www.bwconfidential.com The inside view on the international beauty industry Nov 20-Dec 3, 2014 #101
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The buzz 2 Caution ahead News roundup ndustry executives are talking about the market in more Netwatch 6 Icautionary terms than at the beginning of the year. Estée Lauder Companies said that for its fiscal year it still Beauty blogger review expects the prestige market to grow by 3 to 4%, but that growth will probably be at the lower end of this range. Interview 7 Similarly, L’Oréal ceo Jean Paul Agon remarked that 2014 Bulgari perfume business unit has been the weakest year since 2008-2009, and he now managing director Valeria Manini predicts that the global beauty market will grow by 3% in 2014. L’Oréal had previously estimated that the market Insight 9 would see growth of between 3.5 and 4% this year. Industry viewpoint All this is not surprising given the market’s backdrop. Growth from Chinese and Russian travelers has slowed, political tensions in the Middle East and in Show review 14 Hong Kong have taken their toll on sales at some of the industry’s main players, TFWA World Exhibition currency in emerging markets has been volatile, while the economy in Europe remains sluggish. Store visit 19 But at the same time, since the crisis hit in 2008, brands have got used to Harrods Salon de Parfums working in an extremely uncertain environment and in a tough economy. And in a way, they have had much opportunity to test and fine-tune strategies tailored for low-growth markets. This year’s Christmas sales will no doubt be a measure of how well these strategies are paying off.
Oonagh Phillips Editor in Chief [email protected] Subscribe on p.21 or go to www.bwconfidential.com CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIA CONFIDENTIA L L The buzz Strategy Stay informedwithourdailynewsheadlinesonwww.bwconfidential.com News roundup in thenearfuture. brand inBrazilfromnextMay. ParluxalsomaybringotherbrandstothechannelinBrazil US beautygroupParluxhasinkedadealwithdirectseller JequititosellitsRihanna half of2015. high endofthemarket.ThefirstfragrancefromManilaGrace willlaunchinthesecond strategic forthecompanyasitwillboostitspositioninwomen’s segmentandatthe for itsfashionandaccessoriesbrandManilaGrace.Mavivesaid theseven-yearlicenseis Italy-based Jacobs Beauty,KatVonDFormulaXandElizabeth James. Kendo’s portfolio.Inaddition,Kendohasfourbrandsthatwere createdin-house:Marc to Suliteanu. abroad,” saidKendoceoDavidSuliteanuinastatement. online sales.“BiteBeautyhasenormouspotentialhereinNorthAmericaaswell boutique inNewYorkCity. Beauty. BiteBeautyiscurrentlysoldinSephorastoresNorthAmericaandatitsLipLab Kendo, abeautycompanyownedbyLVMH,hasacquiredCanadianlipstickbrandBite have increasedby5%. Adjusting fortheimpactofacceleratedorders,netsalesinconstantcurrencywould orders tothefiscal2014fourthquarterfollowingatechnologyupgradeatcompany. while netearningsdeclined24%to$228.1m.Thedeclineswereprimarilydueashiftin London. ThebrandwillbeoverseenbyELCgrouppresidentJohnDemsey. standalone storesinParisandNewYorkissoldBarney’stheUSLiberty fragrances createdby12masterperfumers.EditionsdeParfumsFrédéricMallehasfive fragrances createdbywell-knownperfumersandcuratedMalle.Itsrangeincludes21 company EditionsdeParfumsFrédéricMalle.Thebrandwasfoundedin2000andsells in October,TheEstéeLauderCompanies(ELC)announceditistoacquirefragrance Following itspurchaseoffragrancebrandLeLaboandskincareRodinOlioLusso Skincare brand Ole Henriksen, which was purchased by LVMH in 2011, is also part of Skincare brandOleHenriksen,whichwaspurchasedbyLVMH in2011,isalsopartof Bite BeautyfounderSusanneLangmuirwillremainwiththecompanyandreport Kendo aimstoexpandthebrand’spresenceininternationalmarketsanddevelopits In othernews,ELCsawnetsalesforthefirstquarteroffiscal2015fall2%to$2.63bn, n n n n
Carsten FischertoleaveShiseido Parlux teamsupwithJequitiforRihannainBrazil Kendo acquiresBiteBeauty ELC acquiresEditionsdeParfumsFrédéricMalle At aglance... has signed a fragrance license with Italian company Antress Industry Mavive hassignedafragrancelicensewithItaliancompanyAntress Industry n www.bwconfidential.com -Nov 20-Dec 3,2014 #101-Page 2
CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIA CONFIDENTIA L L The buzz worldwide OlivierdeLisletold that wecandevelopalonger-termvision,”Firmenichseniorvicepresidentfinefragrance farmers. “Ouraimistoworkdirectlywithoursupplierswheneverpossible,asthismeans naturals suppliersfromaroundtheworldforfirsttime.Theareallcommunity Roques, headofnaturalsourcingatthecompany,Firmenichbroughttogether14its event inParisthismonth,dubbedNaturalsTogether.UnderthedirectionofDominique Fragrance houseFirmenichputthespotlightonitsnaturalrawmaterialssuppliersatan FEBEA’s complaintresultedinthesearchofEquivalenza’s28storesandcornersFrance. equivalent ofthosefromwell-knownbrands,apracticeFEBEAdeemsascounterfeiting. retailer sellscounterfeitfragrances.Thechainfragrancesthatitpresentsasan month, followingaccusationsfromthecountry’sbeautyassociationFEBEAthat French policewerecalledintoconductasearchofperfumechainEquivalenzathis artificially increasedthepriceofproductimportsintocountryby$138m. P&G’s businessinthecountryfortaxfraud.Thegovernmentbodyclaimsthat this month,thecountry’sFederalAdministrationofPublicRevenue(AFIP)hassuspended n featuring ingredientsfromthesupplierspresent:TogetherHerandHim. of NaturalsTogether,FirmenichmasterperfumerOlivierCrespcreatedtwofragrances assure sustainablesupplyandafocusoninnovationquality.Tomarkthisfirstedition mutual productiontosafeguardfromshortages,makingresponsiblesourcingapriority down 2% like-for-like, reflecting pressure in the mass market. down 2%like-for-like, reflectingpressurein the massmarket. 