BW Confidential's THIS WEEK in BEAUTY

www.bwconfidential.com The inside view on the international beauty industry October 18-31, 2018 #176

CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL

Comment Inside

The buzz 2 Staying sharp News roundup he need to stay fresh, exciting and Netwatch 6 Tfocused on newness in retail was clearly illustrated this week by the news Social media monitor that US-based department store Sears was filing for bankruptcy. Interview 7 In its heyday, Sears was seen as an Natura vice president of direct innovator and has even been called sales Erasmo Toledo the 'Amazon of an earlier era' by some industry observers. However, Sears lost Insight 9 its sharpness some time ago and is Indonesia now paying for it sorely. First came the competitive onslaught of Walmart in the 80s, while the rise of e-commerce and Amazon in Show review 12 particular, dealt another hard blow. Luxe Pack Monaco Despite its (some say lackluster) efforts to digitalize the company, Sears failed to re-create the innovative edge it once had for Store visit 17 today's consumers. Some cite a lack of investment, others a lack of SK-II Future X Smart Store ideas—either of which would have been enough to waver at the hands of Amazon. Such examples give a whole new meaning to the importance of staying relevant in today's market.

Oonagh Phillips Editor in Chief [email protected] Get the essential beauty news of NEWthe week in one quick-read email every Friday with BW Confidential's THIS WEEK IN BEAUTY

ALSO IN VIDEO A video highlight of the week's key news headlines in just under a minute News headlines daily on www.bwconfidential.com @BWCbeautynews News roundup At a glance...

n Sears files for bankruptcy

n Bogart acquires Distriplus Group

The buzz n L'Oréal creates organic skincare brand

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

Retail

US-based department-store operator Sears Holdings, the parent company of department stores Sears and Kmart, has filed for Chapter 11 bankruptcy. As part of restructuring efforts, ceo Edward S. Lampert has stepped down and been replaced with a department named Office of the Ceo, which will manage day-to-day operations. Lampert will remain chairman of the board. Sears has received senior priming debtor-in-possession (DIP) financing of $300m from its senior lenders and is negotiating a further $300m in subordinated DIP financing with its largest stockholder, ESL Investments. The company’s Sears and Kmart stores, including online and mobile platforms, will continue to operate. Some 42 previously announced store closures are expected to be completed by November 2018, and the company will close another 142 stores near the end of this year.

France-based beauty company Bogart Group is to acquire Distriplus Group, the number-two fragrance and cosmetics retailer in Belgium. The acquisition will provide Bogart with 200 doors under the two retail brand names of Planet Parfum and Di. Distriplus Group also has its own logistics platform, and at 2017 year-end, had 1,064 BW Confidential employees and posted turnover of €192m. 17 rue Louis Rouquier With the Distriplus Group, Bogart will have a network of 357 stores in four countries 92300 Levallois-Perret, France [email protected] (France, Israel, Germany and Belgium), generating consolidated turnover of more than Tel: +33 (0)1 74 63 49 61 Fax: +33 (0)1 53 01 09 79 €300m. The company says that the acquisition will provide strong commercial synergies www.bwconfidential.com for its distribution business and enable it to step up the distribution of its own brands. ISSN: 2104-3302 Publisher: Nicolas Grob Editorial Director: Oonagh Phillips [email protected] Walgreens Boots Alliance is to acquire a minority stake in online beauty retailer Journalist & Copy Editor: Katie Nichol [email protected] Birchbox in a move it says will help strengthen its beauty offering and build its prestige Journalist: Monica Defrances portfolio. The collaboration will see Walgreens Boots Alliance create dedicated Birchbox [email protected] Contributors: Sophie Douez, Alex Wynne, retail areas within selected stores, as well as offer a curated Birchbox shop via its online Renata Ashcar, Mayu Saini, Corinne Blanché, Naomi Marcoulet, Kevin Rozario, Tina Milton platforms. The initial pilot will include 11 Walgreens locations across major US cities, Subscriptions rolling out from December through early 2019. 1 year: Beauty Insight (20 issues) + Print Magazine (4 issues) + This Week in Beauty + Daily News + Collector’s Guide: €549/US$769 [email protected] German beauty retailer Douglas has unveiled its revamped flagship store in Frankfurt. Advertising 2 2 [email protected] The five-story, 2,377m (25,155ft ) store positions itself as a prime beauty destination and BW Confidential is published by Noon Media is part of the retailer’s #Forwardbeauty strategy. The basement, ground and first floors 513 746 297 RCS Nanterre Copyright © 2018. All rights reserved. house men’s and women’s fragrances as well as color cosmetics, while skincare brands Reproduction in whole or in part without can be found on the second floor. This floor is divided into different themes: n n n permission is strictly prohibited.

www.bwconfidential.com - October 18-31, 2018 #176 - Page 2 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL News roundup

n n n ‘Natural’, ‘Lab’, offering dermatological and doctor brands and ‘Korean'. The store also offers beauty treatments in dedicated booths, plus a personalized skincare concept from Skinmade. The third floor is dedicated to beauty services.

French brand Cartier unveiled a pop-up store in Paris to celebrate the launch of its new

The buzz fragrance Carat. The store plays host to Mille Facettes, an immersive installation that aims to be an artistic interpretation of Carat, which was inspired by the colorful light that is dispersed in a diamond. Visitors receive a photo and video of the experience by email, which can be shared on social media. For each purchase, consumers will receive a sample of the fragrance filled at the Carat fragrance fountain. Smaller-size samples are available for free. There will also be a juice bar and a bottle engraving service, and an artist will create portraits of shoppers using the seven colors that represent the seven flowers in the scent. The Paris pop-up is open from October 12 until November 4, 2018. Cartier also unveiled a fragrance pop-up in New York’s Soho district at the end of September, which will run until November 4.

