www.bwconfidential.com The inside view on the international beauty industry February 19 - March 4, 2015 #107

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The buzz 2 Big spenders News roundup espite the gloomy economic climate, consumers are Netwatch 6 Dstill willing to spend, and spend a lot on beauty. High- priced items, whether in fragrance, skincare or make-up Social media monitor (especially when compared to mass), continue to do well. French group L’Oréal reported that its Luxe division (along Interview 7 with its Active Cosmetics arm) was its star performer in 2014, Yves Rocher md international markets with sales up by 5.7%. At its meeting for financial analysts Jean-Luc Foucher-Créteau last week, L’Oréal chairman and ceo Jean-Paul Agon stressed that price is not an issue when it comes to beauty. “Despite Insight 9 what people say about the crisis, consumers are not trading Turkey down, even in Western Europe there is no trading down. There is a strong battle among retailers, but consumers are not choosing cheaper products. Private-label sales have Show review 13 even gone down, which is proof that there is no devaluing of the category.” PCD, Paris This is good news for the industry. But while value sales may be rising, unit sales in many markets continue to decline. The market may be blessed with big spenders, but Store visit 15 there are still an awful lot of consumers who have either shifted their spend from beauty Lush, Brazil to other items or who just don’t find the products or stores appealing enough.

Oonagh Phillips Editor in Chief [email protected] Meet the BW Confidential team at:

l China Connect, Paris, March 5-6, l Cosmopack, Bologna, March 19-22 l Cosmoprof Worldwide, Bologna, March 20-23 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 News headlines daily on www.bwconfidential.com @BWCbeautynews l MakeUp in Seoul, April 15-16 News roundup At a glance...

n L’Oréal sales up 1.8% in 2014

n Gaultier license to join Puig in January 2016 The buzz n Jonathan Zrihen named Clarins Group coo

n Prestige beauty sales in the US rose 3% in 2014

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

Results

L’Oréal reported a sales increase of 1.8% in 2014 to €22.53bn. Operating profit reached €3.89bn, a rise of 3.5% against 2013. By division, L’Oréal Luxe saw the strongest growth, at +5.7%, and sales of €6.20bn. The Active Cosmetics division posted a sales increase of 5.3% to €1.66bn, and the Professional Products division saw sales grow by 2% to €3.03bn. The Consumer Products division, however, saw sales fall by 1% to €10.77bn. At the group’s annual results conference, ceo Jean-Paul Agon predicted growth of 3.5% for the market in 2015, on a par with 2014. Below are highlights from the conference. Consumer Products: Following a disappointing year for the division, L’Oréal says that the acceleration of the US economy and lower gas prices will provide a boost to the market in 2015. L’Oréal will develop newly acquired make-up brand NYX in its domestic market and begin to roll it out mid-year in Western Europe, South Asia and Latin America. L’Oréal Luxe: Last year, the Luxe division’s sales bypassed the €6bn mark for the first time, with New Markets making up 42% of sales. Make-up sales grew by 12.2%. Sales for the Yves Saint Laurent brand were up by 11.8%, while Armani saw a 10% increase. Europe: Agon said that despite a drop in mass sales over the summer, the fourth quarter improved, with an especially good end of year for the luxury business. “Some of our competitors say that Western Europe is no longer a priority, but we believe we have market share to gain in all of our divisions in the region,” Agon stated. China: L’Oréal saw sales increase by 3.5% in the market last year. “We hope to get back to stronger growth in China. […] The market is seeing growth of around 6-7%, so that’s a slowdown, but the base of comparison is not the same as in previous years,” said Agon, adding that China is now the number-two beauty market worldwide. The Luxe division outpaced market growth and the group said brands like YSL and Armani are “just beginning in China, and are set to be great sources of growth”. In mass, L’Oréal is moving distribution from department stores to cosmetics stores and e-commerce. Agon called China the group’s “e-commerce laboratory”. “That’s where e-tailing is the most advanced and consumers are the most agile,” he explained. The Body Shop: Given the brand’s poor performance, the product range will undergo a “major renewal” and its retail and communication strategies will be revamped this year. Digital: Last year the group did €800m in e-commerce sales. In the Luxe division, 6% of sales were in the digital channel in 2014. Travel retail: L’Oréal’s sales in the channel exceeded €1bn in 2014. Advertising & promotional costs fell last year as some newer brands rely less on ads and promotion. Some 16% of the group’s media spend was on digital last year. n n n

