www.bwconfidential.com The inside view on the international beauty industry August 27 - September 23, 2015 #116

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The buzz 2 Traveling well News roundup ravel retail has been singled out as one of the most Netwatch 7 Tinnovative distribution channels for beauty for some time, and one that domestic retailers should look to for inspiration. Social media monitor This idea was reinforced over the summer with a flurry of new creative concepts in the channel. Interview 8 Qatar Duty Free, for example, teamed up with L’Oréal Luxe Estée Lauder Companies svp Latin to launch a pop-up store called When East meets West at America Daniel Rachmanis Hamad International Airport in Doha. The pop-up is conceived as a luxury showcase for oriental and Western fragrances from Insight 11 five of L’Oréal’s brands. Meanwhile, LVMH-owned retailer Spain’s beauty market made its debut in travel retail at International Airport with a pop-up store stocking its private-label brand. Bulgari too, has said it will launch a pop-up store Store visit 14 in October at Charles de Gaulle Airport, Paris that will focus on the link between the L’Oréal Dermacenter, Paris brand’s jewelry and fragrances and put the spotlight on its most prestigious fragrances. This comes on top of more permanent initiatives at some of the industry’s key operators, such as DFS’ new T Galleria beauty-only stores or LS Travel Retail’s Amuse Beauty Studio, which aims to make beauty more personal through special services. All these efforts illustrate travel retail’s growing role as a showcase for beauty—a role similar to that fulfilled by department stores in the past. It also has analysts asking when domestic retailers will begin to show the same level of experimentation and interest in coming up with more creative shopping environments. Meet the BW Confidential Oonagh Phillips team at: Editor in Chief [email protected] l MakeUp in New York, Sept 9-10 l Beyond Beauty Paris, Sept 15-17 l Cosmopack New York, Sept 16-17 l Cosmetic 360, Paris, Oct 15-16 l TFWA World Exhibition, Cannes, Oct 18-23 l LuxePack Monaco, Oct 21-23 News headlines daily on www.bwconfidential.com @BWCbeautynews l Cosmoprof Asia, Hong Kong, Nov 11-13 News roundup At a glance...

n Lagardère Travel Retail to acquire Paradies

n Dufry closes 50.1% acquisition of stake of World Duty Free The buzz n Sephora makes travel-retail debut

n Neiman Marcus to launch IPO

n P&G appoints new ceo

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

Retail

France-based Lagardère Travel Retail has signed a deal to acquire North American airport travel retailer Paradies for $530m in cash from Freeman Spogli & Co, the Paradies family and other shareholders. Paradies operates in more than 76 airports in North America. In its fiscal year ended June 28, 2015, Paradies generated sales of $515m. Combining the activities of Lagardère Travel Retail in North America and Paradies would create the second-largest player in North America. The newly combined company would have sales close to $800m and a presence in around 100 airports. Lagardère said the deal would result in significant savings, which could reach $15m per year from the fourth year after the acquisition. Gregg Paradies, president and ceo, would remain at the helm of the new company. Lagardère says the reach of Paradies is complementary to its own operations in the region, where it has a strong presence in Canada and several international US airports, including New York-JFK and Los Angeles.

Swiss travel retailer Dufry has closed the acquisition of the 50.1% stake of World Duty Free (WDF) from Edizione. The deal was approved by all relevant antitrust authorities. Dufry is now preparing the mandatory tender offer for the remaining 49.9% of WDF’s shares. Dufry started to fully consolidate WDF from August and integration is planned to follow shortly afterwards. Dufry expects to generate savings €100m per year. The acquisition of WDF gives Dufry a 24% share of the airport retail market globally.

