www.bwconfidential.com The inside view on the international beauty industry February 5-18, 2015 #106

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The buzz 2 Changing hands News roundup here’s been a strong M&A flavor to the beginning of 2015. TTwo weeks ago, Spanish group Puig announced that it would Netwatch 6 acquire L’Artisan Parfumeur and Penhaligon’s, two brands in the Social media monitor niche fragrance category—a segment that is increasingly catching the eye of large multinationals (at the end of last year, Estée Lauder Interview 7 Companies also bought two niche fragrance players: Editions de Nuxe Groupe international director Parfums Frédéric Malle and Le Labo). Meanwhile, in the make-up Julien Coutas sector, which is also proving to be fertile ground for M&A, US- based Markwins revealed that it would buy teen color brands Insight 9 Bonne Bell and Lip Smacker. Peru’s prestige market And some other big deals could be just around the corner. In travel retail, the Benetton family is looking to sell its stake in operator World Duty Free Group to investors. A string Store visit 12 of bidders are said to be lining up to buy the stake in the retailer, from Swiss group Dufry, Watsons, Taipei Lagardère (owner of LS Travel Retail and Aelia) and Korean group Lotte, to private-equity company KKR. Another big deal that could soon come off is the acquisition of Avon. It has emerged that private-equity player TPG Capital is in talks to buy the direct seller. This would see Avon delisted from the stock market, a move that would perhaps give the struggling company the space to sort out some of its problems. In light of the deteriorating economic environment in many markets, analysts may be cautious about the outlook for beauty in 2015. However, current M&A activity shows that the beauty sector is still attractive and that companies are ready to spend to ensure future growth. Meet the BW Confidential team at:

l China Connect, Paris, March 5-6, Oonagh Phillips l Cosmopack, Bologna, March 19-22 Editor in Chief l Cosmoprof Worldwide, Bologna, March 20-23 [email protected] l Duty Free Show of the Americas, Orlando, March 22-25 l Esxence, Milan, March 26-29 l in-cosmetics, Barcelona, April 14-16 l Luxe Pack Shanghai, April 15-16 l MakeUp in Seoul, April 15-16 News roundup At a glance...

n Speculation mounts over who will buy stake in World Duty Free

n Puig acquires Penhaligon’s and L’Artisan Parfumeur The buzz n Avon said to be in take-over talks with TPG Capital

n Markwins buys Bonne Bell and Lip Smacker brands

n Macy’s acquires Bluemercury

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

Strategy

Speculation is mounting over who will buy the stake in travel retailer World Duty Free, currently held by the Benetton family. It has emerged that travel-retail operator Dufry is considering a bid for the company and that French group Lagardère (owner of LS Travel Retail and Aelia) is also looking at purchasing the stake. Reports say that Lagardère is in talks with several investment funds to finance an operation of more than $1.2bn. These reports come after news that private-equity company KKR was interested in buying the stake in World Duty Free. Other interested parties are said to include Korean group Lotte.

Spain-based Puig has acquired fragrance brands Penhaligon’s and L’Artisan Parfumeur from Fox Paine & Company. Puig says that the deal firmly positions the company in the exclusive, high-end perfume market. Penhaligon’s has its own retail network and a global presence. L’Artisan Parfumeur operates boutiques in France and is also sold internationally. The current team, led by Lance Patterson, will continue to run both brands.

Avon is said to be in take-over talks with private-equity company TPG Capital. A buyout by TPG would see Avon go private, which would enable the struggling direct seller to turn the company around. TPG purchased Avon’s Japanese business in 2010.

US-based Markwins International is to acquire teen mass make-up brands Bonne Bell and Lip Smacker from Aspire Brands. This is Markwins’ third major acquisition in 12 years, following the purchase of AM Cosmetics in 2003 and Physicians Formula in 2012. The company also markets the wet n wild and Black Radiance brands.

