www.bwconfidential.com The inside view on the international beauty industry December 3-16, 2015 #121

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Comment Inside

The buzz 2 A mixed market News roundup hen talking about how the end of the year will pan out, Netwatch 7 Wmany industry players continue to be nervous about the slowdown in China and have reservations about the holiday Social media monitor season in Europe, especially in light of the terrorist attacks in France, which is set to put a dent in pre-Christmas sales and Interview 8 hit tourist spend. However, in the US, the outlook is a lot more P&G Prestige vp of global positive. Market-research group NPD says that the US prestige marketing development and beauty market has entered a phase of “renewed growth”, operations Jose Maria Marquiegui putting the industry in a healthy position going into the holiday season. US prestige beauty sales from January to September Insight 10 were up 8% and the group says more consumers plan to purchase beauty products this South Korean brands holiday compared with 2014. In terms of category, make-up is set to drive holiday sales in the US and elsewhere, with Show review 13 the category cited by industry watchers as the fastest growing globally. In the US, sales Cosmoprof of color rose 13% from January to September and consumers are expected to prioritize this category for the holidays, according to NPD. Store visit 16 In Europe too, make-up is doing well and is credited with driving growth in beauty overall, Chanel’s beauty standalone, Paris a trend that is likely to continue. In France for example, prestige sales rose 11% between January and August this year, while make-up saw growth of 2%. Fragrance is also set to put in reasonable results in key markets—in the first half of this year, the category performed better than last year—with juices as opposed to gift sets likely to drive growth for the holidays in countries such as the US. Skincare, however, is expected to continue to see soft sales in mature markets, although niche categories, such as masks and oils, could help lift the segment. All in all a very mixed market.

Oonagh Phillips Editor in Chief Order your copy of [email protected] BW Confidential’’s special edition The Fragrance Guide on p.7 News headlines daily on www.bwconfidential.com @BWCbeautynews News roundup At a glance...

n unveils new TIP concept in San Francisco

n Natura to open brick-and-mortar stores in Brazil The buzz n John Demsey promoted at ELC

n Beyond Beauty reveals new show format

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

Retail

LVMH-owned beauty retailer Sephora has unveiled a new store concept in San Francisco that is built around its teach, inspire and play (TIP) approach. Called Sephora Beauty TIP Workshop, the 8,500ft2 (780m2) store is at the retailer’s revamped Powell Street location. It stocks over 13,000 products, including 12 new brands, and offers a range of classes and services. Features include The Beauty Workshop, which Sephora says acts as a central workstation where consumers can participate in group beauty classes, watch tutorials, share content using iPad stations and take inspiration from The Beauty Board, a shoppable gallery that displays user-generated content on a digital screen. Elsewhere in the store is The Skincare Studio for skincare consultations and the Sephora Beauty Studio for one-on-one makeovers. Meanwhile, Fragrance IQ allows customers to explore 18 scent families thanks to the new, InstaScent scent immersion technology. The store also features new, multi-branded interactive areas including Trend Tables and the Hair Play Station. Sephora plans to progressively roll out the concept to both new and existing locations.

Estée Lauder Companies (ELC)-owned brand La Mer opened its first Brazilian store at Iguatemi Shopping, a luxury mall in São Paulo. The 42m2 (452ft2) store will carry 32 skus from the La Mer brand and also features a treatment room for and body treatments. For the moment, the store is the only outlet (apart from spas) offering La Mer treatments, an area that the brand wants to develop.

Middle Eastern retail and distribution company The Chalhoub Group has debuted a new retail concept offering beauty, bags and children’s products in Abu Dhabi’s Yas Mall. Tryano is a 20,000m2 (21,500ft2) specialty store selling more than 250 international and local brands, and according to the company, has one of the largest offers in the UAE in its categories. The ground floor beauty space is inspired by winter, and is entered via the fragrance department. Make-up and skincare also have dedicated areas, and the store offers beauty boutiques, corners and multi-brand areas. Several brands are exclusive to the store, including Editions de Parfums Frédéric Malle and SK-II. The three-floor store also offers bespoke services and houses a branch of La Patisserie des Rêves pastry shop. n n n

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n n n UK-based online beauty retailer Feelunique has acquired French perfumery chain Parfumeries Rive Droite in a bid to develop its footprint in France. Founded in 1986, Parfumeries Rive Droite has four boutiques in Paris and its immediate suburbs. These stores will be rebranded under the Feelunique nameplate in the coming months. Fabrice Rimbault, director of Parfumeries Rive Droite, will become chief operating officer The buzz for Feelunique France. Feelunique also appointed Claire Blandin as managing director for France at the beginning of November. Blandin was previously head of purchasing at Beauteprivee.fr and a beauty buyer at Monoprix. Feelunique recently announced the opening of a pop-up store in Paris’ Marais district, showcasing 16 UK beauty brands, from November 27 to December 13.

