough. It must be significant! It might be helpful to look at our three past columnson Permission-to Believe, Permission-to-Buy, and distribution channels.

Lastly, we’d like to let our readers know that we’re taking our own advice about “focus,” as we take leave of absence from The Grayson Report and theBrand-AdAudit columns. We are ready to launch a radically different anti-aging skin care concept, all the while reminded that the world is not waiting for another anti-aging product. It will surely consume all of our time (and then some) for the next year. Stay tuned. Meanwhile, we sincerely thank you for your continued support these so many years.



Suzanne and Bob Grayson are respected, professional marketers, having spent their careers with the leading companies in the beauty industry before starting their successful consulting business in the early 1970s.

Their consulting clients have included Avon, Bristol-Myers, Estée Lauder, Procter & Gamble, Revlon and Cover Girl, among others. They reside in San Juan Capistrano, CA and maintain an office in New York City. For more information, they can be reached at bob@graysonassociates.com or suzanne@graysonassociates.com


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