10% like-for-like,drivenbygrowth fromRimmelandSallyHansen.Fragrancesaleswere offset declinesinfragranceand skincareandbodycare.Colorcosmeticssaleswereup $1.18bn. Thelike-for-likeincrease wasfueledbygrowthinmake-up,whichpartially to profit showeda5%decrease. Saleswereflat,butonalike-for-likebasisgrew1% primarily duetoearlyextinguishmentofdebtandrestructuring charges.Adjustednet Coty reportedan89%declineinnetprofitto$10.6mforthefirst quarteroffiscal2015, a separatedivisionforitse-commerceanddigitaloperations amongotherinitiatives. and salesfunctions,makingthepersonal-carebusinessastandalone divisionandcreating reduce costsby¥30bn-¥40bn($265m-$353m)inthreeyears byintegratingheadoffice ($1.52bn) andoverseassalesroseby8.1%to¥193.1bn($1.70bn). Shiseidoaimsto an increaseof9.2%year-on-year.Domesticsalesweredown by5.1%to¥172.6bn ($3.23bn). Globalbusinesssalesforthecosmeticssegment reached ¥178.6bn($1.7bn), Beauty groupShiseidosawnetsalesforthefirsthalfgrowby1.4%to¥365.7bn improvement inthemassmarketUS. Europe, butpointedoutthatsincetheendofsummerithasbeguntoseeasteady company saidthatsaleswereimpactedbyan“airpocket”inthemassmarketWestern For firstninemonthsoftheyear,salesfell0.4%(+3.3%like-for-like)to€16.56bn.The like salesup2%to€5.39bn.Analystsexpectedgrowby3.8%fortheperiod. L’Oréal reportedlower-than-expectedgrowthinthethirdquarterof2014,withlike-for- News roundup Results
Firmenich also underlined its goals for natural ingredient sourcing: a commitment to Firmenich alsounderlineditsgoalsfornaturalingredientsourcing:acommitmentto According to a press release published on Argentina’s presidential website earlier According toapressreleasepublishedonArgentina’spresidentialwebsiteearlier BW Confidential BW . www.bwconfidential.com -Nov 20-Dec 3,2014 #101-Page 3 n News roundup n n n Retail Skincare brand Ioma has made its debut in travel retail at Geneva International Airport in partnership with Nuance. The brand will occupy a special event area in the airport from November 3 to the end of December featuring its skin diagnostic tool Ioma Sphere 2 and
The buzz the Ioma Factory, which creates personalized skincare formulations for consumers. From December, Ioma will be sold at a counter in Nuance’s new Luxury Beauty Store in Geneva airport, which will offer the brand’s entire range and also host its Ioma Sphere 2 device. Ioma will be exclusive with Nuance in travel retail for 12 months.
French brand Sisley is to open its first New York City standalone boutique in December on Bleecker Street in downtown Manhattan. The 160m2 (1,722ft2) store will sell the brand’s skincare, make-up and fragrance. It also houses a spa and will be the only location in New York offering Sisley’s complete range of treatments. A make-up session comes with each treatment. Sisley will also begin to offer clients facial skincare treatments and make-up lessons at home provided by the brand’s staff. This is Sisley’s second store in the US, following the opening of a boutique in Las Vegas in June this year.
Shanghai Jahwa-owned beauty brand Herborist is to open its first European flagship store in Paris, France at the beginning of next year. The 110m2 (1,184ft2) three-level boutique, which will open in the Opéra district in January, will sell the brand’s complete line-up and house a spa and a tea room. “This store is intended to be a showcase for the brand in Paris, and due to its location will attract not only local consumers, but also tourists, including Chinese tourists,” comments Shanghai Jahwa country manager France Lynn Wang. Herborist is currently sold in 140 Sephora stores in France. The brand has 1,500 standalone stores in China.
Italy-based fragrance distributor and retailer Intertrade Europe is expanding its Avery Perfume Gallery network of niche perfumeries with new doors in Doha, Qatar, Rabat, Morocco and a second location in Milan, Italy to open before the end of this year. The group opened its first store in 2009 in London and now has boutiques in Florence, Modena and Milan, Italy and in New Orleans, US. Each store offers all of the brands in Intertrade’s portfolio, and features a unique interior design meant to reflect each location. Intertrade also plans to open around 10 shop-in-shops in select department store locations for Avery Perfume Gallery and is in negotiations with selective retailers in Paris, London, Berlin and Moscow. n n n News roundup
n n n People Japanese group Shiseido announced that Carsten Fischer, representative director, corporate senior executive officer of the group has resigned and is to leave the company on March 31, 2015. The move follows a string of The buzz management changes at the company after the appointment of Shiseido’s new president and ceo Masahiko Uotani in April. Fischer joined Shiseido in 2006 and was charged with developing the group’s international business.
Data Prestige beauty sales in the US rose by 6% US prestige beauty sales* third quarter 2014 to $2.4bn in the third quarter 2014 compared Category Sales $m % change Q3 2014/ with the same period last year, according to NPD Q3 2013 Group. Make-up saw the strongest growth, with Make-up 1,000 +10 sales up 10% to $1bn, while fragrance sales rose 4% to $543m and skincare sales reported a 2% Skincare 840 +2 increase to $840m. In skincare, the company Fragrance 543 +4 reported that facial masks were the primary driver Source: The NPD Group *retail sales of growth.
According to NPD Group’s 2014 Men’s FragranceTrack report, close to 80% of men who buy fragrance plan their purchases ahead of time, while two- thirds know what brand they aim to buy. Six men out of 10 buy fragrance for replenishment reasons and more than 50% of consumers purchase a large- format fine fragrance as it offers the best value, says the report. NPD figures show that eight out of 10 men use some type of scented product, and nearly all fine fragrance users also use scented body products.