Strategy

Brazilian direct seller Natura is to open brick-and-mortar stores in large shopping malls across Brazil from 2016. The company is currently planning the new concept and no further details on the format were available. The move to open stores is part of Natura’s strategy to diversify its distribution. The company has been hit by falling sales, a declining number of sales representatives, increased competition from local rival Grupo Boticário, which has rolled out a number of new retail formats in the past few years, and the slowdown in the Brazilian economy. The company’s new president Roberto Lima has outlined the group’s need to create new brands, explore new distribution channels and carry out acquisitions. In 2012, Natura took a 65% stake in Australian company , a brand with its own store network. Analysts say that moving into retail could potentially harm the company’s relationship with its sales representatives. However, in a statement regarding the new stores, Natura underlined that providing new buying opportunities for Natura products would strengthen the firm’s direct-sales business and be an asset to sales representatives.

Spanish fragrance house Eurofragance has opened a new creative center in Dubai, UAE. The company invested €2m in the new 1,000m2 (10,763ft2) facility, which will focus on the design and evaluation of fragrances and applications, as well as sample manufacturing. The center also has sales, logistics and corporate development functions. One of the objectives of the new center is to boost sales in air care and . Eurofragance has creative centers in Barcelona and Mexico and plans to open another in Singapore in the near future.

Results

Hong Kong-based beauty retailer Sa Sa saw its sales fall 10.6% to HK$3.78bn ($487.7m) in the six months ended September 30, compared with the prior-year period. The company’s profit fell 55% to HK$153m ($19.7m). The retailer attributed the sales decline to a number of factors, including the decline in mainland tourists traveling to Hong Kong and Macau, where Sa Sa does the majority of its business, as well as a reduction in spending from Chinese tourists. Sa Sa’s sales in mainland China also fell by 8.7% in local currency terms, while those in Singapore were flat, and sales in Taiwan dropped 2.2%. Online sales dropped 1.4%, the company said. n n n

www.bwconfidential.com - December 3-16, 2015 #121 - Page 3 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL The buzz USA said. externally, aspokespersonfor L’Oréal Luxe shared teamsandrepresentthe activity teams aswellmanagethe Luxe division’s relationships withL’OréalUSA’s corporate Vey aspresidentofLancômeUSA. firm Remy-CointreauinJune,willreplace Parksuwan, whojoinedL’Oréalfromspirits operating officerofL’OréalLuxeUSA.Suriya USA, willbecomepresidentandchief become grouppresidentfortheactivity. current divisionpresidentCarolHamiltonwill management intheUS.EffectiveJanuary1, L’Oréal Luxeisreshufflingitstop group presidentLynneGreene. 2016, followtheannouncedretirementof company said. net saleshavegrownmorethan40%,the her leadership,theEstéeLauderbrand’s toherportfolio.Hudisiscurrentlyglobalbrandpresident,EstéeLauder.Under to leadtheEstéeLauderandAERINbrandswhileaddingLaMer,Darphin, Center ofExcellenceforCreative. Editions deParfumsFrédéricMalleandGlamglow.Demseywillalsoleadanewlycreated Malone London,Bumbleandbumble,TomFord,Smashbox,Rodinoliolusso,LeLabo, oversee AramisandDesignerFragrances,Prescriptives,MACCosmetics,BobbiBrown,Jo will addCliniqueandtheMen’sSkincareGrouptohisportfoliowhilecontinuing Estée LauderCompanieshasnamedJohnDemseyexecutivegrouppresident. People decreasing 2%. in Francedown1%andsalestheUK declines, however,withsalesofmascara up 3%.BoththeUKandFrancewitnessed during theperiod,whilethoseinItalywere NPD. MascarasalesinSpaingrew14% to datafrommarket-researchcompany performance inOctober2015,according Mascara salesinEuropedeliveredamixed n News roundup Hamilton will continue to manage Hamilton willcontinuetomanage Xavier Vey,currentheadofLancôme These appointments,effectiveJanuary1, The grouphasalsoappointedJaneHertzmarkHudispresident.willcontinue Data n Source: NPD BeautyTrends Source: NPDBeautyTrends October 2015vs2014 Mascara salesinEurope%change UK Spain Italy France Country 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 % change +3 -1 +14 -2 • The electronic publication-everytwo weeks DAILY NE STAY INFOR • WS SERVICE MED WITHOUR The printmagazine -fourtimesayear @BWCbeautynews what’s CONFIDENTIAL CONFIDENTIAL CONFIDENTIA

