www.bwconfidential.com The inside view on the international beauty industry June 23 - July 6, 2016 #133

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The buzz 2 Shifting sands News roundup he beauty landscape continues to shift. After last Netwatch 7 Tyear’s announcement that Coty would buy P&G’s specialty beauty business, last week it emerged that two Social media monitor mid-sized companies were coming together to create a new player in beauty’s global top-20. These two mid- Interview 8 sized players come in the form of Revlon and Elizabeth Laboratoires Filorga president Arden. Revlon’s acquisition of Arden will create a Didier Tabary group with $3bn in sales and one that has a diversified portfolio in terms of product category, covering fragrance, Insight 10 skincare and make-up, distribution channels with mass The UAE and prestige and also when it comes to geographical spread. Indeed, the complementarity of the two companies (Arden’s position in fragrance, prestige, Show review 13 and travel retail and Revlon’s business in mass and color) was the thinking Beautyworld Middle East behind the deal and one reason that the move has been applauded by investors. However, some industry watchers say the very fact that the two companies Store visit 14 operate in different areas could pose problems to their integration and in the The Glossary, US running of the new entity. Critics also point to the current state of affairs of both companies. Revlon and Arden have been struggling for years and adding an acquisition into the mix could make things more challenging. Or it could be just what is needed to bring two key players of the US beauty market back to growth.

Oonagh Phillips Editor in Chief [email protected] Subscribe on p.15 or go to www.bwconfidential.com News headlines daily on www.bwconfidential.com @BWCbeautynews News roundup At a glance...

n Revlon to acquire Elizabeth Arden

n BPI unveils Zadig&Voltaire fragrances

The buzz n Sisley to launch new skincare

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

Strategy

US-based mass player Revlon is to acquire prestige beauty firm Elizabeth Arden for $419.3m in cash. Revlon is to pay $14.00 per share for all outstanding shares in Elizabeth Arden, representing a 50% premium on the company’s closing share price on June 16. The deal is valued at $870m, including debt. The acquisition will create a company with $3bn in sales and adjusted Ebitda of $560m. Revlon said that the deal will provide it with a broader geographic footprint, as well as an expanded category mix thanks to Elizabeth Arden’s prestige fragrance, color cosmetics and skincare. Elizabeth Arden’s strength in prestige distribution and travel retail will also complement Revlon’s position in mass and salons, the company added. Revlon expects to generate savings of $140m as a result of the transaction. Without taking into account the acquisition, Revlon forecasts net sales of between $2bn and $2.1bn in 2016. Elizabeth Arden’s chairman, president and ceo Scott Beattie is expected to join Revlon’s board of directors as non-executive vice chairman. The deal came as a surprise to many, given that both companies have been struggling for some time. In addition, in January, Revlon said it was looking for strategic alternatives, leading to speculation that it would be sold.

BW Confidential 4 avenue de la Marne 92600 Asnières sur Seine, France Retail [email protected] Tel: +33 (0)1 74 63 49 61 Fax: +33 (0)1 53 01 09 79 More needs to be done to improve the packages beauty products come in when www.bwconfidential.com ISSN: 2104-3302 ordered online, according to luxury packaging company Procos. Publisher: Nicolas Grob Consumers are used to a certain level of care taken with in-store packaging and expect Editorial Director: Oonagh Phillips [email protected] the same when receiving products bought online. This is a need that is not always being Journalist & Copy Editor: Katie Nichol [email protected] met, according to the group, with products coming in basic cardboard boxes. Journalist: Hannah Ikin Procos aims to offer companies packs suited to the constraints of e-commerce, while still [email protected] Contributors: Sophie Douez, Alex Wynne, reflecting the brand’s image. At the Pack & Gift trade show that took place in Paris from Renata Ashcar, Mayu Saini, Raphaëlle Choël, Corinne Blanché, Naomi Marcoulet June 15-16, the company presented a number of models dedicated to e-commerce. They Subscriptions 1 year: electronic publication (20 issues) + included boxes designed to bring e-commerce consumers a luxury experience, including print magazine (4 issues) + daily news: €499 fragrance packaging filled with flowers, and in-box details such as mirrors. or US$699 [email protected] The brand notably developed L’Oréal’s Ma Beauté Luxe boxes, launched in early 2016, Advertising [email protected] which allow consumers to personally choose five products they wish to try in travel BW Confidential is published by Noon Media formats. The box, which Procos says took three years to create, features printed bow 513 746 297 RCS Nanterre Copyright © 2016. All rights reserved. detail, and is designed to keep the products in place, as well as being lightweight (in order Reproduction in whole or in part without permission is strictly prohibited. to keep down delivery costs) and eco-friendly. n n n