French brand Atelier Cologne has raised €5m in a move to boost its retail sales from €20m today to €100m. Some €2.5m of the investment comes from management fund Extendam, while €1.5m comes from private investors. The remaining €1m will be finalized at the end of June this year. Atelier Cologne is sold in 300 doors in 25 countries.

At his New Year’s address to the press, L’Oréal ceo Jean Paul Agon said the group was beginning 2015 “with confidence, energy and ambition”, despite a volatile and uncertain economic context. Basing his comments on nine-month figures, Agon said that L’Oréal outperformed the market in 2014, albeit more moderately than in previous years. n n n

www.bwconfidential.com - February 5-18, 2015 #106 - Page 2 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL News roundup

n n n He added that the group’s performance showed sharp contrast by region and division and singled out the Luxe and Active Cosmetics businesses as having performed particularly well. In terms of markets, Agon highlighted that the group had seen good growth in Europe and that there had been a revival in southern Europe, which had suffered for four years.

The buzz Last year was also described as being important in terms of acquisitions. “Three acquisitions that we made are very strategic for L’Oréal: Magic Holdings, which is the number-one in masks in China and will reinforce our position in this market; NYX, which is a real digital brand from start to finish and we will learn a lot from this brand and make it global, and Niely Cosmeticos, which is a leader in haircare in Brazil,” noted Agon.

Brazil’s government has announced a major tax increase on the fuel, cosmetics and imported goods industries, a move that is set to make doing business in the already heavily taxed country a lot more difficult. For the cosmetics industry, the government will introduce what it calls a Tax on Industrialized Products (IPI). This tax is already applied to manufacturers, and with the new law it will also apply to distributors and retailers. The move is intended to raise R$20.6bn (US$7.7bn) and help consumers regain confidence in the economy. The tax increase is set to go into effect in May. Results

French group LVMH said that sales and net profit reached record levels in 2014. The group reported a 6% increase in sales to €30.6bn last year, while organic growth was 5%. Net profit rose 64% to €5.65bn. However, profit from recurring operations declined 5% to €5.72bn. The perfumes and cosmetics division saw a 5% increase in sales (+7% on an organic basis) to €3.92bn, while profits were flat at €415m. The selective retailing business saw sales rise 7% (+8% on an organic basis) to €9.53bn, while profit fell 3% to €882m. The group said Sephora gained market share. However, travel retailer DFS was impacted by currency and geopolitical events.

Sales at Japanese group Shiseido for the first nine months of fiscal 2015 rose by 3.8% to ¥555.8bn ($4.72bn). Operating income fell 43.6% to ¥18.8bn ($159.8m), attributed to increased marketing investment in international markets, higher bonus payments in Japan and a rise in costs due to problems at its US distribution center. In light of the sale of Decléor and Carita to L’Oréal, net income rose 66.1% to ¥27.8bn ($236.4m).

Fourth-quarter sales at French group Interparfums reached €75m in 2014, an increase of 30% over the same period in 2013. The Jimmy Choo, Lanvin and Montblanc brands reported the best performance in the quarter, which compensated for the slowdown at the Van Cleef & Arpels, Boucheron and Repetto brands. For 2014, Interparfums registered like-for-like sales growth of 19% to €297m. The group is forecasting an operating profit of 10.5% for the year.

Fragrance house Givaudan reported sales of CHF2.11bn ($2.29bn) in 2014 for its fragrance business, a like-for-like increase of 3.6% over the previous year. Sales in the fine fragrance division grew 2.5% like-for-like. Total group sales reached CHF4.40bn ($4.79bn), up 3.7% like-for-like on 2013. n n n

