History of Cosmetic Industry

 History Of Cosmetic Industry  Brief introduction  Market capitalization  Size of the industry  Domestic and Export Share  Top leading

Companies 1

 Latest developments

HISTORY OF COSMETIC INDUSTRY

1.1 HISTORY OF COSMETIC INDUSTRY

Bearing a long glowing heritage of cosmetic and beauty, aesthetic makeup products is being used since olden days and nowadays it appear like a booming economy in India which would be the largest cosmetic consuming country in a next few decades. While the demand of beautifying substances are growing day by day, a large number of local as well as international manufacturers gradually extend their ranges and products in different provinces of India.

Since 1991 with the liberalization along with the crowning of many Indian women at international beauty pageants, the cosmetic industry has come into the limelight in a bigger way. Subsequently their has been a change in the cosmetic consumption and this trend is fueling growth in the cosmetic sector. Indian cosmetic Industry had rapid growth in the last couple of years, growing at a CAGR of around 7.5% between 2006 and 2008. While this is due to the improving purchasing power and increasing fashion consciousness, the industry is expected to maintain the growth momentum during the period

2009-2012. In the Indian Cosmetic Industry both electronic as well as print media are playing an important role in spreading awareness about the cosmetic products and developing fashion consciousness among the Indian consumers.

Due to the development of satellite television and a number of television channels as well as the Internet in the modern day, the Indian consumers are constantly being updated about new cosmetic products, translating into the desire to purchase them. Additionally, the flourishing Indian fashion/film industry is fueling growth into the Cosmetic industry in India by making Indians to realize the importance of having good looks and appearances. Today most of the cosmetics manufacturers in India cater to the domestic market but they are gradually establishing their footholds in overseas markets. In recent years, cosmetic manufactures in India have received orders from overseas markets; for example - Indian herbal cosmetic products have a tremendous demand in the international market

1.2 BRIEF INTRODUCTION

The Indian Cosmetics Industry is defined as skin care, hair care, color cosmetics, fragrances and oral care segments which stood at an estimated $2.5 billion in 2008 and is expected to grow at 7%, according to an analysis of the sector. Today herbal cosmetics industry is driving growth in the beauty business in India and is expected to grow at a rate of 7% as more people shun chemical products in favour of organic ones.

The emphasis of the herbal cosmetic has been on the spectacular growth of the herbal and ayurvedic beauty products business as conveyed by beauty expert Shahnaz Husain who was the first to introduce the concept of ayurvedic cosmetics to the world when she launched her products way back in 1970. Today, the Indian cosmetics industry has a plethora of herbal cosmetic brands like Forest Essentials, Biotique, Himalaya, Blossom Kochhar, VLCC, Dabur and Lotus and many more. The Indian cosmetics industry has emerged as one of the unique industries holding huge potential for further growth. In 2009, the cosmetics industry registered sales of INR 356.6 Billion (US$ 7.1 Billion) despite the global economic recession. Indian cosmetics Industry has mainly been driven by improved purchasing power and rising fashion consciousness of the Indian population and industry players spending

4 readily on the promotional activities to increase consumer awareness and develop their products.

According to a new research report, the Indian Cosmetics Industry is expected to witness impressive growth rate in the near future owing to rising beauty concern of both men and women. Today the industry holds promising growth prospects for both existing and new players.

The baseline is that there has been a rise in variety of products offered by the industry players in the country. The companies have started going for rural expansion and are offering specialized products to generate revenues from all the corners of the country. Improvement and strengthening of the Indian economy in the coming years will also pave the way for the Indian cosmetics market over the forecast period and develop the Cosmetic Industry.

The Indian Cosmetic market which traditionally a stronghold of a few major Indian players like Lakme, and Ponds has seen a lot of foreign entrants to the market within the last decade. India is a very price sensitive market and the cosmetics and personal care product companies, especially the new entrants have had to work out new innovative strategies to suit Indian preferences and budgets to establish a hold

on the market and establish a niche market for them.

1.3 MARKET CAPITALIZATION

According to analysis and figures given by the Confederation of Indian Industries (CII), the total Indian beauty and cosmetic market size currently stands at US$950 million and showing growth between 15-20% per annum. The overall beauty and wellness market that includes beauty services stands at about US$2,680 million, according to CII estimates.

1.4 SIZE OF THE INDUSTRY

The size of Indian Cosmetics Industry globally is $ 274 billion, while that of the Indian cosmetic industry is $ 4.6 billion. The current size of the Indian Cosmetic Industry is approx US$ 600 million. Among these fastest growing segment is color cosmetics, accounting for around US$ 60 million of the market. Industry sources estimate a rapid growth rate of 20% per annum across different segments of the cosmetics industry reflecting with an increasing demand for all kinds of beauty and personal care product. Growth in the Indian Cosmetic Industry has come mainly from the low and medium- priced categories that account for 90 % of the cosmetics market in terms of volume.

1.5 DOMESTIC AND EXPORT SHARE

Costs for importing other products are much higher than producing it in the country. India usually allows the entry of imported cosmetics without any restrictions but the average import tariff on cosmetics products is currently very high at 39.2%.

1.6 TOP LEADING COMPANIES

 Lakmé is the Indian brand of cosmetics, owned by Unilever. It started as a 100% subsidiary of Tata Oil Mills (Tomco), part of the Tata Group; it is named after the French opera Lakmé, which itself is the French form of Lakshmi, the goddess of wealth who has is also renowned for her beauty.  Revlon is an American cosmetic for skin care, fragrance, and Personal Care Company founded in 1932.  Oriflame Cosmetics S.A. (Luxembourg) is a cosmetics group, founded in 1967 in Sweden by the brothers Jonas AF Jochnick and Robert AF Jochnick.  The L'Oréal Group is the world's largest cosmetics and Beauty Company. It concentrates on hair colour, skin care, sun protection, make-up, perfumes and hair care.  Chambor cosmetic line is a blend of the finest traditions in terms of radiant color, soft texture and skin accentuator.  Maybelline is a makeup brand sold worldwide and owned by L'Oréal.  Avon Products, Inc. is a US cosmetics, perfume and toy seller with markets in over 140 countries across the world.  Make-up Art Cosmetics or MAC Cosmetics, is a manufacturer of cosmetics which was founded in Toronto, Canada by Frank Toskan and Frank Angelo in 1984  ColorBar cosmetics are one of the leading brands of color cosmetics in India.  Street Wear is a young, funky and hip brand which globally is positioned at the young and trendy shopper and the range consists of about 30 SKUs covering categories like nail enamel, lipsticks, lip gloss, face make-up kits and eye shadows.

1.7 LATEST DEVELOPMENTS

 According to Indian Cosmetic Sector Analysis (2009-2012), the Indian cosmetics industry is expected to witness fast growth rate in the coming years on the back of an increase in the consumption of beauty products. Owing to growing disposable income of the middle class households and changing lifestyle, it is expected that the cosmetics industry will grow at a CAGR of around 17% during 2010-2013.

 A study even shows that affordability and rising consumer base were the main drivers behind the high cosmetic sales of around INR 356.6 Billion (US$ 7.1 Billion) in 2009. Market players are getting lucrative and good opportunities as people have become more beauty conscious due to changing lifestyle and spreading consumer awareness.

 According to ASSOCHAM the size of India's cosmetics market will rise by almost a half to 1.4 billion dollars in the next two-three years as people get fashion conscious and more brands are launched. With increased awakening about cosmetics brands, which is evident even in rural India, the industry size will grow to around 1.4 billion dollars from current level of 950 million. It is projected to grow at a CAGR of around 7% during the forecast period.  Indian Cosmetics Industry is set for a significant growth depending on the capability of the manufacturers to market their products. Products that claim to renew cells, minimize pores, and restore hydration have created an $83 billion worldwide market.  Due to the optimistic assessment the domestic cosmetic and toiletries industry show that with increased awakening which is growing even in rural India, its size will grow in next 2-3 years to around US$ 1400 million from current level of US$ 950 million. Till then India's per capita consumption of cosmetic and toiletries products could be on par with that of China which currently is US$ 1.5, says ASSOCHAM analysis.

GROWTH AND EVOLUTION OF

INDUSTRY

 GROWTH AND EVOLUTION OF

INDUSTRY IN INDIA

GROWTH AND EVOLUTION OF INDUSTRY

2.1 GROWTH AND EVOLUTION OF INDUSTRY IN INDIA

Cosmetic history worldwide has gone through a sea of change over the past few centuries. Today the cosmetic industry is worth over $50 billion, but this was not always the case. Before we study more about the history of cosmetics, we need to search the origin of cosmetics. A cosmetic was not a business during its nascent stage and it was solely used to enhance the look of the facial skin. It all started during the 4th century BC when cosmetics and business were words from two different worlds.

If we look into the history of cosmetics then we find that the Egyptians were the precursors of cosmetic use. Here the women of the upper class used animal fat, scented oils and eye color to give a real 'facelift' to their faces. During its initial years, cosmetics were restricted to the confines of a room where they were prepared from natural ingredients. Cosmetics had not yet found any commercial use though it was exchanged among women.

The western world also embraced it (though a little late) much to the dissatisfaction of the Church and Queen Victoria. The use of cosmetics here was more among the lower class women and this is what slowly gave rise to cosmetics being manufactured for sale among the common masses. The French were the first to manufacture cosmetics on a large scale with the use of new and improved methods. They replaced the dangerous ingredients like copper and lead with Zinc oxide and other harmless chemicals. This soon resulted in wide sales of cosmetics and women from the elite as well as lower classes started to use it for their facial beautification.

The history of cosmetics changed with the end of World War II and the industrial growth during the 1940's, when cosmetics found acceptance among women from all corners of the world. With the advent of the electronic media

10 like Television and Radio, things looked really sunny for the cosmetic industry as actresses wore cosmetic makeup that attracted the general masses - a huge boost to the sales figures. Soon more and more women turned it into a habit to wear cosmetic makeup for almost all occasions.

People, mostly associated with the cosmetic industry, wanted to manufacture healthier and better products because they did not treat this as a business but something that even had use in their homes. Technological advancements made it easier for the companies to try out different ingredients for their cosmetics and this has also provided a plethora of options in front of modern consumers. Cosmetic history worldwide is all about providing the right kinds of cosmetics to satiate the obsession to look beautiful and remain young.

Nowadays, the cosmetic industry is not only concentrating on cosmetics for women, but even providing the metro-sexual males a chance to improve their facial looks. Today, the world's cosmetic industry faces a huge demand and a real challenge in producing good quality cosmetic products. It is still a highly lucrative business for new entrants, but the challenge now comes from clinical studies that show the existence of toxic ingredients that are currently used in the manufacture of cosmetic products. These ingredients, used over long periods of time, are now being considered harmful to one's health. Therefore, the history of cosmetics today wills evolve into where the industry will go in the future with this new information that indicates the continuous use of these toxic ingredients could be harmful to one's health.

Little did the Egyptians know then, when they were short of options and they sat in front of the mirror to use their cosmetics, what challenges would exist today. Though modern make-up has been used mainly by women traditionally, gradually an increasing number of males are using cosmetics usually associated to women to enhance or cover their own facial features. Concealer is commonly used by cosmetic-conscious men. Cosmetics brands are releasing cosmetic products especially tailored for men, and men are using such products increasable more commonly. There is some controversy over this, however, as many feel that men who wear make-up are neglecting traditional gender roles, and do not view men wearing cosmetics in a positive

11 light. Others, however, view this as a sign of ongoing gender equality and feel that men also have rights to enhance their facial features with cosmetics if women could. While highly subjective, some feel the most attractive beauty is natural beauty without make up.

The personal care market in India is currently estimated at over Rs 300 billion and growing at a rate of about 12% annually. The major contributor to the size of the market is the soaps and synthetic detergents market of close to Rs 190 billion. Besides, skin care market at Rs 20 billion (including fairness creams at Rs 9 billion); hair care (including hair dyes, hair oils and shampoos) at Rs 26 billion; male grooming (and female hygiene) market at Rs 11 billion; colour cosmetics at Rs 5 billion; oral hygiene (tooth pastes, tooth powder and brushes) add another Rs 26 billion to the overall market. Other important components include perfumes and fragrances, estimated at over Rs 5 billion.

Cosmetics, Perfumery Compounds, Flavours & Essential Oils, Essential Perfume Oil, Cosmetics Fragrances, Perfumes & Fragrances, Aromatic Oils, Chemicals, Attar, Essences, Toiletries, Nail Polish, Hair Care, Personal Care, Skin Care, Makeup, Beauty Products

The Indian cosmetic market, which comprises of skin care, hair care, color cosmetics, fragrances and oral care categories, has outperformed world‘s leading cosmetic markets in terms of growth in the recent past. The Indian cosmetic market has started witnessing rampant growth driven by improved spending power and rising consumer awareness about cosmetic products amid growing beauty consciousness.

The market for perfumes and fragrances, as perceived in western parlance, is of a recent origin. The perfumes and fragrances market had remained confined to small quantities of scents, deodorants and after shave lotions. Presently there are some 500 companies in the fragrance industry, for the small volumes, a little too many. The small scale sector is dominating the market. The unorganized market could be four times the size of the organized market.

The growth in demand for perfumes and fragrances over the last 15 years has been phenomenal. From a very small demand of 950 tonnes in 1990-91, it grew to 12,500 tonnes in 2000-01. The market for the product is estimated to have expanded by over 50% in three years to 18,300 tonnes in 2003-04. It is further expected to grow to 26,650 tonnes in 2006-07 and to 36,400 tonnes in 2009-10.

The organized sector is dominated mainly by the multinationals. The unorganized sector, with hundreds of units producing a large number of domestic concoctions, caters to the high upper-middle tier of the market for low price-end of products. The share of the small and informal sector is estimated at about one-third of the total market.

The perfumes market is becoming highly competitive with the presence of an increasing number of new players. The consumer is getting used to the imported fragrances. As the process matures, the market will need to be diversified and more Indian. Companies are importing alcohols and oils to overcome the need for the right mix and process technology which does not exist in India. The consumer preferences and product variety are so wide that technology import is unavoidable at this stage. The market is growing. It is catching up with the rich life style. A long-term high growth trend can be seen provided the consumer finds the product within the reach of his pocket.

Some leading brands include Exclamation, Masumi, Longing, Emeraude, Vanilla Fields, Jill Sanders, David Off, Adidas, Jovan Musk, Joop (All Cotys Premium brand) Wild Orchid, Ivana, Shie (Lakme), Fire, Ice, Charlie, Red and White (Revlon) Denim, Yardleys gold, Park Avenue, Premium, old spice (HLL) etc.

Some of the lead players include Coty India, Lakme Lever, Revlon, Yardly, Palmolive, Helene Curtis, Baccarose Hindustan Lever, Oriflame etc. With a population of more than one billion and a growing taste for Western sophistication, India has become one of the fastest growing markets for cosmetics, perfumes and toiletries. There is a tremendous potential in this budding market.

Cosmetics are substances used to enhance the appearance or odor of the human body. Cosmetics include skin-care creams, lotions, powders, perfumes, lipsticks, fingernail and toe nail polish, eye and facial makeup,permanent waves, colored contact lenses, hair colors, hair sprays and gels, deodorants, hand sanitizer, baby products, bath oils, bubble baths, bath salts, butters and many other types of products. A subset of cosmetics is called "make-up," which refers primarily to colored products intended to alter the user‘s appearance. Many manufacturers distinguish between decorative cosmetics and care cosmetics. The word cosmetics derives from the Greek (kosmetikē tekhnē), meaning "technique of dress and ornament", from (kosmētikos), "skilled in ordering or arranging" and that from(kosmos), meaning amongst others "order" and "ornament"

The manufacture of cosmetics is currently dominated by a small number of multinational corporations that originated in the early 20th century, but the distribution and sale of cosmetics is spread among a wide range of different businesses. The U.S. Food and Drug Administration (FDA) which regulates cosmetics in the United States defines cosmetics as: "intended to be applied to the human body for cleansing, beautifying, promoting attractiveness, or altering the appearance without affecting the body's structure or functions." This broad definition includes, as well, any material intended for use as a component of a cosmetic product. The FDA specifically excludes soap from this category.

PRODUCT PROFILE

 Product profile  Price points and brand positioning  Time-saving and long- lasting  The digital beauty experience  Conscientious beauty  High-tech developments

PRODUCT PROFILE

3.1 PRODUCT PROFILE

Most cosmetics are distinguished by the area of the body intended for application.

 Lip gloss, is a sheer form of lipstick that is in a liquid form.  Lipstick, lip-gloss, lip liner, lip plumper, lip balm, lip conditioner, lip primer, and lip boosters Lip stains have a water or gel base and may contain alcohol to help the product stay on the lips. The idea behind lip stains is to temporarily saturate the lips with a dye, rather than covering them with a colored wax. Usually designed to be waterproof, the product may come with an applicator brush or be applied with a finger.  Concealer, makeup used to cover any imperfections of the skin. Concealer is often used for any extra coverage needed to cover blemishes, or any other marks. Concealer is often thicker and more solid than foundation, and provides longer lasting, and more detailed coverage.  Foundation, used to smooth out the face and cover spots or uneven skin coloration. Foundation primer can be applied before or after to get a smoother finish. Some primers come in powder or liquid form to be applied before foundation as a base, while other primers come as a spray to be applied after you are finished to help make-up last longer.  Face powder, used to set the foundation, giving a matte finish, and also to conceal small flaws or blemishes.  Rouge, blush or blusher, cheek coloring used to bring out the color in the cheeks and make the cheekbones appear more defined. This comes in powder, cream, and liquid forms.

 Bronzer, used to give skin a bit of color by adding a golden or bronze glow.  Mascara is used to darken, lengthen, and thicken the eyelashes. It is available in natural colors such as brown and black, but also comes in bolder colors such as blue, pink, or purple. There are many different formulas, including waterproof for those prone to allergies or sudden tears. Often used after an eyelash curler and mascara primer.There are now also many mascaras with certain components to help lashes to grow longer and thicker. There are specific minerals and proteins that are combined with the mascara that can benefit, as well as beautify.  Eyelid glue, eyelash extensions, eye liner, eye shadow, eyeshimmer, and glittereyepencils as well as different color pencils used to color and emphasize the eyelids (larger eyes give a more youthful appearance)  Eyebrow pencils, creams, waxes, gels and powders are used to color and define the brows.  Nail polish, used to color the fingernails and toenails

3.2 PRICE POINTS AND BRAND POSITIONING

Cosmetic companies are generally focusing on the mass market, thanks primarily to the increasing importance of Latin America, particularly in the area of fragrance, a category that is dominated by mass brands in the region. However, mass and masstige portfolios are also being developed in more mature and traditionally premium-dominated markets, such as Japan. It is important for skin care professionals to understand that this is a result of the growing perception among consumers that mass or the upper end of mass across categories, such as color cosmetics and skin care, may be able to deliver similar quality as their luxury counterparts. Be aware of this trend and be prepared to explain to clients and consumers alike what sets professional skin care products apart from the competition.

Although value growth is being driven by mass beauty, innovation is still most definitely being led by premium brands, including new mascara packaging formats in color cosmetics, as well as skin care ingredients. In 2010 and 2011, there have also been a number of high-profile acquisitions involving premium and professional lines. Super-premium brands retained their exclusivity and high pricing, with some putting in a consistently positive performance throughout the downturn as the spending levels of wealthy consumers remained largely resilient.

3.3 TIME-SAVING AND LONG-LASTING

From the trend for at-home do-it-yourself beauty during the recession, two major diverging trends in terms of new product innovation have developed. Time-saving beauty is a theme in many new products, primarily as a response to demand from today‘s time-poor consumers who want to cut the amount of

19 time and money spent on their daily beauty or grooming routine. As a result, there has been much research and development focus on areas such as fast- drying nail polish and multifunctional products, such as 3-in-1 shower gel, facial wash and shaving foam for men or hybrid products for the face that incorporate elements of facial makeup, skin care and sun care.

Super long-lasting beauty is another overriding theme, because such products are seen as being hassle-free and a good value for money due to the need to apply them less often than their conventional counterparts. These include long-lasting lipsticks and nail polishes, and 24-hour moisturizing in skin care. It is common that clients allow a longer stretch between professional skin care treatments these days, so it is all the more important to provide home-care recommendations and options that will help them maintain the results of professional skin care treatments longer in the most convenient way possible. Do you have options in your retail area that fit this description, and are you working with clients to recommend the best home-care options for their needs?

3.4 THE DIGITAL BEAUTY EXPERIENCE

Although department stores performed marginally better during the previous year, Internet retail managed to achieve stronger absolute value growth to reach total beauty sales of just more than $11 billion in 2010. With e-tailers expanding their product ranges, including beauty, through acquisitions and product-specific landing pages, pressure on store- and spa-based retailers will only intensify.

As consumers continue to rely on the ease of online shopping, skin care facilities and suppliers alike are looking to hone their Internet strategies to create a highly competitive non-store beauty market. The key draw of online beauty shopping for consumers remains price. Typical consumers who buy

20 online already know which products they would like because they are satisfied with the quality from previous usage or have tried the product ―off-line‖ and are purchasing it online due to better prices.

