www.bwconfidential.com The inside view on the international beauty industry June 12-25, 2014 #94
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The buzz 2 Retail buys News roundup etail consolidation continues apace. The news that Netwatch 6 RSwiss travel retailer Dufry will buy The Nuance Group created shockwaves in the industry. The deal is Beauty blogger review the biggest acquisition that the travel-retail sector has ever seen and furnishes Dufry with a strong leadership Interview 7 position, in the form of a 15% share of the global airport La Prairie vice president Asia retail market. Its nearest competitor is WDF, with an 8% Peter Stockdale share. The deal is significant for beauty. Perfumes and cosmetics will emerge as the largest product category for Insight 10 the combined company, representing 33% of sales. Retail in Brazil Suppliers are often wary of these mega mergers and view one less player to deal with as automatically meaning reduced negotiating power. They also Show review usually question where savings will be made and fear that there will be less Luxe Pack New York 14 investment in-store, as money is poured into the acquisition process, expansion China Beauty Expo 15 and integration. Still, several brands told BW Confidential that they don’t expect this deal to Store visit 16 make such a big difference to their day-to-day business, and that they have Sephora, São Paulo, Brazil gotten used to operating in an increasingly consolidated retail landscape. However, suppliers may have a lot more to get used to in the future, as consolidation both in the domestic market and in travel retail is likely to intensify. Indeed, one ceo from a major brand told BW Confidential last week that in the next five years, there will probably only be around two or three main retailers to deal with in the US and Europe. The balance of power looks set to shift once again.
Oonagh Phillips Meet the BW Confidential Editor in Chief team at: [email protected] l MakeUp in Paris, June 12-13
l Beyond Beauty Paris, September 9-11
People CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIA CONFIDENTIA L L The buzz Strategy Travel retail Stay informedwithourdailynewsheadlinesonwww.bwconfidential.com News roundup acquisition, which kept the group develop itsmassbusiness.However, muchofTJoy’smanagementteamleftfollowingthe from putting together a strategybought forTJoy the in company.2010, with the aiminternational of using the power company’s brands, distribution which it says platform have more to growth potentialdistribution inthemasschannel. in China. Coty marketing and brand-building activities, Adidas, Rimmel,andPlayboy.Cotysaiditwouldoverseedevelopment, production, while taking advantagedistribution of Li & Fung’s group broadLi & Fung toUS-based Coty hasdistribute signed ansome agreement of its masswith brandsHong Kong–based in China, consumer-goodsincluding and logistics platform. Nuance’s purchasing into both itsincreased purchasingpowerandtheintegrationof supply chain and renewals and win new contracts forin strategicconcessions, areas. and provide a providesolid foothold a differentiated to secure proposition when competing North and Central Europe, Asia,Mediterranean, the US and Canada. where it will nowwill have strengthen a leading its position, positions in strategic markets in the changing thescopeoftravel-retailindustry,”commentedDufryceoJulianDiaz. Dufry, but also for the travel-retail industry. The scale andSfr2.1bn breadth ($2.3bn) of our businessand an adjusted will Asiabe EBITDA and North of Sfr156m America, ($173.9m). and more than 350 stores. In 2013, Nuancecountries, 239airportsandanetworkof1,750stores. reported sales of in the airport retail industry,combination with a global of themarket two sharecompanies ofretail 15% will and company,confirm a presence Dufry’sThe Nuancein 63position Group,Swiss travelretailerDufryistoacquiretheworld’ssixth-largestduty-freeandtravel- as for the Sfr1.55bn worldwide ($1.73bn). leader The Swiss group says the Coty also announced that it would discontinue Chinese brand TJoy, to focus on its Dufry expects an improvement in gross margin through Dufry expectsanimprovementingrossmarginthrough The groupsaysthatcombiningthetwocompanieswill Dufry claims the geographic presence of Nuance “The acquisition of The Nuance Group by Dufry is a transformational deal, not only for The NuanceGroupoperatesretailspacein66locationsacross19countriesEurope, n n n n At aglance...