France-based Qiriness has opened a pop-up store in Paris. Open through February, this is the skincare brand’s first standalone physical store. The store stocks Qiriness' full skincare range, along with its gift sets for Christmas 2018 and recently launched products. Separate in-store spaces are dedicated to monthly beauty workshops and 15-minute facials, both complimentary. The pop-up may be followed by a permanent store if and when the right location is found

Strategy

Shares of some of luxury and beauty’s biggest names fell last week due to what is being termed a crack-down in China on travelers returning from abroad loaded with merchandise. The said crack-down targets the daigou trade, whereby Chinese travelers stock up on branded items abroad to re-sell at home. Analysts say, however, that fears over the crack-down’s impact on the luxury and beauty industry are exaggerated, as Chinese officials periodically increase their scrutiny on travelers. News of a possible crack-down has added to uncertainty over the potential impact of a US-China trade war on the industry, as well as what some industry watchers see as a slowdown in spending by Chinese consumers.

Asia Pacific-based retail and distribution group Luxasia is expanding into Australia and New Zealand (ANZ) through its acquisition of a majority stake in fragrance and beauty distributor Pacific SMM. Following the n n n Selection of active ingredients that, applied in skin care formulations, can complement facial exercises to achieve a healthy and toned complexion.

Sin título-1 1 21/08/2018 15:17:06 The buzz News roundup ‘acne removal’. photos withfeaturessuchas‘face lift’or products tocustomerswhoedit their Meitu socialmediathatrecommends Watsons Chinawilllaunchan account on customers withtailor-mademessages. with MeituSocialMediatotarget Watsons usingskinanalysis. that recommendsproductsavailableat also addedafeaturetoitsBeautyCamapp stores inthefirsthalfof2019.Meituhas and willrollouttoaround30Watsons Cameron RoadbranchesinlateOctober, Hong Kong’sMongkokBankCentreand Meitu app.TheservicewillbeatWatsons based onhabitsandbehaviorinthe AI, andthestorewillrecommendproducts previews thankstofacialrecognitionand different looksandproductsdownload brands. Customerswillbeabletotryon 600 make-upproductsfrominternational will haveaMagicMirrorwitharound directly onitemssuchasmobilephonecases,clothes,umbrellasortotebags. Kong customerswillenableuserstoeditphotosthroughtheMeituappandprintthem Magic Mirrorandsocialmedia.ThenewMeituDIYcustomizationservicefor3Hong that integratessocialmediaandretail. telecom subsidiary3HongKonginabidtobuildwhatitcallsnewbusinessmodel Chinese social-mediaplatformMeitutocombinebeauty,socialmediaandretail. CK Hutchison,theparentcompanyofretailgroupASWatson,hasteamedupwith minority stakeinDeciem. Deciem inamanner“thatunfairlydisregardstheinterestsofEstéeLauder”.ELChas Companies (ELC)wastakinglegalactionagainsthim,claimingthatherunning On October11,TruaxerevealedthroughDeciem’sInstagramaccountthatEstéeLauder he wasshuttingdownalloperations.Healsoaccusedhiscolleaguesofcriminalactivity. basis. TruaxemadeheadlinesafterpostingavideotoInstagramonOctober8saying say Deciemco-ceoNicolaKilnerhassteppedinasTruaxe’sreplacementonaninterim and boardmemberoftheCanadianskincarecompany,accordingtoreports.Sources An OntariojudgehasorderedtheremovalofDeciemfounderBrandonTruaxeasceo Oceania PtyLtd. a ‘fragrance-heavy’offeringbyPacificSMM.ThecompanywillberenamedLuxasia skincare andcosmeticsbrandstoAustraliaNewZealandcomplementwhatitcalls In addition, Watsons will cooperate In addition,Watsonswillcooperate Selected WatsonsHongKongstores The partnershipwillincludeseveralservices,includingcustomizationusingphotos,a Meitu willpartnerwithASWatsonGroupandCKHutchison-ownedHongKong n acquisition, Luxasia’s presence extends to 14 countries. Luxasia plans to bring more acquisition, Luxasia’spresenceextendsto14countries.Luxasiaplansbringmore n

andprintmagazine • • • goingonintheindustryand stayingaheadofthecompetition News headlinesdailyonwww.bwconfidential.com BW Confidential, theinsideviewoninternational beautyindustry

BW Confidentialisthedestination forkeepingup-to-datewith News headlinescomplementanalysis andinterviewsinourBeautyInsight All majornewsontheindustry published everydayonourwebsite Thewebsite -dailynews The printmagazine -four timesayear • Beauty Insight -everytwoweeks DAILY NE STAY INFOR • The Collector’s Guide - once a y ear The Collector’s Guide -once ayear • WS SERVICE This Weekin Beauty MED WITHOUR