As technology and Internet penetration advance, the beauty industry continues to adapt new strategies to interact with consumers in a more experiential way, both virtually and in-spa. This is happening through social media interaction sites such as Facebook and blog websites, online makeup tutorials and smartphone applications. Competition with both online retailers and mass market venues is nothing new to the professional skin care industry; however, this trend indicates the competition is not dying down or going away. Make sure that you work to have competitive pricing and offer other VIP incentives to ensure your clients are spending their money at your facility and not elsewhere. Also, make shopping with your skin care facility as easy as possible by considering expanding your website to offer online shopping if you feel your business would benefit. Approach retail with an open mind and work to always meet the needs of clients and consumers.

3.5 CONSCIENTIOUS BEAUTY

Naturally positioned, organic and fair-trade beauty products are rapidly moving from niche to mainstream status. This trend is evident both from the transition of such products being sold at specialty outlets to more mainstream stores, such as supermarkets and drugstores, and also from the many beauty companies addressing the demand for beauty innovations that have both a minimal effect on the environment and offer results comparable to standard brands. Changes are also taking place in the regulation of organic beauty in order to help consumers distinguish between the wealth of products available. The European-wide Cosmos standard was introduced in February 2011 and is expected to see a move toward a more harmonized standard in organic cosmetics.

3.6 HIGH-TECH DEVELOPMENTS

Beauty is continuing its quest for scientifically and technologically advanced formulations, with high-tech innovations being seen throughout the entire beauty spectrum. This has been particularly the case in skin care, where innovations based on genomics, involving the study of a particular string of genes responsible for aging and how those express themselves throughout time, have been prevalent. There is an increasing focus on providing similar scientifically advanced innovations in ingredients, both at the upper and lower end of the price spectrum. Color cosmetics have seen a number of innovations that increasingly offer high-tech skin care benefits or a professional-looking finish. Also, the 2009 launch of a prescription treatment to grow eyelashes has created a completely new category for nonprescription eyelash growth products. As a result, many major beauty companies have recently come up with innovations in this area.

DEMAND DETERMINATION OF

THE INDUSTRY

 PRICE  INCOME OF TARGETEDCUSTOMER  PENETRATIONLEVEL  AVAILABILITY OF FINANCE  REPLACEMENT DEMAND  PROMOTION 23

SCHEMES

DEMAND DETERMINATION OF THE INDUSTRY

4.1 PRICE

There is high maturity and price competition in established mass market toiletries such as bar Soap and toothpaste. Since the average Indian household continues to be highly price sensitive, These popular mass-market products will have the lion‘s share of cosmetics and toiletries sales.

This will offer high growth prospects of the overall market over the coming years. The cosmetics and toiletries market are also facing competition from other consumer durables (computers, mobile phones, home theatres and automobiles) as well as the housing sector.Being value conscious, there is a limit to the amount that the average consumer will spend on luxury items such as fragrances.

The mass market for lipsticks (price range between Rs 30 to Rs 100) forms 43 per cent of the total lipsticks market. The price range below Rs 30 forms roughly 48 per cent of the market. The mass premium segment (price range Rs 100 plus) is just nine per cent of the total lipsticks market, where Revlon has a market share of 80 per cent.

Lakme‘s product range consists of the Elle range (priced at around Rs 30) and the medium-priced Ultra range (at around Rs 60) to the premium Orchid range of color cosmetics priced in the range of Rs 120 to Rs 187. French multinational L'Oreal India prices range from Rs.300 to Rs 1,500. By the end of 2001, it expects nearly 50 cities to be selling the products.

Maybelline has now introduced an Express Make-up priced at Rs 299. L'Oreal's product of makeup currently available in the market is priced at the premium end at Rs 599. The brand is currently available in 4,000 outlets. Maybelline New York globally has 900 SKUs in color cosmetics. In

24 competition with L'Oreal's Maybelline range of `transfer-resistant' lipsticks, Revlon has rolled out `Color Stay' lipsticks priced at Rs 239. The lipsticks are thus at a high premium to the Maybelline range priced at Rs 185.

‗The nail enamel market, one of the fastest growing segments in the cosmetic industry, is segmented into three: the mass premium segment priced above Rs 75, and dominated by brands such as Chambor, Orchids, and Revlon; the mass market segment priced between Rs 30 and Rs 75, with brands such as Lakme and Maybelline; and the lower segment, priced below Rs 30. Accounting for 75 per cent of the total market, the popular segment consists of Elle 18, Tips & Toes and other regional brands.‘ The prices of the more popular products of the key players in the category are enclosed herein.

LAKME

1. LIPSTICKS 85/- 2. NAIL ENAMEL 48/- 3. LIQUID LIP COLORS 145/- 4. LIP LINERS 32/- 5. COMPACT 155/- 6. FOUNDATIONS 59/- 7. REMOVER 30/- 8. EYELINERS 40/- 9. MASCARA 95/- 10. FACE POWDER 22/- 11. KAJAL 24/- 12. EYE PENCIL 60/- 13. BLUSHERS 95/- 14. EYE SHADOWS 95/-

MAYBELLINE

1. MOISTURE WHIP LIPSTICKS 99/109/- 2. NON-TRANSFER LIPSTICKS 209/219/- 3. ULTIMATE WEAR NAILENAMEL 59/- 4. NON-TRANSFER LIP LINERS 179/- 5. NON-TRANSFER EYE LINERS 179/- 6. CURL MASCARA 99/- 7. WONDER CURL MASCARA 159/- 8.EASY EYE LINING PEN 159/- 9.EXPRESS MAKE-UP 3 IN 1 STICK 299/- 10.SHINE-FREE FOUNDATION 169/-

REVLON

1. COLORSTAY LIPSTICKS 219/- 2. COLORSTAY LIQUID LIPSTICKS 229/- 3. COLORSTAY CONCEALER 219/- 4. COLORSTAY FOUNDATION 299/- 5. COLORSTAY LIQUID EYELINER 259/- 6. COLORSTAY EYELINER 175/- 7. COLORSTAY LIPLINER 175/- 8. MOON DROP LIPSTICKS 195/- 9. MINI LIPSTICKS 90/- 10. TOP SPEED NAIL ENAMEL 79/- 11. MINI NAIL ENAMEL (8 ML) 55/- 12. NAIL ENAMEL (15 ML) 85,95/- 13. MOISTURISING FOUNDATION 69/- 14. MOISTURISING COMPACT POWDER 145/- 15. BLUSH-ON 200/- 16. EYE SHADOWS 225/- 17. NAIL ENAMEL REMOVER 50,60/-

CHAMBOR

1. LIQUID MAKE UP ( FOUNDATION) Rs.450 /- 2. SILVER SHADOW (COMPACT) Rs.510 /- 3. TRIO EYE SHADOW Rs.375 /- 4. BLUSH ON Rs.395 /- 5. EYE LINER Rs.250 /- 6. MASCARA Rs.250 /- 7. EYE PENCILS Rs.125 /- 8. LIP STICKS Rs300 /- 9. LIP PENCILS Rs.150 /- 10. GLITTER STICK Rs.280 /- 11. SILVER DUST Rs.375 /- 12. LIP CRAYON Rs.345 /-

4.2 INCOME OF TARGETED CUSTOMER India's spending on cosmetics and toiletries is relatively small, with rural and suburban areas concentrating on basic toiletries and cosmetics. The purchasing power of Indian consumers is increasing thereby shaping the aspirations and lifestyles of consumers, who are upgrading to good value products at affordable prices. The Cosmetic Companies have invested heavily on promoting product visibility among rural folk, which has increased the demand for bar soap, talcum powder, lipstick, tooth powder and hair oil in these areas. This has also increased the demand for essential everyday items like bath and shower products, hair care, oral hygiene and skin care. Another strategy followed by companies to promote cosmetics in rural areas was sachets‘ approach. While rural India contributed to growth in volume terms, the urban population contributed 69 %of value sales in 2005 especially for sophisticated products.

These high-quality added-value niche products include mascara, toners, body wash/shower gel, depilatories, sun care and deodorants, amongst others which are unaware to the rural users. Sales are almost completely generated from the urban pockets, concentrated within the key metropolitan areas of New Delhi, Chennai, Mumbai and Calcutta. Due to Western influences, men's grooming products are used more predominantly in urban population compared to their counterparts in rural areas income of targeted customers. Cosmetics and toiletries have witnessed a growing demand from the low and lower middle-income households. The premium labels are being used in urban areas, whereas regional and national brands in the rural areas, where close to 70% of the Indian population resides and price determines purchasing decisions.

4.3 PENETRATIONLEVEL

Indian cosmetics industry has witnessed strong growth during the past few years and has emerged as one of the industries holding immense future growth potential. The cosmetics industry registered impressive sales worth Rs 288.7 Billion (US$ 5.8 Billion) in 2010. The sector has mainly been driven by improving purchasing power and rising fashion consciousness of the Indian population. Moreover, the industry players are readily spending on the promotional activities to increase consumer awareness.

According to research report ―Indian Cosmetic Sector Analysis (2009- 2012)‖, Indian cosmetics sector is expected to witness noteworthy growth rate in near future, owing to the rising beauty concerns of both men and women. The industry holds promising growth prospects for both existing and new players. To support this evidence, we have done an extensive analysis of various segments of the cosmetics industry, keeping in view both the services and products sector.

The baseline for the optimistic future outlook of the Indian cosmetics industry is that, there has been a rise in variety of products offered by the industry

28 players. Moreover, the companies have started opting for online retailing and are offering specialized products to generate revenue from all the corners.

4.4 AVAILABILITY OF FINANCE

Cosmetics business in India is flourishing with higher speed among rural and urban population. India‘s per capita consumption of cosmetic and toiletries products was US$1.5 in the year 2008 which would be expected to grow at the rate of 15 to 20 percent due to increase in per capita income. Consistent increase in per capita income witness the prosperity of country, which results the growing number of middle income population and holding of higher purchasing power. Swift of larger middle income group ultimately widens the consumer market in India.

It becomes now the lucrative market for investors in the business of durable goods, processed food & brewages, real estates, financing, textile and travel etc. Competition between the companies has given greater choices to consumers among new style brands products and services in Indian market. The Indian cosmetic market, which has been traditionally a stronghold of a few major Indian players like Lakme and Ponds has seen a lot of foreign entrants to the market within the last decade. The value of output of cosmetics industry (excluding toiletries) is estimated at Rs 24 billion in the organized sector. The informal sector produces about one-third by value and much higher by volume. The overall market is estimated to be of the order of over Rs 36 billion. It has witnessed a growth rate of 10 to 12% annually. Despite the downward trend in the demand of a large number of consumer products, the cosmetic industry continues to grow at a high rate basically because of the entry of new players (and new products) and globally known brands.

The up-end market is expected to grow at the rate of 12% and might pick up a rate of 15% from the present market value level of Rs 24 bn. According to ASSOCHAM report, 20 percent population believe to use the well known branded products like Uniliver, proctor & gamble, Godrej, Dabur etc. Rest of

80 bilion population spent on low cost cosmetics. Marketing of cosmetic or any not necessitated products are very price sensitive in India.

4.5 REPLACEMENT DEMAND

The Indian Cosmetics Industry is undergoing rapid evolution and transition following liberalization. It has matured considerably during the last decade. Although economic slowdown all over the world had proved a major handicap for big players but it did not affect the overall growth in the industry which was estimated to be in the range of 15-20%. With globalization, there have been changes in many areas viz. upgradation, competition, brand image etc. On the other hand, cosmeceuticals and naturals emerged favorite segments for the consumers. Today, the industry is gearing up for a new phase in its growth, according to market analysts.

For Cosmetics, packaging turned out to be one of the key modes of differentiation during the year. Companies used packaging both as a means towards off the fakes in grey market and as a USP to set a brand apart from the rest. Bubble packs for shampoos, tamper-proff containers for hair-oils (parachute) were some of the innovations that worked..

Personal hygiene products (including bath and shower products, deodorants etc.), hair care, skin care, colour cosmetics and fragrances are key segments of the personal care market. In Asian markets, China and India are the maximum users of herbal cosmetic products. India the total ayurvedic products market is estimated to be Rs. 2500 crore per annum out which Rs. 450 crore is the market of natural herbal cosmetics. The other coming market in Asia is the Malaysian herbal market with an annual turnover of Rs. 4.55 billion per year and is growing at a rate of 20% annually.

China is the largest exporters of herbal cosmetics in the world whereas India stands second in the global market share. Both the countries have a rich heritage and hence are the biggest exporters of herbal cosmetics. The share of organic and natural cosmetics in the $270 billion global cosmetic market is growing at a fast pace

Distinct fragrances used in lotions, shampoos, and other cosmetic products are because of certain aromatic hydrocarbons that are also derived from petroleum. Dermatologists and beauty experts have always pitched against the use of petroleum based materials in cosmetic products.

In recent times organic and natural cosmetics have not only surfaced in the market, but are also fast increasing their share in the overall global cosmetic market, which is worth over $270 billion. This article is an attempt to peep into the world of organic and natural alternatives to petroleum in the beauty care products, and explore possible business opportunities in the segment.

Ordinary commercial cosmetic products, which include even those that are manufactured by well-reputed brands, often contain toxic and chemically- potent substances capable of causing long term adverse impacts on human skin. Some people, in fact, exhibit immediate health problems upon use of such products. However, more and more people around the world are growing aware of the dangers of using chemical cosmetics. This has led to a steady rise in the demand for certified organic skin care and cosmetics.

Most users of natural and organic cosmetics are not aware of what the terms natural and organic refer to in the context of cosmetics. To a common person, natural cosmetics would be those that are not made using any chemical ingredients and processes. In fact, products are labeled quite often as natural in many countries, including the US, even if only 70 percent of the ingredients used in them are from plants and natural sources. The products that are thus sold can have some chemicals as their ingredients—chemicals that are supposedly not harmful to our skin

BEAUTY IN SIMPLICITY

―White mineral oil is a safe, effective, time-proven ingredient‖

A natural substance is derived from a plant, mineral or animal source, without having undergone a synthetic process.

―Organic products are those which use plants and herbs grown organically.‖

The common person has taken natural and organic products as one, and the greatest advocates of the use of natural ingredients in cosmetic products have also not raised much hue and cry about this. They seem satisfied that natural ingredients are slowly replacing carcinogenic ones. They also know making organic cosmetic products is possible only with the greater acceptance of organic ways of farming.

Harmful chemicals and alternatives

Modern research at the Herb Research Foundation has found that human skin absorbs up to 60 percent of the chemicals in products that it comes into contact with directly into the bloodstream. This is why the present day hormone therapy treatments and smoking cessation medications are often prescribed as patches that one applies directly to the skin. Going by the same logic, harmful chemicals used in cosmetics would be entering our bloodstream causing long term adverse impacts. Petrolatum, more commonly called Vaseline, and mineral oils, which are used in most of the cosmetics products and even in baby oil and lotions, form an oily film over skin to lock in moisture. While doing so, these also trap in toxins and wastes and hinder normal skin respirations.

LOVE THE SKIN IN YOU

Propylene glycol, another common ingredient in cosmetic products, is also obtained from petrochemicals. This is added to numerous skin care creams and lotions as an emulsifying agent to make the skin look smooth. However, it speeds up the aging of the skin and can also cause irritation and contact dermatitis. Artificial fragrances, mostly obtained from petroleum byproducts, can cause numerous health problems including headaches, lung problems, skin irritation and dizziness.

Of late, there have been attempts to find alternatives. Multinational companies have started focusing on organic cosmetics as these are considered not only safe for health reasons, but are also looked at as something environment friendly. Many people prepare organic cosmetics at home too. Some of the natural ingredients used in organic cosmetics are yoghurt, honey, oatmeal, chamomile, tea oil, etc. Natural extracts like hemp oil, tea oil, coconut oil, cocoa butter, carrot seed oil and aloe vera can be combined and mixed to form an effective lotion for the skin, which not only protects it from harmful sun rays but often softens and moisturizes the skin.

Beauty recipes from China and India using traditional herbs have earned a special significance the world over. Ayurvedic recipes from India for skin and hair treatment also serve as cosmetics. Mud, mineral products, milk, milk cream, and eggs are used in various natural cosmetics. Spices and condiments like turmeric and saffron figure quite often in the list of ingredients for natural cosmetics. Lemon is another effective ingredient in natural cosmetics. Fruits can make up excellent face packs, and cucumbers, peaches and apricots can be especially mentioned in this regard. The oils obtained from almond and coconut act as very good massage oils for skin and hair, controlling wrinkle and crease formation on the surface of the skin. Natural perfumes can be obtained from essential oils of rare herbs.

The best part about organic cosmetics is that unlike chemical based cosmetics, these do not interfere with the body‘s absorption of vitamin D. Moreover, these help an individual to have a healthy skin, lustrous hair and

33 glowing complexion in a completely natural way. Naturally-made cosmetics also help in skin tissues and cell repair. No wonder, more and more people are realizing the worth of organic cosmetics.

4.6 PROMOTION SCHEMES

Cosmetics are used to enhance the natural beauty of a variety of individuals, so it's no wonder cosmetic companies have to come up with creative promotional ideas to entice different types of consumers to try their product lines. One important aspect of a makeup promotion is that it offers potential customers an opportunity to experience the brand on their skin through sampling.

BEAUTY SOCIALS

 Direct-selling companies have experienced success through home parties hosted by their sales representatives. They create an event tailored to their target market that allows them to meet with a group of potential customers at one time to demonstrate their cosmetics and promote company. They give home parties a unique name, such as "Beauty Socials." During these events, which can be hosted at their store or at clients' homes, attendees learn about proper makeup application, sample the product line and bond with other attendees. After demonstration, take sales orders from interested attendees.

POINT-OF-PURCHASE DISPLAYS

 They Partner with local businesses in vicinity that target market frequents, such as clothing boutiques and hair salons. They work with the owners of these establishments to see if they can create a point-of- purchase display in their stores that features their cosmetic products. A mutually beneficially deal, such as giving the store owner a percentage of their profits or promoting their products or services to existing customer base,encourage them to work with them to promote their product line.

GIVEAWAYS

 Social networking sites helps to promote the cosmetic line to potential clients. They Host a product giveaway and promote it on the blog or on such social networks as Facebook and Twitter. To qualify for entry, customers write reviews about products, name their favorite makeup artists or detail their worst makeup experiences. Than they select a grand-prize winner, a first-place winner, and a runner-up. The grand prize is generally a basket filled with cosmetic products; the other winners can pick a product they want to try. They list winners document with their experiences with products and post their insights to blog, website and other social networks.

BEAUTY WEEK

 Companies host a "Week of Beauty" event and invite potential customers to visit for a free makeup consultation. Quite often they offer tips on the best products and colors for their skin. They either visit customers at home or invite them to company‘s location. If customer visits company‘s location, they are provided with the refreshments. They give participants product samples to take home and encourage them to share their samples with friends and family. Distributing samples help to promote their business to potential clients.Many women and men across all cultures use makeup, nail polish and other forms of cosmetics to enhance their appearance. These beauty products have become a lucrative business venture for entrepreneurs. Effective promotional ideas for cosmetics can help your venture grow into a successful business.

DEMONSTRATIONS

 Companies Partner with beauty-supply stores and spa retailers to host demonstrations using cosmetics, including customer makeovers and product-information sessions that compare their cosmetics with competing brands. In-store demonstrations help to boost direct-sales opportunities and build brand awareness, and the retail industry's built-

in customer base allow companies to introduce cosmetics in a non- intrusive manner. Home parties offer a more informal and intimate atmosphere. Company Partner with five clients who will allow them to host demonstrations in their homes in exchange for free cosmetics or referral commissions on product sales.

ONLINE COSMETICS FORUM

 Often they build an online message board where members discuss beauty topics in a public forum and promote it using social-networking websites and beauty-themed blogs. They moderate the forum to keep all discussions centered on the topic of products line of cosmetics. Also they categorize forum sections into departments for each product that sell to learn which items customers favor the most. They respond to questions, suggestions and concerns that members post about products they are using, and post application, cleaning and storage tips exclusively for members of your online cosmetics forum.

ONLINE TUTORIALS

 Tutorials that provide instructional information for specific products and beauty trends are used as promotional ideas for cosmetics. Companies build their website that features articles with step-by-step instructions on how to use cosmetics, and upload photos as visual demonstrations for each step. They also use feature makeup artists who helps online visitors achieve specific celebrity-themed looks using cosmetics. Online video tutorials are another way to extend promotional ideas for cosmetics. Sometime they hire a model to work as the spokesperson by wearing cosmetics in all online video tutorials. It includes video footage that shows the model without makeup prior to applying cosmetics to the face or nails. They upload video makeovers using volunteer male and female subjects to demonstrate how cosmetics look on the average person.