Shiseido torolloutmajorskincarelaunch Douglas todivest38storesinFranceaspartofNocibéacquisition Coty signsdistributiondealwithLi&FungforChina,discontinuesTJoy Dufry toacquireTheNuanceGroup www.bwconfidential.com -June12-25, 2014#94 -Page 2 Americas: 44%;Australia:9%;other:2% • Combined group sales by region:group’s sales,thelargestproductcategoryforgroup EMEA & Asia: 46%; • Perfumes & cosmetics will account• Thecombinedgroup’ssalescometoSfr5.56bn($6.2bn) for 33% of the combined airport retailmarket • The combined group will have ($613.3m) innewdebt a 15% share of the global be financedwithSfr1bn($1.1bn)inequityandSfr550m • Dufry will buy Nuance for Sfr1.55bn ($1.73bn).The DufryNuancedealinfigures The deal will n
The buzz Retail n 2015 andwillbedistributedglobally.Wildfoxisinmorethan30countries. expand its designer fragrance portfolio.vintage-inspired The brand’s women’s first designer fragrance US-based ElizabethArdenhassignedafragrancelicensewithWildfoxCouture, brand. will Arden launch says in the spring deal is an opportunity to three years. TSG acquired its stakePartners, in Perricone the brand’s MD inproduct 2006. salesbrand PerriconeMDtoUK-basedfundLionCapital.AccordingTSGConsumer and earnings have more than American investmentcompanyTSGConsumerPartnershassolditsshareofskincare doubled in the past Skin Health.Thecompany’sfoundationistobeGalderma. include the specialized medicalacquiring skin treatment from L’Oréal. category, In throughFebruary, the Nestlé creation announced of Nestlé it would commercializes thebrandsinmarketsoutsideUSandCanada. extend its activities to based Valeant Pharmaceuticals Internationaldermatology brandsRestylane,Perlane,Emervel,Sculptra,andDysportfromCanada- for $1.4bn in cash. In abidtoboostitsskincarebusiness,SwissgroupNestléisacquireaesthetic Nestlé already single largestmarket,accordingtothecompany. brands, which together reported investment companyTSGConsumerPartners.Henkelwillpay€270mforthethree sales of €140m in 2013. NorthAmerica America with is Henkel’sthe acquisition of haircare brands SexyHair, Alterna and Kenra, from US News roundup country’s number-one chaininsales. in terms of store numbers. Sephorabecome is France’sthe largest perfumery chain, franchising contracts. required to divest 13 doors andlarge. terminate Of the 25 38 stores, Adventgroup’s will bemarket share was deemed identified 32areaswherethecombined too has 466stores.TheFrenchauthorities directly andthroughfranchises,whileNocibé deal to purchase Nocibé in February.International and the Kreke family, doors aredivested.Douglas,ownedbyAdvent signed a given the green light on the conditionannounced that that the the takeover dealNocibé. would France’sbe competition authorities for itsacquisitionofFrenchperfumerychain to sell 38 stores in France to German retailgroupDouglas obtainhas agreed approval Nestlé plans to operate the brands through Galderma, which it is in the process of Nestlé planstooperatethebrandsthroughGalderma,whichitisinprocessof Following the takeover deal, Douglas will Douglas operates 179 stores in France German groupHenkel is strengthening its professional haircare business in North n
News roundup
n n n Hong Kong’s chief executive Leung Chun-ying has said that there could be a 20% cut in mainland China visitors to the territory, a move that would have a large impact on retail spending there. Visitors from mainland China have been the growth engine for Hong Kong’s retail economy in recent years, as they look to purchase products that are cheaper than at The buzz home. In 2013, there were 40 million mainland visits to Hong Kong. It is not clear how restrictions on travel permits would be imposed or if the crackdown would be on multiple- entry permits. The government could also reduce the number of cities where mainland Chinese can obtain travel permits.
People IFF ceo Doug Tough is to step down from his role of ceo of the company in September, but will remain as chairman for an undetermined period. Tough will be replaced by Andreas Fibig, president and chairman of the board of Bayer HealthCare Pharmaceutical. Fibig has been on IFF’s board of directors since 2011.
French packaging company Groupe Pochet has appointed Tristan Farabet managing director and member of the board. Farabet was previously ceo of Coca Cola France.
French beauty company Sisley founder Hubert d’Ornano has published a book called La Beauté en Partage (or “Sharing beauty”, in French), which tells the story of his life, and of the brand’s creation. D’Ornano, born in Poland, writes about the evolution of Sisley, from its French origins to its construction as a global brand.
Launches Japanese group Shiseido is coming out with a major new skincare launch this fall, based on stimulating the skin’s immune system, which it says is a new category in beauty. Called Ultimune, the product is the fruit of 20 years of research and claims to stimulate the skin’s defenses so that it is able to resist, protect, regenerate and strengthen against harmful aggressors, thereby slowing down the aging process. The formula contains a complex of three main ingredients: Bulgarian rosewater, aqua-in-pool and ß-glucan. “This is a huge launch for Shiseido and we want to make Ultimune our number-one skincare item [in Europe]. We will launch strongly and maintain momentum, as it is a new category. Our strategy is for the consumer to know it, see it and test it,” Shiseido vice president marketing and communications EMEA Florian Hanhausen tells BW Confidential. The launch will be backed by a major marketing and advertising investment, which Hanhausen says represents at least twice the amount that has been spent on its biggest launch to date in Europe. The campaign will include TV, digital (which will make up 10% of media spend for the product), sampling, and a strong push behind beauty advisor training. The launch of Ultimune will also be accompanied by a new brand statement: ‘Because the beauty is already in you’. Ultimune will launch globally in September in two sizes: 30ml, retailing at €85 and 50ml, priced at €115. n n n
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n n n Beauté Prestige International (BPI) is to launch a major new men’s fragrance for its Issey Miyake brand this fall, called Nuit d’Issey. “Products focused on nighttime have become a major segment in the men’s fragrance market, much like the sport category. As a major player in men’s fragrance, we needed to be in this segment, but we wanted to do it differently by using a nature-inspired theme; this is an important launch for us, as The buzz it opens up new territory for the brand,” comments Issey Miyake international marketing director Agnès Satin. The fragrance will launch on a global scale in September and will be backed by a significant advertising and marketing investment, which will include TV, press, outdoor, and sampling at the point of sale. La Nuit d’Issey, which was created by Dominique Ropion and Loc Dong from IFF, is described as a spicy, woody, leathery fragrance. It retails at €54 (75ml) and €76 (125ml).