www.bwconfidential.com - February 5-18, 2015 #106 - Page 3 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL The buzz James Scullyas evpandcfo. Avon hasnamedformerJ.Crewexecutive merchandising, isalsoleaving Sephora. Maureen Watson,seniorvice president currently svpofSephorainsideJCPenney. will bereplacedbyArtemisPatrick, Arriagada isleavingthecompany.She Sephora USchiefmerchantMargarita named grouppresidentglobalbeauty. salon professionalPatriceLouvethasbeen president ofglobalcosmetics,prestigeand for globale-business,anewrole.Group business, willbecomegrouppresident Henretta, whocurrentlyleadsthebeauty healthcare, willaddbeautytohisremit.Deb group presidentforglobalgroomingand of itsbeautybusiness.Taylor,currently P&G hasnamedDavidTaylorashead People 14 doors in Brazil and on Sephora’s e-commerce website. 14 doorsinBrazilandonSephora’se-commercewebsite. Higienó LVMH-owned channel. Thestorefeaturesthreebrands:LaPrairie,IomaandTomFordBeauty. it saysisaconsumerinterestin“high-qualitycosmeticsandexceptionalservice”the Travel retailerNuanceinauguratedanewstoreinGenevaAirportthatcaterstowhat Pty Limited,thecompanywhichoperatesbrand’sfranchisebusinessinAustralia. L’Oréal-owned 80% ofDLF.DLFisDufry’soperatingentityfornewduty-freebusinessesinBrazil. CHF148m ($162.2m)fromitsminoritypartnerBrasifGroup.ThiswillmeanDufryhold Travel retailerDufryexerciseditsoptiontobuy20%ofLojasFrancas(DLF)for explained Macy’schairmanandceoTerryJ.Lundgreninastatement. plan toaddselectedBluemercuryproductsandboutiquesMacy’sstoresnationwide,” an enhancedomnichannelcomponent(…)acrossstores,onlineandmobile.Wealso is tooperateandsignificantlyexpandBluemercurystoresasastandalonebusinesswith Bluemercury operates60boutiques,mostofwhichincludeaspa,in18states.“Ourplan Department-store operatorMacy’sisbuyingbeautyretailerBluemercuryfor$210m. n News roundup Bluemercury willcontinuetobemanagedbyfoundersMarlaandBarryBeck. Retail polis shopping mall in São Paulo. Benefit is currently sold exclusively at Sephora’s polis shoppingmallinSãoPaulo.BenefitiscurrentlysoldexclusivelyatSephora’s is to inaugurate its first standalone store in Brazil in April at the Benefit istoinaugurateitsfirststandalonestoreinBrazilAprilatthe has completed the acquisition of the assets of Adidem The BodyShophascompletedtheacquisitionofassetsAdidem n News roundup

n n n Peter Lichtenthal, global brand president of Bumble & bumble haircare, has added make-up brand Bobbi Brown to his remit. He is now global brand president for both brands. Bobbi Brown was previously managed by Maureen Case.

Packaging supplier Aptar has named Elisabeth Salom L’Ancien to the role of vice The buzz president business development fragrance in the Global Market Development Beauty division. Salom L’Ancien was previously business development director for fragrance.

Data

Prestige beauty sales in France fell by 0.6% in value in 2014 to French prestige beauty sales* 2014 €bn €2.9bn, according to NPD Group. Sales in the first half were down Category Sales % change by 1.5%, while the second half was basically flat at +0.1%. Sales €bn 2014 vs 2013 in December were down last year compared to 2013. However, the Fragrance 1.9 +0.2 fragrance and make-up segments saw slight growth in the second half. Skincare 0.5 -3.8 Fragrance was the only category to post growth for the full year, at 0.2% to €1.9bn. Women’s fragrance sales grew 0.6%. La Vie est Belle Make-up 0.4 -0.1 (Lancôme) took the market’s top spot, pushing Dior’s J’adore to second Total prestige 2.9 -0.6 place. Men’s fragrance sales were down by 0.6%. Make-up sales, Source: NPD Group *Retail sales at €400m, fell by 0.1%. Smaller-ticket items, such as brow products, brushes and lip glosses performed well, says NPD. Skincare sales saw the biggest drop, falling 3.8% to €500m. For 2015, sales in France are forecast to remain flat. On a European basis, NPD reported that in 2014 for the crucial month of December, fragrance sales by value were down 1% in France and Italy (although this does not include online sales, which are usually high during the Christmas period). Fragrance sales rose 3% in the UK and in Spain (for Spain, this growth rate is also based on sales during