L The buzz des Congrès. perfumes andcosmetics.Itwill takeplacefromSeptember13-14,2016atParis’Palais will alsobeaconferenceprogram focusedonskincare,fragranceandtrends. Zoom space,tobeconducted in theperfumezone,willformpartofnewevent.There Beauty includingtheChallengerAwards,RarePerfumes Meetingsandthe alternative perfumebrands.Around100exhibitorsareexpected totakepart. in theCarreauduTempleParis’Maraisdistrict,willbededicated tocosmeticsand The first,calledAlternativeFragrance&Beauty,takingplace fromJune16-18,2016 The showwillnowbesplitintotwoseparateevents,onein June andoneinSeptember. Trade showorganizerInformaistransformingitsBeyondBeautyParis eventfor2016. Trade shows holder forBalmainscents. at €34.99. sandalwood. Itwillbesoldinaselectionoftheretailer’sH&MBeautystores,priced of tonkabeanandjasmine,aheartcedarwhitewoodbasemusk edition As partofitscollaborationwithfashionbrandBalmain,H&Mlaunchedalimited- Launches n based intheUS.Sieuzacpreviouslyspent20yearsworkingforSymriseParis. Cosmo InternationalFragranceshasappointedLucasSieuzacasseniorperfumer, including eBay’sShopping.comsubsidiary,Brands4friendsandKalahari.com. Glossybox’s newceo.Shehaspreviouslyheldtopmanagementrolesatdigitalplayers continue toconsultforthecompany.OnJanuary1,CarenGenther-Kappeszwillbecome Abercron, itsfounderandmanagingdirector,issteppingdownonDecember31.Hewill Germany-based subscriptionbeautyboxfirmGlossyboxannouncedthatCharlesvon general managerofSephorainCanada. and reinforcingitsretailpresence.Pinatelwasmostrecentlyseniorvicepresident development, retail,operationsandinternationalforthecompany,focusingonitsgrowth veteran PhilippePinatelasitspresidentandchiefoperationsofficer.Hewillleadproduct Beauty subscriptionservice—andincreasinglyretailer—Birchboxhasnamedindustry of globalfragrancesatElizabethArden. partners createdFekkaiBrandsLLCasajointventure.Ronkinwasmostrecentlypresident brand withUK-basedDesignerParfumsfromProcter&Gambleearlierthisyear.The Grande, JosieNatoriandHawaiianTropiclabels,jointlyacquiredtheFrédéricFekkai Brands asceoonDecember1.PrestigebeautyfirmLuxeBrands,whichownstheAriana News roundup The second event, called Beauty Factory, will be dedicated to the entire supply chain for The secondevent,calledBeauty Factory,willbededicatedtotheentiresupplychainfor For thefirsttime,dayoneofeventwillbeopentopublic. FeaturesfromBeyond The BalmainxH&MfragrancewascreatedinpartnershipwithInterparfums,thelicense- Luxe Elizabeth ArdenveteranJoelBRonkinjoinedUSfirmsFekkaiBrandsandLuxe fragrance on December 3. The unisex scent contains notes Balmain xH&MfragranceonDecember3.Theunisexscentcontainsnotes n www.bwconfidential.com -December 3-16,2015 #121-Page 5

orUS$699 printmagazine(4issues)+dailynews:€499 Subscriptions Choël, Raphaëlle Saini, Mayu Ashcar, Renata www.bwconfidential.com Fax: +33(0)153010979 Tel: +33(0)174634961 [email protected] 92600 AsnièressurSeine,France 4 avenuedelaMarne BW Confidential permission isstrictlyprohibited. Reproduction inwholeorpartwithout Copyright ©2015.Allrightsreserved. 513 746297RCSNanterre BW ConfidentialispublishedbyNoonMedia [email protected] Advertising [email protected] 1 year:electronicpublication(20issues)+ Corinne Blanché,NaomiMarcoulet Sophie Douez,AlexWynne, Contributors: [email protected] Katie Nichol Editorial Coordinator&Assistant: [email protected] Editorial Director:OonaghPhillips Publisher: NicolasGrob ISSN: 2104-3302

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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 for Phan’sEmMichellePhanline,whichhasbeensoldtoIpsy. fans, saybloggers.Thereisalsospeculationaboutthesuccessandfutureplans News ofMichellePhanpartingwayswithL’Oréalisexpectedtodisappoint and freedeliveryforpurchasesover€15. host ofBritishbrandsinFrance.Thesiteisalsopraisedforitsattractivedeals Bloggers areapplaudingthearrivalofFeelunique’se-commercesiteofferinga ingredients, texturesandaffordability. School, TonyMolyandSkinFoodareappreciatedfortheiruniquepackaging, following itsfeatureonKoreanbeauty.PopularbrandsincludingTooCoolfor their Koreanbrandofferings.Recently,Sephorafurtherfuelledthebuzz Western retailerslikeSephoraandUrbanOutfittershavebeenpraisedfor and expectmorepop-uplocationsorastoretofollow. responded positivelytoapop-upboutiqueforthebrandinLondon’sSelfridges, Canada, havegeneratedexcitementintheblogosphere.Bloggersalso Announcements ofthefirstNYXstoreopeningsinCalifornia,USandToronto, Social mediamonitor BW Confidential BW