US-based Interparfums Inc is to launch a fragrance for British lingerie brand Agent Provocateur this summer, its first since taking over the license in August 2013. The company says the fragrance, called Fatale, is the first major launch for Agent Provocateur since the brand’s debut scent in 2000. Fatale was created by Jean Marc Chaillan of IFF and features top notes of pink pepper and blackcurrant, a heart of gardenia and a chocolate base. Fatale will launch in the UK in June and roll out to Europe, Asia and the Middle East from August. In France, the fragrance will be sold exclusively at Sephora. It retails at €40 (30ml EdP), €65 (50ml EdP) and €90 (100ml EdP).
Estée Lauder-owned Clinique is entering the skincare devices category with the launch of the Sonic System Purifying Cleansing Brush. Developed by Swiss engineers, the brush is designed to work with Clinique’s 3-Step Skin Care system. The brush’s design, which has five patents pending, features an oval-shaped head that is said to allow targeted cleansing in hard-to-reach contoured areas of the face. There are two strengths of bristles: firmer, shorter bristles that are said allow
for easier cleansing of areas prone to more oil production and clogging, and softer BW Confidential bristles designed to target the larger, more delicate areas of the face, like the cheeks. 4 avenue de la Marne 92600 Asnières sur Seine, France Sonic System Purifying Cleansing Brush is slated to roll out this fall. Prices are not [email protected] Tel: +33 (0)1 74 63 49 61 yet available. Fax: +33 (0)1 53 01 09 79 www.bwconfidential.com ISSN: 2104-3302 Publisher: Nicolas Grob French group Nuxe has relaunched Resultime by Collin Paris, an anti-aging facial skincare Editorial Director: Oonagh Phillips brand it acquired in 2008. The new range is comprised of six skus, and has a higher price [email protected] Deputy Editor: Alissa Demorest positioning than the group’s other brands, such as Nuxe and Bio Beauté by Nuxe. [email protected] Editorial Coordinator & Assistant: Resultime features a patented technology called Micro Collagène Vectorisé, a blend Darlene Lim [email protected] of fragmented micro-collagen synthetic peptides, clay and seaweed. The range includes Contributors: Tina Clark, Alex Wynne, three creams that retail between €40 and €45, Microdermabrasion Scrub (€28) and Renata Ashcar, Mayu Saini, Raphaëlle Choël, Corinne Blanché Smoothing Resurfacing Mask (€35). The star product, Regenerating Subscriptions 1 year: electronic publication (20 issues) + Collagen Gel (€45), can be used as either a serum or as a mask. print magazine (4 issues) + daily news: €499 The brand launched exclusively this month at French parapharmacy chain or US$699 [email protected] Parashop’s 70 points-of-sale. In 2015, Resultime will roll out to additional Advertising [email protected] parapharmacies in France, as well as in the pharmacy channel. Groupe Nuxe BW Confidential is published by Noon Media 513 746 297 RCS Nanterre president and founder Aliza Jabès tells BW Confidential that the company is Copyright © 2014. All rights reserved. taking a measured approach to international expansion. It will first build the Reproduction in whole or in part without permission is strictly prohibited. brand’s presence in Europe and Asia, and then focus on other markets. n
www.bwconfidential.com - June 12-25, 2014 #94 - Page 5 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Beauty blogger review BW Confidential reports on what the bloggers are saying about beauty
Complexion enhancers have been gaining popularity with bloggers. The products, such as those by Hungarian brand Omorovicza, are meant to be a bridge between foundation and skincare, imparting a touch of color and moisturizing benefits. They can be worn alone or as a make-up base for coverage.
Netwatch Fine in texture, the formulas are praised for creating a ‘no make-up’ look, while at the same time reviving the complexion in a single application.
UK retailer Selfridges’ event, The Beauty Project, which launched in May, has garnered interest for its ‘thought-provoking’ approach to beauty. The event’s Fragrance Lab was said to encourage a new way of viewing perfume, but some bloggers noted that the fragrance chosen to match his or her personality was not necessarily on target. The FaceGym, an area where visitors learned how to do facial exercises, was praised for its novel approach to anti-aging.