@BWCbeautynews

• what’s

CONFIDENTIAL CONFIDENTIAL CONFIDENTIA

L The buzz cancer patients. special issuetotheCEWandits CentresdeBeauté,whichprovidebeautytreatmentsto (100ml EdP). Burberry Herispricedat€59(30mlEdP),€87(50mlEdP)and €116 personalized byengravingagoldencharmtobeplacedaroundthecap. for Men,launchedin1981.Featuringsmooth,curvedglass,itcanbe The bottledesignwasinspiredbythebrand’sfirst-everperfume,Burberrys Her. Thefruity,floralscentwascreatedbymasterperfumerFrancisKurkdjian. Coty haslaunchedanewwomen’sfragrancefortheBurberrybrandcalled promote organicagricultureinFrance’sProvenceregion. face, bodyandhair). €3.85 (100gAuthenticExtraPureSoap)to€14.19(100mlBeautyOilfor extra-virgin oliveoilfromProvence.LaProvençaleproductsarepriced ingredient: OrganicAOP(PDOorProtectedDesignationofOrigininEnglish) group’s ConsumerProductsDivision.The12-skurangecentersononehero Available exclusivelyfortheFrenchmarket,newbrandispartof L’Oréal Francehaslaunchedaneworganicskincarebrand,LaProvençale. Launches and Macau. particularly inAsiaandNorthAmerica.DFSperformedwell,especiallyHongKong concession closuresinHongKong).BeautyretailerSephorasawstrongorganicgrowth, saw itssalesgrow2%to€9.54bn.Organicgrowthwas8%(+14%excludingtheairport the firstninemonths,drivenbygroup’sstarbrands.TheSelectiveRetailingdivision end of2017,organicgrowthwas13%. was 11%.ExcludingtheimpactofairportconcessionclosuresinHongKongat increased by10%to€33.13bn,withgrowthacrossallregions.Organicrevenue increase bothonareportedandorganicbasis.Forthefirstninemonthsof2018,revenue French groupLVMHpostedsalesof€11.38bnforthethirdquarter2018,a10% Awards award wenttoLaurentBoillot,presidentandmanagingdirector Guerlain. in thebeautyindustryfortheirsuccess,originalityandrisk-taking. TheHonoraryAchiever year, atotalof12prizeswereawarded.TheAchieverAwards recognizethoseworking The here. special-edition magazinefocusing onthewinnersofawards,whichcanbeaccessed News roundup The campaign for Her stars longtime Burberry ambassador Cara Delevingne. The campaignforHerstarslongtimeBurberryambassadorCaraDelevingne. L’Oréal hasalsoteamedupwithcrowdfundingplatformMiimosato Perfumes andCosmeticssaleswereup8%(+14%onanorganicbasis)to€4.41bnfor This year, n ceremony took place in Paris on October 15. This CEW FranceAchieverAwardsceremonytookplaceinParisonOctober15.This BW Confidential BW Results BW Confidential BW n pledged to donate a portion of the advertising revenues of this pledgedtodonateaportionof theadvertisingrevenuesofthis once again partnered with the CEW France to create a onceagainpartneredwiththe CEWFrancetocreatea www.bwconfidential.com -October 18-31,2018 #176-Page 5

The views expressed in this section are those of bloggers and do not represent the opinions of BW Confidential Netwatch have passed such a bill. have passedsuchabill. animals thatwaspassedinCaliforniaSeptember.isthefirstUSstateto to takeonmoreimportancefollowingabillbanningthesaleofproductstested Bloggers arequicktosupportmovesforcruelty-freebeauty,whichisexpected as VitaLiberata'sBodyBlur(pictured). body foundations(whicharefreeofself-tanner)andblurproducts,such category onsocialnetworks.Newproductsincludebodyhighlighters, There ismuchtalkaboutmake-up-inspiredinnovationinthebodycare and lowprice—itretailsatjust$3. positive commentsonsocialmediaforitscomfortableformula,fragrance,longwear The male consumers. step bythebrand,butsomehavesaidthathighpricecouldbediscouragingfor curiosity intheblogosphere.Thethree-skurangehasbeendescribedasaninteresting Chanel's newmen'smake-upcollection,BoydeChanel,hasattractedmuch Social mediamonitor BW Confidential BW has garnered a good deal of Essence Shineclearlipglosshasgarneredagooddealof reportsonwhat’sbeingsaidaboutbeautysocialnetworks Natura vice president of direct sales Erasmo Toledo Back on track Brazilian group Natura is going through much change, driven in part by its acquisition of The Body Shop (a deal that valued Interview the chain at €1bn) from L'Oréal in 2017. The company has also managed to return to growth after a difficult few years, with a new strategy focused on a brand revamp, digital and multichannel distribution. Natura vice president of direct sales Erasmo Toledo tells BW Confidential about the group's progress

Natura has got back to growth after a difficult few years and reported its third consecutive quarter of growth in sales and profitability earlier this year. What has changed? We are going through a period of transformation for the group, with quite encouraging results. We started a new chapter in Natura's history by acquiring The Body Shop, which since the third quarter of last year has been contributing positively to the results of Natura & Co, the group's new corporate brand, which brings together Natura, Aesop and The Body Shop. With the acquisition of The Body Shop, together with the purchase of Aesop three years earlier, we have taken a decisive step towards becoming a global, multi-brand and multichannel group with three companies committed to the same vision of ethical, sustainable business, which has a positive social impact. If we take the Natura brand, we regained leadership in the cosmetics, fragrances and personal hygiene market in Brazil in 2017, which confirms that the company is on the With the acquisition right track in the domestic market, thanks to a renewed brand strategy, which includes digitalized sales and a multichannel approach. “of The Body Shop, together with the How did the company regain leadership in Brazil and how will you keep it? Euromonitor data indicates that we regained the lead in the Brazilian cosmetics and purchase of Aesop fragrance market in 2017. This reflects several actions carried out over the past year: We three years earlier, revitalized and digitalized our sales operation and we invested more in diversifying our sales channels. We continue to advance with our multichannel approach, and our online we have taken a business is almost doubling each year, and now accounts for almost 4% of sales in Brazil. decisive step towards Natura was awarded the E-bit as the best e-commerce site in all categories in Brazil. This recovery is also attributed to the good performance of key categories, such as becoming a global, fragrance, face and body. Another factor is the continued productivity gains obtained multi-brand and multi- by our sales consultants, based on our growth plan, which focuses on fostering the entrepreneurship of our network. The productivity of our consultants increased 21.8% channel group in the first quarter of this year, compared to the same period in 2017, after double-digit growth in the second half of last year.