LVMH-owned retailer Sephora has made its debut in travel retail at Abu Dhabi International Airport. Sephora will open two pop-up stores in terminal 1 and terminal 3 between August 1 and October 31 in partnership with Abu Dhabi Duty Free and LVMH- owned travel-retailer DFS. The stores will stock the private-label range Made In Sephora. In other news, Sephora announced its move into the beauty box subscription market in the US this fall. The retailer’s box, called Play! By Sephora will cost $10 per month and will contain five deluxe-size prestige products. Each box is curated around a specific theme. In addition to product, the box includes a Play Book, which offers application tips and information about each item in the box. Included in the Play Book is a Play Pass, a card offering personalized one-to-one tutorials at a Sephora store, where consumers can learn about the products in their box from the retailer’s staff. Sephora will begin the box service in a limited number of cities in September, with a full US launch in early 2016. n n n

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n n n Travel-retail operator Qatar Duty Free has launched a fragrance pop-up store in collaboration with L’Oréal Luxe at Hamad International Airport, Doha. The pop-up store, called When East Meets West and located in the airport’s departures concourse, showcases fragrances from five L’Oréal brands: Lancôme, Giorgio Armani, Yves Saint Laurent, Ralph Lauren and Viktor & Rolf. Each of the brands shows oriental and Western-

The buzz style fragrances. The pop-up shop also offers a bottle engraving service.

Bulgari is to open its first fragrance pop-up store in Paris at Charles de Gaulle airport in October. The store will be located at terminal S4 and will be open from October 1-31. The store is designed to be what Bulgari calls a jeweler’s temple and evoke the brand’s history. It will focus on the links between Bulgari’s jewelry and fragrance and feature the brand’s most prestigious perfume collections, including Eau Parfumée and Le Gemme. Bulgari’s new fragrance Goldea will also be on show. An oval counter at the center of the store will present interactive animations. The store will offer a tea ceremony with four types of tea: green, white, red and blue, which correspond to fragrance notes. Consumers will also be encouraged to explore the world of gold.

AS Watson has opened a Watsons flagship store in Hong Kong. The 8,000ft2 (743m2) three-story store is located on Yun Ping Road in Causeway Bay and is the largest Watsons store in Hong Kong. The health and beauty store stocks more than 8,300 products, including 840 healthcare and beauty brands, of which 250 are Watsons exclusives. Last year, AS Watson opened and refitted 76 stores in Hong Kong and this year, the number is expected to come to over 80. The investment involved is HK$620m (US$80m) over two years. The group plans to open 1,300 new stores this year in different markets.

US-based prestige department store Neiman Marcus is to list on the stock exchange after 10 years of private ownership. Proceeds from the IPO will be used to repay some of the company’s $7.4bn in debt. Neiman Marcus was taken private by a private-equity consortium led by Texas Pacific Group (TPG) and Warburg Pincus in 2005. In 2013, TPG and Warburg Pincus sold Neiman Marcus to Ares Capital and the Canadian Pension Plan Investment Board for $6bn, choosing a sale over an IPO. The company operates 41 Neiman Marcus stores and two Bergdorf Goodman stores.

Estée Lauder Companies-owned MAC opened a flagship store in São Paulo, Brazil in July. The 117m2 (1,259ft2) store is located in the city’s famous Paulista Avenue and is the brand’s 48th and biggest boutique in Brazil. The store is based on the brand’s new-generation design, which includes a color wall featuring beauty looks and and make-up lessons, which are either free or given when a shopper buys R$90 (US$25.89) of product. The store sells a total of 1,800 skus. Strategy