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Offer valid until February 29, 2016 P&G Prestige vice president Jose Maria Marquiegui

Challenges ahead P&G Prestige vice president of global marketing Interview development and operations Jose Maria Marquiegui talks about the challenges facing the travel-retail channel

What are your expectations for the rest of the year and 2016? This has been a difficult year for the industry. [MERS, changing Chinese travel, Brazil and Russia] are all impacting business. What has happened to Hong Kong and Macau has had a great impact on anyone who’s a local player. One positive of [operator] consolidation is that if you are a travel retailer in Macau airport, you’re probably struggling a lot, but if you’re a global player, you’re maybe winning in Istanbul if you’re losing in Macau. Dubai was in crisis last year, but it is growing in the double-digits this year. Kuala Lumpur keeps growing—it’s becoming a key hub. Ten years ago, Istanbul was a nice tourist destination, but it certainly was not the fantastic luxury destination it is today; these things come and go. I don’t want to play down the impact of this crisis, but these are [external] and not structural issues. In the travel-retail channel, with Gucci Bamboo, we have had very good results. We launched as an avant-première in travel retail and it has ended up being Passengers are a stronger than Boss Ma Vie [launched in summer 2014]. We have been in the top five, so we have been very happy with the way it has been developing in the last “great thing for the part of the year. Hugo Boss’ Boss The Scent launched with a world première with airports, but it’s Heinemann, and we are pleased with it and very hopeful for the next year. shoppers that keep How is the integration of P&G Prestige into Coty progressing? this industry moving, Today, we are P&G and we are very focused on being P&G; the merger has not happened [yet]. We have enough on our plate, and we are very focused on and the rate of doing as much as we can with our iconic brands and with new initiatives. [The conversion is the merger] will create the number-one company for fragrances, the number two for cosmetics, and number three for salon professional, so this is a very exciting biggest challenge future. What is important is that we are creating a new industry leader. We have we face to get authorization for the merger and the day we can merge, it’s going to be great, but today we can only announce Coty’s intention to buy these brands from P&G and create this new company. P&G Prestige vp of global marketing development and What are the biggest challenges facing the travel-retail industry? operations Jose Maria Marquiegui We have to make this category grow again. We have to make more people buy ” fragrances, make them fashionable again and we have to increase the penetration of fragrances. In travel retail, we have to convert walkers into shoppers. Passengers are a great thing for the airports, but it’s shoppers that keep this industry moving, and the rate of conversion is the biggest challenge we face. n n n

www.bwconfidential.com - December 3-16, 2015 #121 - Page 8 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL P&G Prestige vice president Jose Maria Marquiegui

n n n How can you improve conversion? First, you have to have the right initiatives, the right furniture and the right beauty consultants—something that captures your attention. Very often, the shelf is selling for you and you don’t have beauty consultants. So unless This has been a consumers are inspired by the way the goods are presented, why should they Interview “difficult year for the buy a perfume, and why should they buy today? They may try today, and they may like it, and consider buying one day. We need to sell the whole proposal in industry. [MERS, a way that means today’s a good day to buy. changing Chinese We had a Dolce & Gabbana Velvet pop-up store in the old Qatar airport and had fantastic results, so now we are doing it in the new Qatar airport, which travel, Brazil and just opened, and we want to expand it even further. The pop-up store creates Russia] are all the right environment for Dolce & Gabbana Velvet, our top premium line. You need to speak to an expert who tells you the brand story, the brand philosophy impacting business. and gets you into the mood [to buy]. You can do this in a pop-up store, but it is I don’t want to play more difficult to do directly from the shelf. [Initiatives like these are how] we are betting on helping the travel-retail segment become a buyer destination rather down the impact of than just a walker destination. We believe we can do it with all of our brands. this crisis, but these How do you view the recent consolidation of travel retail? are [external] and not It’s an opportunity to work better together and to use [operators’] scale and structural issues our scale to penetrate better and to have better people working together on analyzing data. I’m an expert on brands, shoppers and consumers and they are experts on their airports; if we can get all that information together and analyze it in a combined way, the future is going to be great. I see more of an P&G Prestige vp of global marketing development and opportunity coming out of the combined scale than any threat. Consolidation in operations Jose Maria” Marquiegui the industry is a fact of life, it has been happening for 30 years, so if we have not got used to it, it’s about time. n

s Gucci Bamboo and Boss The Scent have both seen strong results when they pre-launched in s P&G has opened pop-ups for Dolce & Gabbana Velvet at Qatar airport travel retail

www.bwconfidential.com - December 3-16, 2015 #121 - Page 9 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Insight