BW Confidential Launches 4 avenue de la Marne 92600 Asnières sur Seine, France [email protected] French skincare brand Sisley is launching two new skincare products Tel: +33 (0)1 74 63 49 61 Fax: +33 (0)1 53 01 09 79 next year. Intensive Dark Spot Corrector claims to have brightening, www.bwconfidential.com ISSN: 2104-3302 exfoliating and soothing properties thanks to a combination of vitamin C Publisher: Nicolas Grob and E derivatives, prickly pear flower extract, salicylic acid and Editorial Director: Oonagh Phillips [email protected] essential oils of sage, lavender and marjoram. The product Deputy Editor: Alissa Demorest [email protected] is also said to both fade the color of the spots and reduce Editorial Coordinator & Assistant: their size. Intensive Dark Spot Corrector comes in a 7ml bottle Katie Nichol [email protected] featuring a metallic roll-on dispenser head. It launches in Contributors: Tina Clark, Alex Wynne, Renata Ashcar, Mayu Saini, Raphaëlle Choël, February and will retail for €105. Corinne Blanché Subscriptions Sisley is also adding a new facial skincare item to its Sisleÿa 1 year: electronic publication (20 issues) + anti-aging range called Essential Skin Care Lotion. Inspired print magazine (4 issues) + daily news: €499 or US$699 by the Asian skincare routine of layering products, the lotion [email protected] Advertising is meant to be applied after a cleanser and is said to provide [email protected] anti-aging benefits and better prepare the skin for the products BW Confidential is published by Noon Media 513 746 297 RCS Nanterre that follow thanks to its milky gel formula enriched with Copyright © 2014. All rights reserved. Reproduction in whole or in part without marshmallow, padina pavonica and phytosqualene extracts. The permission is strictly prohibited. 150ml lotion launches in March and will retail for €115. n
www.bwconfidential.com - Nov 20-Dec 3, 2014 #101 - Page 5 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Beauty blogger review BW Confidential reports on what the bloggers are saying about beauty
Comments regarding Coty’s impending acquisition of French make-up brand Bourjois highlight fears that the brand’s formulas or product quality will change under its new ownership. Yet bloggers also point out that the deal might mean wider distribution for
Netwatch Bourjois products. Bloggers in the US for example, are particularly keen to see distribution of the brand stateside.
The launch of the advertising campaign for Lady Gaga’s upcoming fragrance Eau de Gaga has been coolly received by many bloggers. The ad has been described as being “classic”, featuring a glamorous and sexy Lady Gaga. Writers also warn that waning public interest in the singer will mean less excitement around the launch of her second scent.
Nail art aficionados are praising a new TV reality show, called Nail’d It, that is airing on the Oxygen channel in the US. Showcasing extreme nail art, bloggers say they are inspired by the nail artists’ techniques, even if the results are impractical to wear.
US-based Younique’s 3D Fiber Mascara has created a small storm in social media circles. The lash-lengthening product consists of two mascaras; one traditional wand and a second that is applied over the first and has a formula based on green tea fibers. Bloggers who tested the product claim that it is “revolutionary” and outperforms other lengthening mascaras. The views expressed in this section are those of bloggers and do not represent the opinions of BW Confidential
10TH EDITION
ADF_PCD_210x148_BW_confidential_vecto.indd 1 07/05/14 10:53 Bulgari perfume business unit managing director Valeria Manini
Looking to luxury Bulgari perfume business unit managing director Valeria Manini Interview talks to BW Confidentialabout her ambitions for the brand
What are your priorities for the brand? My aim is for the brand to be very international, and to have a strong men’s and women’s business in our three core segments: mainstream, high-end and wellness. We are in the process of closing doors that don’t meet our expectations or standards, and are working on our point-of-sale presence by investing in service. Things go so fast now that the luxury aspect of fragrance is becoming lost. Today’s consumer is much more accustomed to the ‘fast buy’, so it’s up to us to re-inject a bit of luxury in the fragrance purchase. This isn’t easy in our industry as there is an overwhelming tendency to cheapen the shopping experience, rather than elevate it. I also want to better segment our offer. With our Omnia and Aqua lines we cater to It’s up to us to consumers who perhaps have less purchasing power and are younger, while for those re-inject a bit looking for a more premium offer, we have our new collection Le Gemme. “ of luxury in the What was the strategy behind the launch of Le Gemme? Bulgari’s fragrance history is quite recent as we introduced our first scent in 1993 and fragrance purchase. we began with a small range for a relatively limited clientele. Then we widened the offer This isn’t easy in our with the launches of Blu, Aqua and Omnia, to reach the scale we have today [the brand is distributed in 24,000 doors]. We wanted to refocus on Bulgari’s jeweler roots, which industry as there is was the thinking behind Le Gemme. The collection is debuting in just 500 doors for the an overwhelming moment, and in travel retail we are aiming for 50 doors in the short term. tendency to cheapen How are your other franchises performing? the shopping The brand’s biggest franchise, Omnia, makes up one-third of our business. Within this range, Omnia Crystalline is our best-seller. We are currently rolling out Man in Black in our experience, rather Bulgari Man line, which has been very well received. Our next major introduction will be in than elevate it the Aqua range, with Aqua Divina in February. We’re also launching a new scent in our Eau Parfumées line called Thé Bleu this spring. The range is positioned as a wellbeing offer and we’re re-launching in domestic markets Bulgari perfume business in June with new packaging and also 150ml sizes. In addition to prestige distribution, the unit managing director line is sold in 2,000 five-star hotels. Distribution in spas will be the next step. Valeria Manini” You exited skincare in 2012. Isn’t there a need to expand the axes of a brand given today’s distribution? Many brands dream of having a three-axe brand, but our expertise lies in fragrance. When LVMH purchased Bulgari in 2011, skincare accounted for a very small portion of our business, around 3%, but it called for a lot of effort and investment. A brand can find value by staying within its core business, and for us that is fragrance. There is still so much that can be done to develop in the fragrance realm, especially given that the market has
been pulled down in terms of quality over the last few years. n n n
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n n n How is the business performing in challenged markets like France? As an Italian brand we have always had a hard time in the French market. It is also extremely difficult as some retailers are solely focused on margins and commercial terms—they may as well be selling ice cream or laundry detergent. For a brand like Bulgari, it’s very difficult to work in that context. For years retailers have been calling