PLAYER IN INDUSTRY

 NUMBER OF PLAYERS  MARKET SHARE OF VARIOUSBRANDS

PLAYER IN INDUSTRY

5.1 NUMBER OF PLAYERS

PROCTER & GAMBLE

Products/Brands: Pantene, Olay, Head & Shoulders, Cover Girl, Clairol Herbal Essences, Max Factor, Hugo Boss, Secret, SK-II, Zest, Safeguard, Rejoice, Vidal Sassoon, Clairol Nice ‗n Easy, Old Spice, Pert, Ivory, Sure, Camay,Physique,Noxzema.

New Products: Olay Quench hand and body lotions, Olay Anti-Aging, Olay Moistures in-shower body moisturizer, Olay Touch of Sun, Olay Ribbons body wash, Pantene Color Expressions, Easy Root Touch Up.

Beauty net sales increased 7% to $21.13 billion in 2006. Beauty unit volume increased 8% in 2006, including nine months of Gillette Personal Care results. Organic volume increased 6%. Volume growth was broad-based across categories and was driven by initiative activity including Pantene Color Expressions, Head & Shoulders brand restage, Olay Regenerist, Olay Ribbons and a technology improvement on Always.

L’ORÉAL

Products/Brands: Hair care, skin care, sun care, color cosmetics, toiletries and fragrances marketed under such brand names as Artec, Biotherm, Cacheral, Carson, Helena Rubinstein, Lancôme, Lanvin, L‘Oréal, L‘Oréal Paris, L‘Oréal Professionnel, L‘Oréal Perfection, L‘Oréal Kids, Giorgio Armani, Harley Davidson, Matrix, Maybelline, Jade, Gemey Paris, Jean-Louis David, Ralph Lauren, Redken, Soft Sheen Carson and Vichy. New Products: Professional-Volume Active, colorants, ColorSmart. Consumer-RevitaLift

Double Lifting skin care, Elséve Nutri-Gloss hair care and Volume Shocking mascara.

Corporate sales rose 6.5% last year and net income surged 37%. Sales in the rest of the world rose 12.6% to $4.5 billion. The gains were attributed to China and Indonesia, but the company noted that a distribution problem hurt results in South Korea.Helped along by an 8.5% gain in the fourth quarter, sales in the professional products division rose 6.1% to $2.5 billion.Consumer product division sales rose 4.6% to $9.3 billion. Garnier, L‘Oréal Paris and Maybelline all recorded good gains. Within the luxury products segment, sales rose 2.7% to $4.4 billion. Lancôme‘s sales were up, Platinéum skin care were also up and L‘Extrême mascara. Within the fragrance sector, Armani Code provided a lift. The demand for effective skin care products helped sales of active cosmetics jump 13.5% to $1.2 billion. First-half sales in Western Europe reached nearly $9.6 billion.

UNILEVER

Products/Brands: Axe/Lynx, Rexona/Sure and Degree deodorants; Dove, Caress, Lux and Lever 2000 soaps; Pond‘s and Vaseline skin care products; Organics, Salon Selectives, SunSilk, Suave and ThermaSilk hair care products. New Products: Dove Cool Moisture, Rexona Teens. Unilever continues to streamline operations. At the close of 2005, nearly 80% of its turnover was managed through ―One Unilever‖ organizations. By the end of 2006, the company expects to deliver $871 million in savings and as much as $1.2 billion in 2007. The reorganization has already helped sales growth, as corporate sales were up 3% in 2005 after being flat in 2004. Despite Unilever‘s determination to cut costs, it will maintain its dual corporate headquarters.

Within the personal care group, sales rose and the company credited the Dove ―Campaign for Real Beauty‖ as a big reason for the sales gain.

At the regional level, sales in developing and emerging markets continue to grow. The company notes that these countries will account for 90% of the

39 world‘s population by 2010. For the first time, sales in developing and emerging markets exceeded sales in Western Europe. But as important as D&E markets may be, Unilever hasn‘t lost focus on Europe and North America.

In 2005, Unilever managed to grow its U.S. business 3.2% behind gains in home and personal care sales. As one might expect, gains in deodorant and personal wash sales helped in a big way as Axe posted double-digit growth, and consumer demand for Dove and Rexona remained strong.

But much work remains to be done in Europe as weakness in the UK led to a decline in personal and home care sales. In Asia and Africa, sales were up 6.9%, driven by the launch of new Lux and Pond‘s products.

JOHNSON & JOHNSON

Products/Brands: Aveeno skin care products, Clean & Clear teen skin care products, Johnson‘s pH5.5 skin and hair care products, Neutrogena skin and hair care products, Piz Buin and Sundown sun care products, Shower to Shower personal care products. New Products: Johnson‘s Soft and Johnson‘s Soothing Naturals, Aveeno Ultra-Calming, Aveeno Essential Moisture lip conditioner, Aveeno Continuous Protection sunblock lotion. Comments: On June 26, Johnson & Johnson agreed to purchase Pfizer‘s consumer product business for $16.6 billion. The acquisition adds more bulk to J&J‘s fast- growing consumer products division. Neutrogena became the first J&J skin care brand to top the $1 billion mark in annual sales. Sales of skin care products rose 12.2% to $2.4 billion and baby and kid care sales rose 7.9% to $1.6 billion. Overall, corporate sales rose 6.7% and net income was up 22.4%.

For the first quarter of 2006, corporate sales rose 1% to $13.3 billion. Worldwide consumer segment sales rose 3.3% to $2.4 billion. The sales gain was attributed to strong sales of Aveeno, Neutrogena and Johnson‘s adult

40 skin products. During the quarter, the company announced that it had entered into an agreement to acquire Groupe Vendome, a privately-held French marketer of adult and baby skin care products

REVLON

Products/Brands: Cosmetics, skin care, hair care and fragrances sold under such brand names as Revlon, Colorstay, Age Defying, Almay, Charlie, Ultima II and African Pride. New Products: Almay-Intense i-Color; Revlon-Fabulash Mascara, Vital Radiance cosmetics. Net sales rose 3% in 2005 and the company cut its losses 41%. Revlon is cutting 250 jobs, or 8% of its work force, and is canceling its recently launched Vital Radiance cosmetics line, which is estimated to drag down the company‘s operating results by $110 million this year. The company also said it will postpone the launch of its Flair fragrance until 2007. Last year, North American sales increased just 0.2% to $857 million. International sales increased 7.6% to $475.2 million,as sales in Asia Pacific and Africa increased 7.3% to $242.6 million. In Europe and the Middle East, sales increased 3.6% to $125 million.

COLGATE-PALMOLIVE

Products/Brands: Speed Stick and Lady Speed Stick antiperspirants; Irish Spring, Palmolive Naturals and Protex soaps. New Products: Palmolive Aroma Crème, Speed Stick 24/7 deodorant with micro-absorbers, Irish Spring MicroClean bar soap, Softsoap Pure Cashmere moisturizing body wash, Speed Stick deodorant with Irish Spring scents. Colgate markets products in two major categories: Oral, personal and home care; and pet nutrition. Beauty sales numbers are only for personal care products, which accounted for 23% of worldwide sales in 2005 and reached $2.3billion. Corporate sales rose 7.5% and net income improved 2%. Gross margin dropped 70 basis points to 54.4%. Colgate expects to save $325-$400 million by 2008 due to its four- year, 2004 restructuring program. Last year, sales in the oral, personal and home care segments rose 8% to nearly $9.9 billion. Volume rose 5.5%. Oral care accounted for 38% of corporate sales, followed by home care (26%),

41 personal care (23%) and pet nutrition`(13%). Within the oral, personal and household care businesses, Colgate divides its sales on a regional basis. Europe accounted for 24% of sales, followed by Latin America (23%), North America (22%), Asia/Africa (18%) and Australia

5.2 MARKET SHARE OF VARIOUS BRANDS/FIRMS

TOP 10 PLAYERS

(Chart no : 1 Market share )

DISTRIBUTION CHENAL IN

THE INDUSTRY

DISTRIBUTION CHENAL IN THE INDUSTRY

THERE ARE THREE CATEGORIES OF CHANNELS OF DISTRIBUTION

PRESTIGE - Department stores, specialty stores and chain department stores, such as Macy's, Neiman-Marcus and J.C. Penney (internationally) and Shoppers‘ Stop, VAMA, Westside, Bombay Stores etc (nationally).

BROAD - Drug stores, food stores, cosmetic discounters, warehouse clubs, and mass merchandisers. Examples are Eckerd, Pathmark, Cosmetic Center, Sam's Price Club and Wal-Mart (internationally) and Satyam, Haiko, Sahkari Bhandar etc. (nationally)

ALTERNATIVE - is identified by five different marketing methods: o Direct Sales o Direct Mail/TV/Print o Free Standing Stores o Health Food Stores o Salons

KEY ISSU OF CURRENT TREND

 PRODUCT QUALITY  CUSTOMER SERVICE  PRICING  MARKETING STRATEGIES  SEGMENTATION AND POSITIONING  CURRENT TRENDS 45

KEY ISSU OF CURRENT TREND

7.1 PRODUCT QUALITY

If a product fulfils the customer‘s expectations, the customer will be pleased and consider that the product is of acceptable or even high quality. If his or her expectations are not fulfilled, the customer will consider that the product is of low quality. This means that the quality of a product may be defined as ―its ability to fulfil the customer‘s needs and expectations‖.

Quality needs to be defined firstly in terms of parameters or characteristics, which vary from product to product. For example, for a mechanical or electronic product these are performance, reliability, safety and appearance. For pharmaceutical products, parameters such as physical and chemical characteristics, medicinal effect, toxicity, taste and shelf life may be important. For a food product they will include taste, nutritional properties, texture, shelf life and so on.

It should have precise limits of acceptability so that the production team can manufacture the product strictly according to specification and drawings. To achieve the above, those responsible for design, production and quality should be consulted from the sales negotiation stage onwards. The overall design of any product is made up of many individual characteristics. For example these may be:

_ Dimensions, such as length, diameter, thickness or area; _ Physical properties, such as weight, volume or strength; _ Electrical properties, such as resistance, voltage or current; _ Appearance, such as finish, colour or texture; _ Functional qualities, such as output or kilometre per litre; _ Effects on service, such as taste, feel or noise level.

Manufacturing drawings and specifications are prepared by the designers and these should indicate to the production team precisely what quality is required and what raw materials should be used.

7.2 CUSTOMER SERVICE

Based in Washington, D.C., the Personal Care Products Council is the leading national trade association representing the global cosmetic and personal care products industry. Founded in 1894, the Council's more than 600 member companies manufacture, distribute, and supply the vast majority of finished personal care products marketed in the U.S. As the makers of a diverse range of products millions of consumers rely on everyday, from sunscreens, toothpaste and shampoo to moisturizer, lipstick and fragrance, personal care products companies are global leaders committed to product safety, quality and innovation.

7.3 PRICING

In recent decades, numerous studies have been conducted on pricing from the perspective of economics, marketing, operational research, decision making, and consumer behavior. The key rationales behind these studies are to optimize pricing and to maximize profits. However, investigative work into pricing a product from the consumer‘s feeling perspective is rare. Hence, this thesis involves the investigation of the relationship between the consumer‘s feelings and pricing. To investigate the relationship of the consumer‘s feelings to pricing, a retail product of a particular retail segment/industry has to be identified that can illustrate the effect of the consumer‘s feelings in relation to pricing. The product and its involvement in the consumer market have to be generally accepted, descriptive and expressive in term of feelings and representable in the industry/market segment. Most importantly, the pricing framework developed can be applied to a wider range of products, or even extended to an industry segment. The cosmetics industry is a lucrative.

7.4 COMPANIES SPECIFIC MARKETING STRATEGIES

Hindustan Lever

This is the leading marketing company of India, which believes that someone somewhere chooses their product about 160 million times a day.14 categories of 400 brands ranging from personal care, food products and home touches the lives of many which is done by no other company .The company has about 174 000 people in 100 countries across the globe and also supports many suppliers, contractors and distributors.

PROCTOR AND GAMBLE

This is the second largest FMCG Company in India which does not lag much behind than the topper Unilever. The company has two subsidiaries in India- P&G Home Products and P&G Hygiene and Health Care Ltd. The latter is the fastest growing Fast Moving Consumer Goods Company of India with turnover of about Rs 500 crores.

GODREJ

Noted among the top Indian marketing companies, Godrej aims at innovation. It deals in fast moving consumer goods and operates in India and other cities across the globe. The company provides variety in the brands like cosmetics, toiletries, hair care, fabric care, baby care, household care and many others.

ITC LIMITED

The ITC is undoubtedly one among the premier marketing companies of India. The company has a market capitalization of about $19 billion and turnover of more than $1.5 billion. It is also rated among the world's best big companies. It specializes in hotels, agri-business, FMCG products, personal care, and branded apparel. Their business motive is to create multiple drivers from corporate strategies. They have peerless distribution reach, great supply chain management, and effective brand building.

7.5 SEGMENTATION AND POSITIONING

SEGMENTATION

According to a CII report, US$0.68 per capita is spent for cosmetics, which might be lower than some other countries, but this indicates a growing awareness among consumers. ―There are two major factors that are swaying the buying decision among women here. First obviously is the television and media exposure they have today. The other not so obvious one is the corporate dressing culture, which slowly is evolving in the Indian market. Due to set dress code in MNCs, a female employee is conscious about picking the right makeup colors for the office. Today she has the money and the inclination to spend it on separate sets of products, especially color cosmetics,‖ said Abdul Rahim, managing director of the Chennai-based cosmetic distribution company GR Fragrances Pvt Ltd, which markets the Diana of London range of cosmetics.

According to a source at L‘Oréal India, women in the age group of 30 and above are getting very selective about the type of products they choose. ―As older women have more cash and are more conscious of their appearance, especially skin, they are willing to spend more on separate sets of creams and lotions that target problem areas. These women also are more open to buying higher-priced products,‖ he says.

In addition, men as well as the beauty professionals and beauty services segment are emerging as big buyers of cosmetics and skin care here. Pradeep Verma, managing director of Derma Color, which sells Kryolan in India, said ―The market is ready for professional makeup products since the Indian professional makeup artists are very well-trained and are aware of the products and prefer to use international brands. Earlier they were sourcing their products from international markets such as Dubai or Bangkok or Singapore.

POSITIONING

With increasing awareness among customers, it has become very important for the cosmetic and skin care companies here to develop the right brand positioning and create the right product and brand awareness.

Pricing of the product and the nature of product usage are the two criteria that define brand positioning. For instance products falling under the price range of Rs 45 to Rs 200 are in the mass-market category. The middle market price can range from Rs 200 up to Rs 800. In the high-end market, pricing can range from Rs 800 to about Rs 5000. Finally there is the premium range of products where the pricing can touch up to Rs 35,000.

―Today it is important for big brands like us to define different brand positioning to retain the right market share. For instance, at L‘Oréal we push Maybelline and Synergie ranges to the younger generation and also in the lower income group mass market. While L‘Oréal range of While L‘Oréal range of cosmetic and skin care products are for the middle and higher-middle class women and Vichy is for high-end users,‖ explains the source at L‘Oréal India. Brands such as Lakme and Color Bar are being pushed as mass market products and focus on younger women and women with lower buying power. Then there is Revlon, Chambor, Diana of London, Bourjois and Pupa that make the mid-range while Clarins, Shiseido, MAC, Christian Dior, Nina Ricci, YSL and Lancôme make the high end. La Prairie touches the premium end of the market. cosmetic and skin care products are for the middle and higher- middle class women and Vichy is for high-end users,‖ explains the source at L‘Oréal India. Brands such as Lakme and Color Bar are being pushed as mass market products and focus on younger women and women with lower buying power. Then there is Revlon, Chambor, Diana of London, Bourjois and Pupa that make the mid-range while Clarins, Shiseido, MAC, Christian Dior, Nina Ricci, YSL and Lancôme make the high end. La Prairie touches the premium end of the market.

Besides L‘Oréal, Unilever, through its Indian arm Hindustan Lever, Procter & Gamble, and most premium and high-end brands prefer to come to the country through distributors such as Baccarose, Euro Traditions, Cosmos Brands, MKP and GR Fragrance.

7.6 CURRENT TRENDS IN THE INDUSTRY

Cosmetics and toiletries are not just the domain of women any longer and Indian men too are increasingly taking to the use of more and more body sprays, perfumes and other cosmetics and toiletries. With rising demand from men, the Indian market is getting enlarged and many players are coming out with cosmetic products especially skin care products for men. The market size of men's personal care segment is estimated at approximately US$ 165million, with Gillette having the largest market share. Other major players in this segment include Godrej, J.L. Morison and HLL. The growing demand for men's cosmetics have made many direct selling companies such as Modicare and Amway to launch new products for men. In the last five/six years, there has been a renewed craze for herbal cosmetic and personal care products, especially in the skin care segment with the growing belief that chemical-based cosmetics are harmful. Shehnaz Hussain, Biotique, and Lotus Herbals are the major players in this segment. Many companies also expanded their range to include herbal variants. The growing popularity for natural products also attracted many primarily health-care companies such as Himalaya Drugs (with its Ayurvedic Concepts range), and Dabur to launch natural-based cosmetic products.

The urban population in the major cities with increasing purchasing power is the main force that drives demand for various cosmetic products in India. The advent of satellite television and awareness of the western beauty and fashion world, advertisements and promotions, increasing number of women joining the work force is changing preferences, customs and cultures in India. The success of contestants from India at various well known international beauty pageants in the last few years have also contributed towards making the

Indian women more conscious about looks, beauty, grooming and aware of western cosmetic products/brands. All this changed the needs and consumption pattern of the Indian women, thus leading to increased growth in the cosmetic sector. More Indian consumers started using cosmetics and a small segment are also seen willing to pay a little more to look good. Increasing disposable income and purchasing power have led to a constant up-gradation from mass to premium products even though mass-market products still constitute the major portion of the India cosmetics and toiletries market.

PESTEL ANALYSIS

 PESTLE ANALYSIS

 IMPORT DUTIES ON

COMPONENTS AND FINISHED GOODS  TAXES AND LEVIES  NON-TARIFF BARRIERS

PESTEL ANALYSIS

8.1 PESTLE ANALYSIS

A pestle analysis is one of the most popular and effective methods of analyzing the external macroeconomic factors that could impact on a business within a specific industry. Commonly, a pestle analysis will be used alongside other analyses that focus on internal factors. The combination of the pestle analysis with other factors will allow a company to create a strategic management plan of how to move its business forward in a way that maximizes the opportunities available to it, externally. A pestle analysis comprises of six factors, namely political, economic, socio-cultural, technological, legal and environmental.

POLITICAL

Political issues as part of the pestle analysis include all sorts of factors that normally derive from the government in the form of policies or legislation. For the purposes of the pestle analysis of a cosmetic industry, there is little in the way of trade restrictions and tariffs to be concerned about. Many employees within the organization are part time workers. With the government currently encouraging single parents back to work on a part time basis at least, the cosmetic industry should see a growing number of workers available. As peak times within a cosmetic industry are generally evenings and weekends, this could certainly fall in line with the political drive to encourage mothers back to work as this would be the times where alternative childcare would be most readily available.

ECONOMIC

The pestle analysis then goes on to look at the economic impact on the cosmetic industry. Key areas for the pestle analysis include inflation rates,

54 interest rates and general economic conditions. Cosmetics are usually considered luxury products; therefore, when there is an economic downturn, the number of customers is likely to reduce. Where individuals have less disposable income due to high inflation levels, they will be less inclined to spend money on luxuries. The current economic climate is relatively weak and individuals are not feeling sufficiently wealthy to spend large amounts of their income on cosmetic treatments. As the pestle analysis has indicated, this to be a particular threat to the cosmetic industry and this should be something that management looks at mitigating. Typically, this could include reduction in costs in relation to part time staff or generating additional revenue with discounts and enhanced services for clients.

SOCIO-CULTURAL

When conducting a pestle analysis on cosmetics, the area of socio-culture presents a much more positive outlook. This part of the pestle analysis considers demographics such as age and wealth as well as issues including career aspirations and general interest in cosmetic issues. In this case, the cosmetic industry is doing extremely well. With a growing number of young women carving lucrative careers, there is an increasing demand for cosmetic facilities. Not only are greater numbers of younger individuals earning good wages, but the grey pound is also increasing in strength. These changing demands have led to substantial diversification and new opportunities within the cosmetic industry.

TECHNOLOGICAL

They measure skin tones or color, with the help of various wavelengths. The different wavelengths are electromagnetic energy with known length and known amount of energy. When an object appears in a given color, it is so due to the emission and/or reflection of light. The object may be absorbing some other wavelengths but the remaining wavelengths of reflected light rays that enter our eyes will then ‗allow‘ our perception of color. The perception of color comes from photoreceptors in our eyes, the L M and S cones sensitive to the light of long, medium and short wavelengths accurately.

A device which is able to detect color is a colorimeter. This device uses sensors that assign consistent measurement parameter to every color, no matter what the ambient conditions happen to be. A colorimeter measures the way an object reflects or transmits lights across the visible spectrum and records the values which correlate with the way the human eye sees color. The light reflected off the object will be passed through a red, green and blue filter.