Natura vice president of direct Is the company renewing its product range? sales Erasmo Toledo We invest about 3% of net sales each year in innovation. Last year, we launched more than 200 products, among them the new Ekos Patauá line for hair treatment, Chronos ” Concentrated Oil and the re-launch of the Natura Homem line, with new items. n n n

www.bwconfidential.com - October 18-31, 2018 #176 - Page 7 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Natura vice president of direct sales Erasmo Toledo n n n How is the digitalization strategy progressing? Digital transformation is an absolute priority. We often say that at its origin, Natura is a social network, since the model of direct sales depends on the relationship and connection between our consumers and sales consultants. This network is in the process of rapid digitalization, enabling the creation of new services and strengthening existing For now, there are Interview relationships. Our vocation is to foster a networked business model by establishing a “no plans to convert digital, data-driven, mobile company that privileges the quality of human relations. At the heart of the digital business model is building greater engagement from the sales The Body Shop stores consultants. We have 200,000 Natura digital consultants, which work in the Natura to Natura or Aesop Network, and we have about 600,000 consultants using the Natura app, and with it, productivity has increased by 10%. The app makes it easier for the consultant to pass stores. Of course, the orders, access training and see promotions, for example. Our goal is for more than one purchase of The Body million sales consultants to use the application by the end of the year. Natura beauty consultants participating in the online model had a productivity increase Shop provides an of 8% in direct sales and 14% in total sales (traditional model and online). The frequency exceptional platform of purchases is also greater. We have come a long way, but we have much to do. Our position is to walk fast and recognize that evolution will occur in short cycles. What for projecting the determines maturity at one stage does not guarantee tranquility for the next. Natura brand into

How is the integration of The Body Shop progressing? new geographies, Both brands [The Body Shop and Natura] share the same commitment to sustainable both in direct and development, fair-trade practices, biodiversity and trusted relationships with supplier communities, and this facilitates the integration process. There is great synergy in the retail sales, but we retail operations of our brands and, therefore, we will explore opportunities. The Body are still studying Shop's products continue to be sold in [the chain's] more than 3,000 points of sale all over the world, and the brand will maintain its own identity. the possibilities

What needs to be done with The Body Shop? The transformation of The Body Shop is already taking place, supported by a Natura vice president of direct comprehensive plan. The company has begun to pick up pace, and had its best first sales Erasmo Toledo quarter in the past eight years. Strategic priorities for the coming years are brand ” rejuvenation, retail operation optimization and multichannel enhancement. We have a brand revitalization plan based on five pillars that the company is implementing.

Will any of The Body Shop stores be converted into Natura or Aesop stores? For now, there are no plans to convert The Body Shop stores to Natura or Aesop stores. The purchase of The Body Shop provides an exceptional platform for projecting the Natura brand into new geographies, both in direct and retail sales, but we are still studying the possibilities.

How do you see the evolution of the direct-sales business? Direct selling is, and will continue to be, Natura's core business. We launched a new value proposition for our sales consultants last year, with more opportunities for professional growth, increased earnings and the digitalization of their activities. We realized we could segment our sales by relationships—offering s Natura attributes part of its recovery better opportunities for those wanting to combine other activities with direct to a good performance of key categories, sales, and bringing more gains to those wanting to make it their profession. n such as fragrance, face and body

www.bwconfidential.com - October 18-31, 2018 #176 - Page 8 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Indonesia Holding steady

Insight The road ahead for prestige beauty in Indonesia looks rosy, thanks to online and new brands moving into the market

restige beauty in Indonesia continues to see Prapid growth, driven by a rising population, an expanding middle class and new brand incursions. According to industry estimates, the prestige market credit: istock currently stands at around $180m, of which around 60% is accounted for by skincare, and is growing at around 15% to 17% per year, a pace that is expected to continue in years to come. (These figures do not take into account the impact of the natural disasters that have hit the country in the past few weeks.) “The prestige beauty market has been growing strongly in Indonesia for the past several years,” says Umesh Phadke, president director of L’Oréal Indonesia. “It has almost always grown faster than the mass market and shows no signs of slowing down.” Indonesia is the Growing competition fourth-largest In recent years, the brand landscape has changed significantly, however. “ “Previously, there were only a few players you could identify—big brands like Estée Facebook country in Lauder, Lancôme and Clinique,” says Luxasia Indonesia country manager Nessy Wisesa. “Nowadays, you look at the market and hundreds of brands have come the world. It is the in,” she continues. largest producer of “Indonesia is a dynamic market and in the eyes of the world [has] huge potential. [Instagram] stories That means everyone wants to play in the market,” says Phadke. “Along with all the global players we are also seeing the emergence of strong local competition. worldwide. Jakarta More competition is great because it drives innovation in the market, increases is the number-one category penetration and brings in new consumers.” Korean brands in particular resonate well with Indonesian consumers, observers Twitter city and say, both those with standalone stores and those sold in Indonesia’s core Bandung is department stores. The department-store channel claims the lion’s share of prestige beauty sales. “La Neige and Sulwhasoo [Amorepacific] are getting very good number six traction, and they get priority for space because they have succeeded in recruiting new consumers, which drives the productivity of stores,” says Wisesa. In color cosmetics, Clio is also resonating well with consumers, she adds. L’Oréal Indonesia president In terms of product categories, while skincare still accounts for the largest share of director Umesh Phadke beauty sales, make-up is growing fast. “Facial powder, foundation and lip cosmetics […] are the most frequently used [make-up] products,” says Kantar Worldpanel ” Indonesia general manager Venu Madhav. “Lipstick is also experiencing a very high growth rate, along with eyebrow products, as Indonesians are very enthusiastic about experimenting,” he adds. In fragrance, meanwhile, the smallest segment in prestige beauty in Indonesia, consumers tend to be loyal to well-known fashion brands’ scents, according n n n

www.bwconfidential.com - October 18-31, 2018 #176 - Page 9 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Indonesia

n n n to Wisesa. “If the fashion is not well-known enough in the country, then the fragrance will also have a problem,” she says, adding that demand for niche scents is nevertheless growing among educated consumers. Insight