In light of increasing awareness about the dangers of skin cancer, bloggers have been keen to uncover new-generation self-tanning products. Among the bevy of ‘new and improved textures’, the latest innovations include tanning pads, liked for being tidy and no fuss to apply (such as Dr. Dennis Gross’ Skincare Alpha Beta Glow Pad) and ‘overnight tanners’, like Sun Laboratories’ Overnight Tan. Australian product Santorini Sun has garnered much praise for its organic formula, while French brand Clarins’ new Radiance Plus Golden Glow Booster, a self-tanner in dropper format that can be added to other skincare or make-up products, is liked for its simplicity and versatility. The views expressed in this section are those of bloggers and do not represent the opinions of BW Confidential
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Beauty insight Luxury insight Make-up Market watch Fragrance insight Skincare insight Insight: Haircare Fragrance insight Make-up insight Skincare insight Insight: Fragrance Make-up insight What’s changed and An analysis of market data, Make-up insight Insight: Fragrance Creation what’s to come? Figures, retail initiatives & trends How prestige is set to develop Data, trends & retailer views China, Japan, Korea trends and new opportunities Color makes a comeback What’s next for the category? What’s next for the category? Trends, opportunities & challenges Ups, downs & new directions What’s in store for 2013? La Prairie vice president Asia Peter Stockdale
Interview Chinese appeal La Prairie vice president Asia Peter Stockdale tells BW Confidential about how the Chinese consumer is changing and the development of the brand’s travel retail business
What new projects are in the pipeline for Asia? La Prairie opened its 40th department-store counter in China at the end of 2013, and in January 2014, inaugurated its first freestanding store and facial treatment rooms in China at the IFC Mall in Shanghai. This is a completely new channel for our China business and builds on our successful Hong Kong freestanding stores; it is the first time in China that our customers can fully immerse themselves in the brand. We’ve seen a very positive response, as the store has traded above expectations since its opening. Also in January, La Asia, driven by Greater Prairie opened a counter at Lane Crawford’s Canton Road store in Hong Kong. “China, the US and What is your outlook for the travel-retail business over next six months? travel retail will deliver We’re expecting continued double-digit growth in travel retail for 2014. The first quarter of 2014 has shown good results in terms of retail in all regions—Europe is still delivering significant growth the slowest growth. All our major airports are developing well and our growth is on or opportunities for above shop trend. Our highest growth rates are in Asia—Greater China in particular—but also in the La Prairie in the next US, Australia/New Zealand and the UAE. We’re also seeing great results in other major five years airports around the world, such as Seoul Incheon, London Heathrow and Paris CDG. The launch of Cellular Swiss Ice Crystal in February and the many outpost promotions have also helped push the business. This was our biggest launch globally to date and the La Prairie vice president Asia products will be introduced in China in October 2014. This also marked the first time we Peter Stockdale made social media an integral part of a new global launch. ” How do you see the performance of travel retail in Asia? Asia, driven by Greater China, the US and travel retail, will deliver significant growth opportunities for La Prairie in the next five years. According to the Global Business Travel Association, by 2016, China will have the world’s largest business travel market, which means there will be extensive growth of airports in China, as well as increased business and travel in surrounding countries. Our travel-retail business growth continues to be driven by mainland tourists in most locations. While the majority of outbound Chinese travel is to Hong Kong and Macau, we are seeing the next generation of PRC travelers spread their wings to further afield within Asia and also to Europe and the Americas. Korean travel retail, once dominated by Korean customers, now has a significant PRC business, depending on the location. Key locations in Seoul are now seeing as much as 30% of their business coming from PRC customers. n n n
www.bwconfidential.com - June 12-25, 2014 #94 - Page 7 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL La Prairie vice president Asia Peter Stockdale
n n n How are Chinese travelers now traveling and buying? The Chinese traveler had quite a few hurdles to jump through in the past year, from ever- changing government regulations on travelers to domestic policy changes inside China. Nevertheless, in the first quarter we continued to experience significant double-digit retail sales growth in Asia, predominantly driven by the PRC traveler. The landscape is More Chinese
Interview most definitely changing, but the long-term trend will continue to be dominated by PRC travelers. Online interaction continues to be important, as we know our PRC customer “travelers [are] coming does a lot of research on the web prior to travelling. On this front, we rolled out six from tier-three and new country-specific websites in January 2014. We will continue to deepen our digital interaction with this customer segment. tier-four cities might We’re seeing more Chinese travelers coming from tier-three and tier-four cities. These not know about our are consumers that might not know about our brand just yet. While shopping is a major priority, these prospective consumers tend to make more mass purchases from brands brand. This tells us they’re familiar with. This tells us there are always things to do in China in terms of brand there are always building, distribution and digital strategy to appeal and be relevant to the next generation of Chinese travelers. The halo-effect from work done inside China will continue to pay off, things to do in China even as the China traveler changes. in terms of brand At the same time, the seasoned Chinese traveler has become more sophisticated. They are looking beyond logos into efficacy and performance and our BAs have to be armed building, distribution with the right combination of knowledge and service to satisfy this customer segment. and digital strategy
How has slower growth impacted Chinese travelers? to appeal to the next Growth is currently a bit weaker in downtown Hong Kong stores, but PRC passengers generation of travelers remain a key business driver—not just in travel retail in Asia, but everywhere in the world. We see Chinese travelers continuing to be the highest spenders in travel retail in 2014. Social media and digital strategies in China will have a big impact on purchase decisions, La Prairie vice president Asia as Chinese consumers are more receptive to seeking information for luxury purchases Peter Stockdale online, while continuing to make over 66% of these purchases outside of China. ” By 2020, the number of affluent Chinese consumers will grow from 120 million to 280 million, representing 20% of the population and accounting for 35% of China’s total consumption and 5% of the world’s consumption. No other emerging country provides such extraordinary growth for luxury consumers. However, this extends beyond the major cities in China to tier-three cities.