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n n n Lancôme faced consumer backlash following its move to cancel the performance of pro-democracy singer Denise Ho at a Hong Kong event it sponsors. Ho was supposed to perform at a Lancôme-sponsored event in Hong Kong on June 16, but the brand canceled the event after negative reactions on Chinese social media platform Weibo. Ho subsequently took to Facebook to ask the brand to refuse self-censorship that she sees as The buzz bending to the Chinese regime. Lancôme temporarily shuttered stores in Hong Kong in response to the protests.

People

Estée Lauder Companies (ELC) has appointed Israel Assa to the newly created position of senior vice president and general manager, business operations, travel retail worldwide, effective July 1, 2016. This Switzerland-based role will see Assa lead ELC’s three regional travel retail organizations. He will report to Olivier Bottrie, president, travel retail worldwide. Sue Fox, vice president, general manager travel retail Europe, Middle East, Africa, Nathan Moris, vice president, general manager travel retail Americas, and Javier Simon, senior vice president, general manager travel retail Asia Pacific, will all report to Assa. This new structure is designed to complement the company’s existing operations in Lachen, Switzerland, as well as helping the organization to service global and regional clients, according to the group. Assa joined ELC in 2001, and was most recently svp, general manager, Estée Lauder travel retail worldwide, a position he held since July 2014.

New Avon LLC has appointed Helene Rutledge to the newly created position of chief innovation officer. Rutledge was most recently vice president of research and development at vitamin and nutritional supplements manufacturer Nature’s Bounty.

Walgreens Boots Alliance has named Alex Gourlay, executive vice president and president of Walgreens, and Ornella Barra, executive vice president of Walgreens Boots Alliance and president and chief executive of global wholesale and international retail, as co-chief operating officers. Gourlay will oversee Walgreens and Boots in his new role, while Barra expands her current remit to include the supervision of global brands, human resources and other business services. Ken Murphy, who becomes evp of Walgreens Boots Alliance and chief commercial officer and president of global brands, will report to Barra as a result of the changes.

Launches

Shiseido’s fragrance arm BPI is thinking big for the launch of its first scents from new license partner Zadig&Voltaire. The company will launch a men’s and women’s fragrance simultaneously for the brand in September—the first time BPI has done so—and the scents will be backed by a major marketing investment, including a large-scale TV advertising campaign. “We have very big ambitions for this launch and want it to be a blockbuster brand for us. There will be a big investment in TV—it will be the most TV-driven brand we have in the portfolio,” comments BPI chief brand officer Nathalie Helloin-Kamel.n n n