the first week of January 2015). BW Confidential 4 avenue de la Marne 92600 Asnières sur Seine, France Prestige nail color polish sales fell by 10% to $29.8m in the US in the 12 months [email protected] Tel: +33 (0)1 74 63 49 61 ending November 2014, according to NPD Group. NPD says this highlights a shift away Fax: +33 (0)1 53 01 09 79 from nails and towards eyes and lips. Eyebrow make-up saw sales growth of 34% for the www.bwconfidential.com ISSN: 2104-3302 period, while eye shadow rose 9%. Lip color was up 13%. Publisher: Nicolas Grob Editorial Director: Oonagh Phillips [email protected] Deputy Editor: Alissa Demorest [email protected] Launches Editorial Coordinator & Assistant: Katie Nichol [email protected] Spanish group Puig is launching a major new fragrance for its Nina Ricci Contributors: Tina Clark, Alex Wynne, Renata Ashcar, Mayu Saini, Raphaëlle Choël, brand this spring. Called L’Extase, the fragrance is described as a new Corinne Blanché chapter for the brand and plays on an erotic theme. It will be backed by Subscriptions 1 year: electronic publication (20 issues) + a racy ad campaign (print and TV) featuring French model and actress print magazine (4 issues) + daily news: €499 or US$699 Laetitia Casta. [email protected] Advertising The fragrance, composed by perfumer Francis Kurkdjian (Takasago), [email protected] centers on two main accords: rose and musk. It comes in a mauve colored BW Confidential is published by Noon Media 513 746 297 RCS Nanterre glass bottle in the shape of a clutch bag and is topped with a gold cap. Copyright © 2015. All rights reserved. Reproduction in whole or in part without L’Extase will launch in March and is priced at €49.90 (30ml EdP), €69.90 permission is strictly prohibited. (50ml EdP) and €89.89 (80ml EdP). n

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The views expressed in this section are those of bloggers and do not represent the opinions of BW Confidential Netwatch format exfoliant that is applied at bedtime and works on the skin throughout the night. format exfoliantthatisappliedatbedtimeandworksontheskinthroughoutnight. its packagingandhigh-qualityformulas.FavoritesincludeMoonlightCatalyst,aserum- networks. Sellingoutfasterthanitcanbestocked,sayreviews,thebrandispraisedfor Arizona-based organicoilandskincarerangeKyprishascreatedabuzzonsocial shift inhowwomenthinkaboutbeautyandaging,saybloggers. Pink andLadyGagaactressNicoleKidmansportinggraylocks.Thetrendhighlightsa The trendforgrayhairhasbeenahottopic,withcelebritiesincludingpopstarsRihanna, Burch’s solidfragrancependantnecklacehasalsobeentalkedaboutonblogs. include FrancisKurkdjian’sscentedleatherbraceletandKilian’sStudio54ring.Tory technologies aresaidtomakefragrancesinthisformatlongerlasting.Popularproducts Scented jewelryhasbeenmakingacomeback.Describedaschicgiftidea,improved minutes toleavethelipsglowingforup12hours. product isdescribedasapeel-offlipstain,whichremovesdeadskincellsinaround15 consumers applylipcolor,thankstowhatissaidbearevolutionaryapproach.The Korean brandBerrisom’sMyLipTintPackisexpectedtostartanewtrendinhow Social mediamonitor BW Confidential BW Distribution atallthe major international events In-depth coverage of the global beauty market Boost your international business with BW Confidential Monaco Worldwide Bologna Elements Showcase NewYork ...TFWA WorldExhibitionCannes Free ShowoftheAmericas Orlando New York reportsonwhat’sbeingsaidaboutbeautysocialnetworks • BeyondBeautyParis • CosmoprofAsiaHongKong > [email protected] • ChinaBeautyExpoShanghai • MondialSpaBeauté Paris • • BeautyWorldMiddleEastDubai LuxePackShanghai • IntercharmMoscow • PittiFragranzeFlorence beauty industry on theinternational The insideview • HBAGlobalExpoNewYork Duty • • InCosmeticsParisLuxePack TFWAAsiaPacific Singapore... • BWCONF_oct2013-def2.indd 1 Global market analysis Insight: Fragrance the CIVETs Data, digital& Travel retail business inthecountry The ins&outs ofdoing Market watch:Brazil Interview Michele Scannavini Coty ceo www.bwconfidential.com luxury trendsfor2014 Sector outlook& Packaging ExsenceMilanLuxePack The insideviewontheinternationalbeautyindustry • N°16 November-December 2013 PCDParisCosmoprof ISSN: 2104-3302 24/09/13 18:00 • BWCONF_fev2014.indd 1 MakeUpinParis Doing colorbetter Insight: Make-up to reachthem How theyshop&how Brazilian travelers Travel retail: Argentina &Colombia? What’s nextforMexico, Market watch: Interview Laurent Boillot Guerlain ceo www.bwconfidential.com & trends Decoration techniques Packaging The insideviewontheinternationalbeautyindustry N°17 March-April 2014 ISSN: 2104-3302 06/02/14 15:16 BWCONF_septembre2014.indd 1 What’s nextfortheindustry? Insight: fragrancecreation Travel retail:Europe The potential&challenges Market watch:Africa the continent’s topairports How theregionisfaring& the nextbigregionforbeauty Interview Luciano Bertinelli Ferragamo Parfums ceo www.bwconfidential.com are evolving How make-up packs Packaging of The insideviewontheinternationalbeautyindustry N°19 September-October 2014 ISSN: 2104-3302 22/07/14 12:04