Interview the shots, but more and more brands are no longer content with this and are being more vocal. Travel retail now In France, our strategy is to be more exclusive with a limited number of doors. We aim represents a quarter to go into more high-end distribution in the market. “ of our global business. What are your views on the recent consolidation in the travel-retail channel? In Asia, travel retail We need to let the first year pass and give time for the sales strategies and new teams to be put into place. It’s a shake-up, but it’s a commercial shake-up. Naturally we prefer to represents 37% of work with retailers that are established and are on a solid footing as those are the ones sales and in Europe, it with a long-term vision. As a brand, we need to stay in line with our own strategy and continue to develop no matter the context. makes up 34%. We The travel-retail offer today is very standardized, but some retailers have more vision are now looking to than others. [LVMH-owned] DFS, for example, is experimenting with new types of offers for fragrance. We created our first ‘jewel flacon’ with DFS for the Masters of Fragrance drive the business in initiative in Abu Dhabi airport, which was an extremely high-end extension of the Le the Middle East Gemme collection. With retailers like DFS, we can open new territory as they allow us to break down barriers in the channel, and this is very motivating. We’re currently looking into potential projects with DFS for its future store in Venice, Italy. Bulgari perfume business How is your travel-retail business performing? unit managing director” Travel retail has always been a strong component of our business. We’ve had a dedicated Valeria Manini team with a general manager devoted to the channel for nearly 20 years, and today we are sold in 2,000 doors. Travel retail now represents a quarter of our global business. In Asia, travel retail represents 37% of sales and in Europe, it makes up 34%. We are now looking to drive the business in the Middle East and we’re seeing extremely strong growth in the region, while the Americas is also a focus. n
s Bulgari is focusing on developing its high-end offer with premium collection Le Gemme. The brand will also launch Aqua Divina, a new scent in its Aqua range, in February 2015
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Insight BW Confidential asks top industry executives at the TFWA World Exhibition about how they see business shaping up this year
Estée Lauder Companies group president international Cedric Prouvé “In terms of international, we are doing well in emerging markets, particularly with Europe, Middle East and Africa emerging markets, and they are taking an increasingly bigger share of our international business. We have a big focus on China and then five priority markets, which are: Russia, the Middle East, South Africa, Turkey and Mexico. Russia is a little bit tricky because of the environment. We have struggled in Russia in the past two to three years, but paradoxically we are having a good year there now. The overall economy is not great, but our goal when markets are tough like that is to gain market share. Russian women love beauty and they are not going to give up on cosmetics. [We are still growing] in sub-Saharan Africa and the numbers are very good. We are cautiously optimistic because the conditions are a little rough between currency and some of the world events and we are also a bit worried about Ebola. There is a psychological risk particularly for travel retail. If Ebola spreads to some key countries, it would probably have an impact, so we are watching it very closely and have crisis management mechanisms in place in case something happens. [For China] fundamentally I agree that China is slowing down, but I think we have been less affected by the restrictions on gifting, as cosmetics are more affordable. In China, most of our brands are growing very well, including at a same-store level. It is a little bit different now for Estée Lauder, as it is the biggest brand in China, so we are struggling a little bit on like-for-like door growth, but we are still expanding distribution. But for China, we are taking a long-term view and we know there will be bumps in the road and issues with growth. The economy is still growing at 7.3% and we are still seeing a lot of runway in our expansion of distribution into tier-three and tier-four cities.”
Puig coo Javier Bach “We see the market influenced by an economic slowdown and currency movements, and especially for companies like us that are euro-based there is an impact. Otherwise we are positive. This year, emerging markets were hit by currency issues and difficult economies. In the short term there is an impact, but in the long term, when you look at demographics these markets still have much potential. The difficulties are more about the situation this year, but this will change. When we look at local currency, we are growing in all the emerging markets and we are gaining share. In Europe, we are not doing too badly. The launch of Invictus has helped create a lot of excitement around Paco Rabanne. There is a lot of consumer understanding out there that we should extract to motivate consumers in a more granular way. When you look at the market on a granular level you find pockets of growth. Some retailers are n n n
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n n n becoming more interested in partnering with brands that can deliver that growth and understanding. People are realizing that the way they reacted to sluggish growth in the market was very promotionally driven and this did not necessarily work well. They are
Insight asking about ways to bring back growth and this will bring a bigger coalition between brands and retailers in many areas. Retailtainment is key, but we see digital as more relevant than ever. [In terms of consolidation] years ago when we defined our strategic plans, we already forecast that there was going to be consolidation, as this has happened in many other sectors. This will put pressure on the supplier side and that is normal. But if you know how to partner, in some cases it is an opportunity and it can also give you speed.”
Beauté Prestige International coo Eric Henry “Business was relatively difficult in the first part of the year, but since the third quarter things have started to pick up. We had an exceptional third quarter and are positive in both sell-in and sell-out. This is because we have had launches that are working very well, with Nuit D’Issey from Issey Miyake, which is above our objectives, the new Narciso scent from Narciso Rodriguez, where the initial results are excellent and Jean Paul Gaultier Intense Classique Eau de Parfum. And we are also distributing My Burberry which has seen good results. The market is morose and the economy difficult in China and Russia, while Europe is more or less negative—continental Europe it is at between -1% and +1%, although the UK is doing well, while the US is at +1%. But all this is not new; this situation has been going on for the past five years. Maybe for travel retail, passenger traffic has fallen a little in 2014, but there has been no major economic event that has made such a big difference this year. At BPI, we are also less affected by the highs and lows of emerging markets as we have positions that are more prudent. All in all, our comparison with the market is much higher than it was last year and we are looking at high single-digit growth for the full year.”