Sephora forges ahead LVMH-owned beauty chain Sephora has been instrumental in bringing in new brands, especially to younger consumers. The retailer, which is operated in Indonesia through PT Mitra Adiperkasa Tbk, the leading department-store operator, is seeing strong expansion. It now has 14 stores, compared with just two, three years ago. “It has become a reference for trendsetting in terms of color and skincare,” says Wisesa. Indonesia has some of the most prestigious department stores in the world, according to French skincare brand Ioma ceo Jean-Michel Karam, especially in Jakarta. But traffic congestion and problems with footfall nevertheless represent challenges to retailers. “The biggest challenge is to get the right customers into the store, given that there are lots of great department stores. In Jakarta, there are around 20 top-level department stores in 20 top-level malls,” says Karam. In-store customer events remain key to bringing in top-end Previously, there consumers, he adds. were only a few PT Mitra Adiperkasa Tbk, which operates the Sogo, Seibu and Galeries Lafayette “ nameplates as well as Sephora, has restructured its portfolio, closing its Lotus and players you could Debenhams stores last year. It cited a strategy in line with millennial consumers moving away from department stores and towards specialty and online. In the first half of 2018, identify. Nowadays, the retailer said it saw “tremendous improvement” from its department-store business you look at the following the restructuring as well as brand rationalization. Parkson, the second-largest player, saw its same-store sales in Indonesia drop 3.8% in the year to June, and is also market and working to hone its portfolio. hundreds of brands In terms of the beauty offer, department stores are bringing in new brands to attract younger consumers, Wisesa comments. “Space is limited, so [department stores] are have come in asking the big brands to share and reduce their size in order to bring in more brands.”

Online expansion Luxasia Indonesia country Online, meanwhile, is seen as key to expanding Indonesia’s prestige beauty market in manager Nessy Wisesa the longer term. While e-commerce as such is still in its infancy, Indonesia has one of the ” highest cellphone penetration rates in the world, and consumers are avid users of social media. This is seen as a key awareness driver for newer brands, even those that are not yet officially present in the country. It is expected to be a game changer for the future. “One element driving change in the competitive landscape is the deep penetration of digital media,” says L'Oréal's Phadke. “Indonesia is the fourth-largest Facebook country in the world. It is the largest producer of [Instagram] stories worldwide. Jakarta is the number-one Twitter city and Bandung is number six. All these factors make competition for consumer mind-space very interesting and intense. It also makes us look at innovative ways of marketing.” Influencer marketing is seen as especially relevant. “It’s no longer about where you are in distribution offline, but it’s about getting your influencer online who is going to be your endorser for your brand—it’s much more impactful than having 10 stores on the ground,” says Wisesa. But beyond building brand awareness, there is the issue of the country’s size and geographical complexity. As Indonesia is made up of thousands of islands, n n n

www.bwconfidential.com - www.bwconfidential.comwww.bwconfidential.com - October 18-31, - October 2018 18-31, #176 2018 - Page #176 10 - Page 10 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL NEW Insight brands closertoconsumers,wherevertheyliveinthecountry. support ofdistributorsandbrandpartners—extendingtheironlinecapabilitiestobring strong growth.Thiswillespeciallybedrivenbylocalretailersandpureplayers—withthe add alotmoredynamismtothemarket.” of prestigeplayersine-commerceisstilllimited,butthatwillchangethefutureand beauty couldgrowevenfasterife-commercetakesoffstrongly.Currently,thepresence a VCfundwithinvestorsincludingYahooJapan.Phadkecomments:“Indonesiaprestige specifically. LocalpureplayersonlineincludeSociolla,whichrecentlysecuredfundingfrom this yeartocaterthesechanges,attributingstaffdigital,e-commerceandCRM easier,” observesWisesa. logistically it’smuchfurther,sohavingeverythingonlinewithe-commercemakesit country wheretheinfrastructureisnotthere,it’sreallyexpensivetogettherebecause presence viastoresorcountersinallcities,”saysPhadke.“Intheeasternpartof consumers arewidelydistributed,butitisdifficultforprestigebrandstohaveaphysical necessarily haveaccesstoahigh-endoffer.“Indonesiaisvastcountryandwealth outlying areas,whiletheymayhavethemeanstobuyintoprestigebeauty,donot Indonesia Looking ahead, Indonesia’s prestige beauty market looks set to continue to witness Looking ahead,Indonesia’sprestigebeautymarketlookssettocontinuewitness Luxasia hasbeeninvestingheavilyinrampingupitsonlinecapabilitiesIndonesia n infrastructure beyond the major cities is lacking. This means that consumers in infrastructure beyondthemajorcitiesislacking.Thismeansthatconsumersin order your copy by email: [email protected] Collector’s Guide Plus allthePlus latest predictions data, industry and trends How digitalisdisruptingbeauty more than100 pages of insight and on analysis n Beauty &Digital