www.bwconfidential.com - June 23 - July 6, 2016 #133 - Page 3 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL The buzz 1981. Thenew formulaclaimsto bodycare itemandwasfirstintroduced in Cream, whichisthebrand’sbest-selling October, itretailsat€130for30ml. base asitletsskinbreathe.Launchingin the skinandissaidtobeanidealmake-up of make-upthroughoutthedaytorefresh and daycream.Itcanalsobeappliedontop coat—following theapplicationofaserum is intendedtobeusedasaskincaretop- is improved.ThebrandsaysDoubleTenseur while overthelongtermskin’sfirmness immediate smoothingandliftingsensation, term benefitsfortheskin.Itprovidesan which issaidtohavebothinstantandlong- the companywillintroduceDoubleTenseur, new skincareproductsthisfall.InOctober, French brandSisleyistolaunchastringof fragrances, thelinecomprisessevenscents. first launchedin2013.Withthetwonew priced at€165for100ml.CollectionMetal by perfumerJérômeEpinetteofRobertet.ThefragrancesarelaunchinginSeptember, line thisfall.Thescents,calledCameliaIntrepideandEmeraudeAgar,werecreated French brandAtelierCologneisaddingtwonewfragrancestoitsCollectionMetal 100ml EdP.Alimitededition30mlEdPispricedat€65. a metaltagengravedwithAnnickGoutal’sinitials.TenuedeSoireeispricedat€135for Soirée, thechyprescentcomesinapurpleglassbottle.Thebottlefeaturespompomand French brandAnnickGoutalislaunchinganewfragranceinOctober.CalledTenuede positioning, willforthemomentbelimitedtosaleinbrand’sfashionboutiques. launched byClarins.However,thesescents,whichhaveamoreexclusiveandniche This isHim!at€75for100mlEdT. white bottle,whilethemen’sflaconisblack.ThisHer!retailsat€90for100mlEdPand Nathalie LorsonandAurélienGuichardofFirmenich.Thewomen’sfragrancecomesina Almairac ofRobertet.ThisisHim!awoodyorientalscentandwascomposedby rock. ThisisHer!awoodyfloralfragrancecreatedbySidonieLancesseurandMichel a printadcampaign. lower, thecompanywillfocusonbuildingbrandthroughpoint-of-saleactivitiesand advertising willplayastrongrole.InmarketsoutsideEuropewherebrandawarenessis and particularlyFrance,aresettobekeycountriesforthefragranceshereTV September, beforerollingouttotheAmericasandMiddleEastnextyear.Europe, News roundup In September, Sisley will re-launch its Neck In September,Sisleywillre-launch itsNeck BPI planstokeeptheexistingfragrancesinZadig&Voltaireportfolio,whichwere The fragrancesplayonthethreevaluesofbrand,accordingtoBPI:Paris,artand n The fragrances, called This is Her! and This is Him!, will launch in Europe in The fragrances,calledThisisHer!andHim!,willlaunchinEurope n publicationandprintmagazine • • • goingonintheindustryand stayingaheadofthecompetition The website -dailynews News headlinesdailyonwww.bwconfidential.com BW Confidential, theinsideviewoninternational beautyindustry

BW Confidentialisthedestination forkeepingup-to-datewith News headlinescomplementanalysis andinterviewsinourelectronic All majornewsontheindustry published everydayonourwebsite • The electronic publication-everytwo weeks DAILY NE STAY INFOR

• WS SERVICE MED WITHOUR The printmagazine -fourtimesayear @BWCbeautynews what’s News roundup

n n n have a firming action thanks to slimming ingredients such as caffeine and red algae extract. The Neck Cream retails at €122 for 50ml. The brand will also introduce a new range for combination and oily skin in its Tropical Resins line. The range launches in September, with the cleanser retailing at €65 for 120ml, the serum at €120 for 30ml and the mattifying moisturizer at €93 for 50ml. The buzz

French beauty brand Nuxe is to launch Huile Prodigieuse Riche in November, 25 years after the brand first launched its Huile Prodigieuse dry oil. Huile Prodigieuse Riche is destined for very dry skin, and comes in a spray format. It contains seven natural plant oils, including macadamia oil at a higher concentration than the brand’s previous oils. Huile Prodigieuse Riche is priced at €35.50 for 100ml. Nuxe will also introduce a new eye cream in its Nuxellence range in September, priced at €35 for 15ml. The product claims to smooth and illuminate the eye area as well as provide an instant perfecting effect thanks to golden, light reflecting pigments, resurfacing powders and soft-focus silica spheres. The eye-cream features a zamak applicator to stimulate micro circulation. Under its Bio-Beauté organic brand, Nuxe will launch a new anti-pollution radiance line based on its best-selling Vitamin Rich Radiance Detox Mask. The four products—a detox lotion, fluid, cream and eye cream—all contain orange water, myrtle leaf and acerola pulp. The products are launching in September, with prices ranging from €14.50-€18.

Japanese brand Menard is relaunching its key Embellir skincare line in September, the third-generation of the range since it was introduced in 1986. The anti-aging line uses new extraction, encapsulation and emulsification technologies to create products with an improved texture and skin penetration capacity, according to Menard. Embellir continues to be based on Reishi, a mushroom found in humid regions of China. According to the brand, Embellir prevents UV rays and free radicals from having a negative effect on skin protein synthesis. The line, which targets women aged 40-50 and up, consists of six products. They range in price from €122 for the cleanser to €340 for the day and night creams. Menard has also revamped the line’s packaging for a more modern look.