Ferragamo Parfums ceo Luciano Bertinelli “The market is very tough, with China slowing down, eco- nomies in Europe difficult and the political situation in some countries very unstable. For everyone in the industry, the growth potential that existed one or two years ago is not there now. Today, you are very happy if you can have like-for-like growth in high single digits. For us, we will end the year on a positive trend. There are ups and downs. In the US, we continue to grow quite well, but are a little below expectations, while in China we lost the first five months of the year due to regulatory issues and you can’t recuperate this. But we continue to have good positions in China. In department stores there, Signorina is number-eight and we are the number-five fragrance brand. We continue to open new counters and have started opening counters where we combine watches, eyewear and fragrance. The second part of the market in China is the secondary channel—so the mom-and-pop stores and the internet, and there we are suffering. On the internet they are dumping the price; it is not easy to manage the price and control the product [in this channel]—this is the challenge. n n n
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n n n China is more difficult today. Around five years ago when you put money in the market, it grew, but now you have to be careful where you invest, especially when it comes to media. But despite this, you have to be in China and it still represents a huge Insight opportunity. We are working on a project to see how to invest in China in the next four to five years.”
Shiseido vp travel retail worldwide Philippe Lesne “There is a slowdown which includes Asia, and this has not been the case in recent years. We are growing in [travel retail] in Asia at 25% to 30% and overall on a global basis in travel retail at 15%. Europe is more concerning and in the next two to three years we don’t see much change there. Latin America is also experiencing a slowdown, but it will come back as it always does. We feel the impact at different degrees for Russia, the Hong Kong downtown business has been affected by [the political situation there] and we are monitoring what will happen with Ebola. However, the long-term trend is very positive. The global nature of travel retail means that it is subject to different crises.”
La Prairie Group president & ceo Patrick Rasquinet “There is a slowdown of the market in general. I would estimate that the total skincare market will grow by 2 to 3% for 2014, which is one of the lowest figures we have seen for the past few years. The markets that used to provide growth are slowing. China for example, has been delivering far lower growth than in previous years. In Europe, the market is extremely gloomy, starting with the usual suspects of Italy and Spain, but France is also suffering. The market in skincare in France is -4 or -5%, so it is quite dramatic. For us, growth in Europe is in the low single digits, above market trends in most markets. Some markets are doing really doing well for us, like Russia, where we are seeing growth of 37% this year. We established our subsidiary one and a half years ago and it is really paying off. We have 138 doors and we are focusing on visibility, merchandising, service and adding well- trained BAs in these stores. We estimate that we are growing at least three to four points faster than the market in terms of sell-out. We are suffering a little bit from the demonstrations in Hong Kong. It is more a worry if the Chinese government decides not to bring the Chinese there any more. And the more uncertainty there is around it the worse it is. It is same thing with Ebola, when it is mediatized too much, it is never good for our business and we have seen it in the past. If people start becoming afraid of traveling, they won’t travel.”
Sisley ceo Philippe d’Ornano “2014 should be a good year for us. Our launches have all been successful and we launch fewer new products than our competitors so we are less subject to the ups and downs of launches. We have a solid range and pillars that work well. In North America and in several important countries in Western Credit : Bruno Lévy Europe, including Germany, Spain and Italy, we should n n n
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n n n finish the year in double-digit growth. In China, although there is a general slowdown, we are still growing by double digits. Our new subsidiaries in Brazil and South Africa have a strong start, and the Middle East is also in good development.
Insight We do not see the evolution of the market as only being dependent on economic or political short-term developments. We believe the beauty market, especially at the high end, is underdeveloped. What interests us is the people who have never tried a high- end product and who would be perhaps interested if we offer the right product and do the work to attract them. This represents a large number of women and men, and is a promising way to develop our business. [In terms of retail consolidation], I think the problem is not consolidation, but whether retailers work well or not in developing their business and giving good service to customers. If so, we have no problem with consolidation. Of course, if consolidation results in disorganization at the operator level or lack of clear management or decision- making that is split up into different departments, which means that you cannot really build a strategy together, then it is not good. Consolidation is not a problem in itself for a brand in strong development and with a premium image like Sisley. For obvious reasons, retailers don’t only want to deal with just a few groups in their stores. Retailers first want brands that perform well. They are also very interested in high-end brands that bring them higher baskets and image.”
P&G Prestige vp global market development & operations Bill Brace “This year our biggest and most important brands, like Hugo Boss and Dolce & Gabbana have been growing solidly. SK-II in travel retail has been one of the biggest success stories in our portfolio over the past year and is seeing double-digit growth in the channel. It is a strong brand with Asians and we have seen that extend very nicely into travel retail. The business has been growing in China and among Chinese travelers. We are also selectively expanding into new travel-retail doors outside of Asia. We have opened in Dubai, Heathrow and on the West Coast of the US and in New York and Toronto. Our business in China has been growing solidly, although it hasn’t been quite as exuberant as it was two years ago because of some of changes in government policy and other issues. There is still growth in Russia although it may not be not as dramatic as it once was. We are able to do some nicely targeted programs with Russian travelers and we are seeing good responses. At some airports where we have a high frequency of Russian travelers, we are deliberately being more aggressive with our high-end fragrances, like Dolce & Gabbana Velvet Collection, and growth from the high end may be making up for less traffic. There continues to be solid strong growth on the premium side, which compensates for the volume losses we are seeing. In terms of [consolidation], it is one of the dominating trends to drive scale and profitability. We have strong partnerships with Dufry and Nuance, so with them coming together, we have the opportunity to implement some of our growth strategies in a stronger way. Yes, there will be more pressure on retail margins, but if we do our job well with retailers, they are going to achieve those targets through growth as opposed to trying to extract them [from us]. I would expect more consolidation to come as it is still a fragmented retail environment” n n n
www.bwconfidential.com - Nov 20-Dec 3, 2014 #101 - Page 12 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Industry viewpoint n n n Guerlain managing director travel retail worldwide Philippe Guitelmann “On a global basis our travel-retail business is doing well, but
Insight locally it’s very contrasted. The regions that are seeing the most challenges are those that depend on Russian tourists, whose spending power has taken a hit. Another factor is that Chinese travelers are changing their destinations. This year there was a big slowdown in travel in Southeast Asia compared to last year, which was somewhat counterbalanced by strong growth in South Korea. Korea is becoming a very trendy destination for Chinese travelers and accounts for a big share of sales growth. Japan, too, has been positive due to a favorable currency exchange and a bigger influx of Chinese tourists in the country. In today’s market, regions or airport locations are less of a priority, instead the question is: who is the consumer? Although the lack of data on our consumer is still frustrating, progress is being made as more information is being shared, but it still remains very limited. One area where travel retail is really lagging is in digital, but this too appears to be changing. We’re seeing apps developed by airport operators, more CRM, retailers developing their online boutiques and trade marketing that isn’t just devoted to in-store, but also to online. The consolidation that is happening today isn’t a surprise, and it will continue. We have to focus on what these deals can bring to the market. We hope it will mean a stronger channel in terms of logistics and that these players are motivated to work with brands to increase penetration in-store and grow the average basket size. The travel retail channel is moving in a positive direction with a higher quality image and more services. This gives us leeway to better express our brand, giving us more exposure and increased retail potential. New openings such as at Doha airport and the new Haitang Bay complex in China represent real milestones.”