What are your plans for other emerging countries in Asia? We continue to keep a close watch on the readiness of the travel markets in places like Myanmar, Vietnam and Cambodia. We believe there is room for those markets to mature, before luxury skincare is introduced. We are already active in Thailand and Indonesia and bullish on their medium-term future. We see a bright future ahead once domestic politics stabilize in Thailand and will continue to invest in Bangkok and further afield. Our travel-retail business in Thailand is well established [two doors at BKK airport and two downtown stores], but we are seeing a shift towards PRC customers, and there is certainly untapped potential. We successfully opened Male last year and Bali this year and are currently s La Prairie opened its first standalone store in looking into further opportunities in Vietnam and Cambodia. n mainland China at the beginning of this year
www.bwconfidential.com - June 12-25, 2014 #94 - Page 8 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL 9. 10. 11. 2014 www.cosmeeting.com
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s Brazil prestige retailers, from left to right: Sephora Brazil, Opaque, The Beauty Box and Fragrance
Retail in Brazil Challenges ahead It’s been a tough year for beauty in Brazil. BW Confidential analyzes the state of prestige retail in country
restige retail in Brazil is still underdeveloped and given the current state of the Peconomy, growth in the sector is unlikely to come soon. Despite Brazilian consumers’ love of imported luxury products, they are seeing their income weaken due to poor economic growth, and are facing an erosion of purchasing power and inflation. As a Small retailers will result, most of the population is prioritizing basic needs, with luxury purchases much further down on their list. All this is taking its toll on retailers. “With all the events this not“ survive the new year, such as the (football) World Cup, presidential elections and strikes, the outlook for market reality. 2014 is not optimistic. Added to that, there are significant barriers of high taxes, high prices and few high-end fragrance stores; all of this will likely see retail growth slow Only big companies down,” says one industry analyst. and chains will be Distribution for prestige products is already very limited. There are only around 150 doors for selective brands in Brazil, despite a population of 200 million. The market is mostly able to establish dominated by small players, who are finding business increasingly difficult. These stores profitable margins in are not only faced with a fall in sell-out, but also by increasing tax difficulties, mainly the tributary substitution tax system in place in the most important states of Brazil. LVMH this business general director of fragrance brands Brazil Renato Rabbat says the large major chains, such as Sephora and department-store group Renner, will become stronger and dominate as a result. Fragrance general manager Distributor Royal Opera saw growth of 12% in 2013, but it was not an easy year n n n Pedro Penedo” www.bwconfidential.com - June 12-25, 2014 #94 - Page 10 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Retail in Brazil
n n n according to Virginie Delambre, marketing director of the group. “We had a currency devaluation of more than 25% and that had a huge impact on purchases; it is difficult to pass this on to the consumer and it means that margins are squeezed,” she comments. Insight
The Brazil cost Perfumery chain Opaque Group president Sun Chul Kim says the investment required to open new stores in malls today is extremely high. In addition, there is no real culture of high-street stores and security issues make this difficult. “The cost of borrowing is very high and there is also a powerful combination of factors impeding growth for family- owned groups. In the future, luxury retail business will only be in the hands of the big players; the number of small operators will decrease,” he notes. The cost of borrowing Retail chain owner Adriana Karina Ricci agrees on the cost issue. “Operating costs is high and there is a in Brazil are so absurd that they prevent businesses from prospering and expanding,” “ she comments. Ricci owns two beauty chains in the Brasilia region: Lord, which has a powerful combination more selective positioning, with 11 stores, and Lady, which she recently acquired and is positioned in the masstige segment with 12 doors. Ricci says the strategy for future of factors impeding growth lies in better segmentation of the retail offer (which is one reason she recently growth for family- acquired the Lady masstige chain). Offering more accessibly priced or masstige brands may be another way for smaller local owned groups. retailers to survive. “Before, we specialized in targeting older consumers, but we need to In the future, the luxury face up to the new reality to make our stores more inviting to the new emerging middle- class consumer,” explains Opaque’s Kim. Department store Renner purchasing director retail business will Haroldo Rodrigues says: “The challenge is to create appeal for consumers and provide only be in the hands access to the best deals, despite all the barriers to product imports.” Retailers also need to find a way to market products that are sometimes priced four of the big players; times higher than in other countries, meaning that Brazilians buy abroad instead of at the number of small home. The Brazilian Association of selective and multibrand perfumeries (ABPS), of which Adriana Karina Ricci is president, has been working with its members to develop operators will decrease local brands that are positioned as luxury lines, to be sold in all of the association members’ stores. Pedro Penedo, former general manager of Portuguese retailer Polimaia, who became Opaque Group president general manager of the Fragrance chain (part of the Bright Star Group) eight months ago, Sun Chul Kim highlights that the price of some local products is getting closer to accessible imported ” brands, like Puma, Azzaro or Sabatini.