French luxury shoe and accessories brand Christian Louboutin is launching a lip lacquer in July, priced at €80. Loubilaque comes in a bottle with thick, clear walls carved with a mermaid tail pattern. The vial features a silk ribbon and can be worn as a pendant, the brand says. The cap is said to resemble a turret-like crown evoking the Art Deco movement and Middle-Eastern antiquities. The launch of the lip lacquer follows the introduction of a lipstick line in 2015 and a nail polish line in 2014. Christian Louboutin’s beauty business is run through a joint venture with US-based Batallure Beauty.

L’Oréal-owned Urban Decay has launched a new lipstick line called Vice Lipstick, which comprises 100 shades. The launch is accompanied by an ad campaign fronted by actress Ruby Rose. Vice lipstick retails at €18.50, and launches in June. It is exclusive to Sephora stores in France and on Sephora.fr, as well as Urban Decay’s online shop. n

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brands, retailers, packagers and fragrance allthe Plus houses latest data and listings on the category’s launches, •Retail developments •Online sales •Travelretail •Mature &emerging markets NEW The FragranceGuide more than100 pages of insight and analysis

E verything you need to know about fragrance: The views expressed in this section are those of bloggers and do not represent the opinions of BW Confidential

Netwatch of the global fragrance market to hitthemarketinUSandEurope. bloggers have said that they think more products with such packaging will begin hit amongbloggers.Thepackagingisdescribedasoriginalandcute.Many Playful anddoll-likepackagingfromAsianbrandsisprovingtobea 20 peopletotryoneofthemwillgetafreetubebalm. the special-editionicecreamflavors,storesaidthatfirst Glossier’s lipbalms:cherry,mintandrose.Inadditiontoserving company begansellingice-creamflavorsinspiredbythreeof ice creamshopMorgenstern’sFinestIceCream.The blogosphere throughitscollaborationwithNewYorkCity’s Online beautybrandGlossierhasgeneratedexcitementinthe new productstothemarket. Commentators saidtheyliketheretailer’seffortstobring brand Fig+Yarrow(pictured),hasinterestedbloggers. which includesanexclusivecollaborationwithnatural US massretailerTarget’smoveintothenaturalcategory, Social mediamonitor BW Confidential BW

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• • • • Packaging... Sampling New formats Consumer habits • bypost: • byemail:[email protected] Please completethisformandreturnit: Signature &date: VAT number (requiredforEuropeanUnion):...... Email (required):...... Country:...... Postal code:...... City:...... Address:...... Last name:...... First name:...... Company:...... Contact information • Numberofcopiesat r r Pleasebillme(issueswillbedelivereduponreceptionofpayment) r American Express r CB, Visa, Mastercard/Eurocard Yes, Iwanttoorder Expiration date: Expiration date: BWConfidential-4av.delaMarne92600ASNIERESFrance €55 each: Order form The Fragrance Guide l_l_l_l_l l_l_l l_l_l_l_l_l l_l_l_l_l_l_ll_l_l_l_l l_l_l_l_l l_l_l_l_l

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Offer valid until August 31, 2016 Laboratoires Filorga president Didier Tabary

Moving forward Interview Skincare brand Filorga has gone from strength to strength over the past 10 years despite recent declines in the skincare category. President Didier Tabary tells BW Confidential about the opportunities ahead