s Domestic brands dominate the beauty market in

South Korean brands style

An analysis of the continued popularity of Korean brands

-Beauty is currently the international calling card of the cosmetics world, as Kmanufacturers and retailers look to South Korea as a source of growth. But the internationalization of South Korea’s beauty industry is a recent phenomenon, while the local market itself remains extremely insular, an atypical introvert on the global beauty market. The Korean It is estimated that only 15% of South Korea’s beauty market is taken up by government wants international brands. Korea’s two market leaders alone, AmorePacific and LG “ Household & Healthcare, account for between 55% and 70% of sales, according to to make cosmetics estimates, and continue to see impressive growth rates. one of the key pillars announced a 15.7% increase in domestic sales for the first nine months of 2015 to 2.68 trillion won ($2.3bn). While LG did not indicate separate results for its domestic of the economy business, the company said it saw 17.6% sales growth for its Beautiful division in the third quarter, to 565bn won ($487.7m). LG said in its most recent report that its domestic market share in the prestige segment had grown from 17.5% at the end of Inspiration & Information general the third quarter of 2014 to 20% in the second quarter of 2015. n n n manager Florence” Bernardin Korea’s cosmetics exports and imports Nine Nine % growth FY 2014 % months months nine months $bn growth 2014 $bn 2015 $bn 2015/2014 2014/2013 Cosmetics exports 1.06 1.73 +63.4 1.59 +53.5 Cosmetics imports 0.687 0.709 -3.1 0.950 +8.2 Source: Korea International Trade Association (KITA)

www.bwconfidential.com - December 3-16, 2015 #121 - Page 10 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL South Korean brands

n n n “The market for Korean brands in Korea is strong and will remain so for a long time,” comments Singapore-based strategic advisory firm Martin Roll Company ceo Martin Roll, author of Asian Brand Strategy. “If you look at almost Insight any category—cars, retail, technology, mobile phones, home appliances, even food,—[Koreans] prefer their own brands,” he continues. “There is this sense of isolation in Korean culture. If you speak to most of the international brands, they’ve always found Korea very hard to crack.” Leading Korean brands like Sulwhasoo, (AmorePacific) and Belif (LG) are good at focusing on a story built around traditional remedies (a category that performs well, along with brands centered on product safety and surgical concepts). International brands like and Kiehl’s (both owned by L’Oréal) have been more successful in South Korea than other foreign labels, partly because of their storytelling, according to France- Top 10 skincare brands in South Korea 2014 based consultancy Inspiration & Information general Ranking Brand manager Florence Bernardin. In make-up, Estée Lauder Companies-owned brands MAC and do 1 Sulwhasoo (AmorePacific Corp) well, the only two international brands to make the top 2 (LG Household & Healthcare) 10 color cosmetics ranking according to Euromonitor International. (Although skincare dominates the market, 3 Hera (AmorePacific Corp) representing around 50% of beauty sales, make-up 4 Missha (Able C&C) is the second biggest segment, and is growing fast in 5 O Hui (LG Household & Healthcare) department stores, according to observers.) 6 Iope (AmorePacific Corp) With so much of the market taken up by just two 7 The History of Whoo players (Able C&C, the owner of Missha, is number (LG Household & Healthcare) three), there should logically be little room for smaller players. But this is not so. AmorePacific’s growth from 8 SU:M37 (LG Household & Healthcare) a small, local company 20 years ago to an international 9 SK-II (P&G) beauty player today is a source of national pride to 10 Isa Knox (LG Household & Healthcare) Koreans, Roll says, and is inspiring a new generation of Source: Euromonitor International entrepreneurs. “That’s going to fuel other industries, and will attract talent to the industry. Whether you’re a laboratory, or a designer, or an economist, it’s a major Top 10 make-up brands in South Korea 2014 win for Korea.” Ranking Brand The Korean government has also been paying attention, realizing that both at home and abroad, 1 The Face Shop (LG Household & Healthcare) cosmetics represent a growth opportunity for Korean 2 Etude (AmorePacific Corp) industry, which until recently was mainly focused on 3 Hera (AmorePacific Corp) electronics. “The Korean government wants to make cosmetics one of the key pillars of the economy,” says 4 Iope (AmorePacific Corp) Inspiration & Information’s Bernardin. 5 Missha (Able C&C) 6 Sulwhasoo (AmorePacific Corp) Exports accelerate 7 (AmorePacific Corp) Korean cosmetics exports grew 63.4% in the nine months to September, according to data from the Korea 8 MAC (Estée Lauder Companies) International Trade Association. That rate has 9 Bobbi Brown (Estée Lauder Companies) accelerated from growth of 53.5% in full-year 2014, 10 O Hui (LG Household & Healthcare) 26% in 2013 and 19% in 2012. n n n Source: Euromonitor International