Another more accurate method of color measurement is to use a spectrophotometer, which records the amount of energy present at each wavelength of visible light. And we can take measurements using a spectrophotometer, an instrument that divides the visible spectrum into discrete bands and records the amount of energy present in each one. When we do a color measurement with the spectrophotometer, we obtain its spectral response curve which shows how much radiant energy the sample transmits or reflects at each wavelength. The operation of the spectrophotometer is basically to illuminate the sample with a light source, of a known wavelength and spectral range, and this will be reflected by the sample at different wavelength intervals. This is done by passing the reflected light through a monochromating device that splits the light up into separate wavelength intervals.

LEGAL

When looking at the cosmetic industry from a pestle point of view, it is not surprising that safety legislation is both plentiful and restrictive. It is necessary for all cosmetics to comply with the basic safety regulations, but they should also pay attention to treatment specific requirements, especially in relation to surgical type procedures. All practitioners will have to be suitably qualified, which will have the impact of increasing staff costs.

Insurance will have to be maintained and all necessary employment law provisions complied with. As the workforce is likely to be largely part time and possibly even self-employed, attention will have to be paid to ensure that the correct taxes and paperwork requirements are complied with.

ENVIRONMENTAL

The issue of environmental factors has only just been added to the pestle analysis in a bid to recognize how important this factor can be to the success of a business. Traditionally, in the pestle analysis, a company would consider the environmental issues with which it must comply. In the case of a cosmetic industry, this is largely likely to be in relation to dangerous substances such as massage oils and cleaning chemicals.

However, a slightly different approach which the pestle analysis reveals is that the environment could, in fact, bring opportunities to a cosmetic company with a growing demand for organic and natural products. Many consumers (as previously analyzed in the pestle analysis) will pay a premium for natural products and, as such, being seen to be environmentally friendly will not only ensure regulatory compliance, but may also encourage more customers at a higher value.

8.2 IMPORT DUTIES ON COMPONENTS AND FINISHED GOODS

Costs for importing products are much higher than producing it in the country. India allows entry of imported cosmetics without any restrictions but the average import tariff on cosmetics products is currently very high at 39.2 percent. This makes imported products very expensive for most consumers. Most foreign cosmetics companies selling premium brands have had a difficult time developing the low volume premium market in India. Many had to re- work price strategies towards the mass segment. Price is not the only reason responsible for their problems. Poor assessment of the size of the upper middle and high-income groups, and price sensitivity even within these groups, had added to their problems.

According to estimates of industry experts and trade publications, India's annual import of cosmetics and toiletries and intermediate raw materials is approximately US$ 120 million. Countries like US, Europe, mainly France, Germany, Italy, Netherlands, and Spain account for the major share; and Australia, China, and Japan account for rest of the share.

Sophisticated products such as fragrances, non-transfer long-stay lipsticks, liquid lip color, eye make-ups, anti ageing/anti wrinkle creams, professional hair-care products, preparations for shaving creams, are some of the major items of import.

8.3 TAXES AND LEVIES

Sales tax is levied on the sale of a commodity which is produced or imported and sold for the first time. If the product is sold subsequently without being processed further, it is exempt from sales tax.

Sales tax can be levied either by the Central or State Government, Central Sales tax department. Also, 4 per cent tax is generally levied on all inter-State sales. State sales taxes that apply on sales made within a State have rates

58 that range from 4 to 15 per cent. Sales tax is also charged on works contracts in most States and the value of contracts subject to tax and the tax rate vary from State to State. However, exports and services are exempt from sales tax. Sales tax is levied on the seller who recovers it from the customer at the time of sale.

Sales Tax in India is that form of tax which is imposed by the government on sale/purchase of a particular commodity within the country. It is imposed under Central Government (Central Sales Tax) and the State Government (Sales Tax) Legislation. Normally, each state has its own sales tax act and levies the tax at various rates. Apart from sales tax, certain states also impose extra charges such as works contracts tax, turnover tax & purchaser tax. Thus, sales tax plays a major role in acting as a major generator of revenue for the various State Governments.

Under the sales tax which is an indirect form of tax, it is the responsibility of seller of the commodity to collect or recover the tax from the purchaser. Generally, the sale of imported items as well as sale by way of export is not included in the range of commodities that require payment of sales tax. Moreover, luxury items (such as cosmetics) are levied higher sales tax rates. The Central Sales Tax (CST) Act that comes under the direction of Central Government takes into consideration all the interstate sales of commodities.

Hence, we see that sales tax is to be paid by every dealer when he sells any commodity, during inter-state trade or commerce, irrespective of the fact that there may be no liability to pay tax on such a sale of goods under the tax laws of the appropriate state. Sales tax is to be paid to the sales tax authority of the state from which the movement of the commodities starts or commences.

 Central Excise Duty applicable to Cosmetics / Toilet preparation falling under Chapter 33 are currently attracting 8% Excise Duty on Ad Val basis + 2% Education Cess + 1% Secondary Higher Education Cess on Excise Duty, after considering 30% abatement

EXCISE DUTY STRUCTURE – FINISHED GOODS

ABATEMENT BASIC EXCISE EDU. CESS HIGHER TOTAL DUTY FROM MRP DUTY EDUCATION %

CESS

30% 10% 2% 1% 10.30%

35% 10% 2% 1% 10.30%

(Table no : 1, Excise duty structure)

Cosmetics (35% Abatement)

8.4 NON-TARIFF BARRIERS

Because countries consider it in the interest of their national economies to export more than they import, they rely on a number of methods designed to restrict imports and protect their markets from international competition. In addition, countries also attempt to increase the amount of money they hold in their reserves and reduce the amount of their respective national currencies held by other countries. These concerns have led countries to impose a variety of trade restrictions such as import quotas, tariffs, and trade barriers, especially in the first half of the century. But countries have also established preferential trade agreements with favored nations that granted such nations reduced tariffs and trade barriers.

In order to limit the flow of goods from elsewhere, countries implement import quotas, which set maximum limits on the number of various goods a country will import. When confronted with a trade deficit, countries impose trade quotas as a quick remedy to prevent the growth of the trade imbalance. Countries also use import quotas to protect their markets from competition. In

60 addition, countries have resorted to prohibiting of certain imports altogether, especially during the mercantile period.

Nations also impose tariffs, or taxes, on imported goods to limit the number of imports that are entering the country. The buyer of imported products pays the tariffs, making the price higher for the goods in the country that imported them. The higher price from the tariffs decreases any price advantage these goods might have over similar domestic products. Governments increase their revenues through tariffs and tariffs also subsidize domestic producers, providing them with motivation to produce the goods other countries try to export. Tariffs take the form of duties calculated as a percentage of the value of the goods imported—usually about 4 percent—and as fixed tariffs applied to a specific quantity of an imported product. But tariffs often benefit one sector of a domestic economy while harming another. Tariffs on imported steel, for example, protect the domestic steel industry from international competition, but they force car manufacturers to pay higher steel prices, and the car manufacturers in turn pass the higher prices on to consumers.

Countries also restrict imports by using nontariff barriers, that is, by establishing voluntary restraint agreements. With these agreements, exporters voluntarily limit the quantity of goods they ship to importing countries. Japanese car manufacturers, for example, reached a voluntary restraint. States in the early 1980s to restrict the number of automobiles they export, thereby decreasing U.S. imports of Japanese cars.

Besides these direct methods of limiting imports, various domestic policies and programs work indirectly—and sometimes unintentionally—to restrict imports; these policies and programs function therefore as trade barriers. These trade barriers take the form of health and safety regulations, tax policies, and product labeling laws. Government support of certain industries, such as agriculture, also functions as a trade barrier, giving domestic producers an advantage over outside producers.

Indian cosmetics industry has witnessed strong growth during the past few years and has emerged as one of the industries holding immense future

61 growth potential. The cosmetics industry registered impressive sales worth Rs 422.3 Billion (US$ 9.3 Billion) in 2010. The sector has mainly been driven by improving purchasing power and rising fashion consciousness of the Indian population.

Moreover, the industry players are readily spending on the promotional activities to increase consumer awareness. According to this new research report ―Indian Cosmetic Sector Analysis (2009-2012)‖, Indian cosmetics sector is expected to witness noteworthy growth rate in near future, owing to the rising beauty concerns of both men and women. The industry holds promising growth prospects for both existing and new players. To support this evidence, we have done an extensive analysis of various segments of the cosmetics industry, keeping in view both the services and products sector. The baseline for the optimistic future outlook of the Indian cosmetics industry is that, there has been a rise in variety of products offered by the industry players. Moreover, the companies have started opting for online retailing and are offering specialized products to generate revenue from all the corners.

This new research report incorporates an extensive research and rational analysis of the cosmetics industry in India. It provides segment level analysis of the industry along with the emerging trends that may shape up with the betterment of economic conditions. The research will help consultants, industry analysts, and vendors to get in-depth knowledge of the current, past, and future performance of the industry. The report also provides information regarding consumer behaviour, particularly men and rural population, with regard to cosmetic products.

 Cosmetic is an industry which is more featured towards feminity, so it should give equal emphasize on the both gender of society.

 Promotion done is sometime illusionary, where result shown in promotion does not match with actual reality.

 Manufacturer should make usage of environment friendly inputs.

 Artificial chemicals used in preparation of cosmetics need to be replace by natural and organic inputs.  India is being seen as a strong manufacturing hub and a good source for natural ingredients, it should form joint venture with multinational companies to increase profitability and market share  As cosmetic industry presents a big opportunity to brands both national and international market, government should provide enough support to develop the industry.  The importance of context in analyzing the cosmetic industry indicates a need for greater regulation of cosmetics. Beauty culture dramatically shapes and is shaped by American societal and cultural milieu, and thus regulation of this powerful force is important in order to protect consumers and society. This need should be continued to be met by the industry itself, through, for example, things like tighter, more transparent, and more uniform industry standards. The unavoidable reality is that the pragmatic constraints of FDA limited capacities cannot be ignored, and thus the current system voluntary self- regulation represents the most practical and effective means of utilizing aligned incentives to ensure consumer safety.

Company Study

COMPANY INFORMATION

PART – II

 HISTORY OF REVLON

 GROWTH OF THE COMPANY

HISTORY OF REVLON

9.1 HISTORY OF REVLON

Revlon was founded in the midst of the Great Depression, 1932, by Charles Revson and his brother Joseph, along with a chemist, Charles Lachman, who contributed the "L" in the Revlon name. Starting with a single product a new type of nail enamel the three founders pooled their resources and developed a unique manufacturing process. Using pigments instead of dyes, Revlon developed a variety of new shades of opaque nail enamel. In 1937, Revlon started selling the polishes in department stores and drug stores. In six years, the company became a multimillion dollar organization. By 1940, Revlon offered an entire manicure line, and added lipstick to the collection. During World War II, Revlon created makeup and related products for the U.S. Army, which was honored in 1944 with the Army-Navy "E" Award for Excellence.

By the end of the war, Revlon was listed as one of America's top five cosmetic houses. Expanding its capabilities, the company bought Graef & Schmidt, a cutlery manufacturer seized by the government in 1943 because of German business ties. This acquisition made it possible for Revlon to produce its own manicure and pedicure instruments, instead of buying them from outside supply sources.

In November 1955, Revlon went public. The IPO price was $12 per share, but it reached $30 per share within 8 weeks.

In the 1960s, Revson segmented Revlon into different divisions, each focusing on a different market. He borrowed this strategy from General Motors. Each division had its own target customer:

 1932: Brothers Charles and Joseph Revson and Charles R. Lachman establish Revlon.

 1935: The Company‘s first ad appears in The New Yorker magazine.

 1940: Lipstick is added the company's product line.

 1955: The Company changes its name to Revlon Inc. and goes public.

 In 1957, Revlon acquired Knomark, a shoe-polish company, and sold its shoe-polish line Esquire Shoe Polish in 1969. Other acquisitions, such as Ty-D-Bol, the maker of toilet cleansers, and a 27 percent interest in the Schick electric shaver company were soon discarded. Evan Picone, a women's sportswear manufacturer which came with a price tag of $12 million in 1962, was sold back to one of the original partners four years later for $1 million. However, the 1967 acquisition of U.S. Vitamin and Pharmaceutical Corporation made Revlon a leader in diabetes drugs.

 1961 sale by Charles Revson of 65,000 shares common stock (par value $1.00 per share) and 65,000 class B common stock (par value $1.00 per share) conversion by underwriters of 65,000 shares class B common stock (par value $1.00 per share) registration and secondary distribution of 130,000 shares common stock (par value $1.00 per share)

 1962, when Revlon debuted in Japan, there were subsidiaries in France, Italy, Argentina, Mexico, and Asia. Revlon's entrance into the Japanese market was typical of its international sales strategy. Instead of adapting its ads and using Japanese models, Revlon chose to use its basic U.S. advertising and models. Japanese women loved the American look, and the sales for 1962 came to almost $164 million

 1965 public offering 660,000 shares common stock conversion by Charles Revson of 465,698 shares class B common stock (par value $1.00 per share); sale by Charles Revson, Charles R. Lachman, and Garfield-Broadway Realty Corp. of 660,000 shares common stock (par value $1.00 per share); registration of 749,868 shares common stock

 1966 U.S. Vitamin & Pharmaceutical Corporation is acquired

 1968, Revlon introduced Eterna27, the first cosmetic cream with an estrogen precursor called Progenitin (pregenolone acetate), as well as introducing the world's first American fashion designer fragrance, Norman Norell. Later, Revlon launched Braggi and Pub for

men, and a line of wig maintenance products called Wig Wonder.

 1970, Revlon acquired the Mitchum line of deodorants. Mitchum Co. is purchased.

 1972 $50,000,000 4 3/4% convertible subordinated debentures due 1987

 1973, Revlon introduced Charlie. Geared to the under-30 market, Charlie model Shelley Hack in Ralph Lauren clothes, personified the independent woman of the 1970s. This was the first perfume ad to feature a woman wearing pants. Charlie raised Revlon's net sales figures to $506 million for 1973 and almost $606 million the following year.

 1975 registration and public offering of $100,000,000 aggregate principal amount of 8.45% notes due May 1, 1985, of Revlon, Inc.1975 registration and sale by selling stockholders through underwriters of 650,000 shares of common stock (par value $1 per share) of Revlon.

 1979-1980 Revlon lost ground to Estée Lauder. Estee Lauder spent millions of dollars on numerous magazine ads featuring Czech supermodel Paulina Porizkova, shot by famed Chicago fashion photographer Victor Skrebneski. Revlon's share dropped from 20 percent to 10 percent of department store cosmetics sales. Sales at the drugstore also declined as Revlon lost shares to Noxell's Cover Girl brand. Revlon compensated with more acquisitions; Max Factor, Ellen Betrix, Charles of the Ritz, Germaine Monteil, Almay, Fermodyl, Lancaster, Aziza, and Halston. The 1977 acquisition of Carlos Colomer, a Spanish professional beauty supply distributor, brought Fermody and Roux and helped introduce Revlon to the world of ethnic care: Creme of Nature, Realistic, Lovely Color and Milk and Honey.

 1983 the company attempted an unsuccessful hostile takeover of Gillette. In 1989, Revlon became one of the first companies to replace animal tests with alternative safety testing methods.

 1985, at a price of $58 per share, totaling $2.7 billion, Revlon was sold to Pantry Pride (later renamed to Revlon Group.), a subsidiary of Ronald Perelman's MacAndrews & Forbes Holdings. The buyout-- engineered with the help of junk bond king Michael P. Milken--saddled Revlon with a huge $2.9 billion debt load, which became an albatross around the company's neck for years to come. Pantry Pride Inc. offered to buy any or all of Revlon's 38.2 million outstanding shares for $47.5 a share when its street price stood at $45 a share. Initially rejected, he repeatedly raised his offer until it reached $53 a share while fighting Revlon's management every step of the way. Forstmann Little & Company swooped in at $56 a share, a brief public bidding war ensued, and Perelman triumphed with an offer of $58 a share.

Perelman paid $1.8 billion to Revlon's shareholders, but he also paid $900 million of other costs associated with the purchase. Perelman had Revlon sell four divisions: two for $1 billion, the vision care division for $574 million, and the National Health Laboratories division which became a publicly owned corporation. Revlon is sold to Pantry Pride, a subsidiary of Ronald Perelman's MacAndrews & Forbes Holdings, and becomes a private company.

 1988. Additional make-up lines were purchased for Revlon. Max Factor in 1987 and Betrix in 1989, later sold to Procter & Gamble in 1991. Also in 1991, Revlon sold the Clean & Clear brand to Johnson & Johnson.

 1994: Color Stay lipstick is introduced.

 1996: Revlon makes an initial public offering of stock.

 2000: The Company‘s professional products line is sold.

 2011, Revlon acquired Mirage Cosmetics; makers of Sinful Colors nail products.

The origins of Revlon Inc. date back to 1931, when Charles Revson and his older brother, Joseph Revson, distributed Elka nail polish as Revson Brothers. Within a year, Charles decided to open his own nail polish company, going into partnership with Joseph and a nail polish supplier named Charles R. Lachman, who contributed the ‗l‘ to the Revlon name. Revlon was established in 1932. Charles noticed that the permanent-wave boom was making beauty salons more popular, and that demand for manicures was rising at the same time. He therefore targeted beauty salons as a market niche. Within its first nine months, the company boasted sales of $4,055. In 1933 there was a sharp rise to $11,246. That same year, the company incorporated as Revlon

Products Corporation. The company grossed $68,000 at the end of 1934; sales had multiplied more than forty times by 1937.

Revlon enlarged its market that year by retailing his nail polish through department stores and selected drugstores. The company steered clear of cut-rate stores, selling his product only at premium prices. Advertising became key to maintaining this policy. Its use was a fateful step for the industry; never again would major cosmetics companies attempt to sell beauty items without it. The company began to label its nail enamels with evocative names like Fatal Apple and Kissing Pink. Revlon's first commercial advertisement appeared in the New Yorker in 1935.

Revlon had a whole line of manicure products by 1940. Lipstick, Revlon's next major item, appeared in 1940. The company began an advertising campaign touting "matching lips and fingertips"; the campaign proved to be greatly successful, with 1940 sales figures reached $2.8 million. World War II brought shortages of glass bottles and metal lipstick cases; paper was used as a substitute. Aromatic oils, fixatives, and packaging materials were also in short supply, as they were previously imported. Since the shortages affected the entire industry, secrecy was replaced by mutual cooperation; new synthetics and domestic sources of supply were shared, and a new U.S. aromatics industry was born. During the war, Revlon produced first-aid kits, dye markers for the navy, and hand grenades for the army.

At the end of the war, Revlon listed itself as one of America's top five cosmetic houses. The company bought Graef & Schmidt, a cutlery manufacturer, which made it possible for Revlon to produce its own pedicure and manicure instruments, instead of buying them from outside supply sources. Revlon's 1952 Fire and Ice campaign was one of its most successful, raising that year's net sales to almost $25.5 million. In 1955 the company again scored an advertising success when it became the sole sponsor of the CBS television show, "The $64,000 Question." Net sales for 1955 grew to $51.6 million, from $33.6 million the previous year. That year, an allegation of wiretapping was filed against Revlon by Hazel Bishop. The charge was denied by Revlon controller William Heller, who nevertheless admitted "monitoring" employee's telephones for training purposes. Revlon reorganized as Revlon, Inc., in November of that year. The company went public one month later and was listed on the New York Stock Exchange a year later. The success of "The $64,000 Question" led to a spin-off named "The $64,000 Challenge." The two shows helped to raise the company's net sales figures to $95 million in 1958 and to $110 million in 1959. This success came to an end in 1959 when charges were levied that both shows had been rigged.

During the early 1960s Charles Revson became aware that his company was in danger of locking itself into a narrow, upper-middle-class image that could restrict sales. The company then segmented its product line into six principal cosmetics houses, each with its own price range, advertising program, and image. Princess Marcella Borghese aimed for international flair; Revlon was the popular-priced house; Etherea was the hypoallergenic line; Natural Wonder served youthful consumers; Moon Drops catered to dry skins; and Ultima II was the most expensive range. Early attempts to diversify into other fields were unsuccessful. For instance, Knomark, a shoe-polish company bought in 1957, sold its shoe-polish lines in 1969. Other poorly chosen acquisitions, such as Ty-D-Bol, the maker of toilet cleansers, and a 27 percent interest in the Schick electric shaver company were also soon discarded.

The company's first successful acquisition came in 1966, when it bought U.S. Vitamin & Pharmaceutical Corporation. The buy-out brought Revlon a

71 company with annual sales of $20 million, most of them coming from a drug used to treat diabetes. U.S. Vitamin proved its worth within a year with its acquisitions of Laboratories Grossman, a Mexican pharmaceutical company; a comparable concern in Argentina; and another in Chile. Another U.S. Vitamin acquisition was Nysco Laboratories and its Nyscap process for timed- release medication. This, in turn, led to the introduction of vasodilation drugs. Fully disposable injectables, introduced in 1968, also came from U.S. Vitamin.