How is your business performing this year and what are your key priorities for development? After 10 years of growth (+40% per year, and a turnover that has grown twenty-fold), we expect to reach €90m in sales this year. The strength of our business model lies in our strength in the medical field, as we are the first French laboratory in aesthetic medicine, and in skincare, with our range of “medi-cosmétiques”, which was created 10 years ago. Today, we are the number-five skincare range in the distribution channels where We have a very we are present. “different strategy for Our objective for the coming years is to continue this double-digit growth and to double sales in the next three years. To do so, we have three main priorities: firstly, China, given the size innovation—R&D represents 10% of our sales. Secondly, to be visible—we will launch of the country. We a TV ad campaign in France and communicate on billboards in Europe. Our goal now is also to increase our presence on the point of sale to get maximum visibility. Thirdly, decided to focus on we will expand our international development: we are currently in 80 countries with 10 a digital strategy and subsidiaries and offices. We will set up more subsidiaries and expand our presence in China and the US, which are two key markets. being present on marketplaces such as How is your business currently split by region? France is our historical market and still represents 40% of our business. That being said, Tmall and Taobao. some international markets are developing very well, like Russia, Poland, Italy, Spain and This allows us to of course, China. We also see the US as a big opportunity to grow faster. develop the brand You recently launched in China. How is the brand performing there? very quickly, knowing We have a very different strategy for China, given the size of the country. We decided to focus on a digital strategy and being present on marketplaces such as Tmall and Taobao. that we benefit from This allows us to develop the brand very quickly, knowing that we benefit from strong strong support from support from bloggers—who are key in China. Our products were already liked by Chinese customers before we had even started selling them in the country, and our Meso bloggers—who are Mask already has a Chinese nickname. [However, our focus on the web] will not prevent key in China us from going into physical stores as well. We are already present in two of the best regional Chinese perfumery chains: Body Style and Fiona. Laboratoires Filorga president How will you build awareness of your brand in new markets? Didier Tabary Our offer—a mix of medical efficiency and luxurious codes—is rather unique and we provide products that are also affordable. We have good PR coverage in magazines n n n ”

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n n n and on blogs (we were elected the number-one skincare brand by bloggers in France) and we started communicating in the press last year and also now through billboards both in France and Europe.

What are your ambitions for the travel-retail channel, which you

Interview If skincare is recently entered? We have just started with Aelia in Aéroports de Paris. We’ll definitely pursue this strategy “declining, it’s of retailing in the airports of the countries where the brand is already established with a because women good awareness and where the business is growing: Europe, but also Dubai. Apart from being a strong image builder, the percentage of additional business driven by travel retail are sometimes can have a great impact, so we hope we can transform this into long-term success. disappointed by

Given the competitive nature of travel retail, how difficult will it be for you the results they to gain shelf space and critical mass in this channel? get from their The key to gaining shelf space is to make the brand a commercial success. This is why we have put all the means in place to drive success in the duty-free stores where products. Women we are represented: starter kits, exclusive offers, events at the point of sale, high-end expect products that merchandising materials, training and exclusive beauty advisors—we have invested a lot. really work and are What would you like to see operators focus on to boost the development of fed up paying a lot smaller brands? Operators usually focus on well-established brands with proven track records. I do not of money for blame them as space is scarce and profitability stakes are high. But I would say the key is marketing only to understand before the others which brand is going to be the new “must have”.

Skincare is seeing slow growth or declines in many markets, how are you dealing with this and what impact is it having on the brand? Laboratoires Filorga president If skincare is declining, it’s because women are sometimes disappointed by the results Didier Tabary they get from their products. Women expect products that really work and are fed up ” paying a lot of money for marketing only. And this is where we, skincare brands, have a strong responsibility. It is our job to invest in R&D and formulas (rather than on stars who front the products) in order to offer products that really do the job. This is our biggest commitment at Filorga. This has had a positive impact on our brand as performance is at the heart of our product development. Before launching a product, we perform hundreds of trials and we only put it on the market if we can ensure visible efficiency in less than seven days. Where retailers are concerned, I believe it is key to open the market to new brands that are bringing fresh ideas to renew the market as a whole.

How do you see the development of pharmacies for skincare? Pharmacies are a great channel for skincare as they offer good advice, proximity and a very good image. It is the fastest-growing channel for skincare and the trend is likely to continue in the coming years. Filorga is one of the only brands that perfectly fits both the pharmacies’ and the perfumeries’ needs and constraints. This gives us a great range s Filorga is focusing on China and the US as of opportunities. n part of its international expansion strategy

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Insight Tough times continue The industry continues to adjust to a difficult market in the UAE

he prestige beauty market in the United Arab Emirates (UAE) has stumbled over the Tpast year, largely due to a decline in tourism, which the country had built much of its economy on, as well as a strong currency against the euro. With Russian and Chinese tourists curbing their travels there, as well as visitors from Saudi Arabia cutting back on visits to the emirates, the prestige beauty market has taken a severe hit in recent months, and there is little visibility on how the market will pan out in the year ahead. While official data is hard to come by, industry sources estimate that the prestige market grew by 7.5% last year (although Euromonitor International puts the premium market’s growth at a lower 4.8%). For 2016, however, growth is expected to slow to just 2.5%, largely due to the drop in tourism and the strong dirham. “This year [our business] is negative, and I think the whole market is negative,” comments Sisley regional director for the Middle East and Africa Sébastien Gautier. “In terms of ranking, we are still number five, but since we are negative, that means everyone is negative.”