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L Insight South Koreanbrands home andabroad. bringing growthtotheindustry—both at an epicenterofthecosmetics universe, future, SouthKoreaislikely to remain together tosuggestthatfor the foreseeable in theworld,”saysRoll.Allthiscomes of thecountry,it’sonehighestratios terms ofR&D[investment]relatedtoGDP innovation, theytakethatveryseriously.In some timetocome.“Koreansaregreatat right now,itlookssettocontinuefor one oftheattractionsKoreanmarket acquisition targets].” make senseandbecomeattractive[as winners, andscaletoalevelwherethey in thedozens,andsomeofthemwillbe are goingtoseeasurgeofnewbrands,”saysRoll.“Notinthehundreds,but that withinafewyears,morepotentialtargetscouldmakethelistlonger.“You more entrepreneurialstartupsinsuchafast-pacedenvironment,islikelytomean as wellTonyMolyandHolikaHolika.Butthepaceofgrowth,creation make-up artistbrandSon&Park,eyelinerspecialistClio,lipcolorPeripera, regarding make-upbrandTooCoolForSchool,whileotherindependentsinclude more overtheyearstocome,”hecomments. Korean growthengineistoacquireabrand;you’regoingseethataccelerating to knowwhat’sgoingoninsideSouthKorea,andonewayreallygetthe the market,acquiringabrandisonewayin,Rolladds.“Thebigplayersaredying everyone islookingat,”sheadds. concept inpeople’sminds.Therewillbefurtheracquisitions,therearebrandsthat brands fromothercountriesinAsia],becauseKoreancultureremainsquiteavague says Bernardin.“Koreanbrandsandproductshavelessofan‘Asian’image[than a newimpetustothemarket,routine,andcanrecruitcustomers,” to bethefirstinawaveofsuchtransactions.“SouthKoreanbrandscanbring more acquisitionsoftheseplayers.Indeed,ELC’sinvestmentinDrJart+isexpected The popularityofKoreanbrandsbothathomeandabroadisexpectedtolead K-beauty acquisitionslieahead Peach andLily,whichofferK-BeautybrandstoUSconsumers. driven bythearrivalofahandfulwebsiteslikeMomomango,SokoGlamand TonyMoly, forexample,aresoldbySephoraintheUS.Theinfluxisalsobeing Companies (ELC)announcedinOctoberthatithadmadeaninvestment),and brands arealsomakinginroadsstateside.DrJart+(inwhichEstéeLauder Sephora stores,followingitssuccessfulintroductionintheUS2014.Other Asia, butalsoinNorthAmerica,whereLaneigerecentlylaunchedCanadavia As to the fast-paced rate of innovation, As tothefast-pacedrateofinnovation, Targets, however,maybehardtocomeby.Afewmonthsago,rumorsabounded And sinceinternationalbrandshavetraditionallystruggledtocarveoutaplacein n AmorePacific, in particular, is rapidly expanding internationally, not just in AmorePacific, inparticular,israpidlyexpandinginternationally,notjust n www.bwconfidential.com -December 3-16,2015 #121-Page 12 combination ofthesechannels. the beautypie,shesays.Local playersaregenerallypresentina and beautyboxesareallstrong channelscompetingforpartof spenders,” shecomments. because thereisaraceforprice.Koreanwomenareverycareful “Department storesaresaturated,andsalessluggish, Inspiration &InformationgeneralmanagerFlorenceBernardin. among theofferonmarket,”saysFrance-basedconsultancy brands, andIdon’tknowhowtheconsumerfindsherway is saturatedintermsofthebrandoffer.Thereaplethora continues tostruggle,accordingobservers.“Themarket has beentheirrelianceonthedepartment-storechannel,which Part oftheprobleminKoreaforinternationalpremiumbrands Korea: atoughmarketforinternationalplayers Meanwhile standalone stores, the internet, home shopping Meanwhile standalonestores, theinternet,homeshopping “ Martin Roll Martin RollCompanyceo to come more overtheyears see thataccelerating brand; you’regoingto engine istoacquirea the Koreangrowth to reallygetinside Korea, andoneway going oninsideSouth dying toknowwhat’s The bigplayersare ”

Cosmoprof Asia Trends from the East BW Confidentialreports on what was seen and heard at Cosmoprof Asia, which took place in Hong Kong from November 11-13 Show review