French flavor and fragrance company Mane has invested $1.5m in a new creative center in São Paulo, Brazil to strengthen its position in the country and Latin America. The new 1,500m2 (16,146ft2) center is housed in a state-of-the art business complex in the city. n n n

www.bwconfidential.com - August 27 - September 23, 2015 #116 - Page 3 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL The buzz n bodycare brands AdidasandPlayboy. driven primarilybylowernetrevenues from Skincare andbodycarefell5% like-for-like, of newlaunchactivityinsome brands. declines incelebritybrandsand alowerlevel sales weredown2%like-for-like, dueto fragrance, skincareandbodycare.Fragrance color cosmeticswasoffsetbydeclinesin company saidthe8%like-for-likegrowthin on alike-for-likebasis)to$4.40bn.The previous year.Netsalesweredown3%(flat $232.5m, upfromalossof$97.4minthe basis) to$1.02bn. quarter declined2%(flatonalike-for-like a resultoftaxbenefit.Netsalesforthe in thesameperiodayearago,largelyas came inat$21magainstalossof$20.1m fourth-quarter offiscal2015.Netprofit US-based strength oftheUSdollar. unfavorable foreignexchangeduetothe MERS virusontravel-retailinKoreaand a declineinspendingbyRussianandBraziliantravelers,theimpactof growth fortheEstéeLauderandCliniquebrands. above theprior-yearperiod,tocoincidewithnewlaunches,aswellinitiativesreignite and expandeddistribution. Malone andTomFordsawdouble-digitgrowth,partiallydrivenbynewproductlaunches sales weredown1%(+5%onaconstantcurrencybasis)to$1.42bn.MichaelKors,Jo currency basis)drivenbydouble-digitgrowthfromSmashboxandTomFord.Infragrance, In make-up,thegroupreporteda2%increaseinsalesto$4.30bn(+7%onconstant from theEstéeLauderandCliniquebrandsthatwerelaunchedinprior-yearperiod. basis), reflectingthenegativeimpactofforeigncurrencyandlowersalesproducts profit wasdown9.2%to$1.09bn. dollar. Excludingtheimpactofforeigncurrencytranslation,netsalesincreased3%.Net quarter wouldhaveincreased7%.Netprofitfortheperiodwasdown40%to$153m. Adjusting fortheimpactofacceleratedorders,netsalesinconstantcurrency 2014, whichcreatedanunfavorablebasisforcomparison,andtocurrencyfluctuations. fourth quarter2015,dueinparttoacceleratedretailerordersthesameoffiscal Estée LauderCompanies(ELC)reporteda7.6%declineinnetsalesto$2.52bnforits News roundup For the fiscal full year, net income rose to For thefiscalfullyear,netincomeroseto However, ELCiscautiousaboutslowerretailgrowthinHongKongandChina, For thefirstquarteroffiscal2016,companysaiditwillincreaseinvestmentspending For thefullyear,skincarenetsalesfell6%to$4.48bn(-2%onaconstantcurrency For thefullyear,netsalesfell2%to$10.78bn.SaleswerehitbystrengthofUS Results moved to profit in the Coty movedtoprofitinthe 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 By region, a 1% like-for-like growth rate in the Americas was tempered by flat like- for-like results in EMEA and Asia Pacific. Emerging markets grew 4% like-for-like during the year, accounting for 29% of net revenues in fiscal 2015 compared to 28% of net revenues in the prior year.

The buzz Launches

Parfums Christian Dior is to unveil its first men’s fragrance in 10 years this fall. The new scent called Sauvage is set to be a major launch for the brand and will be backed by a significant ad investment. Actor Johnny Depp is to front the new fragrance in an ad campaign, which includes a film directed by Jean-Baptiste Mondino featuring music from slide guitarist Ry Cooder. Dior underlines that the new scent is not a flanker to its Eau Sauvage line, but is its own standalone fragrance. The fougère scent created by in-house perfumer François Demachy, opens with top notes of bergamot and citrus, a heart of ambroxan and a base of elemi and pink pepper. Sauvage will retail at €67.50 (60ml EdT) and €92.90 (100ml EdT).

Coty is launching a new fragrance from fashion designer Marc Jacobs this fall. Called Decadence, the woody scent was created by master perfumer Annie Buzantian of Firmenich in collaboration with perfumer Ann Gottlieb and Marc Jacobs. The fragrance comes in an emerald green bottle, inspired by the classic shape of a Marc Jacobs handbag. The bottle has a gold cap with textured snakeskin detail, and features a gold chain and black silk tassel. Decadence will launch in October and is priced at €55 (30ml EdP), €85 (50ml EdP) and €115 (100ml EdP).