Revlon had begun to market its products overseas at the end of the 1950s. Worldwide markets produced sales of $281 million by 1967. The 1970s began with annual sales of about $314 million. The cosmetics division, its six lines separately aimed, advertised, and marketed, was the industry leader in all franchised retail outlets. Revlon fragrances, such as Norell and Intimate for women and Braggi and Pub for men, had also become familiar to U.S. consumers. Revlon also had a new line of wig-maintenance products called Wig Wonder. An important 1970 acquisition was the Mitchum Company of Tennessee, makers of antiperspirants and other toiletries. In 1973 Revlon introduced Charlie, a fragrance designed for the working woman's budget. Charlie was an instant success and helped raise the company's net sales to $506 million in 1973, and to almost $606 million the following year.

The company gained new leadership in 1974; Charles Revson named Michel Bergerac his successor. Bergerac introduced the Performance Incentive Profit Sharing Plan, which allotted each executive points based on profit objectives achieved for the years 1974 to 1976. He also cut company spending with tighter inventory controls and the elimination of 500 jobs. Also that year, Bergerac installed a management-information system requiring that all managers report monthly on problems, sales, and competition. Bergerac's first major purchase came in 1975 when he acquired Coburn Optical Industries, a manufacturer of ophthalmic and optical processing equipment and supplies

9.2 GROWTH OF THE COMPANY

Revlon reported 3% growth in revenues to $347 million in the third quarter, inclusive of its acquisition of certain assets of Bari Cosmetics in July 2012. The overall effect of the acquisition, however, is minimal.

In particular, the U.S. market that accounts for more than half of Revlon‘s sales grew by 4%. The results were supported by growth in Latin American and Canadian markets where sales grew by about 20% and 11%, respectively.

The prevailing situation in the European market casts its shadow on what was otherwise a growth story as sales declined by 14% in Europe, the Middle East and Asia. Color Cosmetics continued to be a major contributor to overall growth, and it makes up 60% of Revlon's stock value by our estimates.

Revlon‘s business model has proven its resilience, sustainability and validity for more than 40 years in emerging, as well as mature, markets. The key drivers, such as being your own boss, setting your own goals, the low barriers of entry and exit, the lack of discrimination regardless of one‘s sex, ethnicity, age, education, physical condition or financial resources, are all in line with a growing population of entrepreneurs that is less dependent on secure employments. Although the reasons for joining may vary among the many sales consultants in the more than 60 countries where Revlon‘s is represented, most of them agree that Revlon‘s offers attractive financial rewards as well as social benefits, i.e. the possibility to look great, make money and have fun. Some join as a way of supporting their family, while building a business and fulfilling a career dream. Others see it as a way to achieve a more flexible life or make extra money while studying, being in between jobs or simply extending one‘s social life.

9.3 Growth & Valuation

Earnings growth (last year) -3.92%

Earnings growth (this year) +48.17%

Earnings growth (next 5 years) +5.00%

Revenue growth (last year) +3.35%

Consultants also join in order to save money through discounted purchases of cosmetics and personal care, Revlon‘s by enjoying a discount valid for themselves and their families. The ﬂexibility of the system means that consultants decide for themselves what they want to achieve by joining. An additional important growth driver for consumers is the growing demand of cosmetics and toiletries products world-wide.

Revlon‘s offers the leading business opportunity for people who want to start making money the same day they join and work towards fulfilling their personal dreams and ambitions through its unique business concept – Make Money Today and Fulfill Your Dreams Tomorrow. A sales force of approximately 3.2 million independent consultants has seized this opportunity and is successfully marketing Revlon‘s wide portfolio of Swedish, natural, innovative beauty products, together creating annual sales exceeding $1.3 billion.

PRODUCT PROFILE

 SKIN CARE  COLOUR COSMETICS  FRAGRANCE  PERSONAL & HAIR CARE  ACCESSORIES  WELLNESS

PRODUCT PROFILE RODUCT

10.1 PRODUCT PROFILERODUCT PR

Some of their products include: Natural Skin Care Tender Care, Enigma Dare to Dream Edition Eau de Toilette, Mirage Eau de Parfum, Ecollagen Energizing Cocktail, Tender Care Lip Balm, Aqua-Rhythm Intense Hydration Youth Preserve Day Cream and the Anti-bacterial Hand Gel.

Revlon‘s manufactures more than 1,000 products. Each year, they add up to 300 new products to their product line. They have a large R&D Department that is very committed to developing new, high quality products. All products are based on natural ingredients and are never tested on animals. Their product line consists of skin care, cosmetics, fragrances, personal and hair care, accessories and wellness products.

The product line varies a little bit, depending on which country you live in. Most products have a shelf-life of 36 months. Revlon‘s product offering is building on more than 40 years of skincare and cosmetics expertise – combining the wisdom of nature with the best of science.

10.1.1 SKIN CARE

Revlon‘s has a wide range of innovative skin care products, developed and tested by the Skin Care Research Centre in Ireland. Revlon‘s Skin Care offers proven, effective solutions to everyday skin care needs.

• Facial moisturizers

• Anti ageing

• Hand & Body

10.1.2 COLOUR COSMETICS

Revlon‘s portfolio offers a wide and sophisticated range of products with formulations and trendy packaging that enhances every woman‘s natural beauty.

• Lipsticks

• Foundations

• Powders

• Mascaras

• Eye shadows

• Nail

10.1.3 FRAGRANCE

Revlon‘s offers a qualitative fragrance portfolio ranging from exclusive to the more moderately priced. All fragrances are developed in France to ensure superior quality, innovation and performance.

• Men

• Women

• Home fragrance

10.1.4 PERSONAL & HAIR CARE

The extensive and high performance hair and body care products offer a variety of ranges to meet daily needs.

• Hair care

• Oral Hygience

• Bath and Shower

• Deodorant

• Foot

10.1.5 ACCESSORIES

Revlon‘s accessories are non cosmetic products aimed at women, men and kids.

• Hair brushes • Towels

• Hand bags • Seasonal gifts

• Sunglasses • Toilet bags

• Belts • Necklaces

• Pedicure sets • Bracelets

10.1.6 WELLNESS

Wellness by Revlon‘s has been carefully designed in partnership with Swedish scientists and nutritional experts to bring innovative, safe and high quality wellness products that will bring out beauty from within.

• Vitamins

• Nutritional shakes

FUNCTIONAL DEPARTMENT

 PRODUCTION DEPARTMENT  MARKETING DEPARTMENT  FINANCIAL DEPARTMENT  HUMAN RESOURCE DEPARTMENT  INFORMATION TECHNOLOGY  OTHERS 81

FUNCTIONAL DEPARTMENT

11.1 PRODUCTION DEPARTMENT

At the end of 1977, Revlon‘s board of directors decided to build a production plant, on the outskirts of Dublin, Ireland. The plant was completed two years later, july 1979 following extensive project work, including transfers of technology from former subcontractors. The building cover 2800 square meters for production, research laboratories and quality control. The current extensions now have been completed and have increased the capacity for filling from 22 million to approx. 40 million units. The plant is one of Europe‘s most modern cosmetic manufacturing units and is well equipped with high technology production equipment.

All Revlon products undergo strict physical, chemical and microbiological control before reaching the customer. The objective is that the customer should be able to rely on the product to promote long term quality, regardless of how it was purchase.

In order to attain this objective, all deliveries of raw materials and packaging are tested according to strict specification before they enter the production process. An overriding priority is to offer consumer products that meet the highest safety and quality standards. The water used is tested daily to guarantee a high degree of microbiological purity.

11.1.1 RESEARCH & DEVELOPMENT

BEAUTY RESEARCH

Revlon‘s has over 40 years of experience in producing beauty products, combining the best natural ingredients with the latest scientific research. The accumulated knowledge and experience has been gathered into one dedicated Research & Development team that is based in two locations, Dublin, Ireland and Stockholm, Sweden. All together, the Research &

Development function employs over a hundred scientists and technical experts, covering many scientific disciplines including formulation science, skin research, clinical testing, process development, packaging technology, microbiology, toxicology, environmental science, patent support, and global regulatory affairs.

FROM IDEA TO LAUNCH

The process from idea to launch takes several years, involving valuable time and resources through the stages of R&D, manufacturing, marketing and distribution. Thus, being at the forefront of trends and needs is essential to deliver a strong offering to the market on time. It is the only way to gain new customers and to make old ones‘ remains loyal to the brand. Revlon‘s customers come from various parts of the world; have different habits, income and needs. To create attractive offers for such a heterogenic customer base requires a wide product range, high launching pace and proactive reaction to new trends. It is a constant challenge to stay on top of competition and remain innovative through the constant launches. Ideas originate from various sources such as international fairs and exhibitions, global trend reports, research projects and focus groups. A strong team of brand managers representing all five product categories is continuously monitoring trends, needs and new launches in order to stay in the loop maintain competitive strength and gain market shares.

ENSURING THE HIGHEST STANDARD

Revlon‘s core competencies embrace a wide range of technologies and products, with the accent placed squarely on delivering innovative, high performance formulations with proven scientific consumer benefits. The products comply with the most stringent international regulatory requirements, and are extensively tested to ensure optimum safety, efficiency and quality as well as ethical and environmental integrity. No Revlon‘s product has ever been tested on animals. Having an in-house Research and Development centre provides Revlon greater flexibility over product development in line with

83 the Company‘s natural Swedish heritage, ensuring delivery of the highest standard product in the shortest possible time.

11.1.2 MANUFACTURING AND LOGISTICS

Revlon‘s products are manufactured both in-house and by various subcontractors with expertise in specific product areas. Revlon‘s owns five manufacturing units based in Poland, Sweden, India, China and Russia. These factories focus primarily on the production of Skin Care, Fragrances, Personal and Hair Care and Colour Cosmetics- areas in which there are sufficient volumes to achieve economies of scale. Revlon‘s is continuously exploring new sourcing opportunities closer to its main markets. In 2009, Revlon‘s has successfully ramped up the production at its new Moscow site and the year before, Revlon‘s initiated bottling and packaging of fragrance products in Ukraine. Revlon is also continuously striving to increase energy efficiency. The Swedish facility is now only using clean hydroelectric power and minimizing energy needs through the use of heat pumps.

11.1.3 QUALITY ASSURANCE

Revlon‘s quality assurance team works both with in-house manufacturing operations and subcontracted suppliers to achieve consistent adherence to the high quality, safety and ethical standards set by the Company, no matter the location of the manufacturing site. Revlon‘s maintains a policy of global compliance for all its products to ensure conformity with the highest market standards. Examples include adherence to stringent water quality standards and a strict control over other raw materials used in production.

11.1.4 CODE OF PRACTICE

During 2009 Revlon‘s integrated the new ISO Cosmetic Good Manufacturing Practice (GMP) Standard with the Company‘s Code of Practice. This new ISO standard gives guidelines for the production, control, storage and shipment of cosmetic products. All Revlon‘s suppliers are audited on a regular basis to ensure compliance with the Code of Practice and the Code of Ethics. Revlon‘s carries out Corporate Social Responsibility (CSR) & Quality Audits on all accessories suppliers in China, to ensure that they not only meet Quality

84 standards, but that they also comply with the Company‘s Ethical Policies. This is an extra layer of audit, in addition to the frequent audits carried out by Revlon‘s sourcing and procurement partners.

WASTE

Revlon‘s is committed to minimizing the waste produced, having numerous ongoing initiatives to reduce the amount of waste generated. For example, the Company has decreased its total effluent waste by introducing site treatment at two facilities. Revlon is continuing to reduce total waste in the manufacturing operations and the goal is to achieve an additional 10 percent reduction in total waste generated per unit production

WATER

With operations in countries like India and China, reducing water use is of course another key priority for Revlon. During the past five years the Company has managed to achieve a combined reduction of 35 percent in water use at the manufacturing operations. From 2010 to 2015, the goal is to deliver an additional 10 percent reduction (per unit production) in water use at the manufacturing facilities leading to a total reduction over a decade of at least 45 percent.

11.2 MARKETING DEPARTMENT

The market for cosmetic product is developing positively with recent growth averaging around 4% per year by volume, although, as with other consumer industries, growth in 1992-1993 decreased as a consequence of the general economical recession. The company has experienced steady growth in sales since the start in 1967 with, in June 1994, sales totaling $230 million for the group. The current trends are returning to personal service, care and attention. The global market for cosmetics and toiletries is mature and growth through the year 2000 is projected to reach the modest rate of 3% annually.

Revlon launched its direct sales method in 1967 – when the Company was founded – as a vital part of its innovative business concept. It has proven to be a successful marketing method in emerging, as well as mature, markets. Becoming an Revlon consultant can provide a way of supporting the family, while fulfilling a career dream. However, it is also a way to achieve a more flexible life or make extra money while studying, being in between jobs or simply to extend one‘s social life. As a matter of fact, the increasing number of sales consultants as a result of the current recession is proof of our attractive career opportunity. For consumers, the driving force is a more flexible, relaxed and individual way of shopping, receiving personal advice from someone familiar.

11.2.1 PRODUCT

Over the years Revlon has launched thousands of products conveying the Revlon‘s product philosophy – combining the wisdom of nature with the best of science – providing a wide portfolio affordable for the many people. Revlon products are developed using cutting-edge technology and products are manufactured according to the highest quality standards. Revlon Cosmetics offers over 900 cosmetic products at any given time, more than a third of which are newly introduced each year launched its direct sales method in 1967 – when the Company was founded – as a vital part of its innovative business concept. It has proven to be a successful marketing method in emerging, as well as mature, markets. Becoming an Revlon consultant can

86 provide a way of supporting the family, while fulfilling a career dream. However, it is also a way to achieve a more flexible life or make extra money while studying, being in between jobs or simply to extend one‘s social life. As a matter of fact, the increasing number of sales consultants as a result of the current recession is proof of our attractive career opportunity. For consumers, the driving force is a more flexible, relaxed and individual way of shopping, receiving personal advice from someone familiar.

11.2.2 PACKAGING DEVELOPMENT

Manager, Package Development City New York State NY Part Time No Temporary No Travel Required 10% Description Responsible for the global development of new product launches and the on-going maintenance of regular business packaging for color cosmetic brands. Actively interfaces with Marketing, R&D and Creative in the "discovery" phase and assumes responsibility for the successful execution of selected packages in the "tactical" phase. Investigates new packaging techniques, materials, processes and developments to provide innovative and cost-effective packaging concepts and solutions. Plays an active role in determining feasibility of new projects as they relate to cost, timing, and manufacturability.

11.2.3 DISTRIBUTION

The Company‘s products are sold in more than 100 countries across six continents. The Company‘s worldwide sales forces had approximately 290 people as of December 31, 2008. In addition, the Company utilizes sales representatives and independent distributors to serve certain markets and related distribution channels.

UNITED STATES. Net sales in the U.S. accounted for approximately 58% of the Company‘s 2008 net sales, a majority of which were made in the mass retail channel. The Company also sells a broad range of consumer products to U.S. Government military exchanges and commissaries. The Company licenses its trademarks

87 to select manufacturers for complimentary beauty-related products and accessories that the Company believes have the potential to extend the Company‘s brand names and image. As of December 31, 2008, eleven licenses were in effect relating to seventeen product categories, which are marketed principally in the mass-market distribution channel. Pursuant to such licenses, the Company retains strict control over product design and development, product quality, advertising and the use of its trademarks. These licensing arrangements offer opportunities for the Company to generate revenues and cash flow through royalties and renewal fees, some of which have been prepaid.

As part of the Company‘s strategy to increase the retail consumption of its products, the Company‘s retail merchandisers stock and maintain the Company‘s point-of-sale wall displays intended to ensure that high-selling SKUs are in stock and to ensure the optimal presentation of the Company‘s products in retail outlets.

INTERNATIONAL. Net sales outside the U.S. accounted for approximately 42% of the Company‘s 2008 net sales. The five largest countries in terms of these sales were Canada, South Africa, Australia, U.K and Venezuela, which together accounted for approximately 23% of the Company‘s 2008 consolidated net sales. The Company distributes its products through drug stores and chemist shops, hypermarkets, mass volume retailers, general merchandise stores, department stores and specialty stores such as perfumeries outside the U.S. At December 31, 2008, the Company actively sold its products through wholly-owned subsidiaries established in 14 countries outside of the U.S. and through a large number of distributors and licensees elsewhere around the world.

11.2.4 SEGMENTATION, TARGETING AND POSITIONING

SEGMENTATION

Revlon, Maybelline, and Cover Girl use segmentation strategies in order to target their predominant consumers: A woman concentrates on Middle Market Price Segment

TARGETING

Increases the cost-effectiveness of advertising. Most advertising channels have a cost that is a strong function of the amount of exposure (e.g., the number of people who see the ad) regardless of whether audience members are potential customers or not.

POSITIONING

Increases potential ad effectiveness by clarifying the message. This step is all about defining a space in the mind of the customer something that your customer thinks of and associates with Revlon product.

11.2.5 OBJECTIVE

Examines and identifies key information and issues about Revlon, Inc. for business intelligence requirements, Studies and presents the company's strengths, weaknesses, opportunities (growth potential) and threats (competition). Strategic and operational business information is objectively reported. Provides analysis on financial ratios of the company; The profile also contains information on business operations, company history, major products and services, prospects, key competitors, key employees, locations and subsidiaries.

11.3 FINANCE DEPARTMENT

11.3.1 RATIO ANALYSIS

Ratio analysis is a widely used tool for financial analysis. It is defined as the systematic use of ratio to interpret the financial statement, so that the strength and weakness of a firm as well as its historical performance and current financial condition can be determined. The term ration refers to the numerical and quantitative relationship between two items/variables. The relationship can be expressed as:-

1. Percentage

2. Fraction

3. Proportion of numbers

Ratio analysis is a comprehensive tool of analysis in that it seeks to measure and establish cause and effective relationships between either two items of balance sheet or both the balance sheet and profit and loss account. A tool used by individuals to conduct a quantitative analysis of information in a company's financial statements. Ratios are calculated from current year numbers and are then compared to previous years, other companies, the industry, or even the economy to judge the performance of the company. Ratio analysis is predominately used by proponents of fundamental analysis.

OBJECTIVES OF RATIO:-

 Ratio analysis is a process of comparison of one figure against another  Interpretation of ratio is helpful to know the strengths and weakness of the firms operations and its financial position  Ratio analysis helps various interested parties like prospective investors, creditors, banks, and employees to draw useful conclusions to serve their purpose.

CLASSIFICATION OF RATIOS

1. LIQUIDITY RATIO

 Current Ratio  Liquid Ratio

2. LEVERAGE RATIO OR STRUCTURAL ANALYSIS

 Proprietary Ratio  Fixed Capital – Fixed Assets Ratio

3. PROFITABILITY RATIO

 Gross Profit Ratio  Net Profit Ratio  Operating Ratio  Return on Total Assets  Return on Capital Employed  Return on Shareholders‘ Equity

LIQUIDITY RATIO

1. CURRENT RATIO

It is a liquidity ratio that measures a company's ability to pay short-term obligations. The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. The ideal current ratio is 2:1. The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash‘s. TOTAL CURRENT ASSET:

YEAR 2007 2008 2009 2010 2011

DEBTORS 100000 170000 150000 200000 190000

BANK 35000 25000 40000 12000 25000

CASH 20000 15000 10000 21000 50000

INVENTORY 90000 120000 140000 100000 180000

LOAN 96460 84398 99911 182725 122312

CURRENT 341460 341460 341460 515725 567312 ASSETS

CURRENT LIABILITIES:

YEAR 2007 2008 2009 2010 2011

PROVISION 4307 7401 1010 42851 2540

CREDITORS 190000 200000 191000 200000 270000

CU.LIABILITIES 194307 207401 192010 242851 272540

CURRENT RATIO = CURRENT ASSETS ÷ CURRENT LIABILITIES

YEAR 2007 2008 2009 2010 2011

CU. ASSETS 341460 414398 439911 515725 567312

CU. LIABILITIES 194307 207401 192010 242851 272540

CURRENT RATIO 1.76 1.98 2.29 2.12 2.08

(Table no: 2, Current ratio)

Current Ratio

2.5

1.5 Current 1 Ratio

0.5

0 2007 2008 2009 2010 2011

(Chart no : 2, Current Ratio)

INTERPRETATION This ratio indicates good financial position of the company. It is generally believe that 2:1 current ratio a comfortable working capital position. By observing the current ratio of both the years we can say that the ratio of both the years is more than 2, which indicates good sign for the company.

2. LIQUID RATIO

Liquid ratio is a class of financial metrics that is used to determine a company's ability to pay off its short-terms debts obligations. The higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts.