espite a slowdown in many Asian markets, organizers of beauty trade show Cosmoprof Asia DCosmoprof Asia said that this year’s event was a record edition. Some 63,241 visitors Took place: from November attended, growth of 5.5% on last year. There was a significant increase in visitors from 11-13 in Hong Kong the US and Europe, as well as from emerging markets, such as Chile, Thailand, Ukraine No of visitors: 63,241, and Vietnam. The show hosted 2,504 exhibiting companies, up 6% from 2014. +5.5% vs 2014 Cosmoprof Asia director and UBM Asia executive vice president Michael Duck No of exhibitors: 2,504, commented that the expansion of the show reflects the development of business in the +6% vs 2014 region and said that growth will continue despite a tougher economy in key countries, such as China. “There is no doubt that China will continue to grow. The recent economic problem is a big blip, but overall the trend is upwards, because cosmetics have become a necessity for the Chinese. There are also new big players like Korea and , marketing into China and ASEAN, which has changed a lot. People come to the show for trends just like they did 20 years ago, but the difference now is that there is a lot more to see.” There were two new areas at the show to highlight key trends in the region. Spot on Beauty covering 3,700m2 (39,826ft2) was dedicated to companies focused on finished There is no doubt products for the spa and wellness, hair, nail, cosmetics and personal care sectors, while “that China will Discover Trends showcased products from three fast-growing segments: natural and organic, baby care and men’s grooming. Masks and small-format packaging were also continue to grow. key trends. The recent economic Given the growth of Cosmoprof Asia, next year’s edition will have a different format spread across two venues and will last for four days instead of three. From November problem is a big blip, 15-17, the Asia World Expo will host exhibitors of ingredients, machinery and equipment, but overall the trend packaging, contract manufacturing and private label. From November 16-18, the Hong Kong Convention & Exhibition Centre will host exhibitors of finished products. is upwards, because cosmetics have Heard in show: industry players on Asia become a necessity for “There is still great potential in countries like Japan, and Singapore. China the Chinese is doing well, but the target is the low, rather than high end, as consumers there are looking for high-quality products, but are very price conscious.” Caseti project management executive Bryan Wong Cosmoprof Asia director and UBM Asia executive vp Michael Duck “In China we need to take into account a new channel: Wechat as a distribution ” channel is definitely a reality. Tier-three, tier-four and tier-five cities are growing the fastest and local brands are more familiar with these cities than international players and they are looking to merge to become stronger there.” Intercos strategic marketing manager Asia Anna Dato n n n

www.bwconfidential.com - December 3-16, 2015 #121 - Page 13 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Cosmoprof Asia

n n n “The market has changed considerably over the past five years: brands are attracted by more premium packaging, and there are more Chinese brands in this premium market; this is very new. Our biggest challenge is to offer sophisticated and complex packaging within a short period—time to market is becoming the most important asset.” HCP Packaging France president Eric Firmin

“Dual, multifunctional and easy-to-use products are more important in Asia, with Show review waterproof and smudge-proof products also popular. Demand from Asia is becoming more sophisticated; there are more Asian trendsetters, led by Korea.” Schwan Stabilo Cosmetics area sales manager Jeena Park

“[Traditionally] China is not a fragrance market, but things are changing with an increase in domestic consumption of perfumes. We win more and more projects with big Chinese manufacturers because they don’t trust local producers. Although this means that they need to import, which increases the price and lead time.” Parfex area sales manager Alexandre Levet

“The attitude to fragrance among Asians seems to be changing. Before there was no offer designed for them—it was either cheap fragrances or high-end products like Chanel. They have not been exposed to fragrance that much, but this is evolving.” Centdegres design director, managing partner Elie Papiernik

“Asia, especially China, is becoming more mature and appreciative of high technology and safe products. As the Chinese market is going upscale, Asian consumers realize the good price-quality ratio of French products. This demand for higher quality is a trend that will keep growing.” Cosmetic Valley export & communication director Franckie Venet

“In China, although consumers have more disposable income, they make informed purchases and a lot is done online. Brand awareness, social media and key opinion leaders are important to develop the Chinese market. Managing a new Western brand in China is definitely not an easy job.” Zwilling Beauty Group APAC business development manager Oliver Hart

“Asian consumers’ shopping habits have changed noticeably. As incomes have risen, they are becoming more Westernized and sensitive to quality. They have increased spending on cosmetics and healthcare products and are willing to pay premiums for high-quality goods.” Genie-S vice president Ralph Bou Nader

Seen in show There were a wealth of natural products at the show. These included Wedge Australia, which presented an anti-aging daily specifically designed for men and made from seaweed and organic olive oil; Lafe’s Natural Bodycare, which showed a n n n

www.bwconfidential.com - www.bwconfidential.comwww.bwconfidential.com - December - December3-16, 2015 3-16, #121 2015 - Page #121 14 -- PagePage 1414 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIA

L Show review Cosmoprof Asia of 96%natural ingredientsaddressingfemale hairloss. styling categories.Thenewest additionis“O’righthairtonicforher”,aproductmade more than100productsinthe ,conditioner,bodywash,hairtonicand planted togetherwiththepackaging afterusetogrowatree.Therangeconsistsof is createdusingnaturalcoffee. Eachbottleincludesthreecoffeebeansthatcanbe uses recycledcoffeebeansandthebrowncolorofrecyclable plasticpackaging Taiwanese companyHairO’rightpresentedtheTreeinaBottleline.Theformula remove impurities,killbacteriaandactasanexfoliator. light therapy,UVCleanlightTechnologyandexfoliatingbristles, andwhichclaimsto production. AlsoonshowwasUVCleanlight,amultifunctional productcombining cleansing brush.Thebeautydevicecombineslighttherapy tostimulatecollagen US-based companyCareplusSkinCarepresentedtheSonulaseLEDredlight US, UK,Belgium,TheNetherlands,Malaysia,,NewZealandandAustralia. brush. Itcosts$30($16forarefill)andissoldonline,inspasatdermatologiststhe Brushonblock and isdistributedinKorea,HongKongChina. like minicapsulesthatwhitenandmoisturizetheskin.Theproductlaunchedin2015 Korea-based in Korea. products comeincapsuleformatsandtargetteenagers.Theyarecurrentlysoldonly Korean brandAhvogoshowedconvenientpackagingforitsanti-acneproducts.The moisturize andofferUVprotection,anti-wrinklebenefitswhiteningproperties. cushion cosmetics.Themake-upproduct,whichcomesinpowderform,alsoclaimsto SPF 50+PA+++,totakeadvantageofthetrendformulti-functionalproductsand Korean companyGreencospresentedits5-in-1DeoproceUVWaterfulCushion Shower, anon–the-gocleanser,andSportsLubricant,amoisturizer. for thegroinarea:FreshandDryBalls,ageltextureanti-perspirant;Waterless “recognize theissuesmenfacebelowbelt”.Therangecomprisesthreeproducts the men’smarket.Thecompanysaysthatitsproductsarespecificallydesignedto UK-based brandBelowTheBeltclaimstohavecomeupwithanewsegmentin and vegetables. patented appliancecanbeusedbyconsumersathometomakemasksfromfruit patented FruitMaskMachinetocapitalizeonthegrowingtrendformasks.The Chinese companyZhongshanHonghaiPlasticTechnologypresentedits Astaxanthin totargetskinaging. exhibited AstasTrueRadiance,aproductthatfeaturesnaturalantioxidant preservatives, andNewZealand-basedSupremeBiotechnologies,which that claimtobefreeofglycols,parabens,syntheticfragrancesandchemical n range of sustainable personal-care products (deodorant, babycare, haircare) range ofsustainablepersonal-careproducts(deodorant,babycare,haircare) Salty FamilyGrouppresentedtheRealEggPack,asetofeightegg- presented its eponymous refillable sunscreen product in the form of a presented itseponymousrefillablesunscreenproductintheformof www.bwconfidential.com -December 3-16,2015 #121-Page 15 n

Store visit

Moving house

Chanel has just opened its first permanent beauty standalone in the French capital

hanel has chosen to move outside its familiar quarters in Paris’ Golden CTriangle and set up shop in the trendy Marais district for its first permanent beauty standalone in the French capital. The brand describes the decision as a desire to tell its story differently, and as a nudge towards the irreverent spirit of brand founder Gabrielle Chanel. The 72m2 (775ft2) space at 40, Rue des Francs-Bourgeois is housed in part of a former private mansion, and combines elements of historic architecture with contemporary design features. Its walls are a stark white, but are transpierced in places with bare stone sections. The floor is made of traditional ‘tomette’ clay tiles, worn with age, and an old well and black metal supports are also integrated into the design. Product displays are also formed from black metal, and appear suspended from the ceiling. Mirrors, meanwhile, play an integral role in the design, with a reflective ceiling as well as round, porthole-like mirrors of various sizes that are peppered around the walls. The store is designed to encourage customers to stay and discover more about the brand, and features make-up stations permanently staffed by make-up artists and fragrance experts on hand to offer advice. Specially created leather sofas inspired by Chanel those in Chanel’s private apartments on Rue Cambon encourage customers to relax, l Opened: October 2015 as do a selection of books, some of which are for sale, others just to be read in situ. l Location: Paris, France A boudoir-like men’s space offers the brand’s masculine fragrances and doubles up as a l Size: 72m2 (775ft2) private area for workshops. l Special features: The whole space is designed to be adapted with new seasonal installations, and one make-up stations, men’s wall is reserved for new artistic interpretations of brand imagery and iconic products from area, seasonal installations, Chanel’s creative team. Chanel’s existing beauty standalone in Paris, a pop-up on Rue staffed by make-up artists and Saint-Honoré, is set to close before the end of the year. n fragrance experts

www.bwconfidential.com - December 3-16, 2015 #121 - Page 16 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Store visit

s Store fittings are suspended from the ceiling in Chanel’s new beauty space

s Mirrors play a key role, both in the ceiling and as round, porthole-like features on the walls

www.bwconfidential.com - December 3-16, 2015 #121 - Page 17 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL BW Confidential The inside view on the international beauty industry

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