Shoe designer Christian Louboutin is to launch a lipstick line this fall. The brand, whose beauty business is run by US-based Batallure Beauty, will introduce a collection of 36 lipstick colors in September. The lipsticks come in a gold-colored tube, which can be worn BW Confidential as a necklace. The lipstick retails at $90. The move into lipsticks comes after Louboutin 4 avenue de la Marne launched a nail polish line last August. 92600 Asnières sur Seine, [email protected] Tel: +33 (0)1 74 63 49 61 Fax: +33 (0)1 53 01 09 79 www.bwconfidential.com People ISSN: 2104-3302 Publisher: Nicolas Grob Editorial Director: Oonagh Phillips P&G has appointed David Taylor as its new president and ceo, effective November 1. [email protected] Editorial Coordinator & Assistant: Taylor is currently group president of global beauty, grooming and health care. He will Katie Nichol [email protected] succeed interim ceo AG Lafley, who will become executive chairman of P&G. Contributors: Sophie Douez, Alex Wynne, Lafley, who was ceo of the group from 2000 to 2009, came out of retirement to take Renata Ashcar, Mayu Saini, Raphaëlle Choël, Corinne Blanché, Naomi Marcoulet the reins of the company in 2013 following the exit of Bob McDonald. He implemented a Subscriptions 1 year: electronic publication (20 issues) + strategy to reduce the number of brands in P&G’s portfolio, which culminated in the deal print magazine (4 issues) + daily news: €499 or US$699 to sell 43 beauty brands to Coty. P&G is now organized into four industry-based sectors [email protected] with 10 categories and 65 brands. Lafley was also charged with finding a new ceo. Advertising [email protected] BW Confidential is published by Noon Media 513 746 297 RCS Nanterre Beauty tool manufacturer Anisa International has appointed Rachelle Copeland Copyright © 2015. All rights reserved. as vice president of product development. Copeland will lead the product design and Reproduction in whole or in part without permission is strictly prohibited. development team and contribute to the company’s strategy. n

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Cosmoprof North AmericaLasVegas... in NewYork•Cosmetic360 Paris•BeautyEurasiaIstanbulCosmeticBusiness Munich •CosmeTokyo,CosmeTech Hong Kong•PittiFragranze Florence•LuxePackNewYorkMakeUpinParis • TFWAAsiaPacificSingaporeMake Up • LuxePackMonacoMake UpinSãoPaulo•BeyondBeautyParisInCosmetics •LuxePackShanghaiCosmoprof Asia Beauty ExpoShanghai•Make UpinSeoul•DutyFreeShowoftheAmericasOrlando •IntercharmMoscowEsxenceMilan ...TFWA WorldExhibitionCannes •BeautyWorldMiddleEast Dubai•PCDParisCosmoprofCosmopackBologna • In-depth coverageoftheglobalbeautymarket Distribution atallthemajorinternational events The views expressed in this section are those of bloggers and do not represent the opinions of BW Confidential Netwatch effect thansea-saltsprays,theyarelikedfortheirnon-stickymoisturizingproperties. Bloggers predictsugarhairsprayswillbeabigtrend.Saidtogivesoftertexturizing baking soda-freeproductforsensitiveskin. baking sodaandorganicveganingredientslikeplantoils.Thecompanyalsomakesa Meow TweetDeodorantCreamislikedforitsnatural-basedformulaof bloggers sayitisagoodprimerofferingcolor-correctiontogiveeven-tonedlids. for offeringmoisturizationandprotectiontheeyelids.Ithasasmoothingtexture Benefit’s newAirPatrolproduct,aBBcreamforeyelids,isdescribedas‘genius’idea Spa oftheWorldrangebasedonethicallysourcedingredientsfromaroundworld. the luxuryimagehasinjectednewlifeintobrand.Theredesigndebutedin A revampedlookforTheBodyShopproductshasbeenpraisedbybloggers,whosay $39 andwithouttheskinreddeningirritationsthatresultwithclassicpeels. Located intheButterflyStudiosalonNewYork,PeelBaroffersexpresspeelscosting US brandBeautyRX’sPeelBarissaidtobechangingthegameinskincarepeels. Social mediamonitor BW Confidential BW Boost yourinternational business withBW Confidential reportsonwhat’sbeingsaidaboutbeautysocialnetworks > [email protected] The insideviewontheinternationalbeautyindustry Estée Lauder Companies svp Latin America Daniel Rachmanis