Collistar international director Paolo Bevegni “This year has been tough in Italy, as the market is still not recovering and is at -3%. There are more promotions in the market and it has become difficult to build business. In export however, we are doing very well and should end the year at +15%. This is even considering what happened in Russia, where we basically lost three months. The devaluation of the ruble was a major issue and there was some destocking from retailers. In the rest of Europe, we are up by 20%. We need to be more aggressive in other markets as Italy is difficult. In China, we are happy in terms of visibility, but the big problem is that it is difficult to be innovative and come out with new products due to regulations. China is growing, but I think the market is becoming more and more challenging. The internet in China is interesting, but the costs of doing business in this channel are also very high—opening a store on [Alibaba-owned website] Tmall is almost as expensive as opening a brick and mortar store in the high street.” “Consolidation makes it harder for smaller brands to negotiate. But my main worry is that with consolidation, the airport stores will all begin to look alike with the same brands from the same groups and so there is a risk of the shopping experience becoming boring. But as the market consolidates more newcomers may also begin to enter the market.” n
www.bwconfidential.com - Nov 20-Dec 3, 2014 #101 - Page 13 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL TFWA World Exhibition
30 years of duty
BW Confidential reports on what was seen and heard at the TFWA World Exhibition, which was held in Cannes, Show review France from October 26-31
ne of the main themes to emerge from discussions with industry executives at Othis year’s TFWA World Exhibition is that 2014 is turning out to be a tougher year than expected. Growth from Chinese and Russian travelers has slowed, currencies in emerging markets are volatile, Europe’s economy is still sluggish, while there are worries We have yet to that political tensions in the Middle East and the spread of Ebola could put a brake on travel. As outgoing managing director of travel retail at L’Oréal Barbara Lavernos put “convert enough it: “2014 has been a challenging year, and everyone has experienced a slowdown”. passengers into Another industry executive added that 2014 has been one of the toughest years since the economic crisis hit in 2008. customers. In our However, despite this, the travel-retail industry continues to make major gains. TFWA rush to extreme president Erik Juul-Mortensen pointed out in his opening address that the travel-retail business has grown tenfold to $60bn since the first TFWA World Exhibition was held premiumization 30 years ago. He also highlighted how the business has shifted regionally: Asia Pacific, we have left the which accounted for 20% of travel-retail and duty-free sales 30 years ago, now makes up more than 37% of the business, and the Middle East has grown its share from 6.5% in impression that 1985 to 10.6% last year. Europe is the only region that has lost share during the 30-year travel shopping is period, moving from 56% of the market to 34%. But Juul-Mortensen insisted that the industry needs to be careful not to become only an opportunity complacent in the light of such growth, and said that more needs to be done to convert for the few travelers to buyers. “After 30 years we have yet to convert enough passengers into customers. It could be argued that in our rush to upmarket, high-end luxury and extreme premiumization we have narrowed that sense of opportunity and left the impression that travel shopping is only an opportunity for the few […] When the price aspect of value TFWA president becomes ignored then we disenfranchise a huge middle market that wants a mid-priced Erik Juul-Mortensen opportunity,” he said. He added that the industry has fallen behind when it comes to ” technology and the mobile world. Industry consolidation was another major talking point at the show in light of the recent acquisition of Nuance by Swiss group Dufry. And industry players expect more M&A to come in the sector. While large supplier groups seem unfazed by the trend, some smaller brands expressed real concern about pressure on margins and greater difficulties of being TFWA World Exhibition listed at increasingly bigger operators. Held: October 26-31, 2014 As for the TFWA, it had much to celebrate for the 30th anniversary of the World Exhibitors: 471 vs 464 in 2013 Exhibition, with visitor numbers exceeding expectations. Visitor numbers reached 6,701, Beauty exhibitors: 120, 26% +6% over last year. A total of 471 exhibitors attended, of which 120 were in the of total perfumes and cosmetics category. n n n Visitors: 6,701, +6% vs 2013
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n n n News from the show Japan-based Shiseido is to launch its Aupres brand in travel retail at the end of the year, as part of the group’s development of its multi-brand strategy in the channel. Aupres, which is for the moment sold exclusively in China in around 1,100 counters and is positioned as an entry-level prestige brand, has strong recognition among Chinese consumers. The brand will launch in travel retail in Thailand and Hong Kong in December and will then be introduced to Beijing airport. The company will start with limited distribution of the brand before rolling it out on a wider scale. Show review
L’Oréal put the focus on catering to an increasingly diverse consumer base in travel retail at the show, as it announced that it would introduce its dermocosmetics brands La Roche- Posay and Vichy and professional haircare brand Kérastase to the channel. “Travelers are becoming more numerous and there is a strong democratization of the channel. So today you need a vast portfolio to answer the desires and aspirations of all customers, which is why we will develop mass, active cosmetics and professional haircare in the channel,” commented L’Oréal’s new managing director of travel retail Vincent Boinay. Boinay defined the arrival of Vichy, La Roche-Posay and Kérastase in travel retail as marking the construction of two new categories in the channel that don’t exist today. Vichy and La Roche-Posay will be retailed together in what L’Oréal calls Dermacenter shop-in-shops (pictured). The Dermacenters will offer personalized services. Kérastase will be sold in Kérastase hair studios, which will provide express hairdressing services. The brands will be introduced to the channel this month in Asia and launch in the Americas at the beginning of 2015. The news follows the creation of a travel retail structure to include brands from all L’Oréal’s divisions, which was announced this year.