Make-up bucks the trend Growth rates for the year are expected to vary by category. On the up side, make-up continues to grow strongly, with a 12% increase forecast, as consumers continue to buy into professional brands and new products arrive on the market. The color cosmetics category is now said to represent around 35% of the beauty market in the Middle East. “We UAE beauty and personal care sales* by category 2015 are expecting to grow three times faster than the Category 2015 sales % change market,” reveals Make Up For Ever Middle East $m 2015/2014 general manager Tamara Al Zaq. “Consumers are Fragrance 607.5 +4.3 realizing there is something other than traditional Color cosmetics 379.2 +4.7 brands; they want to carry the latest cool lipstick Skincare 286.5 +3.2 and try new brands and they are no longer driven by traditional brands.” Men’s grooming 286.3 +3.2 This echoes Clarins Group Middle East president Haircare 270.6 +3.9 Osama Rinno’s views. “The make-up artist brands Premium beauty & 898.5 +4.8 or specialist brands are growing and eating up the personal care three-axis brands,” he says. Private-label brands Mass beauty & 964.4 +3.1 in make-up are also performing well, notably at personal care Sephora, observers say. Total beauty & 2,055 +3.8 As in other markets, the trend for social media and personal care** selfies is driving the category. Social media Source: Euromonitor International *Retail sales price, constant prices influencers, bloggers and make-up artists haven n n **Total includes other categories not listed

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n n n a big impact on what consumers are buying. Al Zaq says Make Up For Ever’s continued growth, despite being present on the market for many years, is partly due to its strength in foundation, as consumers Insight are more brand loyal in this segment than in trend categories like lipstick and eye make-up. “Consumers now are much more aware and educated on what they want to buy, researching on the internet and social media, and they are more careful about how they spend,” Clarins’ Rinno continues. “They are no longer going to the most expensive brands and thinking if it’s expensive, it’s good for me.” As such, he says, Clarins has seen 25% growth in its skincare business in 2016 so far, compared with a 10% drop for the prestige skincare market overall. “The brands that are suffering are the very expensive niche brands. We are very accessible, and have a strong, loyal consumer base, so we are seeing the benefit of this.” Consumers are no In fragrance, meanwhile, consumption of international brands is also down, according to observers, although niche brands, private label and local brands continue to perform “longer going to the well, as local consumers remain avid fragrance buyers. most expensive Arabic fragrances strong brands and thinking Sources say that retailers continue to seek out new, niche fragrance concepts and the if it’s expensive, it’s market for Arabic fragrances remains solid. Testament to this is distributor and retailer Chalhoub’s decision to develop its own Arabic fragrance brand, called Ghawali, which good for me will be sold in its own branded stores from this summer. Paris Gallery too, has been focusing on developing its own brands in the Arabic fragrance category, according to market watchers. Industry players note that international brands, however, have been Clarins Group Middle East hard hit by the currency situation, as prices on the market are no longer as competitive president Osama Rinno as they once were due to the strong dirham, especially for tourists coming from Europe. ” Dubai in particular has built its economy on tourism—The Dubai Mall alone is estimated to account for 5% of the Emirate’s GDP, according to its operator Emaar Properties, and tourists are estimated to represent 40% of spending in Dubai. The Dubai Mall saw 80 million visitors in 2014 (2015 data was not available). As such, the decline in Russian and Chinese tourism, as well as fewer visitors from Saudi Arabia, where consumer confidence has been hit by the drop in oil prices and the country’s war against Yemen, has resulted in drops in hotel occupancy rates, forcing hoteliers to reduce prices to fill rooms. This has attracted different consumer groups who are less inclined to spend on shopping, especially given current high prices. Another challenge affecting the market both at the retail and brand level, meanwhile, is cashflow. Local retailers and distributors, some say, especially those that also have a strong presence in the struggling fashion category, are having a tough time financing their growth, and as such are underinvesting in the beauty Beauty retail market share in the GCC category, leading to product shortages and other issues. “This is driving the market down, driving us and other brands down, so that in the end the Retailer 2015 market share problem is not the market [itself], it’s the lack of cashflow that’s affecting estimate % the market,” says one brand executive. Sephora 17 Paris Gallery 11 The retail challenge Wojooh 10 In retail, meanwhile, development has slowed over the past few years. Debenhams 7 “The retail market in general is difficult to develop,” says Al Zaq. “Either Source: Industry sources, does not include sales you wait for new malls to come or regions to open, or you are on n n n from all international department stores