• • • • • • • • • The future Big tech Blockchain China’s techtrends Data andCRM Voice technology New distributionchannels Online sales Artificial Intelligence Luxe Pack Monaco New ideas BW Confidential reports on what was seen and heard at the 31st edition of packaging show Luxe Pack Monaco, which took place at the Grimaldi Forum from October 1-3 Show review ecurity, sustainability and time-to-market were key concerns at this year’s Luxe Luxe Pack Monaco SPack trade show in Monaco. In general, exhibitors were upbeat about the state of Took place: October 1-3, the market, with many noting that while make-up has driven growth in recent years, Monaco skincare is now on the rise and expected to see strong sales in 2019. Exhibitors: 470 (51% Innovations on show included tech-driven products aiming to tackle issues such as international; more than 80% traceability and user data. Brought on by security and authenticity questions around European) cross-border e-commerce, several companies are exploring NFC and RFID technology Visitors: 9,280 that can be included in packaging. The systems provide a creative way of letting consumers check the authenticity of products purchased online, while the brand can communicate with consumers, send messages and special offers and collect data. Examples include the TrustConcept technology by Germany-based Kurz Key trends and Arjowiggins' Connected Paper, • Different textures and materials, including wood, stone and leather, to created with PowerCoat technology differentiate and echo notes or raw materials used in the product. that embeds NFC into products such • Individualism. This can be seen in unique decorations for fragrance bottles, as paper, without any metal often achieved with colorful laser printing and where no two bottles are the same. parts involved. • Sustainability is no longer just a trend but a must-have. Cosmetics companies The annual Luxe Pack In Green want recycled and/or recyclable materials that are high-quality, with a luxe look. awards, held on October 2, recognized • Mini products and travel-sized items continue to be popular. innovations in sustainable development. • Small runs that are quick-to-market continue to grow in demand, due to Groupe Pochet-owned Qualipack won the need to come out with the latest trending products on social media, increased the Packaging Solutions category for its use of limited editions and the growth of niche brands. L'essentiel make-up case, while glass • Security and data are major concerns. Several companies are launching manufacturer Verescence took the products using NFC and RFID technology to help consumers verify products prize for the Corporate Responsibility purchased online and to help brands communicate with and collect data category. Commenting on the focus from consumers. on sustainable development at the • Creative accessories, such as ribbons or silk appliqués, are a popular solution show, Luxe Pack show director Nathalie for brands looking for new ways to differentiate themselves. Grosdidier commented: "This year, • Personalization remains important, with more companies adding we clearly see the commitment of the high-tech ways to customize products. Examples include in-store engraving and management at companies for concrete laser printing. decisions and actions. Another strong • Protection. As formulations come with fewer ingredients, there's a need for theme is the use of recycled [materials] packaging that shields preservative-free solutions from elements such as oxygen. in packaging, tying in with the circular • Rethinking the beauty gesture. Several players are creating solutions based economy theme." on the movements made while using a product, for example the satisfaction of New at the show this year was the a mascara wand that audibly 'clicks' shut; or all-over perfume sprayers with a Luxe Fragrance Forum, a half-day series continuous spray. of conferences on perfume. n n n

www.bwconfidential.com - October 18-31, 2018 #176 - Page 12 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Luxe Pack Monaco

n n n "Perfume has always been a central theme of the show. This year, besides the participation of leaders like Pochet, Bormioli, Heinz, Verescence and many others, we integrated a number of actors, like O-I Europe and Wheaton," Grosdidier told BW Confidential. Just one week following the show, organizers announced they would launch a Paris edition of Luxe Pack in 2019.

Show review Seen in show Germany-based Geka had a trend-focused stand, with a backdrop including forecasts for fall/winter 2019-2020 based on findings by trend intelligence company Beautystreams. In terms of packaging and decoration, the firm predicts that elements such as fruit and vegetable shapes, pops of color, collage-type lettering, textured coating and matte metallic effects will be popular. Geka presented its helloGLAMOUR collection (pictured), a kit with five color cosmetics products. It includes the absolutelyGLITTER mascara brush, made with EOSbombyx2K fibers, which claim to give volume and length, and a lip gloss and highlighter featuring heavy-walled, four-edged bottles, with caps decorated on all four sides for a high-end look.

French packaging group Albéa's stand this year was called the Albéa Pop-up Store, designed to look like an ephemeral shop, with products displayed as if in a retail setting. The booth included a Green area, where it showed eco-designed products including foam pumps made from PCR (Post-Consumer Recycled) plastic (pictured left), and a tube claimed to be the lightest on the market—Albéa says it is 33% lighter than a standard tube. Albéa states it is looking to develop an efficient circular economy through how it produces and via its products, and has set itself key goals in this area for the next five years. Next year the group will publish its first CSR report and by 2025 it is aiming for 100% recyclable or re-usable plastic packaging. Another key area for the group is its full-service and fast-track offer to reduce time to market. The company showed its new Fast Track tubes (pictured right), which are produced in Italy and can be delivered across Europe in four weeks or less. The tubes can be customized with different prints, applicators, caps and brands' own décor and can be produced in small runs of 1,000 to 9,000 units.

French olfactory marketing company iD Scent presented a new way of experiencing a fragrance at the point-of-sale. Scentcloud is a customizable diffuser that makes fragrance visible thanks to a 'perfume cloud' effect created through a venture spray system that provides a faithful rendering of the scent that customers can see. The diffuser will be used for a forthcoming launch from Narciso Rodriguez. iD Scent also showed its 2019 collection of scented accessories, including bookmarks, notebooks, stickers and ribbons.

Procos presented its Wallet bag, made fully customizable by its changeable outside cover. Created by Italian designer Giorgio Fabbi, this variation on the company's Convertible bag is a response to the rising trend for limited editions and other smaller runs. While the bag can be mass produced, the outside cover can be updated and produced in smaller runs, depending on product launches. n n n

www.bwconfidential.com - October 18-31, 2018 - Page 13 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Luxe Pack Monaco

n n n Cosfibel showed its new range of cosmetics coffrets, with new shapes, layers and decorative elements. New offers include a snow-globe-inspired lid that can be filled with glitter or a maze game, and a box with a pop-up globe (pictured) that unfolds upon opening and can be used to display different images or text. The company also presented gift coffrets with the lid set into the base to play with unexpected gestures.