LIQUID RATIO = LIQUID ASSETS ÷ LIQUID LIABILITIES

LIQUID ASSETS = CURRENT ASSETS – STOCK

YEAR 2007 2008 2009 2010 2011

CU.ASSETS 341460 414398 439911 515725 567312

STOCK 186085 240982 221309 286350 264556

LIQUID ASSETS 155,375 173,416 218,602 2,29,375 3,02,756

LIQUID LIABILITIES = CURRENT LIABILITY – BANK OVERDRAFT

YEAR 2007 2008 2009 2010 2011

CU.LIABILITIES 194307 207401 192010 242851 272540

BANK 0 0 0 0 0 OVERDRAFT LIQUID. 194307 207401 192010 242851 272540 LIABILITIES

LIQUID RATIO = LIQUID ASSETS ÷ LIQUID LIABILITIES

YEAR 2007 2008 2009 2010 2011

LI. ASSETS 155,375 173,416 218,602 2,29,375 3,02,756

LI. LIABILITIES 194307 207401 192010 242851 272540

LIQUID RATIO 0.8 0.84 1.14 0.94 1.11

(Table no : 3, , Liquid ratio)

Liquid Ratio

1.2

0.8

0.6 Liquid Ratio 0.4

0.2

0 2007 2008 2009 2010 2011

(Chart no : 3, Liquid Ratio)

INTERPRETATION

The standard ratio is considered to be 1:1. In the year 2010 it is below the standard ratio but in the year 2011 it has gone above the standard ratio which indicates a good financial position of the company.

LEVERAGE RATIO

1. PROPRIETARY RATIO The ratio shows the proportion of proprietors fund to the total assets employed in the business PROPRIETARY RATIO = PROPRIETORS FUND ÷ TOTAL ASSETS X 100 PROPRIETORS FUND = SHAREHOLDERS FUND

YEAR 2007 2008 2009 2010 2011

PRO. FUND 69678 70367 71018 71225 71301

TOTAL ASSETS 516048 580178 615240 755849 830320

PRO. RATIO 13.5 12.13 11.54 9.42 8.59

(Table no : 4 , Proprietary ratio)

Proprietary Ratio

14 12 10 8 6 Proprietary Ratio 4 2 0 2007 2008 2009 2010 2011

(Chart no : 4, Proprietary Ratio) INTERPRETATION From the above graph we can say that as compare to 2010, the proprietors have provided larger funds to purchase the asset, but the investment in the total assets is at larger pace, which leads to decrease in the proprietary ratio. So there is possibility of firm using retain earning for the increased investment in the assets.

2. FIXED CAPITAL – FIXED ASSETS RATIO

Fixed Capital to Fixed Assets Ratio = Fixed Capital ÷ Fixed Assets x 100

YEAR 2007 2008 2009 2010 2011

FC 69678 70367 71018 71225 71301

FA 140,628 138,711 135,934 1,85,259 2,03,030

FC TO FA RATIO 49.55 50.73 52.24 38.45 35.12

(Table no: 5 , Fixed capital – Fixed assets ratio)

Fixed capital to fixed assets ratio

60 50 40 30 FIXED CAPITAL TO 20 FIXED ASSETS RATIO 10 0 2007 2008 2009 2010 2011

(Chart no: 5, Fixed capital – Fixed assets ratio)

INTERPRETATION

Fixed capital to fixed assets ratio shows decreasing trend when compare to past year 2010.Which shows company is increasing investment in fixed assets only rather than focusing on fixed capital as well.

PROFITABILITY RATIO

1. GROSS PROFIT RATIO Gross Profit Ratio is also known as ‗Gross Margin‘ it expresses the relationship between Gross Profit earned on Net Sales.

GROSS PROFIT RATIO = GROSS PROFIT ÷ SALES X 100

YEAR 2007 2008 2009 2010 2011

GROSS PROFIT 777826 909034 874,782 1002479 1014793

SALES 1109385 1319666 1316595 1513596 1493767

GP RATIO 70.11 68.88 66.44 66.23 67.94

(Table no : 6, Gross Profit Ratio)

Gross profit ratio

72.00

70.00

68.00 GROSS PROFIT RATIO 66.00

64.00 2007 2008 2009 2010 2011 (Chart no : 6 Gross Profit Ratio)

INTERPRETATION From the above chart we can see that the GP ratio in 2011 has increased as compared to 2010. It is a measurement of how much from each dollar of a company's revenue is available to cover overhead, other expenses and profits. A high gross profit margin indicates that the company can make a reasonable profit, as long as it keeps the overhead cost in control. Gross profit margin can be used to compare company's activity over time.

2 NET PROFIT RATIO

Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed as percentage. NP ratio is used to measure the overall profitability and hence it is very useful to proprietors. The ratio is very useful as if the net profit is not sufficient, the firm shall not be able to achieve a satisfactory return on its investment.

NET PROFIT RATIO = NET PROFIT ÷ SALES X 100

YEAR 2007 2008 2009 2010 2011

NET PROFIT 91978 124388 100312 117537 99820

SALES 1109385 1319666 1316595 1513596 1493767

NP RATIO 8.29 9.43 7.62 7.77 6.68

(Table no : 7, Net Profit Ratio)

Net profit ratio

6 NET 4 PROFIT… 2

0 2007 2008 2009 2010 2011

(Chart no : 7 Net Profit Ratio)

INTERPRETATION

Though the gross profit ratio has increased in 2011, but due to increase in selling and marketing expenses and other administrative expenses, the ratio of net profit has decreased in the year 2011.

3. OPERATING RATIO

This ratio is used to ascertain the efficiency of a company's management by comparing operating expense to net sales. Operating Expense ratio is the yardstick of Operating efficiency but it should be used cautiously. Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. OPERATING RATIO = OPERATING EXPENSE + COST OF GOODS SOLD ÷ SALES X 100

YEAR 2007 2008 2009 2010 2011

OPE EXP +COGS 91978 124388 100312 117537 99820

SALES 1109385 1319666 1316595 1513596 1493767

OPE RATIO 85.99 89.26 92.86 93.44 93.21

(Table no : 8, Operating Ratio)

Operating Ratio

94 92 90

88 Operating 86 Ratio 84 82 2007 2008 2009 2010 2011

INTERPRETATION (Chart no : 8 Operating Ratio)

In the year 2011 the operating expenses are low as compared to the year 2010 due to higher sales in 2010. The smaller the ratio, greater the organization's ability to generate profit. When using this ratio, however, investors should be aware that it doesn't take debt repayment or expansion into account.

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4.RETURN ON CAPITAL EMPLOYED RATIO

The concept of capital employed means the long-term funds employed in business supplied by the creditors and owners. It enables the management to show whether the funds entrusted to it have been properly used or not.

RETURN ON CAPITAL EMPLOYED = NET PROFIT BEFORE INTEREST & TAX / CAPITAL EMPLOYED X 100

CAPITAL EMPLOYED = EQUITY SHARE CAPITAL + RESERVES & SURPLUS + SECURED LOANS

YEAR 2007 2008 2009 2010 2011

EQ.SH.CAPITAL 60000 100000 100000 100000 100000

R & S 9000 25000 36878 18000 34000

SECURED LOAN 678 954 125 947 796

CAP. EMPLOYED 69,678 125,954 137,003 1,18,947 1,34,796

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RETURN ON CAPITAL EMPLOYED = NET PROFIT BEFORE INTEREST & TAX / CAPITAL EMPLOYED X 100

YEAR 2007 2008 2009 2010 2011

NPBIT 105908 141536 117253 135217 121814

CAP. EMPLOYED 69,678 125,954 137,003 1,18,947 1,34,796

ROCE 152 112.37 85.58 113.68 90.37 (Table no : 9, Return on capital employed)

ROCE

200

150

100 ROCE

0 2007 2008 2009 2010 2011

(Chart no : 9 Return on capital employed)

INTERPRETATION The Return on Capital Employed ratio (ROCE) tells us how much profit we earn from the investments the shareholders have made in their company. Compare to 2010, earning before tax is showing decreasing trend in current year, which results into lesser return on capital employed when compare to past year.

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5. RETURN ON SHAREHOLDER’ EQUITY

The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. RETURNS ON SHAREHOLDERS EQUITY = NET PROFIT AFTER TAX ÷ SHAREHOLDER’S FUND X 100

YEAR 2007 2008 2009 2010 2011

NPAT 91978 124388 100312 117537 99820

HODER‘S FUND 69678 70367 71018 71225 71301

ROSE 132 176.77 141.25 165.02 140.00

(Table no : 10, Return on share holders equity)

ROSE

200

150

100 ROSE

0 2007 2008 2009 2010 2011

(Chart no : 10 Return on share holders equity)

INTERPRETATION The ratio of return on shareholders‘ fund shows decreasing trend. As compare to 2010, profits after tax and shareholder‘s fund are decreasing in current year. The reason for this decreasing trend is higher tax chargeable in current year. The ratio of return on shareholder equity indicates low profitability or low return on shareholder fund

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11.3.2 DU-PONT ANALYSIS

This method of performance measurement was started by the DuPont Corporation in the 1920s. With this method, assets are measured at their gross book value rather than at net book value in order to produce a higher return on equity (ROE). It is also known as "DuPont identity".

DuPont analysis tells us that ROE is affected by three things: - Operating efficiency, which is measured by profit margin - Asset use efficiency, which is measured by total asset turnover - Financial leverage, which is measured by the equity multiplier

If RONW is unsatisfactory, the DuPont analysis helps locate the part of the business that is underperforming.

11.3.2.1 RETURN ON NET WORTH (RONW)

Return on Net Worth is used in Finance as a measure of a company‘s profitability. It reveals how much profit a company generates with the money that the equity shareholders have invested. Therefore it is also called Return on Equity. This ratio is useful for comparing the profitability of a company of current year to that of past year. RONW measures how much return the company management can generate for its equity shareholders. It is a function of Net Profit Margin and Net worth Turnover.

RONW = NET PROFIT MARGIN X NET WORTH TURNOVER

NET PROFIT MARGIN= (PAT–PREFERENCEDIVIDEND) ÷NETSALES X 100

NET WORTH TURNOVER = NET SALES ÷ NET WORTH

NET WORTH = EQUITYCAPITAL + RESERVES AND SURPLUS – MISC EXP.

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YEAR 2007 2008 2009 2010 2011 P A T 91978 124388 100312 117537 99820 PREFERENCE - - - - - DIVIDEND NET SALES 1109385 1319666 1316595 1513596 1493767 NET WORTH 92821 128912 158121 225383 224036 NET PROFIT 8.29 9.43 7.62 8 6.68 MARGIN NET WORTH 11.95 10.24 8.33 6.715662 6.667531111 TURNOVER RONW 99.07 96.56 63.47 53.73 44.53910782 (Table no : 11 Return on net worth)

RETURN ON NET WORTH

100.00

80.00

60.00 Return on Net Worth 40.00

20.00

0.00 2007 2008 2009 2010 2011

(Chart no : 11 Return on net worth)

INTERPRETATION

From the above graph, we can say that the ratio on Return on Net Worth have a slight decreases in 2011 as compared to the year 2010, due to decrease in net profit margin and net worth turnover i.e ( net sales in compare to net worth) the ratio is declining. The term ―Net-worth‖ means money belonging to equity share holders and includes reserves net of fictitious assets awaiting write off.

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11.3.2.2 RETURN ON TOTAL ASSETS

Return on Total Assets is a ratio which measures a company's earnings before interest and taxes (EBIT) against its total net assets. The ratio is considered an indicator of how effectively a company is using its assets to generate earnings before contractual obligations must be paid. The greater a company's earnings in proportion to its assets, the more effectively that company is said to be using its assets.

RETURN ON TOTAL ASSETS = NET PROFIT MARGIN X TOTAL ASSETS TURNOVER

TOTAL ASSETS TURNOVER = NET SALE ÷TOTAL ASSET

YEAR 2007 2008 2009 2010 2011

NET SALE 1109503 1317004. 1316613. 235074 179676 .2 06 6 TOTAL ASSET 516048 580178 615240 755849 830320

TOTAL ASSETS 2.15 2.27 2.14 2 1.80 TURNOVER

RETURN ON TOTAL ASSETS = NET PROFIT MARGIN X TOTAL ASSETS

YEAR 2007 2008 2009 2010 2011 NET PROFITMARGIN 8.29 9.43 7.62 8 6.68 TOTAL ASS 2.15 2.27 2.14 2 1.80 TURNOVER ROTA 17.82 21.41 16.31 16.02 12.02 TURNOVER

(Table no : 12, Return on total assets)

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RETURN ON TOTAL ASSETS

25.00

20.00

15.00 Return on Total Assets 10.00

5.00

0.00 2007 2008 2009 2010 2011

(Chart no : 12 Return on total assets)

INTERPRETATION

From the above graph, we can say that the ratio of the year 2011 has decreased in compare t the year 2010. There is a decrease in Profit After Tax and Sales in the year 2011 and the investment in total assets is increasing. Due to decrease in Profit Margin and Total Assets Turnover, there is a decrease in Return on Total Assets. The assets of the company are comprised of both debt and equity. Both of these types of financing are used to fund the operations of the company. The ROA figure gives investors an idea of how effectively the company is converting the money it has to invest into net income. The higher the ROA number, the better, because the company is earning more money on less investment. But in this case ROA is on a decline stage because in comparison with investment, earnings are less

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11.3.3 RETURN ON INVESTMENT ANALYSIS

Return on Investment (ROI) analysis is one of several commonly used financial metrics for evaluating the financial consequences of business investments, decisions, or actions. ROI analysis compares the magnitude and timing of investment gains directly with the magnitude and timing of investment costs. A high ROI means that investment gains compare favorably to investment costs.

Maximization of Return on Investment is the ultimate objective of the company management. For, it is the expectation of a high return that motivates equity share holders to continue with the company and new investors to put in their money in the company‘s equity.

Three major ratios are computed and analyzed within this broad group: Return on Net Worth, Earning per Share and Cash Earnings per Share

11.3.3.1 RETURN ON NET WORTH (RONW)

Return on Net Worth is used in Finance as a measure of a company‘s profitability. It reveals how much profit a company generates with the money that the equity shareholders have invested. Therefore it is also called Return on Equity. This ratio is useful for comparing the profitability of a company of current year to that of past year. RONW measures how much return the company management can generate for its equity shareholders. It is the measure of overall profitability of a company after discharging cost of borrowed capital and income tax payable to government. It is a function of Net Profit Margin and Net Worth Turnover.

RONW = NET PROFIT MARGIN X NET WORTH TURNOVER

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NET WORTH TURNOVER = NET SALES ÷ NET WORTH

YEAR 2007 2008 2009 2010 2011

NET SALE 1109503 1317004. 1316613. 235074 179676 .2 06 6 NET WORTH 92821 128912 158121 225383 224036

NET WORTH 11.95 10.24 8.33 6.72 6.67 TURNOVER

RONW = NET PROFIT MARGIN X NET WORTH TURNOVER

YEAR 2007 2008 2009 2010 2011 NET PROFIT 8.29 9.43 7.62 8 6.68 MARGIN NET WORTH 11.95 10.24 8.33 6.72 6.67 TURNOVER RONW 99.07 96.56 63.47 53.73 44.54 (Table no : 13, Return on net worth)

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Return on net worth

100.00

80.00

60.00 Return on Net Worth 40.00

20.00

0.00 2007 2008 2009 2010 2011

(Chart no : 13 Return on net worth)

INTERPRETATION

From the above graph, we can say that the ratio on Return on Net Worth have a slight decreases in 2011 as compared to the year 2010, due to decrease in net profit margin and net worth turnover i.e. (net sales in compare to net worth) the ratio is declining. The term ―Net-worth‖ means money belonging to equity share holders and includes reserves net of fictitious assets awaiting write off.

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11.3.3.2 EARNING PER SHARE

The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability. Earnings per share are generally considered to be the single most important variable in determining a share's price.

EARNING PER SHARE = PAT ÷ WEIGHTED AVERAGE NO. OF EQUITY SHARES OUTSTANDING

YEAR 2007 2008 2009 2010 2011

PAT 91978 124388 100312 117537 99820

WAESO 56428.22 56540 56995.45 57,057 57,040

EPS 1.63 2.20 1.76 2.06 1.75

(Table no : 14, Earning per share)

Earning per share

2.50

2.00 Earning Per 1.50 Share 1.00

0.50

- 2007 2008 2009 2010 2011

(Chart no : 14, Earning per share)

INTERPRETATION

Above shown graph depicts that in current financial year earning after tax has reduce significantly, which is obviously result of higher chargeable tax. This scenario affects the shareholder earning. Here earning per share has reduce by 0.31% when compare to past year 2010.

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11.3.3.3 CASH EARNING PER SHARE

A measure of financial performance that looks at the cash flow generated by a company on a per share basis. This differs from basic earnings per share (EPS), which looks at the net income of the company on a per share basis. The higher a company's cash EPS, the better it is considered to have performed over the period.

CASH EARNING PER SHARE = PAT + NON-CASH CHARGES ÷ WEIGHTED AVERAGE NO. OF EQUITY SHARES O/S

YEAR 2007 2008 2009 2010 2011

PAT + NON- 70,535.28 70,675.00 71,244.32 85,585.19 99,820 CASH CHARGES WANESO/S 56428.22 56540 56995.45 57,057 57,040

CASH EARNING 1.25 1.25 1.25 1.5 1.75 PER SHARE (Table no : 15, Cash earning per share)

Cash earning per share

2.00

1.50 cash earning per share 1.00

0.50

- 2007 2008 2009 2010 2011 (Chart no : 15 Cash earning per share)

INTERPRETATION

From the above graph we can say cash earnings per share is showing increasing trend in the current financial year which is positive sign for the company. This ratio is affected by the non-cash charge

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11.3.4 LEVERAGE ANALYSIS

Leverage is used to describe the firm‘s ability to use fixed-cost assets or funds to increase the return to its owners. It is defined as ―the employment of assets or funds for which the firms pays a fixed-cost or fixed return‖. It means ―the tendency for profits to change at a faster rate than sales‖. There are primarily two types of leverages – Operating and Financial. The leverage associated with investment activities is referred to as operating leverage, while leverage associated with financing activities is called financial leverage.

OPERATING LEVERAGE

The Operating Leverage is defined as ―the firm‘s ability to use fixed operating costs to magnify the effects of changes in sales on its Earning Before Interest and Taxes. a firm will not have Operating Leverage, if its fixed operating cost is Zero

OPERATING LEVERAGE = CONTRIBUTION ÷ EBIT

YEAR 2007 2008 2009 2010 2011

CONTRIBUTION 339072 337929 286163 265604 304249

EBIT 182297 216621 168331 184447 182185

OPERATING 1.86 1.56 1.7 1.44 1.67 LEVERAGE (Table no : 16, Operating leverage)

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Operating leverage

1.5 Operating Leverage 1

0.5

0 2007 2008 2009 2010 2011

(Chart no : 16, Operating leverage)

INTERPRETATION

The higher the degree of operating leverage, the greater the potential danger from forecasting risk. That is, if a relatively small error is made in forecasting sales, it can be magnified into large errors in cash flow projections. The opposite is true for businesses that are less leveraged. A business that sells millions of products a year, with each contributing slightly to paying for fixed costs, is not as dependent on each individual sale.

FINANCIAL LEVERAGE

Financial leverage results from the presence of fixed financial charges in the firm‘s income statement. Financial leverage is concerned with the effects of changes in EBIT on the earnings available to equity shareholders. It is defined as ―the ability of a firm to use fixed financial charges to magnify the effects of changes in EBIT on the Earning Per Share‖.

Financial leverage may be favorable, if the earnings made by the use of funds exceed the fixed cost of using the funds.

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FINANCIAL LEVERAGE = EBIT÷ EBT

YEAR 2007 2008 2009 2010 2011

EBIT 182297 216621 168331 184447 182185

EBT 105908 141536 117253 135217 121814

FINANCIAL 1.72 1.53 1.44 1.36 1.5 LEVERAGE (Table no : 17, Financial leverage)

Financial leverage

2.00

1.50 Financial Leverage 1.00

0.50

0.00 2007 2008 2009 2010 2011

(Chart no : 17, Financial leverage)

INTERPRETATION

In the year 2011, there is an increase in the financial leverage as compared to the year 2010. The financial leverage is favourable if the earnings made by the use of the funds exceeds the fixed costs of using the funds. The leverage will be considered favourable if the firms earns ore on assets purchased with the funds than the fixed costs of their use.

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Combined leverage

3.50 3.00 2.50 Combined 2.00 Leverage 1.50 1.00 0.50 0.00 2007 2008 2009 2010 2011

(Chart no : 18, Combined leverage)

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11.3.5 WORKING CAPITAL ANALYSIS

As we know working capital is the life blood and the centre of a business. Adequate amount of working capital is very much essential for the smooth running of the business. And the most important part is the efficient management of working capital in right time. The liquidity position of the firm is totally effected by the management of working capital. So, a study of changes in the uses and sources of working capital is necessary to evaluate the efficiency with which the working capital is employed in a business. This involves the need of working capital analysis.

Capital required for a business can be classified under two main categories via, 1) Fixed Capital 2) Working Capital

Every business needs funds for two purposes  For its establishment  To carry out its day- to-day operations.

Long terms funds are required to create production facilities through purchase of fixed assets such as P&M, land, building, furniture, etc. Investments in these assets represent that part of firm‘s capital which is blocked on permanent or fixed basis and is called Fixed Capital

Funds are also needed for short-term purposes for the purchase of raw material payment of wages and other day–to-day expenses etc. These funds are known as Working Capital

In simple words, working capital refers to that part of the firm‘s capital which is required for financing short- term or current assets such as cash, marketable securities, debtors & inventories. Funds, thus, invested in current assts keep revolving fast and are being constantly converted in to cash and this cash

117 flows out again in exchange for other current assets. Hence, it is also known as revolving or circulating capital or short term capital. There are two concepts of working capital 1. Gross working capital 2. Net working capital

The gross working capital is the capital invested in the total current assets of the enterprise. Current assets are those Assets which can convert in to cash within a short period normally one accounting year.