Sephora and Grupo Boticário make waves Another important movement that shook up the market was Sephora’s entrance in 2010. The retailer now has 11 doors in Brazil and will end the year with a total of 14 stores. The LVMH retailer’s move into Brazil has been credited with injecting a new professionalism into the market, and many local players were forced to up their game as a result. The company’s strong points are its wide assortment of exclusive brands and its make-up section, where consumers can browse brands at their leisure—something that is quite new for Brazilian shoppers. Sephora has just inaugurated its eleventh store in the country, which it calls a ‘concept store’, featuring new services and decor. (See store visit, p. 16.) Sephora is not the only retailer making waves in the market. Grupo Boticário also brought out a new beauty retail format called The Beauty Box in 2012. Conceived as a one-stop shop, the concept was Grupo Boticário’s first foray into selling third-party n n n
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n n n brands. The store carries its own brand, local Brazilian lines, and foreign prestige brands like Dior, Lancôme, Shiseido and Burberry. According to Grupo Boticário sales and marketing director Breno Salek, the aim is to bring consumers closer to a multi-
Insight brand retail format. Another objective was to have a pyramid structure of brands, from high-end to more accessible lines. The company says the concept is off to a good start and that it exceeded its sales forecasts in the first year. However, analysts say that The Beauty Box is still searching for its commercial identity. What is certain is that the group has the financial strength to withstand any slowdown in the market, iron out any difficulties, and expand. The Beauty Box currently has 18 stores and plans to have 36 doors by the end of the year. The target over the next five years is for 80 stores.
The web’s pros and cons The internet, too, is transforming the retail market. Due to the size of the country, it is the only platform that covers the entire territory. At the same time, Brazilian consumers, especially young consumers, are familiar and comfortable with shopping online. Many e-commerce sites also offer favorable terms—for example, payment in up to 10 installments, whereas in brick-and-mortar stores, the maximum number of installments is six. This is seen as the ideal way to introduce consumers to luxury products. The main players are Sephora (thanks mainly to its acquisition of local online retailer Sacks in 2010), Dafiti, a website dedicated to fashion brands that also sells fragrance, and Beleza na Web, originally created as a web retailer for haircare, but which has expanded into make-up, skincare and fragrance over the past two years. However, the growth of the internet is not seen as good news for small retail players. “Small retailers will not survive this new market reality. Only big companies and chains will be able to establish profitable margins in this business,” comments Fragrance general manager Pedro Penedo. Given the combination of factors, small local players Market trends will have a tough time ahead. The market is changing, with Although Brazil’s new consumers are fans of fragrance (before they could afford big groups benefiting from to buy fragrance, they purchased scented soaps and deodorants), they still prefer these changes. Renner’s local brands like Natura, Boticário or Avon. These brands are easier to find and Rodrigues says prestige buy—Boticario has more than 3,700 stores in Brazil and Natura and Avon have stores will closely follow the an army of more than 1.5 million consultants. Today, the most successful foreign international format, with a brands are those at the lower end of the prestige pricing spectrum, such as wide brand offer and high Antonio Banderas, Shakira, Gabriela Sabatini, Ferrari and Azzaro. These brands level of service. However, are said to be the front door in attracting Brazil’s new middle-class consumer and even for the big players to who tomorrow may be interested in other international names. prosper and for the market to Haroldo Rodrigues, purchasing director of department store Renner, observes grow, it needs to see lower a strong trend in the celebrity segment and more affordable fragrances. At the taxes and prices that match same time, luxury brands have wide acceptance and generate good loyalty. those internationally, so that Mainstream brands, however, need to communicate their message and brand more purchases are made to Brazil’s new middle-class consumer. Brands like Calvin Klein, Paco Rabanne inside the country, rather and Carolina Herrera are gaining market share, thanks to strong communication than abroad, concludes and investment in TV advertising, which has significant penetration and an LVMH’s Rabbat. n n n immediate impact on sales.
www.bwconfidential.com - June 12-25, 2014 #94 - Page 12 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Retail in Brazil
n n n Brazil’s main prestige retailers at a glance Retailer No of Strengths Weaknesses stores Insight Renner 224 Large number of stores and Perfumery layout is not very attractive payment options. prestigious. BAs are not always available.