French sampling company Arcade Beauty presented solutions tapping into the growing Show review demand for nomad formats and travel-sized beauty products. Products include its 3D Pouch travel pack, available in various capacities (from 20ml), which has a waterproof closing system and is designed to stand with a gusseted bottom; and its turnkey Week- end travel kit (pictured), with sample sizes for different skincare products. Arcade Beauty general manager Carl Allain explained that retailers such as Sephora, with its On-the-go beauty offer, are behind a big push towards producing mini products.

Decoration and accessories company Seram showed products for customization, personalization and gifting, including NFC-powered decorations. Thanks to a collaboration with Gravotech Group-owned Gravograph, Seram offers an in-store customization concept. The concept uses Gravograph's hot-stamping or laser-engraving machines, which store staff can connect to via an app or a QR code to input customer data and customization preferences, such as initials and symbols. The customer can choose from different accessories, such as keychains, and finishes, and can watch the item being personalized while they wait.

Silgan Dispensing showed its newest pump, the Mark VII Max Style (pictured). Created for sunscreen application, the pump has been designed to cradle the groove of the user's finger, and features two ribs on the actuator to increase friction for better grip. The pump provides a range of different spray angles and patterns, according to the company.

France-based glass manufacturer Verescence presented Upcycled, its new sustainable perfume bottle. Made in France with high-end glass, both the cap and bottle are recyclable and the eco-design extends to the silk-screening and lacquering. The weight of the bottle was reduced from 180g to 130g, which the company claims reduces greenhouse gas emissions by 21%. The bottle was filled with a 100%-natural-origin unisex cologne by Givaudan perfumer Marypierre Julien, with notes including natural apple oil and akigalawood that have been upcycled, meaning used and repurposed for a higher-quality product.

Dispensing company Aptar Beauty + Home showed its new Skin Protect solution (pictured), which was developed to protect volatile formulations from external contaminators such as light and oxygen. The cap prohibits air from being drawn into the tube thanks to a piston that hermetically seals the opening as soon as the product is no longer being dispensed. Its ‘twist to lock’ closing mechanism is quick and intuitive, while a three-point ventilation system prevents surface moisture. Skin Protect comes in 50ml, 75ml and 100ml tubes, and can be used for liquid formulations such as skincare, foundation and BB cream. n n n

www.bwconfidential.com - October 18-31, 2018 - Page 14 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Luxe Pack Monaco

n n n Talking heads: The industry on the global packaging market “The biggest challenge in the industry is capacity. The market needs more flexibility because the demand is fluctuating more and it's difficult to serve the market in time. [Thanks to] social-media influencers, our customers say it's hard to tell how much they'll sell in the next month or next three months, and that is a challenge for glassmakers. So we have to be more flexible. On the other hand, a glass furnace has to run for 24 hours a day, 365 days a year, so how does that

Show review fit together? That's a challenge for all of our industry and it will be the challenge of 2019." Stölzle Glass Group ceo Georg Feith

"Glass packaging this year is doing very well. In Europe, [most companies'] capacities are fully booked. We have operations in the US, in India and in Sri Lanka, and we are exporting a lot to Europe. We do [turnover of] roughly $315m and we grow at a rate of 10% every year. Currently there is more demand than supply. That's the problem. [Our clients] want more innovation, they want shorter production runs and quicker turnaround. There are a lot more flankers and smaller runs—the industry is facing a challenge of capacity." Piramal Enterprises executive director and Piramal Glass director Vijay Shah

"We get a lot of questions about sustainability. Consumers are demanding it more. Plus, companies are increasingly able to provide materials that are actually recyclable. Quality is sometimes a trade-off for recyclability. This is an evolution that we are going through." Dow Packaging & Specialty Plastics business communications manager EMEA Roderik Wijkstra

"Our clients ask for a lot of innovation and a lot of service. It's a mature market. There are 30 [cosmetics and perfumery] groups that have a third of the global market. If you look at suppliers, the top-30 groups cover about 20% of the global market. At this show 10 years ago, there were only three or four glassmakers. Today there are 12 or 15. Today, glass bottles are not all the same quality and the only way to differentiate them is to accessorize them. The accessory is a rising star." Cosfibel group ceo Alain Chevassus

"Everybody is asking for sustainability and biodegradable plastics. There is now a stronger demand [for this]. People say, 'we have our suppliers and we are satisfied, so if you want to come in you need to have something around sustainability'. Before, this was marketing, but now it's a key question for survival. More countries are eliminating plastic, such as bags and straws and such— and we will see more of this. The biggest challenge and question for packaging producers will be 'what we are going to do with our plastic?'" Awantys Group ceo Carsten Wolansky n n n

www.bwconfidential.com - October 18-31, 2018 - Page 15 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Luxe Pack Monaco

n n n Talking heads: The industry on the global packaging market "The samples market is going through a complete transformation because of social media and because brands are asking themselves lots of questions about ROI and promotional budgets. There's also the emergence of mini products, travel retail, etc. These changes are forcing us to be more flexible and to invest in engineering and sourcing, to be able to meet the demand that is coming both from big brands, which ask us for new products and innovations, as well as indie brands."