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n n n a waiting list to find a space in an existing mall, which is challenging. In the past two years, there have been a few new malls, but not at the level of Dubai Mall or Mall of the Emirates. Development is not in line with the space needed. Retail Insight development depends on mall development.” Development in Abu Dhabi, which has been tipped for expansion, has been slower than expected, observers note, although several retail projects are still ongoing. Yas Mall, which opened in November 2014 and was tipped to be the Either you wait for UAE’s second-largest shopping center after the Dubai Mall, has been slower to new malls to come attract shoppers than anticipated, observers say. “Yas Mall is successful, but “ not yet up to expectations,” says Al Zaq. The mall is home to department stores or regions to open, or including Debenhams and House of Fraser as well as Chalhoub’s new concept you are on a waiting Tryano, which offers a broad range of exclusive and selective brands. House of Fraser recently closed its outlet in Abu Dhabi’s World Trade Center mall. list to find a space Sephora, meanwhile, continues to go from strength to strength in the UAE, and in an existing mall, is now estimated to be the leading beauty player by sales, with 17 stores and a 17% market share in the GCC. After a rocky start in the market, the LVMH-owned which is challenging. retailer which operates in the Middle East through a joint venture with Chalhoub, In the past two years, has reportedly seen double-digit sales growth every year for the past three years, and continues to perform well. there have been a International department stores like Bloomingdale’s and Harvey Nichols, both few new malls, but operated by Al Tayer group in the UAE, are also performing well, according to observers. “The international department stores coming to the Middle East are not at the level of eating market share from local retailers,” comments Al Zaq. Saks Fifth Avenue, Dubai Mall or Mall however, recently confirmed it would close its Dubai store later this year. of the Emirates. Local players struggling Development is not in In such a context, local players are struggling. Industry watchers say that Paris Gallery has been consistently losing market share, while Wojooh (owned by line with the Chalhoub) has also seen a tough time in recent years. Observers nevertheless space needed praise Wojooh’s efforts to grow its consumer base along a Sephora-type model and the introduction of its private label make-up line Wow by Wojooh. More brands are also introducing standalone stores on the market, especially in the booming make-up category. Make Up For Ever plans to have 25 standalones in Make Up For Ever Middle East the GCC by early 2017. Nars, Smashbox and Urban Decay are all reported to have general manager Tamara Al Zaq plans for their own stores in the UAE too. ” And there are still plenty of larger retail developments in the pipeline, with projects expected to accelerate towards the end of the decade and into the 2020s. France’s Groupe Galeries Lafayette will open a BHV store in Dubai’s City Walk mall in September 2016 with its franchise partner ADMIC, also in charge of its Dubai Mall store, while another newcomer, Singapore-based Robinsons, will make its entry in Dubai’s Festival City Mall, managed by its owner Al-Futtaim, next spring in partnership with Chalhoub. Al Tayer and Macy’s are also partnering to bring the Macy’s and Bloomingdale’s banners to Abu Dhabi, scheduled for 2018. While there is little visibility about how the UAE market will perform this year, let alone further down the road, industry players hope that with patience and investment, the current difficult market will be a short-term glitch, rather than an extended downturn. n

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Market changes BW Confidentialreports on what was seen and heard at the Beautyworld Middle East show, which took place in Dubai from May 15-17 Show review

espite a difficult market in the Middle East, the Beautyworld Middle East trade show Beautyworld Middle East Dsaw a strong turnout on both the exhibitor and visitor front. Visitor numbers rose Took place: Dubai, May 15-17 26% to 37,553, while some 1,530 exhibitors (+6% versus 2015) attended the show. Visitors: 37,553, +26% vs 2015 Fragrance companies were there in force representing 200 exhibitors, including key Exhibitors: 1,530, +6% vs 2015 fragrance creation houses such as Givaudan, Mane, CPL Aromas and Iberchem. This year’s event also saw the debut of a new area devoted to niche fragrances called Quintessence. Some 10 fragrance companies exhibited in this area. Also new this year was organizer Messe Frankfurt’s decision to group together beauty packaging companies in one area.