The Beauty Box 18 Original concept and solid Store design and market financial backing; part of positioning needs Grupo Boticário, so has the fine-tuning. Still has potential to grow fast. low awareness among consumers.
Fragrance 13 Financial strength Management restructuring from Bright Star Group and is still ongoing and stores a professional management; do not yet have a unified invests in communication concept. with consumers.
Lady 12 Consumer trust in the Recently acquired by Lord. store and it is known for The business will take good service. some time to adjust to new management.
Lord 11 Consumer trust in the store Recently started to offer a and good service. franchising operation that is still very expensive.
Sephora 11 Size of stores’ product As a foreign player in assortment, with strong Brazil, analysts question exclusive component, and the retailer’s profitability product testing. Strong web in the country, given the business, due to acquisition cost of doing business in of Sacks in 2010. the market.
Opaque 8 Well organized and has The retailer is trying to a good relationship with adapt to changes in the clients and suppliers. market and find a new way of maintaining its high-end position.
Grupo Suil 8 Good assortment of luxury Three retail brands brands; services offered. managed: Suil, Vent Vert and Caleche. Family owned, may need more structured management in the future. n
www.bwconfidential.com - June 12-25, 2014 #94 - Page 13 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Luxe Pack New York Bigger and busier BW Confidentialreports on the 12th edition of Luxe Pack New York
uxury packaging trade show Luxe Pack New York reported strong visitor numbers Lfor its 12th edition at 3,311 attendees, up 14% from last year. The show was held at new venue Pier 92, in midtown Manhattan, to accommodate more exhibitors—190 Show review versus 165 in 2013. “Exhibitors and visitors like the new format—larger aisles, new design stands and more space for the Innovation Forum and seminar room,” Luxe Pack executive director Nathalie Grosdidier tells BW Confidential. Some companies, however, worry that the show will lose its ‘niche’ status if exhibitor numbers continue to grow. A new addition this year was Luxe Pack Promo, a section that welcomed 15 suppliers specialized in promotional gifts. “There was a demand for these kinds of products, and we selected suppliers that offered added value and a luxury focus,” says Grosdidier. For the first time in New York, the show hosted the Luxe Pack in Green award for environmentally friendly packaging. Airopack won for its Pressurized Dispensing System. Suppliers polled at the show were divided about the market’s performance this year, with many forecasting flat or lower sales compared to 2013. “We have limited visibility on how 2014 will pan out, but we believe that there will be slower growth than what we saw last year,” explains one European executive. Others point out that the North American market has not been as strong as was hoped, so far this year. Some executives were more upbeat. “Our forecasts are more related to short-term, rather than long-term expectations, but so far, 2014 has been more dynamic than 2013,” comments Marco Azzali, export sales director for Italian glassmaker Bormioli Luigi. Decoration specialist Seram md Bruno Savage says there has been an uptick in orders. “We’re seeing a busier launch schedule and we’re forecasting a surge in demand for decorative accessories, especially in North America and Asia,” he comments. Luxe Pack New York will run from May 13-14 next year at the same venue.
Seen & heard in show Packaging supplier MWV shared findings from its Skincare Research and Insights Study, which explores consumers’ facial skincare routines around the world to better understand the role of packaging in skincare usage. The study showed that consumers identify most with the sensorial experience of applying skincare, beyond just branding and price positioning. “This study revealed the emotional connection behind product usage. The ‘care’ element is powerful for the skincare consumer,” explains MWV Home and Beauty president Kevin Clark. He adds that these initiatives are also changing the way MWV interacts with its brand partners. “Not only do brands value the insight, but they recognize that they create a more effective relationship between supplier and brand,” Clark says.
US anodizing specialist Anomatic revealed that it launched two new anodizing lines this month at its site in Newark, Ohio. The new lines will allow for a production capacity of 250 million units. Anomatic also opened its first sales office in Brazil, at the end of 2013. Luxe Pack New York Held: May 14-15, 2014 UK-based carton board manufacturer Tullis Russell is opening a biomass production site Exhibitors: 190, vs 165 in 2013 in July, which will reduce the company’s carbon footprint for its Trucard paper by 70%. n Visitors: 3,311, +14% vs 2013
www.bwconfidential.com - June 12-25, 2014 #94 - Page 14 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL China Beauty Expo Onwards and upwards BW Confidential reports on what was seen and heard at China Beauty Expo, held in Shanghai from May 7-9
here may be a slowdown in China, but the mood at the China Beauty Expo trade China Beauty Expo Tshow was upbeat, with 1,837 exhibiting companies this year—a 10.9% increase Held: May 7-9 in Shanghai, China
Show review over 2013—and a stronger representation of international brands. “The scale of national Exhibitors: 1,837, +10.9% groups has grown continuously, especially the German and French pavilions,” comments Visitors: 252,200 from 80 countries China Beauty Expo general deputy manager Ying Sang. The German pavilion’s size increased by 36% compared to last year, while the French pavilion was 53% bigger. The show was split into three main parts: finished products, ingredient suppliers and packagers, and professional products (for spas and beauty salons). It also hosted Zoom Asia, a special area for foreign brands looking to launch their products in Asia. BW Confidential was the official partner of the Zoom Asia area. Visitors commented on the rise of fragrance distributors exhibiting at the show, a sign that China’s perfume market is developing. Make-up was singled out as a growing segment, along with the organic and natural category. Attendees said the development of these sectors, combined with continued investment from foreign and local Chinese companies, indicates that the market still has much potential, despite the slowdown.