Full speed ahead Estée Lauder Companies is seeing strong growth in Latin

Interview America, despite a challenging environment. Estée Lauder Companies’ svp Latin America Daniel Rachmanis tells BW Confidential about the group’s strategy for the region

How is your Americas business performing? The prestige beauty market in Latin America is growing in double digits. This is very good compared with other prestige markets worldwide, which are growing around 4%—Latin America is growing three times as fast as global markets. Countries seeing especially strong growth are Mexico, Peru, Brazil and Colombia. Other countries like Venezuela and Argentina are stable or declining due to macroeconomic challenges. Estée Lauder Companies had growth of 28% in fiscal 2015 in Latin America compared to fiscal 2014, and it is the company’s fastest-growing region. We are gaining market share in all categories. Mexico is our largest market, Brazil is our fastest-growing market and we see Peru and Colombia as future growth markets. Our priorities are to continue to gain market share in prestige and to recruit middle-class consumers, as well as capture traveling consumers. High-end specialty Growth is coming from aspirational, middle-class consumers trading up to a better pharmacies are a shopping experience in our freestanding stores, like MAC and Clinique. In terms of “ channels, specialty stores, e-commerce and freestanding stores are growing well. In strong format for categories, make-up is seeing very strong growth, followed by skincare, while fragrance represents a big opportunity for us. prestige brands, so it is a channel that we How are you dealing with the difficult situation in Brazil? The macroeconomic situation in Brazil is quite challenging, with inflation, a drop in are looking at consumption and the devaluation of the real. However, we grew 45% in Brazil last year. Brazil is the fastest-growing market for us globally. While we remain cautious, the macroeconomic situation has not affected our growth so far. We are not reducing Estée Lauder Companies svp investment, and we are working to continue growing in Brazil and gaining market share. Latin America Daniel Rachmanis

In terms of distribution, will you focus mainly on developing your own ” standalone stores for your brands in this region? In Mexico and Chile, we have very strong department-store partners. Department-store Estée Lauder Companies distribution does not exist in Brazil, so we are focused on our own freestanding stores Latin America there—we have 50 MAC doors and 14 Clinique stores and kiosks. Our second growth l Brazil is the fastest-growing channel is e-commerce, where our sales are growing nearly 100% compared with the market globally for the group previous year. We also believe in the growth of specialty players, like Sephora. l MAC is the number-one prestige brand in Latin America Will you open stores for brands such as Smashbox? l No of MAC stores We did a test with Smashbox, whereby we launched a pop-up store in Brazil—the in Brazil: 50 brand’s first in the world—in 2014. The group has a portfolio of over 30 brands and in l No of Clinique stores Brazil we have 10, so there is a lot of opportunity to bring new brands to Brazil. n n n in Brazil: 14