07/08/14 11:34 Nuxe Groupe international director Julien Coutas

Global ambitions Interview Nuxe Groupe international director Julien Coutas tells BW Confidential about the French skincare brand’s development plans at home and abroad

What are your priorities for developing the brand? Naturally we are continuing to develop the BRIC markets, and one of the major projects this year is our relaunch in China. When you look at the BRICs more closely, you see that these markets are complex. Brazil is very expensive to do Although department business in when looking to medium- and long-term profitability, and Russia and “stores in China are India are also complicated. Investors swoon over these markets, but operationally it’s very difficult. challenging as they We are also developing our existing markets. There is still a lot of growth to are losing traffic every be had in Europe, which accounts for around 45% of Nuxe’s sales. For us, all European markets are performing well and it’s also the region where we have the year and operational largest number of subsidiaries. costs remain very Our priorities are first to reinforce our productivity in existing markets and then to seize opportunities in major new markets, but there aren’t many of those left as high, we feel that Nuxe is already present in 70 countries. After Europe, Asia is our priority, as well we have the right as the Middle East, where we’ve seen strong growth in the past few years. business model for How are you developing Nuxe in the Middle East, and in Asia? the channel Our biggest markets in the Middle East are Iran, Saudi Arabia and Egypt, which we opened three years ago, and the UAE. Iran is a complex market—although there is a lot of potential given the huge population and consumer interest in Nuxe Groupe international director beauty, importing is a challenge and it is an expensive market in which to operate. Julien Coutas The market is also very unpredictable—a brand can receive a huge order one day ” and then nothing for months. In Iran, we are sold in a few hundred pharmacies, which is the number-one channel for beauty there, as there are no department stores to speak of. Nuxe in brief In Asia, our biggest project right now is for China. Nuxe was present in the l Nuxe Groupe sales country a number of years ago, but we pulled out and we are re-launching this 2014: €182m year with reformulated products. We will be present in department stores, at l International sales: Sephora and in cosmetics shops, but not in pharmacies. Although department 40% of total group sales stores in China are challenging as they are losing traffic every year and operational l International sales costs remain very high, we feel that we have the right business model for the growth 2014: channel. In China we will initially focus on tier-one, tier-two and tier-three cities. +20% However, we don’t want to disperse the brand, and we will remain focused on the l N° of markets: key cities. n n n 73 including France