Talking points A key talking point at the show was the slowdown in the market in many countries in the Middle East in part due to a decline in Russian and Chinese visitors to the region (especially the UAE) and the impact of currency fluctuations. The region’s beauty market is estimated to have grown by only 1% between January and April this year. This compares with a 5% growth rate in 2015. Suppliers said they were also beginning to feel the effects of the drop in oil price. On top of these macro-economic issues, a key distributor pointed out that consumer behavior in the region is changing. Consumers are becoming more discerning, and are no longer blindly buying the biggest brand names and the most expensive products, but rather are looking for something different and original. Another buzzword at the show was Iran. The country, which is already the world’s seventh-largest beauty market, is seen as offering strong growth opportunities due to the lifting of sanctions. However, several executives said that competition is heating up in the market as more beauty companies rush to move into the country. Others said that they were still uncertain about how to develop this market. One fragrance executive summed up his view of developing in Iran as “the need to have a very good distributor and one that pays their bills.” While the buzz may have been over Iran, most at the show said that when it comes to the Middle East, the key market to focus on is still Saudi Arabia. In terms of trends, fragrances adapted to tastes of the region were well represented, while local Arabic fragrance brands remain strong in the market. At the event, color cosmetics brands highlighted the solid performance of this category in the region. In what used to be an overwhelmingly predominant fragrance market, make-up has now come to take a 35% share of beauty sales in the Middle East. Within make-up, the trend for halal products was much in evidence at the show. Halal claims can now be found in almost all sub-segments of make-up including nail polish. Next year’s show takes place from May 14-16. n

www.bwconfidential.com - June 23 - July 6, 2016 #133 - Page 13 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Store visit

© Eric Williams/RPG Beyond beauty stores Bookstore chain Barnes & Noble launches beauty shop-in-shop in campus bookstores

S-based bookstore chain Barnes & Noble has launched a beauty concept store at Uits college bookstores called The Glossary, in a move to bring cosmetics to stores where students shop. The Glossary is housed as a distinct store within select Barnes & Noble College bookstores and covers on average of 350-500ft2 (32-46m2). “The Glossary is a first- of-its kind, dynamic shopping environment that offers students the opportunity to explore, sample and purchase a wide variety of mass and prestige beauty products,” explains Bruce E. Teitelbaum, ceo of retail design firm RPG, which designed and built the concept. The Glossary’s design is intended to encourage experimentation with products, as opposed to the traditional approach of putting beauty products in a showcase, says Teitelbaum. “Through in-depth student discussions and focus groups, we recognized a gap in access to beauty solutions on campus and worked with [the students] to help shape The Glossary,” says Lisa Mazzio, director of merchandise, fashion trends and beauty, Barnes & Noble College. “Their feedback informed the categories and brands we sell, the look and layout of the stores themselves, and the format that inspires self-discovery rather than [having] in-aisle beauty consultants, which students expressed were less desired,” adds Mazzio. Barnes & Noble College worked with health and beauty brands distributor EC Scott The Glossary Group on The Glossary’s product selection. The shop-in-shop stocks color cosmetics, l Launched: May skincare and haircare products. The range spans both prestige brands, including l Location: Barnes & Noble Smashbox, Philosophy and Bliss, and traditional mass-market brands, including college bookstores, US Burt’s Bees, CoverGirl and Maybelline. Its product range is designed to appeal to a l Size: 350-500ft2 (32-46m2) diverse spectrum of college students. ”The Glossary’s design attracts value seekers, l Special features: product perfectionists and brand devotees, and is scalable to add, evolve and change Product experimentation is the product mix in the future,” adds Mazzio. encouraged in the shop-in-shops, The Glossary is present on four university campuses. It plans to add another which feature a selection of mass location in August 2016. n and prestige products

www.bwconfidential.com - June 23 - July 6, 2016 #133 - Page 14 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL BW Confidential The inside view on the international beauty industry

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