Show review Arcade Beauty general manager Carl Allain

"One trend is glassification, or moving from plastic to glass. More brands are asking us to produce products in glass. It's a response to the interest in premiumization, but also in eco-design. Sustainability is key; it's a deal-breaker. The challenge in sustainability is to find a good fit between the cap, the pump, the juice and the bottle." Verescence global marketing & communication director Astrid Dulau-Vuillet

"We did a global consumer study on attitudes to fragrance, around refills and recycling. When we looked at this a few years ago, consumers were not interested—they were thinking about sustainability, but in other parts of their lives. Now, it's moving into some of the more luxury spaces. A few years ago, consumers thought refills were a bit gimmicky. Attitudes seem to be changing, particularly with millennials." Silgan Dispensing vice president marketing John Ferro

"Plastic at the moment does not have a good image. But it's as recyclable as glass or paper. It's just that the recycling reflex has never been built. Plastic is everywhere and it's not going anywhere. But we need to change the end-consumer's way of thinking." RPC Bramlage marketing manager Delphine Roux

"Sustainability and personalization are still big buzzwords, but what's really important now is differentiation. To have something that's different, be it through materials, customization or through different decoration techniques such as burned wood or gold-leaf appliqués. Raw materials have also become very important in formulation, in skincare and perfumes, and the ingredients should be mirrored in the packaging. It needs to be coherent, and also out of the ordinary." Quadpack category manager fragrance division Isabelle de Maistre

"The environmental question is important. [We need to] create packaging that meets the expectations of newer generations—millennials also want products to be playful, practical and effective. In luxury, it is more complicated to use recycled materials, but [we can use] recyclable materials. We can also consider minimalist decorations, for example not using glue, and so on." Groupe Pochet strategic marketing director Anne Jarrety

"The market forecast is looking good. People are spending more, especially in Asia. There, people have more money to spend on cosmetics or fragrance. Asia is still a growing market for finished products." Gerresheimer senior director sales cosmetics Bernd Stauch n

www.bwconfidential.com - October 18-31, 2018 - Page 16 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Store visit

Digital first SK-II’s new, high-tech pop-up concept features facial recognition, self-service shopping and AI technology

ith its new pop-up store concept, P&G-owned skincare brand SK-II is focusing on Wtechnology and shareability to attract a new generation of beauty consumers. Called the SK-II Future X Smart Store, the concept features an art experience that uses facial recognition, intelligent skin analysis and frictionless checkout thanks to a personalized bracelet connected to an e-commerce site. The concept store first launched in Tokyo, Japan this summer, from May 2 until June 28, and attracted 8,500 visitors. The second store was unveiled in Shanghai, China, from September 12 until October 7, and a San Francisco store is planned for launch before the end of the year. Following the opening of the Shanghai store, Global SK-II ceo Sandeep Seth said: “In shifting our focus to bring innovation to consumers around the shopping experience versus product technology, SK-II is leading the way to create a new model for how we build and evolve our relationship with our consumers in China and globally.” Upon entry, visitors to the store are registered and given a personalized bracelet embedded with RFID technology that is connected to Chinese online retailer JD.com. At the retail table that leverages projector mapping and IR cameras to create a gesture-based experience, customers can shop SK-II products on JD.com and automatically add items to their carts. SK-II Future X The concept also includes The Art of You, which is a large, digital wall that creates Smart Store personalized art pieces based on facial expressions. The Miracle Water Lab offers visitors l Location: Stores have an immersive experience based on how the SK-II Facial Treatment Essence works on opened in Tokyo, Japan and the skin, while an SK-II skin scan, which is a reinvention of SK-II’s iconic Magic Ring Skin Shanghai, China; next opening Analysis, scans a user’s skin while they sit in a booth, without direct contact. The visitor in San Francisco, US then receives a skin condition analysis with a set of recommendations based on results. l Size: 2,500ft2 (232m2) in There is also an immersive art installation called the Pitera Lab (Pitera is the hero Tokyo, and 5,000ft2 (464m2) ingredient in the SK-II Facial Treatment Essence), which is imagined as a playground for in Shanghai visitors that encourages social-media sharing. l Special features: The Art of SK-II says it will use real-time insights and feedback collected at the pop-up stores to You digital wall, Miracle Water benefit its physical retail spaces. n Lab, personalized RFID bracelets

www.bwconfidential.com - October 18-31, 2018 #176 - Page 17 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Store visit

s Shoppers can order online through a retail table in the physical store (left). The boutique also features an immersive art installation called the Pitera Lab (right)

s The store has a beauty bar (left) and booths where consumers can undergo a skin scan (right)

www.bwconfidential.com - October 18-31, 2018 #176 - Page 18 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL BW Confidential The inside view on the international beauty industry

The Print Magazine Beauty Insight This Week in Beauty

Four times a year Every two weeks Every week bwconfidential.com The Collector’s Guide

News headlines every day Once a year # Subscription order form Please complete this form and return it: • by post: BW Confidential - Subscription Department 17 rue Louis Rouquier Subscribe for 2 years and save 20% 92300 Levallois-Perret - France • by fax: +33 (0) 1 53 01 09 79 Yes, I want to subscribe to BW Confidential • by email: [email protected]

r 2 year subscription: €879 or US$1,199 r 1 year subscription: €549 or US$769 Contact information • Beauty Insight (40 issues) • Beauty Insight (20 issues) Company:...... • Daily News on www.bwconfidential.com • Daily News on www.bwconfidential.com • This Week in Beauty • This Week in Beauty First name:...... • The Print Magazine (8 issues) • The Print Magazine (4 issues) Last name:...... • The Collector’s Guide (1 issue per year) • The Collector’s Guide (1 issue) Job title:...... + Free: each subscription includes full access to the entire contents of BW Confidential’s Address:...... archives on www.bwconfidential.com Postal code:...... City:...... Payment method r € r US$ Country:...... Email (required):...... r CB, Visa, Mastercard/Eurocard l_l_l_l_l l_l_l_l_l l_l_l_l_l l_l_l_l_l VAT number (required for European Union):...... Expiration date: l_l_l_l_l Security code l_l_l_l r American Express l_l_l_l_l_l l_l_l_l_l_l_l l_l_l_l_l

Signature & date: 2019 28, until February 2019 - Offer valid Expiration date: l_l_l_l_l Security code l_l_l_l_l r Please bill me