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n n n The criteria we are using to decide which brands enter Brazil is to first determine the relevance of the brand to Brazilian consumers. For example, we know that categories like fragrance and make-up are very important for Brazilians. The second criteria is the distribution model. We are giving priority to brands that have a successful retail model There is a lot of around the world, such as Aveda, Jo Malone, La Mer and Bobbi Brown, although we Interview don´t have any concrete plans at this stage. “opportunity to bring new brands to Brazil. How do you see the pharmacy channel evolving for prestige products? High-end specialty pharmacies are a strong format for prestige brands, so it is a channel The criteria we are that we are looking at for some of our brands in a very selective way. using to decide which It seems that the focus for this market is on make-up and skincare, will you brand comes first is develop fragrance in the region, given the category’s strength there? the relevance of the Some two-thirds of the prestige beauty market in Latin America and almost 80% in Brazil is in fragrance. What’s interesting is that even with that, according to the latest brand to Brazilians. Segmenta data, the number-one prestige brand in the region by far is MAC, which is The second critera is a make-up brand. Estée Lauder Companies in Latin America has become the number- one player in prestige beauty. Clinique is the number-one brand in prestige skincare. the distribution model. However, fragrance remains the largest category in the market, and on a global basis We are giving priority we are looking to establish Estée Lauder Companies as the leader in the luxury fragrance segment with brands like Jo Malone, Tom Ford and the recently acquired Editions de to brands that have a Parfums Frédéric Malle and Le Labo. successful retail model How do you see beauty consumers’ habits changing? around the world In Brazil, consumers will continue to look for shopping experiences, services, exclusivity and unique interaction with the brand—this is something consumers in the country didn’t have before. What I can see is that the retail brands that are offering consumers a unique Estée Lauder Companies svp experience tend to grow faster than brands that don´t, which are basically door- to-door Latin America Daniel Rachmanis and regular retail brands. ” How can you get consumers to buy your brands rather than cheaper local brands? Clinique and MAC are very well-positioned at the entry level of prestige. In the case of MAC, we have our make-up artists providing education and make-up services for clients. For Clinique, our beauty advisors provide skin care advice and services. Also, for some of our entry-price categories like lipstick for MAC or the Three-Step products for Clinique there is the possibility of paying in installments, which creates an opportunity for middle-class consumers to buy into a prestige brand in an accessible, affordable way.

How can you better adapt your product ranges to Brazilian consumers? For MAC, we regularly launch collections that correspond to Brazilian trends, like the recent Julia Petit Collection and the collection by fashion designer Pedro Lourenço. In our MAC and Clinique stores in Brazil we look to categories that are more relevant to Brazilian consumers and we make s MAC regularly launches collections tailored sure that they are clearly identified. n to Brazilian tastes, like those from Julia Petit

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15. 16. 17. 2015 www.cosmeeting.com

BEAUTY REBORN IN PARIS

THE TRADESHOW TO DISCOVER & RECRUIT Media: INTERNATIONAL BEAUTY BRANDS A BEYOND BEAUTY In conjunction with Creative Beauty Paris EVENT Insight

Spain Getting better Spain’s beauty market is picking up, but has undergone significant changes as a result of the crisis, which both brands and retailers need to come to terms with

hings are finally beginning to look up for the Spanish beauty market. For the Tfirst time in nearly a decade, cosmetics and fragrance sales are beginning to rise as consumers regain confidence in the economy and begin spending again after several years of recession. In 2014, total beauty sales fell 1.1% to $9.09bn, according to Euromonitor International. “The market is very dynamic, especially in fragrance,” says NPD Beauty Spain We now have executive director Isabel Alonso. The selective market grew 5% in the five “approximately 2,200 months ended May 2015, Alonso said, after a drop of 2.5% last year. “The economy is better, and families are daring to spend; there is a momentum that prestige doors, that’s will be difficult to slow down. People want to spend and to treat themselves, practically 240 less and perfumery offers that opportunity to the consumer,” she says. Additionally, tourism in Spain is on the rise, proving an additional boost to than in 2012 spending as consumers choose destinations in Spain, over areas like North Africa and Turkey because of current insecurity, and Greece due to the country’s NPD Beauty Spain executive economic problems. director Isabel Alonso Overall, fragrance and make-up are seeing relatively strong growth so far this year, boosted notably by new products, says Alonso. Prestige fragrance n n n ”