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1.NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES

YEAR 2007 2008 2009 2010 2011

C A 341460 411398 439911 515725 567312

C L 194307 207401 192010 242851 272540

N W C 147,153 203,997 247,901 272,874 294,772

(Table no : 18, Net working capital )

Net working capital

300,000

250,000

200,000 Net Working Capital 150,000

100,000

50,000

- 2007 2008 2009 2010 2011

(Chart no : 19, Net working capital )

INTERPRETATION From the above graph we can say that the Net Working Capital is increasing in the year 2011 due to increase in current assets as compare to the year 2010. Positive working capital means that the company is able to pay off its short- term liabilities. gives investors an idea of the company's underlying operational efficiency.

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2.WORKING CAPITAL TURNOVER RATIO = COST OF SALES / NET WORKING CAPITAL

YEAR 2007 2008 2009 2010 2011

COST OF SALES 331,559 410,632 441,813 511,117 478,981

N W C 147,153 203,997 247,901 272,874 294,772

WCTR 2.25 2.01 1.78 1.87 1.62

(Table no : 19, Working capita turnover )

Working capital turnover

2.50

2.00

1.50 Working Capital 1.00 Turnover

0.50

0.00 2007 2008 2009 2010 2011

(Chart no : 20, Working capita turnover ) INTERPRETATION

Working Capital Turnover Ratio provides some useful information as to how effectively a company is using its working capital to generate sales. The working capital turnover ratio is used to analyze the relationship between the money used to fund operations and the sales generated from these operations. In a general sense, the higher the working capital turnover, the better because it means that the company is generating a lot of sales compared to the money it uses to fund the sales. But in this case, the expenses against sales are more as compared to sales, so it is bad sign for the company

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3.STOCK TURNOVER RATIO

The ratio signifying the efficiency of sales is the stock turnover ratio. It shows the number of times the average stock is turned over during the year

STOCK TURNOVER RATIO = COST OF GOODS SOLD ÷ AVERAGE INVENTORY

AVERAGE INVENTORY = INVENTORIES ÷ 2

YEAR 2007 2008 2009 2010 2011

COGS 331,559 410,632 441,813 511,117 478,981

AVERAGE 93042.5 118991 110654.5 143175 132278 INVENTORY STR 3.56 3.45 3.99 3.57 3.62

(Table no : 20, Stock turnover ratio )

Stock turnover ratio

4.00 3.80 3.60 Stock Turnover Ratio 3.40 3.20 3.00 2007 2008 2009 2010 2011 (Chart no : 21, Stock turnover ratio )

INTERPRETATION

In case of Stock Turnover Ratio, the company is revealing increasing trend. With the decrease in COGS, there is an increase in the ratio. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying. High inventory levels are unhealthy because they represent an investment with a rate of return of zero. It also opens the company up to trouble should prices begin to fall.

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4.CURRENT ASSETS TURNOVER

Current Assets Turnover Ratio establishes the relationship between net sales and Current assets. This ratio indicates how well the Current assets are being utilized. A higher current assets turnover ratio indicates the capability of the organization to achieve the maximum sales with maximum investment in current assets. Higher current assets turnover ratio better will be the situation.

CURRENT ASSETS TURNOVER = NET SALES ÷ CURRENT ASSETS

YEAR 2007 2008 2009 2010 2011

NET SALES 1109385 1319666 1316595 1513596 1493767

C A 341460 411398 439911 515725 567312

CAT 3.25 3.21 2.99 2.93 2.63

(Table no : 21, Current assets turnover ratio )

Current assets turnover

4.00

3.00

2.00 Current Assets Turnover 1.00

0.00 2007 2008 2009 2010 2011

(Chart no : 22, Current assets turnover ratio )

INTERPRETATION

From the above graph, it can be seen that current assets turnover ratio of the year 2011 is decreasing as compared to the year 2010. Due to the increase in the current assets and decrease in sales, it shows that company has ideal assets as a buffer; sales are less as compared to the investment in assets. This shows an ineffective utilization of assets.

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5.FIXED ASSETS TURNOVER Fixed Assets Turnover Ratio establishes the relationship between net sales and net fixed assets. This ratio indicates how well the fixed assets are being utilized. FIXED ASSETS TURNOVER = NET SALES ÷NET FIXED ASSETS

YEAR 2007 2008 2009 2010 2011

NET SALES 1109385 1319666 1316595 1513596 1493767

N F A 140,628 138,711 135,934 185,259 203,030

FAT 7.89 9.51 9.69 8.17 7.36

(Table no : 22, Fixed assets turnover ratio )

Fixed assets turnover ratio

10.00

8.00

6.00

Fixed Assets 4.00 Turnover Ratio

2.00

0.00 2007 2008 2009 2010 2011

(Chart no : 23, Fixed assets turnover ratio )

INTERPRETATION

Fixed assets turnover ratio shows a decreasing trend. If the fixed asset turnover ratio is low as compared to the past years of data for the firm, it means that sales are low or the investment in plant and equipment is too much. This may not be a serious problem if the company has just made an investment in fixed asset to modernize

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6.TOTAL ASSETS TURNOVER: Total Assets Turnover Ratio (TATR) is used to measure the firm's ability to utilize its assets to generate sales. It is an indication to the firm's operation efficiency. A lower ratio means inefficient utilization of assets.

TOTAL ASSETS TURNOVER = NET SALES ÷ TOTAL ASSETS

YEAR 2007 2008 2009 2010 2011

NET SALES 1109385 1319666 1316595 513596 1493767

TOTAL ASSETS 516048 580178 615240 755849 830320

T A T 2.15 2.27 2.14 2.00 1.80

(Table no : 23, Total assets turnover )

Total assets turnover ratio

2.50

2.00

1.50 Total Assets 1.00 Turnover Ratio

0.50

0.00 2007 2008 2009 2010 2011

(Chart no : 24, Total assets turnover )

INTERPRETATION

As compared to 2010, the Total Assets Turnover Ratio is decreasing in the year 2011. The lower the total asset turnover ratio, as compared to historical data for the firm and industry data, the more sluggish the firm's sales. This may indicate a problem with one or more of the asset categories composing total assets - inventory, receivables, or fixed assets. The firm should analyze the various asset classes to determine in which current or fixed asset the problem lies.

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11.4 HUMAN RESOURCE DEPARTMENT

11.4.1 CORE VALUES

Togetherness – people who work together and share the same goals achieve greater results. They motivate each other and know that pulling together is more rewarding than doing it alone.

Spirit – people with a can-do spirit have a winning attitude and never give up. They are prepared and committed to do what it takes to succeed.

Passion – passionate people have the power to change the world. They love what they do, they believe in it. They know deep down that they can make a difference.

11.4.2 CULTURE: THE ORIFLAME WAY

REVLON is a fast growing company, with ambitions to constantly attract new people and add new markets to its world. The people behind Revlon are the reason for the Company‘s success. But how does one run a company with more than three million consultants all over the world who speak different languages and hold different values, religious beliefs and political convictions? The key is the corporate culture. A common culture is an invisible bond. It has the power to unite, enthuse and lead people over borders and boundaries that might otherwise separate them. Revlon culture is based on entrepreneurship as well as respect for and belief in peoples‘ capability.

Revlon‘s corporate culture was created in the early years of the Company and formed in conditions of strong competition and financial challenges. The culture is a direct result of the approach that proved most stimulating and effective. It is built on values such as mutual trust and respect, entrepreneurial spirit, customer focus and quality demands and it is reflected in all parts of the organization, as well as in the approach to social responsibility.

Revlon‘s corporate culture can be summarized in three key values; togetherness, spirit and passion. All employees are required to be familiar

125 with the Company‘s values, history and driving forces, called The Revlon Way, as these are the keys to Revlo‘s continued success.

Protecting the corporate culture has been one of the greatest and most important challenges to the Company during its strong growth.

The Revlon Way

Revlon wants to ensure that all employees understand the core values and operating principles of the Revlon culture. The Revlon Way is a one-day seminar presented by senior manager trained for this purpose. The seminar is given in English, Russian and Spanish to fully reach its target audience. To date, 1,380 employees have attended the Revlon Way and the CEO and President Magnus Brännström has personally conducted 50 of these training sessions, as it is a highly prioritized matter in the Company.

11.4.3 SUPPORT TOOLS

Sales consultants are offered a number of tools to help them succeed, coordinated in SARPIO – Sales and Recruitment Processes in Revlon. SARPIO is the global platform for processes, training and communication. It has been developed in order to offer consultants support in developing and managing themselves and their businesses, while ensuring that they convey the Revlon brand in a consistent way. In 2009, Oriflame launched a new management tool for the sales force in most markets. This tool helps sales consultants to track performance of their network and identify action areas that can improve business effectiveness. It also improves communication with the sales force.

During the past years the online activity among the Revlon sales consultants has increased dramatically. Around 50 percent of the sales force uses the online services and more than half of all orders are placed through the online ordering. Moreover, online social networks are becoming significant grounds for sales and recruitment activities. As time spent online increases, the sales force is provided with new tools that allow them to continue their business activity in this environment. During the year Revlon conducted a pilot rollout of

126 an e-learning concept to coach and support the sales force in their selling and recruiting activities. The response has been very positive and the intention is to continue the e-learning initiative globally going forward.

11.4.4 A CREATIVE CAREER OPPORTUNITY

A creative career at Revlon means a unique possibility to be involved in the production of one of the world‘s largest beauty publications. The core team consists of art directors, layout artists, layout editors and copywriters. Production involves project management, image retouching and prepress, print production coordination, technical layout and text editing. The catalogue planners, creative directors, project managers, creative category managers, print production coordinators, photography coordinators, model bookers, stylists, image retouches and text functions support every step of the creation and production process.

11.4.5 STRIVING TO BECOME NUMBER ONE WORKPLACE

Striving to become the number one beauty company selling direct, Revlon needs to become the number one workplace. Revlon presents a stimulating, creative and dynamic working environment that empowers people to grow as people and professionals, whether they are employees or independent sales consultants. The greatest challenge is to preserve core values and a genuine sense of entrepreneurship, as Revlon grows and requires more structure.

Attract, develop and retain Revlon has 3.2 million independent sales consultants in 62 countries. In addition to this the Company has over 8,000 employees located in offices all over the world. To retain these people and to be able to attract outstanding professionals, Revlon must offer motivation and potential for development. The Company presents a stimulating and entrepreneurial working environment that empowers people to grow as people and professionals, whether they are employees or independent sales consultants .Revlon consultants get the chance to run their own company – setting their own targets, planning income and working hours and sometimes even changing their lives. Revlon‘s employees develop both in their day-today work and in Revlon Academy, a unique training program created to

127 support and strengthen Revlon‘s culture. Revlon has also implemented a new strategy for compensation and benefits. In order to find the right person for each position, a performance management and an internal succession planning system have been adopted.

11.4.6 DIVERSITY

Embracing and actively working to sustain diversity, Revlon aspires to be a company that reflects the globally diverse audience that it serves. In addition to hiring the best talent, Revlon believes that diversity of gender, nationalities and cultures leads to the creation of better perspectives, ideas and products. The diversity of employees and partners serves as the foundation of better service for customers and stakeholders all over the world. Revlon takes pride in offering the people who join the Company an opportunity to work abroad in one of the many countries where they have a presence. Revlon has offices in more than 60 countries, each of which is a venue for diversity and common experience, not least the Stockholm office where people from more than 30 countries work together towards the same goals – a truly unique working environment. Revlon hosts three major international conferences every year in various, carefully chosen locations. The conferences provide an opportunity for leaders to exchange experience and ideas with top management and colleagues from all over the world. Last year´s Gold Conference in Rome hosted a record number of 4,800 attendees from 58 markets.

11.4.7 GENDER EQUALITY

Revlon always strives for an even distribution of gender and ethnical background within all categories of employees at all levels. All employees should be evaluated based on the same basic principles; performance, experience and potential. Their ambition is that the work environment at Revlon shall be suitable for all employees, men as well as women, who should find it possible to combine work with the responsibility of having and raising children. When recruiting, Revlon always wants to review both female and male candidates. According to statistics for the global top 200, the Company is close to a gender distribution of 60/40 in favour of men. Looking

128 forward, this gives the Company a very good base for recruiting women into top management. Revlon always strives to secure equal pay for equal work and performance benchmarked against external market data. A salary mapping comparing wages has been conducted between men and women at the Stockholm office and it shows the Company is compliant with both law and policy for equal opportunities when it comes to differentiating between women and men based on gender.

In 2009, a global policy for equal opportunities was published together with two target actions for gender equality – A mentoring program was implemented for top women in the Company and a program aimed at women with leadership potential was initiated and will be introduced as a topic at Revlon Academy.

11.4.8 THE RIGHT PEOPLE ON THE BUS

In order to grow and reach the corporate vision, they have to drive and focus on Talent Management processes in the Company. The concept ―Having the right people on the bus‖ was launched in 2009. The concept consists of two parts. The first part involves presentation and training in the crucial processes for attracting, recruiting, developing and retaining key people. The second part focuses on forming cost-efficient and effective strategies, actions and responsibilities for ―People and Culture‖ together with management. The purpose of the concept is to establish a structured framework, an explicit ownership and a sharp agenda in each Region/Market/Department in Revlon.

11.4.9 THE ORIFLAME ACADEMY

Revlon‘s most important training programmers for managers are found in Revlon Academy, implemented in 2006. The internal three-step development programmer for managers has been created to support and strengthen Revlon‘s culture, increasing integration, strategic understanding as well as leadership and management skills.

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11.4.10 GLOBAL INDUCTION PROGRAM

In 2009, a new global introduction process was implemented as a way of welcoming new hires to Revlon. The process begins before a new employee arrives and lasts up to a year or longer after the employee is in place. The purpose of the process is to ensure that all new hires get up to full speed as quickly and smoothly as possible, feeling that they made the right choice when they decided to join Revlon.

The introduction focuses on introducing the new hire to his/her role, explaining how it relates to Revlon‘s overall functions, activities and vision. The process also involves setting performance targets, as well as enrolling the new hire in the Revlon and Revlon Academy training.

11.4.11 ENCOURAGEMENT AND MOTIVATION

Revlon has a well-developed system for encouraging sales consultants. An important part of this is the Success Plan, according to which sales consultants are rewarded for their own sales, as well as those of any consultant within their network. This provides sales consultants with an incentive to maximize network sales and to enlist new consultants to grow the scope of their network. Apart from the financial rewards, successful sales consultants and network builders are also rewarded with Senior Manager and Director Titles depending on their achievements. Increasingly important means of encouragement are the cost-free training programmers and seminars that Revlon offers. Every year, Revlon hosts three major international conferences in exotic locations. The conferences are an integral part of the overall Success Plan where a title has to be met in combination with reaching a certain qualification each year. At the conferences, the Company has an opportunity to launch key initiatives for the leaders and have product experts presenting the science behind the products. An equally important aspect is the venue that the conferences provide for leaders to exchange ideas with top management and between themselves. Last year‘s Gold Conference in Rome hosted a record number of 4,800 attendees from

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58 countries. Revlon has been awarded several times for these extraordinary events.

11.4.12 REVLON COMPENSATION PLAN

The first way to make money is by selling products to retail customers. One can do this by doing group presentations, one-on-one sales presentations or by sharing catalogs with friends and family members. When one do this, one keep the wholesale retail difference. In most cases, this is somewhere between 20% and 40% of the selling price. Sometimes it‘s more and sometimes it‘s less. It varies by product and whether or not one gives his customers any type of discount. Every product has a ―suggested retail price.‖ The amount one charges customers is up to him.

The next way to make money in the Revlon business is to sponsor new distributors. When you sponsor people into the Revlon business, you can earn money off their sales too. When they sell products to customers and sponsor new distributors, you earn a small commission off each sale. As their sales increase and their down line grows, your commissions grow and you make more money. Therefore, it‘s in your best interest to help your new Revlon distributors succeed.

The final way to make money in the Revlon business is with leadership rewards and incentives. When you build a large down line and generate lots of sales volume, Revlon will reward you with cash incentives, gifts, travel opportunities and more. The amount of money you can earn is unlimited. It‘s all based off your sales volume and your group‘s sales volume. The more volume your ―total business‖ does the more money you make.

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11.5 INFORMATION TECHNOLOGY

The experience and expertise at Revlon is so progressive with more than 40 years experience, over 100 scientists and state of the art R&D facilities. They are constantly searching for better solutions and technologies in order to create innovative products that are consistently on-trend and meeting Consumer needs.

The research process starts with identifying ―consumer insights‖, meaning they need to gain a deep understanding of their target consumer‘s attitudes and beliefs in order to create products that can change behavior. Therefore, they are constantly analyzing the latest beauty and cosmetic trends and communicating directly with consumers through our advanced market research techniques. An Revlon product‘s life begins at its Skin Research Institute, where sophisticated science is used to create unique and sometimes patented technologies that give them the leading edge on their competitors. These new technologies are then passed on to the scientists in its Product Development Centre in Dublin, whose role it is to create a cosmetic formula that fits within an existing Revlon brand or has the potential to start a new one, bring it to manufacture and enable its sales. Most importantly though their role is to create a product that customer will love and enjoy using.

At Oriderm, its in house testing facility, high tech equipment is used to measure the performance of the products directly on the skin of volunteers. This allows it to see real results on real skin and provides customers with the confidence what the claims they read in the catalogue really are true. Using the best of science is obviously extremely important to the creation of its products, but it also strives to apply the highest quality and ethical standards to everything it does – that’s our Swedish nature for you!

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11.6 OTHERS

CORPORATE SOCIAL RESPONSIBILITY

Revlon, believe that companies have the same moral responsibilities as individuals. This belief has guided its operations for over 40 years, and continues to shape the Company‘s social and environmental responsibility. It is about fulfilling dreams in a natural, progressive and ethical way and it is particularly important for an international company like Revlon, which operates in many different countries and cultures.

Revlon‘s view of Corporate Social Responsibility (CSR) encompasses applying a responsible business model, which empowers people and provides them with tools to enrich their lives. Becoming a sales consultant for Revlon provides financial opportunities from the first day – but never any risk. Apart from contributing to the communities in which the Company operates by providing employment and business opportunities, Revlon also supports charities on a local, regional and global level. In addition, the Company continuously strives to minimize negative impact on the environment in all areas of its operations.revlon is committed to the ten principles of the United Nations Global Compact. These apply to the areas of human rights, labour standards, the environment and anti-corruption. The Company worked during the year to integrate these principles into the Code of Conduct and to ensure that they permeate all aspects of the business. Revlon strives to make sure that its suppliers are committed to operating in line with policies and requirements regarding wages, working hours, child labor, etc. Revlon manufactures 46 percent of all products in-house, five internal factories produce skincare creams and liquids, foundations, mascaras, lipsticks, personal care and hair care products as well as fragrances. The remaining part of the product range, which includes cosmetics, accessories and food supplements is produced by external suppliers in Europe, the United States and Asia, both for finished products and accessories.

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11.6.1 CHARITY INITIATIVES

Revlon is a grass roots company, which means that it is provided with a unique insight into the lives, conditions and needs of people around the world. Revlon has a long tradition of supporting projects aimed at improving living conditions for the underprivileged in the countries where the Company operates. The purpose of these initiatives is primarily to defend the rights of children.

The various charity activities in which Revlon is involved include funding, product donations and the time and energy of employees spent in numerous social causes. One of these is the World Childhood Foundation under the patronage of HM Queen Silvia of Sweden, which Revlon co-founded in 1999. Another is the Af Jochnick Foundation that continues to provide grants to local charities. Their objective is to assist 100,000 children with education over a period of ten years to ensure their survival, security and progress. Meanwhile, each day in communities around the globe, many of Revlon‘s employees and consultants are committing their time to support charitable initiatives.

11.6.2 REVLON FOUNDATION

Revlon is proud of all good work, but realize that as the business continues to grow and the Revlon brand becomes more recognized around the world, there is a need to better coordinate, support, and ultimately increase the charitable work undertaken across our markets. The decision was therefore taken during 2009 to set in motion a process designed to enhance and expand Revlon‘s charitable giving program, under the global framework of the Revlon Foundation. Revlon Foundation‘s mission is providing help to children and young women through a wide range of educational initiatives so that they can have the opportunity to change their lives for the better and are empowered to turn their dreams into reality. By offering a selection of charity products and accessories, the aim is to raise one million Euros during the Foundation‘s first year, and to double this amount during the following two years. In order to create greater impact and focus for the charitable efforts in a more determined and sustainable way, Revlon will partner with a global NGO

134 that supports focus and can assist the Company in establishing charity initiatives in all markets around the world.