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What are your plans for the Americas? We are slowly building our presence in Latin America. Nuxe is currently distributed in Mexico, Colombia, Brazil and Uruguay. We are putting substantial resources into the Iran is a complex market, but the business has been slow to develop. Brazil, for example, has a quite a limited distribution landscape—there are basically no department stores and cosmetic market—although

Interview “ stores are said to be losing steam. There is Sephora, which we entered last year, but with there is a lot of such a limited number of stores it’s a challenge. Brazil is a hard nut to crack: just doing business there is difficult, so making money is even more of a challenge. In addition, potential given the skincare is a tough category and there is a lack of quality distribution for the segment. huge population and As for the US, we have a subsidiary there, but the business could be better. We didn’t succeed in breaking through in prestige and we don’t work with Sephora there. For a long consumer interest time we worked with independent pharmacists and we are currently in the test phase in beauty, importing with Target and are also in Duane Reade’s Look Boutique. In the beginning, we thought that the Look Boutique concept would do very well, but it seems to be struggling a bit in is a challenge and terms of traffic. Duane Reade planned to expand the concept to a lot more stores, but it is an expensive slowed down its development. We also looked at Ulta, but the stores don’t have much merchandising or many beauty advisors, and for a brand like ours which is not very well market. It is also very known it’s difficult for us to stand out in that context. We are also in contact with Blue unpredictable—a Mercury, but it doesn’t have very many points of sale. brand can receive a You are mainly sold through pharmacies in France. What is your distribution huge order one day strategy in international markets? Basically we go to the channel that is the most qualitative in each market. If that is a and then nothing pharmacy, then that is our main distribution channel. The beauty of a brand like Nuxe is for months that it can be at home in a number of different channels. Few pharmacy brands can make this claim. Although our business model is anchored in the pharmacy, in markets like the UAE we are both in major pharmacy chains and at Sephora. [As of the end of Nuxe Groupe international director 2014] we were sold in two Sephora stores in Dubai and are opening a third in the Mall Julien Coutas of the Emirates. ” What is your strategy with Sephora? We are in an exploratory phase and are testing the brand in several markets with Sephora. In markets like Asia and the Middle East, where pharmacies are chains and operators are much more open and business-oriented, it isn’t a conflict for us to also have a presence in Sephora. In France, however, there is a different mentality and we have to be careful not to upset our pharmacy retail partners. Sephora has approached us in France, but for the moment it’s a no-go for us for that reason.

Do you see the pharmacy sector in France opening up to the chain model? It will have to happen someday, but the French are very conservative so it’s bound to take time. Some pharmacies are grouping together to centralize costs, so there is a momentum there, but it will be a while before we see players like Boots come to the market. But things change; when parapharmacies first opened in France, pharmacies would boycott the brands sold there, but those days are over. For Nuxe, I believe the best approach is to open as many channels s Nuxe is relaunching its business in China as possible. n this year with a reformulated product range

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Peru’s prestige market Going strong The prestige market is seeing solid growth in Peru, driven by increased purchasing power and new retail developments

urrently one of the better performing economies in Latin America, Peru is seeing Can increased focus from cosmetics players. This is in part due to rising purchasing power and ongoing retail expansion from department-store players, which is slowly drawing consumers away from the dominant door-to-door channel. While growth in 2014 was slightly slower than in previous years, according to market observers, Peru has been less impacted by economic fluctuations than its neighbors like Brazil, Argentina, Venezuela and Chile. According to data from prestige beauty tracking firm Segmenta, Peru’s prestige beauty market grew 12.6% in value terms year-on-year and 13.7% in unit terms in 2014. Growth is predicted to Peru beauty & personal care sales* by category 2014 continue at similar rates in 2015. Category 2014 % change “[Peru] is the best-performing market in the region,” sales $m 2014/2013 comments Segmenta Latam retail manager Daniel Morimoto. He nevertheless observes that, “the market Fragrance 520.4 +8.7 was impacted [in 2014] by the economic situation, Haircare 438.2 +7.6 because these countries that lead with commodities Skincare 308.8 +8.4 are quite affected by the slowdown of the European, Color cosmetics 261.8 +6.5 American and Chinese economies.” Men’s grooming 184.9 +8.6 Changing consumer tastes Premium beauty 98.9 +9.4 Most Peruvian consumers are just beginning to access & personal care luxury cosmetics, particularly in categories outside Mass beauty & 2,010 +8.2 fragrance, thanks to rising disposable incomes, the personal care expansion of distribution and the associated access to Total beauty & 2,430 +8.1 credit now offered by department stores. BPI general personal care manager for the Americas Gérard Pichon-Varin n n n Source: Euromonitor International *Retail sales