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n n n sales rose 7.3% from January to May this year, while the make-up category was up 6.2%, according to NPD. “Certain brands have grown their market share through good innovation as well as by strengthening their Insight pillars,” says Alonso, citing the successes of Yves Saint Laurent Black Opium (L’Oréal) and Paco Rabanne Invictus (Puig) as examples. The skincare category, meanwhile, is suffering from a lack of innovation compared with previous years, mirroring its performance in other markets, and is seeing flat to declining sales. Prestige skincare sales from January to May this year fell by 0.1%. Nevertheless, despite the relatively good news, growth in the prestige Despite the first segment is expected to slow towards the end of the year as consumers signs of economic embrace more of a wait-and-see attitude to spending ahead of general “ elections expected in December. “The market is quite sensitive to electoral recovery in 2014, the periods,” notes Alonso. She expects overall growth for the prestige segment to price sensitivity of come in at around 3% for 2015. Spanish consumers Crisis changes face of prestige retail remained, pushing The economic crisis has nonetheless transformed the face of prestige retail in Spain, forcing hundreds of perfumeries to close, which has changed the unit prices down and dynamics of the market. Regional perfumery chains have become stronger hindering value sales in this context, buying up ailing smaller retailers that could not compete. “We now have approximately 2,200 prestige doors,” says Alonso, “That’s in several categories practically 240 less than in 2012.” During the crisis, retailers, faced with consumers trading down (brands such as Kiko and discount perfumery chain Equivalenza, as well as private label Euromonitor International were the main beneficiaries of this) engaged in a discounting war, with certain regional chains coming out winners, according to sources. “Margins are becoming smaller and lots [of retailers] cannot survive,” observes ArtDeco ” vice president of marketing Anna Blasco. Partly as a result of fewer doors, prestige sales in Spain have shrunk from 25% of overall beauty sales in Spain beauty market* by category 2014 2011 to around 20% in 2014, according to estimates. Category 2014 sales % change $bn 2014/2013 Pharmacies grow beauty sales Skincare 1.73 -0.4 Pharmacies, meanwhile, have Haircare 1.38 -0.6 grown their share of beauty Fragrance 1.34 -4.1 sales. One brand to have chosen Color cosmetics 0.93 -1.7 the pharmacy route in Spain is Men’s grooming 0.73 -3.1 upscale skincare line Ioma, which is aiming to be in 300 Mass beauty & 5.58 -0.8 pharmacies in the country by the personal care end of 2015. “Our diagnostic Premium beauty & 2.08 -2.6 machines make Ioma a very personal care different brand, and for the Total beauty & 9.09 -1.1 pharmacy channel it is a way for personal Care them to attract new consumers Source: Euromonitor International *Retail sales price and boost their income,” n n n

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n n n Ioma ceo Jean-Michel Karam tells BW Confidential. As the market emerges from nearly a decade of declining sales, discounting remains a challenge. “Spanish consumers seem to have embraced frequent Insight discounts and promotions as normal,” market-research company Euromonitor International stated in a recent report. “Despite the first signs of economic recovery in 2014, the price sensitivity of Spanish consumers remained, pushing unit prices down and hindering value sales in several categories.” This has been a disadvantage for mainstream brands especially. “The high- end luxury brands have performed well. It is the lower-priced brands that have suffered from the effects of competition,” says Alonso. Spanish consumers are looking for value, she states, not just low prices, and brands have seen strong business for large-sized fragrances, which now represent 30% of the market in unit terms. “Many international brands thought that if Spanish consumers are having trouble spending, they had to offer small formats, but that is not how the Spanish consumer reasons at all,” she says.