BPI expects to sign a new fragrance license in the next few months. The company recently signed a license with French fashion brand Zadig & Voltaire, whose first fragrance from BPI will launch in 2016. The company will also introduce its first fragrance for Azzedine Alaïa in the second half of next year. Also in terms of launches, BPI will introduce For Him Bleu Noir for Narciso Rodriguez. “For Him was launched in 2007, but it wasn’t supported as much as it could have been given the potential and success of For Her, so we want to give the men’s business a boost with this new launch,” says Narciso Rodriguez international marketing director Stéphane Goret Dervailly. For Elie Saab, BPI will unveil a limited edition of the original Le Parfum fragrance called Le Parfum Resort Collection next spring.
German brand ArtDeco used the show to unveil a new tagline for its ad campaigns: My Beauty My Way. “We came up with the new slogan to inject more story-telling and sex appeal into the brand and to reach new consumers,” explained ArtDeco vice president marketing Anna Blasco. The company is also refining its global brand image to provide a more coherent message from market to market. Some 55% of ArtDeco’s business is now done in export, with the remainder coming from Germany.
Italian company Mavive used the TFWA event to push its Merchant of Venice fragrance brand, which launched last year. The brand is now looking to expand its distribution to high-end perfumeries and department stores in Europe and the Middle East. n n n
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n n n It has just opened House of Fraser in the UK and will launch the brand in Italian department store La Rinascente in 2015. On the product front, Merchant of Venice will introduce a new range of four fragrances for men called Nobil Homo at the beginning of next year. It will also unveil the Murano Art Collection, a luxury collection where the fragrance bottle fits into a vase made of Murano glass. The Murano Art Collection will retail at between €600 and €2,000.
Skincare brand Jurlique continues to push ahead with new door openings in travel retail. Show review By the end of this year it will have opened 15 new doors in the channel and it is looking to develop locations with high Chinese passenger traffic, such as Vancouver, Toronto, San Francisco and Los Angeles; it is also in discussions for New York. In the local market in China the brand claims to be ranked number 14. In September, Jurlique also rolled out what it calls a strategic new line and a major project positioned at the premium end of the market. Called Nutri Define, the line comprises three products (serum, day cream and night cream), with the serum retailing at $150.
Italian group Eurocosmesi signed a fragrance license with Italian leather goods brand Braccialini. A first fragrance is to launch in April 2015, and will target Eastern Europe and Asia, while a second scent is slated for March 2016. The debut fragrance will be priced around €75 for 100ml. Braccialini is a family-owned company specializing in leather handbags. The brand operates around 300 freestanding stores and 250 shops-in-shops.
French skincare brand Institut Karité is building its in-flight and airport duty-free business. The brand launched this month at operator Shilla in Singapore’s Changi airport and has signed amenities contracts with Thai Airways and Turkish Airlines, which will kick off in 2015. The brand has also launched 10 new coffrets for travel retail.
Nearly two years after creating its travel-retail division, French brand Nuxe is looking to grow its business in Europe. “Our current focus is in Europe. We are working with Heinemann in Germany and just signed with Nuance for Stockholm and Geneva airports,” Nuxe travel retail director Marion Bruimaud tells BW Confidential. The next regional priority for the brand will be Asia, where it will enter Changi airport, Singapore this fall. The brand is also in talks to enter airport retail in South Korea next year.
French beauty brand Yves Rocher is looking to build its travel-retail presence by opening standalone stores in airports, rather than through multi-brand retail, says Jean-Luc Foucher-Créteau, Yves Rocher managing director Eurasia zone. The brand is currently present in around 12 multi-brand travel-retail stores worldwide. “We’ve received a lot of demand from airport operators to develop our standalone model. Being sold in a multi- brand environment doesn’t suit our brand as well,” he explains. Foucher-Créteau adds that until recently, airport standalone retail has been mainly focused on the luxury sector. “Operators want to differentiate their offer and we have the capacity to address travelers with more limited means,” he says. Yves Rocher will focus on developing its standalone travel-retail network initially in Asia, Eastern Europe, Russia, the CIS countries, Turkey and the Middle East. Western Europe will be the next priority, followed by Latin America. In the long term, the brand aims for travel retail to make up 10% of its global sales. n n n
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n n n Launches seen in show Parfums Ferragamo is to launch Emozione next February, a fragrance that it hopes will become a new pillar for the brand. Emozione is positioned as a scent for a more mature consumer and is 8% more expensive than other Ferragamo fragrances, due to the high level of quality ingredients used in the product, according to the company. The scent is a floral woody chypre and was created by Alberto Morillas and Amandine Marie from Firmenich. The tall bottle has gold finishing on the top and leather-like cream sides and features a Gancino chain. The fragrance will retail at €59 (30ml EdP), Show review €83 (50ml EdP) and €109 (92ml EdP).
Italy-based Euroitalia is to launch the women’s counterpart to Versace’s Eros men’s fragrance, which was introduced in 2012. The Eros women’s fragrance is a major new launch for the company. It is positioned as a luxury fragrance and comes in a metallic gold bottle featuring the brand’s medusa motif on the cap. The scent was created by Alberto Morillas, Olivier Cresp and Nathalie Lorson from Firmenich. The fragrance will launch in December in Italy and begin rolling out to European markets in February. It retails at €66 (30ml EdP), €89 (50ml EdP) and €120 (100ml EdP).
France-based Interparfums is launching a new women’s fragrance for its Jimmy Choo franchise next February, aimed at a younger consumer than its other scents, Flash and Jimmy Choo. The group is also coming out with new men’s and women’s fragrances for Karl Lagerfeld next April, almost a year since the launch of the first scents. The line will also be geared toward younger consumers. “We have a bit of fine-tuning to do with Lagerfeld. The first fragrance was maybe a bit too understated, but this new launch will be younger, and somewhat more glamorous,” explains Interparfums chairman and ceo Philippe Benacin. He says that the Lagerfeld business is in line with the budget and that markets in northern Europe and Russia have done well, while South America is also seeing good initial sales. However, the brand has had a slower start in the US. Interparfums also has new launches in store for Lanvin next year (a flanker for Eclat d’Arpège called Eclat de Fleur), a new men’s fragrance for Balmain and a line for men and women from jewelry brand Boucheron in February 2015.