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n n n comments: “More people are now able to access luxury goods. However, like most of the people who access this new world of luxury, it is more through what they see and what they read: the key names of the luxury business. Right now they

Insight go to the big names.” According to Segmenta, in fragrance, which still represents the lion’s share of the prestige market at 56% (and saw growth of 13.5% in 2014), Puig brands Carolina Herrera and Paco Rabanne, (especially in men’s), are particularly popular. Nevertheless, consumer habits are changing. “The local population now goes to perfumeries and department stores and is finding out about brands in general,” [Discounting] is says Pichon-Varin. “The demand is there, and it is up to us to put [consumers] in contact with our brands.” Morimoto adds: “Peruvian consumers are maturing in “still one of the big terms of global consumption, getting to know the brands and starting to want more issues, because many quality from products.” There is also a market for high-end brands, like Estée Lauder Companies-owned La Mer, which is performing well among wealthy consumers, consumers are quite he says. Meanwhile, younger consumers accessing the market for the first time are used to promotions. driving demand for make-up brands like MAC and OPI. Indeed, make-up is currently the category seeing the fastest growth, according to Morimoto, with sales up 18.6% There are still in 2014. Leading brand MAC is growing its presence through retail expansion, he consumers who have says, and saw 30% sales growth during the period. Skincare, meanwhile, is the worst performing category, with growth of 4.6%, just migrated from the according to Segmenta. Growth is being driven by products like BB creams and door-to-door channel clarifying items, he claims, rather than by anti-aging and moisturizing products. Morimoto says that the slowing growth is partly due to climatic phenomenon El and are totally focused Niño, during which demand for moisturizers generally drops. “Also, you still have on promotion. competition for skincare [from the] door-to-door channel,” he says. “Consumers prefer to have an international imported fragrance and still buy skincare from the [Changing this] will door-to-door market.” take some years Promotion driven Peru, notably in fragrance, has traditionally been a market driven by promotion, Segmenta Latam retail manager especially as brands and retailers fought to draw consumers away from the door- Daniel Morimoto to-door channel. Many brands are also available at discounts in less selective distribution, notably in border areas, say sources. But this is beginning to change ” as retailers, especially department stores, attract consumers with full-price products thanks to exclusive launches, in-store events and branding initiatives, as well as department-store credit cards. “[Discounting] is still one of the big issues, because many consumers are quite used to promotions,” says Morimoto, noting that business was less driven by n n n

Peru prestige market breakdown 2014

Make-up Peru prestige beauty sales 2014 22% Fragrance 56% Total sales $39.84m Skincare Value change +12.6% 22% Unit change +13.7% Source: Segmenta, sales in sell-out terms Source: Segmenta (not including Perfumerias Unidas)

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n n n promotions in 2014 than in previous years. “There are still consumers who have just migrated from the door-to-door channel and are totally focused on promotion. [Changing this] will take some years.” Insight