Heard in show “We remain extremely positive on the Chinese market and its upward trends in volumes, quality and innovations. From manufacturers to distributors, packagers, components and raw material operators, everyone is affected by the economic slowdown. Given this, companies need to modify their approach, and reactivity and adaptability are key.” SGD Asia Pacific chairman and general manager Cyril Ruiz-Moise
“There is big potential for make-up in China. More girls want to use make-up and the color business here is up by 15%. The challenge is the tough competition. Our strategy is to combine make up with skincare functions, as China is traditionally a skincare market.” Intercos strategic marketing manager Ellen Tang
“There is a slowdown here, but the growth rate is Cosmetic Valley helps French brands expand in China still at an average of 6-8% and we see it as a very promising market for nail polish.” This year, French beauty cluster Cosmetic Valley’s delegation helped around Fiabila Key account director 22 French companies exhibit at the show. BW Confidential was the exclusive Guillaume Bourdon press partner accompanying the French delegation to China Beauty Expo. The delegation was also accompanied by Miss France to showcase French values of prestige and beauty. Most were satisfied with this year’s edition, as “Clients here want the latest technology and design many companies established good contacts with potential distributors. “The for packaging. We are launching new colors this year beauty industry is the only sector still generating growth in France, so there is with real gold, and another series with ceramics. Our a lot at stake for us in the export business. France is associated with security, challenge is quality, so we sometimes have to go to performance, innovation and know-how. We are seen as competitive, as we Korea (for airless, for example) and other parts of the offer products with good value for money,” explains Cosmetic Valley export world to source specific components for our clients.” and communication manager Franckie Venet. “The Chinese are ready to pay a HCT vice president of sales Rosa Mang n premium for our products because of their quality,” she continued.
www.bwconfidential.com - June 12-25, 2014 #94 - Page 15 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Store visit
Sephora unveils new concept in Brazil The LVMH-owned retailer opened its 11th store in Brazil, which it describes as bringing a new concept to the market
VMH-owned perfumery chain Sephora opened what it calls a new concept store Lfor the Brazil market at the end of May. Located in the Shopping Cidade Jardim mall in São Paulo, home to many international luxury brand boutiques, the store is the retailer’s 11th in the country and offers a range of new features. Sephora Covering 450m2 (4,844ft2), the store is decorated with what the retailer calls “high- São Paulo, Brazil tech” contemporary furniture, created at its San Francisco headquarters in the US. l Opened: It also has a new lighting system, featuring different types of light for each product May 2014 category, so that shoppers can better navigate the boutique and find products. l Size: 450m2 (4,844ft2) The store also offers a range of services, including the Beauty Express and Premium l Location: Cidade Services. With the Beauty Express system, consumers can take advantage of a free Jardim shopping mall, 15-minute make-up session, with no appointment necessary. The Premium Services São Paulo, Brazil are more personalized and consumers can choose to have a full makeover for R$150 l Special features: (US$66) or a facial treatment for R$200 (US$88). The Premium Services last 45 Express makeovers and minutes. These services can be paid for by product purchases. longer beauty services, A host of Sephora exclusive brands can be found at the store, including Alterna, Nail Studio, special Benefit, Dr. Brandt, Make Up For Ever and Nars. lighting to differentiate As well as these features, the store offers concepts that can be found at the chain’s product categories international boutiques, such as Hot Now, a selection of the latest bestselling l On Offer: Exclusive products, the Nail Studio, Beauty-To-Go, a section featuring products priced under brands, including Benefit, R$99 (US$43.78) and Sephora Favorites, among others. n Make Up For Ever and Nars
www.bwconfidential.com - June 12-25, 2014 #94 - Page 16 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Store visit
s The new concept offers free express services, as well as longer makeovers that can be paid for by purchasing products
s The store offers a range of exclusive brands including Benefit and Nars, as well as features from its international boutiques, such as the Nail Studio
www.bwconfidential.com - June 12-25, 2014 #94 - Page 17 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL BW Confidential The inside view on the international beauty industry
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