Swiss company Art & Fragrance presented the new Noir Premier fragrance collection from Lalique. Noir Premier is a high-end collection of five fragrances (there is also a sixth fragrance created exclusively for Harrods) which come in tall black bottles. Each fragrance retails at €220. “We have high expectations for Noir Premier and early indications show that it will be a good performing line,” explains Art & Fragrance ceo Roger von der Weid. The company will also launch a new women’s fragrance called Living Lalique at the beginning of next year.
Refillable fragrance bottle brand Travalo presented its newly launched luxury line Milano HD. The range is available in five colors for domestic markets and three colors exclusively for travel retail. The Milano HD is priced $49. It launched in airport travel retail and in-flight in October, and is rolling out to domestic markets before the end of the year. “Our goal is for every fragrance wearer to have a Travalo, and for those that already own one, to also purchase our more premium Milano,” explains n n n
www.bwconfidential.com - Nov 20-Dec 3, 2014 #101 - Page 17 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL TFWA World Exhibition n n n Travalo global marketing manager Stéphanie Jacquet. In addition, the company is introducing a new generation of its Classic line in March 2015. The line will come in 10 colors and will integrate a spray mechanism that dispenses a finer mist than the previous version.
French fragrance group INCC presented a new men’s fragrance collection for the Mercedes brand called VIP Club, which is slated to launch next spring. The collection features five fragrances created by Firmenich master perfumers Show review Harry Fremont, Olivier Cresp, Honorine Blanc, Annie Buzantian and Alberto Morillas. Each fragrance represents a specific olfactory family. The fragrances are priced at €53 (50ml) and €70 (100ml). A coffret with five 50ml bottles will retail at €190. INCC also signed a fragrance license with the Principality of Monaco in August. The debut Monaco Parfums fragrances for men and women will be presented at the TFWA show in Cannes next year.
US-based Parlux presented a string of new launches at the show. The group will unveil a new fragrance for Paris Hilton called With Love this fall and a new scent from Kenneth Cole called Mankind Ultimate next year. For Rihanna, the group is rolling out Rihanna Rogue Love and will also launch a new masterbrand in 2015.
LVMH-owned Bulgari is launching a new women’s fragrance in its Aqua line called Aqua Divina. Created by Firmenich perfumer Alberto Morillas, the EdT was inspired by Italian painter Botticelli’s interpretation of the Roman goddess Venus. Aqua Divina is described as a “salty flower” fragrance. The line is priced at €47 for 25ml, €69 for 40ml and €86 for 65ml. The advertising campaign, featuring model Magdalena Frackowiak, will launch in February 2015 along with the fragrance.
Collistar unveiled a limited-edition spring-summer make-up collection created in collaboration with Italian design company Kartell. The co-branded collection is called Trasparenze and is inspired by Kartell’s color palette. The company says this partnership is a natural development following its Ti Amo Italia project, which was launched in collaboration with designer Antonio Marras this year.
Swiss brand La Prairie is expanding its Cellular Swiss Ice Crystal range in January next year. It will launch an eye cream in the range, which is said to hydrate and brighten dark circles and an emulsion, which has a lighter texture than the range’s first products. The range’s formula is based on survivalist plants and a new extremophile plant has been incorporated into these new products. The eye cream retails at $212 for 20ml, while the emulsion is priced at $286 for 50ml.
Guerlain is to launch a limited-edition 200ml version of its Orchidée Impériale cream, part of its Orchidée Impériale skincare line exclusively for travel retail in January. The brand will create only 1,000 of the items, which will be sold in select airports in Asia, Europe, the Middle East and the US and will retail at €950. n
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Harrods unveils Salon de Parfums Billed as a sanctuary of scent, Harrods’ new premium concept was conceived to provide a luxurious setting for fragrance discovery
K-based department store Harrods opened its new premium fragrance concept, Salon de UParfums, at its London store this month. The retailer says the area, which is on the store’s sixth floor, was designed to provide an intimate retail experience. “A growing appreciation for fine fragrance and a greater interest in individuality inspired us to develop a unique perfumery concept,” explains Harrods head of beauty Mia Collins. The product offer is comprised of an edited selection of fragrances aimed at perfume connoisseurs and includes high-end and rare fragrances, as well as perfume creation and personalization services. The 5,090ft2 (473m2) space is divided into two parts: individual brand boutiques and the Fragrance Gallery. The boutiques are aligned on either side of a corridor featuring columns, showcase windows and decorative light fittings. There are 11 brand boutiques: By Kilian, Chanel, Clive Christian, Creed, Dior, Ex Nihilo, Guerlain, Henry Jacques, Roja Dove Haute Parfumerie, Tom Ford and Xerjoff. At the end of the corridor is an oval-shaped gallery with a seated area decorated in soft grays and natural tones. The Fragrance Gallery groups together premium brands, and includes Harrods exclusives from companies, such as London-based perfumer Thomas Kosmala, Liquides Salon de Parfums Imaginaires and high-end ranges like Dolce & Gabbana’s Velvet Collection as well as scents l Location: London, UK from Elie Saab and Bond N°9. Some brands created limited editions for the Salon de Parfums. l Size: 5,090ft2 (473m2) Ferragamo Parfums, for example, launched specially created fragrances from its Signorina l On offer: 11 branded franchise: Signorina Eleganza comes in a handcrafted 1,000ml crystal bottle and two 50ml boutiques, Fragrance flacons of Signorina Eau de Parfum feature bottles made of silver, gold and precious stones. Gallery, exclusive While many industry players welcome more luxury settings for fragrance, some question fragrances and whether consumers will make their way to the sixth floor of the store to buy scent.n limited editions
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s In addition to the Fragrance Gallery, the new space features branded boutiques that line both sides of a marble corridor
s There are 11 branded boutiques featuring both niche and traditional prestige brands, such as Chanel and Roja Dove
www.bwconfidential.com - Nov 20-Dec 3, 2014 #101 - Page 20 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL BW Confidential The inside view on the international beauty industry
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