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Cutex Nails It

By Tom Branna, Editorial Director | February 8, 2012

Best known for its nail polish remover, the brand is growing again thanks to investments from its owner, Arch Equity Partners.

You’ve got to hand it to the owners of Cutex—they’ve discovered a formula for success. When Arch Equity Partners acquired the brand from Prestige Brands International in 2010, the investment house set about to return the nail polish remover to its original formula—a move which makes all the difference in the world to consumers, according to John Mandelker, president, Cutex.

“Prestige watered down the formula,” insisted Mandelker. “Now we can make the claim that Cutex works twice as fast as competitors’ products.”
That’s because the current Cutex formula contains 2% water, compared to 30-35% water for the leading competitor and private label formulas. When they choose Cutex over a competitor, women ultimately use less product and fewer cotton balls. The improved formula, launched nearly a year ago, has proved to be a hit, as Cutex posted double-digit sales gains at retailers such as Walmart, Kmart and Walgreens in 2011, proving Mandelker’s assumption that people would pay more for a product that works better.
It’s not the first time that Arch brass has been right about Cutex. When the PE firm was looking to invest, personal care wasn’t top-of-mind.
“We don’t target personal care specifically, but Cutex has to be a top 100 most-recognized brand,” explained Mandelker. “We saw the opportunity to get a brand with that kind of recognition. We knew we could grow the business by focusing on marketing, innovation and adding new products.”
John Mandelker
Further Advances
Cutex is expanding its reach in the nail care category with the launch of Advanced Revival, the firstinnovation in nail polish remover formula in more than 15 years, according to the company.Advanced Revival is billed as the first nail polish remover of its kind, combining an acetone-based formula with natural botanical oils for stronger, healthier nails.
Advanced Revival Nail Polish Remover is a patent-pending formula that combines the power of acetone with the strengthening and nourishing properties of natural botanical oils.The oils begin as a liquid that conditions and then turns into a solid when exposed to air.As the oils solidify, the nails are strengthened and left feeling nourished and clean after the first use.

Advanced Revival Nail Polish Remover is new from Cutex.
The impetus for Advanced Revival Nail Polish Remover came after a Cutex researcher viewed 15th Century religious icons and marveled at their brilliance, even though the wood was 500 years old. He returned to the lab and developed a botanical oil-based formula, which is based on flaxseed and blackcurrant that nourishes the cuticle and creates a protective coating as it dries.

“We were excited by the discovery and took it to consumers to test,” recalled Mandelker. “One woman told us that when she does her nails, it feels like she dipped her hand in chemicals. But when she used our product, she said her fingers felt cleaner and conditioned, and she didn’t feel like she need to wash her hands after use.”

Best of all, for Cutex, 89% of test subjects said they liked Advanced Revival Nail Polish Remover better than products that are currently on the market. And although it will cost 50 cents higher at retail, 65% of those queried said they were willing to pay a premium for it.

“If we can get that first trial, then we will have a customer forever,” insisted Mandelker.

More Innovations Ahead

Once Cutex has a customer, company executives don’t want to let her go, so the plan is to aggressively expand product offerings. In April, Cutex will roll out a corrector pen that includes four replacement nibs. According to Mandelker, consumers loved the pen, but the nib would get discolored from the nail enamel. By adding replacement nibs, consumers get a pen that’s five times more valuable than standard correctors.

Also in April, in a nod to value-conscious consumers, Cutex will roll out a larger 8oz bottle that costs the same ($4.99) as its 6oz bottle of remover.

With a lineup of new products at the ready, company executives are determined to improve Cutex’s distribution network in 2012. Mandelker candidly says there are holes to fill with major retailers.

“Some people think that all nail polish removers are the same; a lot of people don’t know that other products contain more water. We are still working to get the trade to understand the difference.”

Buy and Hold

The introductions come at a time when Arch is considering expanding its personal care offerings via acquisitions. Ideally, Arch is looking for companies that might be complementary to Cutex, such as a nail polish or hand cream company that has sales in the $15 to $30 million range. As Mandelker observed it’s easier to have an impact on a $25 million company than it is to move the needle at a $250 million company.

“Our investors are really taking a mutual-fund approach to help spread the risk. We like personal care, so all things being equal, we would look for a fit. If the (right) personal care company comes up, we would be very much interested.”

For the record, aside from Cutex, Arch owns Chandler Industries, a contract manufacturer of precision-machined components.

It’s all part of Arch Private Equity’s buy-and-hold strategy.

“The one thing that differentiates us, is that most PE firms sell businesses in five to seven years,” explained Mandrake. “We have a long-term hold strategy. We have a different mindset; our investors want dividends.”

With a growth plan in place and a collection of new products moving forward, Arch Private Equity is confident that it has a hot hand in Cutex.

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