Although Coty paid Unilever big bucks for the Calvin Klein fragrance lines back in 2005, it didn’t acquire the license for color cosmetics, which went to Markwins International. The latter had previously been known for its low-cost, budget approach to mass makeup lines, so the jury has been out awaiting the results of Markwins’ first major foray into the prestige end of the market. Especially since Calvin Klein color cosmetics were trialled in the past and never really made the grade.
Strategically, Markwins chose Europe to start. The line has gained a useful foothold in Italy and France, and recently entered Germany, the largest European market.
“Today Europe accounts for 75% of our sales,” Markwins International chairman Eric Chen is quoted as saying, “but in three years it should account for only 50% of turnover, compared with 20% each for Asia and the U.S.”
HBA Retail Update for Europe
Our pricing table for color cosmetics quotes Douglas and Schlecker, two large European retail chains; so for those of our North American readers unfamiliar with European retailer names, we thought it might be helpful to provide a brief heads-up on the HBA retail scene in Europe. Like most things European, it isn’t exactly straightforward, so we have tried to summarize the situation in two charts.
Up to now, chain ownership of pharmacy has not been allowed in most of continental Europe, although this may well change by the end of this year as a number of legal challenges from the European Court of Justice are considered by individual member states. So, the likes of Schlecker, Europe’s largest drugstore chain, currently operate without the advantage of in-store pharmacies to generate footfall—but as we’ve written about before, they are testing a number of work-arounds, anticipating a change in German legislation. In France, so-called para-pharmacies sell upscale skin care, etc., but cannot by law prescribe Rx, yet.
As pharmacy laws are liberalized in continental Europe, the most important strategic implications will be for the major pharma players in OTC and Rx. But there will be benefits for HBA suppliers, too, as pharmacy chains gather presence in France, Italy and Spain and maybe prove easier to deal with than the myriad of small independents currently...offering an alternative channel to those avaricious French hypermarkets.
Meanwhile, the UK goes its own sweet way, with chain pharmacy long established. But with legislative changes in the offing over the Channel, all the more potential for newly-privatized Boots to make headway in continental Europe.
On the prestige front in Europe, perfumery chains lead the way, headed by Chinese-owned Marionnaud and German-owned Douglas. Department stores come some way behind, unlike in the the U.S. where one gets the impression that specialty stores like Ulta are only recently becoming more of a force to be reckoned with.
Hair Care in France
In September of last year (see Happi, p. 44), we wrote a piece about Beiersdorf being brave to launch an all out assault on French hair care in L’Oréal’s back yard. We went on to suggest that Beiersdorf’s share target of 5% by the end of 2008 might be a bridge too far. Well, after only six months—it launched halfway through last year—Beiersdorf reached 3.5% so we may yet have to eat our words. The launch is certainly doing a whole lot better than Unilever, which seems to be struggling in hair care all over the place these days.
Privately-owned Spanish company Puig is probably best known for its international prestige fragrance brands, such as Paco Rabanne, Carolina Herrera, etc, but in its own domestic market of Spain, the company has a very strong mass portfolio, too. Its mass brands cover most categories, although they’ve been notably weak in hair care.
This is because Puig distributed Bristol-Myers Clairol’s hair brands until they were acquired by P&G. So then Puig decided to fill the resulting gap by creating their own hair care line, HairTech, but this never set the world on fire, despite being supported by one of the strongest mass market sales forces in Spain.
So Alberto-Culver’s decision to entrust the Spanish launch of its much revived Tresemme hair care line to Puig seems a shrewd move on the Chicago company’s part. Puig did great things for Herbal Essences when they launched that brand in Spain some years back, achieving near blanket trade coverage in record time. With Tresemme’s low price point, and Puig’s sales muscle, things ought to go well—and the Spanish like large packs, as anyone who has ever dropped a Spanish shower gel on their toes can testify. In fact, it’s an exciting time at Alberto. CEO Jim Marino has been re-configuring the company, with some success, not least reviving Nexxus in mass when many thought it had died way back in professional. The company’s sale of non-core Swedish subsidiary, Cederoth, to Nordic private equity, Capman, will also provide some useful cash.
All Change at Estée Lauder
Interesting times at Estée Lauder, too, where it’s all change on the executive floor. From our perspective, the company is still very reliant on the U.S. and maybe needs a decent acquisition in Europe, in fragrance, preferably...but YSL’s just gone, to L’Oréal…
Also, there is surely a large ‘tail’ of low volume SKUs to clean out, since such tail end charlies inevitably drive cost. And then there are all those niche hair care brands—wonder if they’ll be on the block, now that Phil Shearer’s gone? Meanwhile, Estée is to launch its semi-mass Beauty Bank brands internationally, on a retailer exclusive basis. We have to say that American Beauty, Good Skin & Flirt never did great things for us in Kohl’s department stores in the U.S., but then maybe we missed something.
Factor Gets a New Distributor
P&G is outsourcing the distribution of Max Factor in Europe to the Russian owned Dr Scheller company, based in Germany, which already has its own color cosmetics line, Manhattan. Acquired by the Russian Kalina group a few years back, Dr Scheller is known for its well established sales, merchandising and logistics capabilities in Germany, so it evidently makes sense financially…but curious nonetheless.