When formulating new products, Revlon makes a point of striving to use natural ingredients that are in line with the Company‘s Environmental Policies and are not harmful to the environment. All primary surfactants and preservatives have a good biodegradability profile. Scientific reports on environmental issues are continuously being monitored to ensure that action can be taken to replace suspect ingredients or packaging materials. Revlon was one of the first companies to utilize plant extracts in skin care products and has always tried to optimize the use of ingredients from renewable plant sources. Revlon has strong animal welfare policies. No Revlon products contain ingredients which cause suffering to animals. Revlon products have never been tested on animals. Consumer safety has always been considered a top priority for Revlon and the Company has very strict policies for ingredient selection, formulation and safety testing. All Revlon cosmetic products are fully compliant with the latest European and other international regulations. All cosmetic products are manufactured in line with the international guidelines on Good Manufacturing Practices for cosmetics.

At present, Revlon owns and operates five cosmetic manufacturing plants – in Poland, Sweden, India, China and Russia. Energy conservation, greenhouse gas reduction, waste reduction and water use are key considerations in the design of these plants and the production equipment used Revlon there. Work continuously to monitor environmental data at our factories to identify opportunities for improvement. Moreover, as regulatory requirements vary in different parts of the world, Revlon adapts its policies to comply with the ever changing and increasingly demanding environmental legislation at local and international levels.

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SWOT ANALYSIS

 STRENGTH  WEAKNESSES  OPPORTUNITIES  THREATS

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SWOT ANALYSIS

12.1SWOT ANALYSIS

Revlon, SWOT Analysis company profile is the essential source for top-level company data and information. Revlon, SWOT Analysis examines the company‘s key business structure and operations, history and products, and provides summary analysis of its key revenue lines and strategy.

Revlon ('the company') is engaged in the production, marketing and selling of an array of cosmetics, hair color, beauty tools, anti per spirants deodorants, fragrances, skincare and other beauty care products. The company operates in North America, Asia-Pacific, Europe, Africa, and Latin America. It is headquartered in New York City, New York and employs 4,900 people. The company recorded revenues of $1,321.4 million during the financial year ended December 2010 (FY2010), an increase of 2% over FY2009. The operating profit of the company was $199.8 million in FY2010, an increase of 17% over FY2009. The net profit was $327.3 million in FY2010, as compared to a net profit of $48.8 million in FY2009 at Revlon products.

SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective.

Setting the objective should be done after the SWOT analysis has been performed. This would allow achievable goals or objectives to be set for the organization.

The aim of any SWOT analysis is to identify the key internal and external factors that are important to achieving the objective. These come from within the company's unique value chain. SWOT analysis groups key pieces of information into two main categories:

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 Internal factors – The strengths and weaknesses internal to the organization.

 External factors – The opportunities and threats presented by the external environment to the organization.

The internal factors may be viewed as strengths or weaknesses depending upon their impact on the organization's objectives. What may represent strengths with respect to one objective may be weaknesses for another objective. The factors may include all of the 4Ps; as well as personnel, finance, manufacturing capabilities, and so on.

The external factors may include macroeconomic matters, technological change, legislation, and socio-cultural changes, as well as changes in the marketplace or competitive position. The results are often presented in the form of a matrix.

 STRENGTHS: characteristics of the business, or project team that give it an advantage over others

 WEAKNESSES (or Limitations): are characteristics that place the team at a disadvantage relative to others

 OPPORTUNITIES: external chances to improve performance (e.g. make greater profits) in the environment

 THREATS: external elements in the environment that could cause trouble for the business or project

Identification of SWOTs is essential because subsequent steps in the process of planning for achievement of the selected objective may be derived from the SWOTs.

First, the decision makers have to determine whether the objective is attainable, given the SWOTs. If the objective is NOT attainable a different objective must be selected and the process repeated.

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Users of SWOT analysis need to ask and answer questions that generate meaningful information for each category (strengths, opportunities, weaknesses, and threats) in order to maximize the benefits of this evaluation and find their competitive advantage

SWOT analysis is just one method of categorization and has its own weaknesses. For example, it may tend to persuade companies to compile lists rather than think about what is actually important in achieving objectives. It also presents the resulting lists uncritically and without clear prioritization so that, for example, weak opportunities may appear to balance strong threats.

It is prudent not to eliminate too quickly any candidate SWOT entry. The importance of individual SWOTs will be revealed by the value of the strategies it generates. A SWOT item that produces valuable strategies is important. A SWOT item that generates no strategies is not important.

The cosmetics industry plays a significant part in the economy. In this sense, the industry study proves to be useful since it provide findings as to the past and current situation of the industry. This study can be classified according to the famous (SWOT) Strength, Weaknesses, Opportunities, and Threats format.

STRENGTH

• Revlon is the major player in cosmetics, skin care, and fragrance and

Personal care products. It has long history of 75 years.

• Famous brand especially among the women‘s.

• Despite of heavy debt and net losses from last few years. Product

Development is the main focus area for Revlon.

• Strong research and development.

• Revlon products are sold in more than 100 countries.

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• Revlon 43 percent sales are from United States market.

• It has been supporting several health programs for Women.

• Advertising is one of the key areas for Revlon.

• Revlon aims to provide quality products.

• Distribution channels are well managed that the reason Revlon products are

Used in more than 100 countries of the world.

During the three decades, from 1970 to 1990, the cosmetics industry gained momentum in its extensive development through per capita consumption. Even some segments may vary; the cosmetic industry is near maturity. The current annual retail sales of the industry totaled up to $14.5 billion.

The first quarter of this current year has seen a demand beginning to revive and trend is expected to continue well into the following year.

Over the years Revlon has launched thousands of products conveying the Revlon product philosophy – combining the wisdom of nature with the best of science – providing a wide portfolio affordable for the many people. Revlon‘s products are developed using cutting-edge technology and products are manufactured according to the highest quality standards. Revlon‘s Cosmetics offers over 900 cosmetic products at any given time, more than a third of which are newly introduced each year.

At the first sign of an economic slowdown in 2008, Revlon started adapting the catalogue offers promoting more value for-money products. This had a beneficial impact on overall sales in 2009 and led to a positive product mix for different target groups and people with varying incomes. At this time, the Company created products that were on trend for 2009. At the same time, Revlon increased prices by approximately 5 percent on average.

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WEAKNESSES

 Weak financial position due to net losses and heavy debts.

 Cutting down number of jobs reduce employee trust on the Company.

 Continuous changes in the Organizational Structure may impact the performance for employees.

 Besides advertising other marketing areas are the weak. Opportunities

Accounting to the past developments, the cosmetics industry has never been always in such a case. The industry is no longer recession-proof and is now bound for depressions and declinations. Actually, the sales in the past year are slow moving because of downed consumer spending. Consumers that time then tend to settle for the less expensive lines.

Another setback of the industry is the demand-price ratio. Within the past five years, the prices were invariable and steady but promotion budgets were growing and getting greater than ever.

OPPORTUNITIES

 Revlon is currently facing financial problems so joint ventures or partnership with other players in the industry may open the doors of new opportunities.

 Utilize all marketing methods to promote its products; it will help to boost the sales of the company.

 Develop products for male segment

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In keeping away from a potential head-on competition, a strategy of focusing on special niches proved to be effective especially in the struggle with the industry leaders. This has been a great line of attack adopted by smaller companies in their contest with the market leaders. They survive and exist through specializing in niches, differentiating the product lines, and focusing on market segment. A potential huge market has been spotted on men as they account for 50% of adult population that consume one-fifth of cosmetic sales. The failure of the market leaders in such opportunity provides hint to smaller companies as to what would be the proper and better approach to the market. Furthermore, the senior citizen population is a large growing market segment which should be given focus as the population‘s needs were not being met.

The Revlon ―Business Opportunity Concept‖ is built on four Strategic Cornerstones; Brands & Products, Network Marketing, World Class Service and People & Culture. The Revlon supply chain organization is one of the main pillars of the strategic cornerstone; ―World Class Service‖. It is the ultimate objective of the supply chain organization to deliver an industry leading service to the sales organization, to the consultants and to the end customers. In recent years, Revlon has implemented a new operating platform, locating Revlon marketing, catalogue and supply functions to Stockholm, Sweden and expanding central and regional logistic hubs in Warsaw, Poland and Moscow, Russia. In 2009 the integration of the Baltic markets into the Warsaw Group Distribution Centre was finalized. During the year a new supply chain management system was implemented, providing higher transparency and better responsiveness throughout the planning cycle. The roll-out to Revlon markets will continue as planned during 2010. A new Group Distribution Centre will be established in Budapest serving neighboring countries. By consolidating the inventory closer to the consultants and by eliminating intermediate warehouses in the various markets, the lead times will be shortened, product availability will be improved and the inventory will be better controlled and managed

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THREATS

 Intense competition with major players of the industry including Procter & Gamble, Unilever, L‘Oreal,

 Rapid changes in fashion may require heavy budgets for product development & marketing. Revlon has to find some financial assistance to support its operation to sustain its position in the industry.

 Revlon selling its products through websites but it haven‘t made efforts to develop relations with the customers through online channels.

 Government instability and variation in exchange rate in few countries

 Focused towards woman segment

Notwithstanding the apparent growth of the cosmetic industry during the past four decades, there are currently more than 700 growing cosmetic companies competing in the market. Additionally, there are also market leaders that dominate the cosmetic industry. Consequently, it creates stiff and intensifying competition especially to those smaller companies as market leaders are putting pressure on these smaller cosmetic companies. Competitors being a cosmetics company selling direct means that Revlon compete both with major cosmetics manufacturers for end customers as well as with other direct sellers for consultants.

Some of the largest competitors to revlon in Eastern Europe are the global manufacturers Procter & Gamble, L‘Oreal, Beiersdorf and Unilever, while the Russian company Kalina has been very successful in key markets such as Russia, Ukraine and Kazakhstan. The two largest cosmetics companies selling direct in Eastern Europe, are by a wide margin Revlon and Avon, but there are many other direct sellers that compete for consultants. Russian Faberlic and the American direct sellers Mary Kay and Amway are some of

143 the companies that have built a large sales force of consultants during recent years. Direct sales as a channel is estimated to have more than 20 percent of the total C&T market in Eastern Europe. This is higher than the global average of approximately 11 percent. In Latin America, Revlon is still a small player in the cosmetics market. Avon has been very successful in this region as well as many local companies, such as Natura, Esika, Yanbal and Jafra. Direct sales are very popular in this region and depending on country, it is estimated that this channel has taken about 30 percent of the total C&T market. According to Euromonitor, the largest cosmetics manufacturers in Revlon‘s Asian markets are Unilever, Procter & Gamble and L‘Oreal. Direct sales has a significant share of the market in China, with Amway, Avon and Mary Kay being the largest direct sellers, while Amway and Revlon‘s have the largest market share among direct sellers in Indonesia and India.

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SWOT ANALYSIS

1. Effective communication Strength 2. High R&D 3. Innovation 4. Loyal customers 5. Market share leadership 6. Strong brand equity 7. Uniqueproduct

1. Over leveraged financial position Weakness 2. Not diversified 3. Poor supply chain 4. Weak management team 5. Week product related service

1. Financial markets (raise money through debt, etc) Opportunity 2. Emerging markets and expansion abroad 3. Innovation 4. Online 5. Product and services expansion 6. Takeovers

1. Competition Threats 2. Economic slowdown 3. External changes (government, politics, taxes, etc) 4. Exchange rate fluctuations 5. Lower cost competitors or imports 6. Maturing categories, products, or services 7. Price wars

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INDUSTRY ANALYSES

 Scope of Revlon

 Reasons To Purchase  Competition level  Competitive force

 Porter’s five force analysis

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INDUSTRY ANALYSES

An industry is a group of firms producing products that are close substitutes. In the course of competition, these firms influence one another. Typically, industries include a mixture of competitive strategies that companies use in pursuing above-average returns. The Indian cosmetics industry, which witnessed a strong growth in the recent years, has emerged as one of the markets holding immense growth potential. With the rising beauty concerns among both men and women, the Indian cosmetics sector would continue to expand remarkably in near future. New product launches catering to consumers' growing requirements would fuel growth in the industry, for which the future outlook seems exceptionally bright.

SCOPE OF REVLON

 Examines and identifies key information and issues about Revlon, Inc. for business intelligence requirements;  Studies and presents the company's strengths, weaknesses, opportunities (growth potential) and threats (competition). Strategic and operational business information is objectively reported;

 Provides analysis on financial ratios of the company;  The profile also contains information on business operations, company history, major products and services, prospects, key competitors, key employees, locations and subsidiaries.

 Provides all the crucial information on Revlon, Inc. required for business and competitor intelligence needs

 Contains a study of the major internal and external factors affecting Revlon, Inc. in the form of a SWOT analysis as well as a breakdown and examination of leading product revenue streams of Revlon, Inc.

 Data is supplemented with details on Revlon, Inc. history, key executives, business description, locations and subsidiaries as well as a list of products and services and the latest available statement from Revlon.

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REASONS TO PURCHASE

 Quickly enhance your understanding of Revlon,  Gain insight into the marketplace and a better understanding of internal and external factors which could impact the industry;  Increase business/sales activities by understanding your competitors' businesses better;  Recognize potential partnerships and suppliers;  Obtain yearly profitability figures  Support sales activities by understanding your customers‘ businesses better  Understand prospective partners and suppliers  Keep fully up to date on your competitors‘ business structure, strategy and prospects  Obtain the most up to date company information available

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COMPETITION LEVELS

Businesses compete on several levels and it is important for them to analyze these levels so that they can understand the demand. Competition is identified on four levels:

 Consumer needs: level of competition that refers to the needs and desires of consumers. A business should ask: What are the desires of the consumers?  General competition: The kind of consumer demand. For example: do consumers prefer shaving with electric razor or a razor blade?  Brand: This level refers to brand competition. Which brands are preferable to a consumer?  Product: This level refers to the type of demand. Thus what types of products do consumers prefer?

Another important aspect of a competition analysis is to increase the consumer insight. For example: [Ducati] has, by interviewing a lot of their customers, concluded that their main competitor is not another bicycle, but sport-carslike [Porsche] or [GM]. This will of course influence the competition level within this business.

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COMPETITIVE FORCES

These are forces that determine the level of competition within a particular market. There are six forces that have to be taken into consideration, power of the competition, threat of new entrants, bargaining power of buyers and suppliers, threat of substitute products and the importance of complementary products. This analysis is described in Porter 5 forces analysis.

PORTER'S FIVE FORCES ANALYSIS

Porter's five forces is a framework for the industry analysis and business strategy development developed by Michael E.Porter of Harvard Business School in1979. It draws upon Industrial Organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven to normal profit.

The five force model of competition expands the arena for competitive analysis. When studying the competitive environment, firms concentrated on companies with which they competed directly. Porter's five forces include three forces from 'horizontal' competition: threat of substitute products, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers.

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THE THREAT OF THE ENTRY OF NEW COMPETITORS

Identifying the new entrants is important because they can threaten the market share of existing competitors. Profitable markets that yield high returns will attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards zero (perfect competition).

 The existence of barriers to entry (patents, rights, etc.) The most attractive segment is one in which entry barriers are high and exit barriers are low. Few new firms can enter and non-performing firms can exit easily.  Economies of product differences  Brand equity  Switching costs or sunk costs  Capital requirements  Access to distribution  Customer loyalty to established brands  Absolute cost advantages  Learning curve advantages  Expected retaliation by incumbents  Government policies  Industry profitability; the more profitable the industry, the more attractive it will be to new competitors

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THE INTENSITY OF COMPETITIVE RIVALRY

For most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry.

 Sustainable competitive advantage through innovation  Competition between online and offline companies; click-and-mortar -v- slags on a bridge  Level of advertising expense  Powerful competitive strategy  The visibilities of proprietary items on the Web used by a company which can intensify competitive pressures on their rivals.

How will competition react to a certain behavior by another firm? Competitive rivalry is likely to be based on dimensions such as price, quality, and innovation. Technological advances protect companies from competition. This applies to products and services. Companies that are successful with introducing new technology are able to charge higher prices and achieve higher profits, until competitors imitate them. Examples of recent technology advantage in have been mp3 players and mobile telephones. Vertical integration is a strategy to reduce a business' own cost and thereby intensify pressure on its rival.

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THE THREAT OF SUBSTITUTE PRODUCTS OR SERVICES

Substitute products are goods or services from outside a given industry that perform similar or same functions as a product that the industry produces. Eg. Revlon Optimals White Foaming cleanser and cleanser/face wash for oily/combination skin, Revlon Tea Tree Purifying Wash & Tone Gel and Garnier Light Fairness Face Wash. The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives:

 Buyer propensity to substitute  Relative price performance of substitute  Buyer switching costs  Perceived level of product differentiation  Number of substitute products available in the market  Ease of substitution. Information-based products are more prone to substitution, as online product can easily replace material product.  Substandard product  Quality depreciation

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THE BARGAINING POWER OF CUSTOMERS (BUYERS)

The bargaining power of customers is also described as the market of outputs: the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes.

 Buyer concentration to firm concentration ratio  Degree of dependency upon existing channels of distribution  Bargaining leverage, particularly in industries with high fixed costs  Buyer volume  Buyer switching costs relative to firm switching costs  Buyer information availability  Ability to backward integrate  Availability of existing substitute products  Buyer price sensitivity  Differential advantage (uniqueness) of industry products  RFM ( recency, frequency, monetary value) Analysis

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THE BARGAINING POWER OF SUPPLIERS

The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm, when there are few substitutes. Suppliers may refuse to work with the firm, or, e.g., charge excessively high prices for unique resources.

 Supplier switching costs relative to firm switching costs  Degree of differentiation of inputs  Impact of inputs on cost or differentiation  Presence of substitute inputs  Strength of distribution channel  Supplier concentration to firm concentration ratio  Supplier competition - ability to forward vertically integrate and cut out the buyer

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CONCLUSION

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CONCLUSION

It is concluded that the Revlon siness is a viable business opportunity for the following reasons. First and foremost, they offer exceptional products at reasonable prices. And all products come with a 100% money back guarantee. Next, they have a good reputation, a strong financial backing and exceptional leadership. Additionally, they offer a good compensation plan and great distributor support. Simply put, they have everything that‘s required in a good direct selling company. The Company is providing a wide assortment of distinct product brands at affordable prices:

• Assured product performance at value for money

• High purity ingredients and strict manufacturing standards

• High ethical standards and stringent environmental policies

Your key to success is to find a good sponsor, build a large retail customer base, and continuously sponsor new distributors into your Revlon business. If you can do that, you will make money and build a profitable Revlon business. Please know that Revlon is not a get rich quick business opportunity. It takes time and effort to succeed, just like any other viable business model.

On a side note, if you have a good experience with the company, why not share your story? On the bottom of this page, you can fill out the web form to share your Revlon experience with others. You can give a product testimonial or share your business experiences with others. Be sure to check it out!

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ANNEXURE

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Profit & Loss Account

P&L A/C 2007 2008 2009 2010 2011

Operating 11408 100000 9322 100037 90020 Exp Cost of 80570 24388 90990 17500 9800 goods sold NPBIT 105908 141536 117253 135217 121814

ROCE 152 112.37 85.58 113.68 90.37 Profit after 91978 124388 100312 117537 99820 tax EBIT 182297 216621 168331 184447 182185

EBT 105908 141536 117253 135217 121814

Miss.exp

Net sales 1109503.2 1317004.06 1316613.6 235074 179676

Net profit 91978 124388 100312 117537 99820

Sales 1109385 1319666 1316595 1513596 1493767

EPS

Gross profit 777826 909034 874,782 1002479 1014793

Total

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Balance sheet of REVLON as on 31ST March

LIABILITIES 2007 2008 2009 2010 2011

Fixed capital 69678 70367 71018 71225 71301

Equity share 60000 100000 100000 100000 100000 capital R & S 9000 25000 36878 18000 34000 Secured Loan 678 954 125 947 796 Unsecured Loan

Holder’s fund 69678 70367 71018 71225 71301 Equity shares 56428.22 56540 56995.45 57,057 57,040 outstanding

Equity par 1.63 2.20 1.76 2.06 1.75 share Pref. Dividend - - - - -

Pro. Fund 69678 70367 71018 71225 71301

Creditor 190000 200000 191000 200000 270000 Provision 4307 7401 1010 42851 2540

Li. Liabilities 194307 207401 192010 242851 272540

BANK O/D - - - - -

Net Worth 92821 128912 158121 225383 224036

ASSETS 2007 2008 2009 2010 2011

Fixed asset 140,628 138,711 135,934 1,85,259 2,03,030

Stock 186085 240982 221309 286350 264556 Debtors 100000 170000 150000 200000 190000 Bank 35000 25000 400000 12000 25000 Cash 20000 15000 10000 21000 50000 Inventory 90000 120000 140000 100000 180000 Loan 96460 84398 99911 182725 122312

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Net worth turnover

profit margin 8.29 9.43 7.62 8 6.68

Total assets 516048 580178 615240 755849 830320

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BIBLIOGRAPHY

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BIBLIOGRAPHY

Web site: - www.revlon.com

Reference:- Financial Accounting For Management - Ambrish Gupta

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