Retailers focus on exclusivity Retailers are focusing more on introducing exclusive brands, which were in the past the preserve of Spain’s main department-store operator El Corte Inglés and LVMH-owned beauty retailer Sephora, sources say. Most of the major retailers clearly highlight their exclusive brand offer on their websites as a unique selling point. “Retailers are seeking closer collaborations with manufacturers, [and] there are lots of chains or associations of perfumeries, that are seeking the advantages offered by differentiating through exclusivity,” comments Alonso. Indeed, it is a way for retailers to move away from an offer dominated by price alone. Perfume Holding offers its Atkinson’s niche brand at El Corte Inglés, for example. “We are happy with Spain concerning this category Spain prestige market growth by category Jan-May 2015 of product,” Perfume Holding Category % change Jan-May 2015/ vice president of marketing Jan-May 2014 Brigitte Wormser says, although she admits that overall, the Fragrance +7.3 market remains difficult. Make-up +6.2 It seems that brands will Skincare -0.1 have to integrate the changed Total prestige market +5.0 dynamics of the Spanish Source: NPD Beauty market into their strategies to return to growth, especially when it comes to negotiating Spain prestige brand ranking by category Jan-May 2015 with retailers. Rank Fragrance Skincare Make-up Nevertheless, most industry players agree that the ongoing 1 Chanel Biotherm Lancôme signs of a turnaround that some 2 Paco Rabanne Clarins Estée Lauder had begun to despair of can only 3 Loewe Estée Lauder Clinique be good for the market. n Source: NPD Beauty

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L’Oréal opens Dermacenter in Paris L’Oréal brings five of its dermo-cosmetics brands together with a strong service offer in a new Dermacenter store in Paris

’Oréal’s active cosmetics division has opened a new store in Paris selling its five dermo- Lcosmetics brands: Vichy, La Roche Posay, SkinCeuticals, Roger & Gallet and Sanoflore. Called Dermacenter, the new 37m2 (398ft2) store is located in Paris’ marais district, which is home to a string of beauty boutiques. Dermacenter sells 700 references from the five brands, and a pharmacist and skin expert are on hand to provide advice to consumers. The store also hosts a range of services, including skin diagnosis using what the company calls a high-tech tool that can measure eight different types of skin problems, a make-up workshop and a treatment room offering express treatments using the SkinCeuticals brand and mini-treatments using Vichy and La Roche Posay. L’Oréal already operates Dermacenters in Asia, Latin America, the Middle East and Dermacenter Paris Eastern Europe. l Opened: July 2015 To coincide with the store opening, L’Oréal has also launched My-Dermacenter.com, l Location: Paris, France an e-commerce site offering a range of services, including expert advice through a live l Brands on offer: Vichy, chat with skin experts and skin diagnosis. L’Oréal says the site’s aim is to learn about La Roche Posay, SkinCeuticals, consumers’ needs, recruit young consumers to the pharmacy channel and support French Roger & Gallet and Sanoflore pharmacies in their e-commerce strategies. l Size: 37m2 (398ft2) Analysts say that both the store and the website could be seen as a competitor to the l Special features: pharmacy channel. However L’Oréal claims that the website can offer pharmacies an skin diagnosis using tool example of how to approach e-commerce and the type of content they could use on their to measure skin problems; own site. Through the site’s store locator, it offers a web page for each of its authorized make-up workshop; pharmacy partners where they can add details such as opening hours and services. It also treatment room offering proposes training programs for pharmacists focused on boosting their online visibility. express treatments using the L’Oréal says that the site is intended to develop shopper traffic at pharmacies, especially SkinCeuticals brand; mini- among the 15-24 age group. It adds that 81% of consumers search on the web before treatments using Vichy and La buying a product, but that 88% of them end up buying in a brick-and-mortar store. n Roche Posay

www.bwconfidential.com - August 27 - September 23, 2015 #116 - Page 14 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Store visit

s The Paris Dermacenter brings together five of L’Oréal’s dermo-cosmetics brands

s The store hosts a range of services, including skin diagnosis using what the company calls a high-tech tool, and a make-up workshop

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