The development of department stores The Lima Centro district is estimated to represent around 70% of the prestige cosmetics business, but other areas, both in the capital and beyond, are attracting more attention from retailers. Some 78% of the population lives in urban areas, according to data from the World Bank. The Peruvian market remains dominated by independent perfumeries and a single chain, Perfumerias Unidas, with 16 stores. “Even though it only has 16 doors, Perfumerias Unidas has the best doors on the market by far, including the department stores,” says Pichon-Varin, who estimates there are around 120 prestige cosmetics doors in the country in all. “The quality of distribution is very good in Peru, where it has developed a lot in the past five to seven years,” he says, adding that one of the biggest challenges for coming The quality of years is improving the quality of points-of-sale country-wide. “Out of our 120 doors, probably half of them are A-doors.” “distribution is very The biggest change facing retail in recent years, however, is the incursion of Chilean good in Peru, where department-store chains. Falabella entered the market in 1995 via a merger with Saga, and now has 24 stores. Another Chilean department-store chain, Ripley, followed in it has developed a 2007, and now has 25 stores, including three new doors opened in 2014. Its most lot in the past five to recent, in Pucallpa’s new Real Plaza mall, is an example of how retailers are expanding outside of the Peruvian capital—Pucallpa is a port city in the Amazon. Cencosud- seven years owned Paris, meanwhile, entered the market in 2012 and plans to have 15 stores by the end of 2015. Local department-store player Oeschle, meanwhile, has undergone a relaunch under BPI general manager for the new ownership after closing down in the 1990s, and now operates around 20 stores, Americas Gérard Pichon-Varin although only two have a true selective cosmetics offer, according to sources. Department stores are estimated to represent between 15 and 20% of the prestige ” beauty market in Peru, a share that is growing and will continue to do so as they expand in the regions. “They are trying to impose growth through openings in the interior of the country,” says Morimoto. “[Perfumeries] are losing importance in the market because with the department stores and their [credit] cards, consumers get really attached to these retailers, and start buying only in these types of channels,” adds Peru leading prestige brands 2014 Morimoto, who claims that Skincare Make-up Women’s Men’s certain brands are leaving fragrance fragrance perfumeries and focusing Lancôme MAC Carolina Herrera Hugo Boss on department stores, partly because of this. Clinique Lancôme Givenchy Paco Rabanne As Peru’s prestige cosmetics Estée Lauder OPI Shakira Carolina Herrera market begins to move Biotherm Christian Dior Calvin Klein Ralph Lauren towards maturity and retailers Clarins Clinique Christian Dior Tommy Hilfiger expand there is plenty of Source: Segmenta room for growth ahead. n

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Youth appeal Watsons looks to Gen Y with a new concept store in Taipei, Taiwan

ong Kong-based retailer AS Watson has opened a new concept store Hcatering to Gen Y under the Watsons name in Taiwan in a bid to boost its brand awareness among this consumer group. In November 2014, the group refitted a Watsons store located in the Ximending district, Taipei, a trendy area dotted with clubs and fashion stores popular with the city’s youth. The two-level 3,078ft2 (286m2) store is billed as an emporium of health and beauty products, rather than just a personal-care outlet. It features a wide range of derma skincare and cosmetics brands from Korea and Europe. The boutique is also home to non-traditional beauty product segments, such as an interactive counter for colored contact lenses, which are currently in fashion in Taiwan. The store’s design also keeps the younger consumer in mind. It was inspired by a New York loft and features graffiti and neon category signs. There are also cube-like merchandising units that can be periodically rearranged to create new looks. The stairs change color, which the company says creates a fun atmosphere at the store. Watsons Gen Y In terms of special features, the Gen Y store houses a charging area, which l Opened: is equipped with plug sockets for charging phones and a tablet that links November 2014 to the Watsons e-commerce site so that consumers can search for products l Location: Taipei, Taiwan not available in the store. There are also TV broadcasts featuring the latest l Size: 3,078ft2 (286m2) promotions or product advertisements. Other services include a nail bar and a l Special features: candy bar. Charging area, nail bar, Watsons says it is satisfied with the first results of the store and plans to roll candy bar, interactive counter out the concept to other cities in the near future. n for colored contact lenses

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s The store is home to cube-like merchandising units that can be periodically re-arranged to create new looks

s The store’s design was inspired by a New York loft and features graffiti, neon signs and stairs that change color

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