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n n n Direct seller Avon reported sales of $8.9bn for 2014, a decrease of 11% over 2013. The number of active sales representatives also decreased by 5%. Sales for the beauty segment fell by 12% to $6.27bn.

German group Beiersdorf’s net profit was up 8.2% in 2014 to €581m. In the Consumer The buzz division, EBIT excluding special factors rose 6.2% to €678m, while EBIT margin was 13% compared with 12.5% in 2013. Sales in the division were up 2.1% (+4.8% on an organic basis) to €5.21bn. The Nivea brand saw a sales increase of 6.2%, La Prairie’s sales were up 5.1%, while Eucerin saw growth of 6%.

French group Hermès reported sales of €4.12bn in 2014, an increase of 11.1% over 2013 at constant exchange rates. In the fourth quarter, sales were up 9.6% to €1.22bn. Fragrance sales rose 10% in 2014 to €230.8m, while sales for the fourth quarter were up 13.8% to €59.1m. Hermès expects operating margin to be around 31% for 2014.

Japan-based Kao Group saw net sales grow by 6.6% to $11.73bn in 2014. Operating income rose by 6.9% to $1.11bn. Net sales for the Beauty Care division reached $4.93bn, an increase of 3.4% over the previous year. Within the division, cosmetics sales were up by 1.4%; the business was flat in Japan, but sales increased in international markets.

Net sales at Estée Lauder Companies (ELC) were up by 1% for the second fiscal quarter of 2015 to $3.04bn. By category, make-up reported the strongest increase, at +4%, with sales of $1.18bn. Growth mainly came from the group’s make-up artist brands, which partially offset slower sales from its heritage brands. Skincare sales rose by just 1% to $1.27bn. Fragrance sales were down by 8% to $439.7m due to poor results from the Estée Lauder brand and certain designer fragrances. From a regional perspective, sales in Asia Pacific decreased by 2% to $631.6m for the period. The Americas region saw sales up by 1% to $1.20bn for the second quarter. In BW Confidential Europe, the Middle East and Africa, sales grew by 3% to $1.21bn. 4 avenue de la Marne For the first six months of the fiscal year, net sales reached $5.68bn. ELC is forecasting 92600 Asnières sur Seine, France [email protected] net sales growth of 5-6% for fiscal 2015. Tel: +33 (0)1 74 63 49 61 Fax: +33 (0)1 53 01 09 79 www.bwconfidential.com ISSN: 2104-3302 For the second quarter of fiscal 2015, adjusted net income at Coty rose 47% to Publisher: Nicolas Grob $163.2m, driven by cost cutting. Net sales however, fell 5% (flat on a like-for-like basis) to Editorial Director: Oonagh Phillips [email protected] $1.26bn. Color cosmetics sales rose 2% (+7% like-for-like), while fragrance sales saw a Deputy Editor: Alissa Demorest [email protected] 5% decline (+1% like-for-like). Skin and bodycare sales were down by 13% (-7% like-for- Editorial Coordinator & Assistant: like). By region, sales in Asia Pacific were down 4% (flat like-for-like), EMEA saw a 6% Katie Nichol [email protected] fall in sales (flat like-for-like), while the Americas showed a 3% decline (-1% like-for-like). Contributors: Tina Clark, Alex Wynne, Renata Ashcar, Mayu Saini, Raphaëlle Choël, Corinne Blanché Subscriptions Beauty group Elizabeth Arden saw net sales tumble to $333.6m for its second fiscal 1 year: electronic publication (20 issues) + quarter 2015, a decrease of 20.2% compared to the same period in fiscal 2014. The print magazine (4 issues) + daily news: €499 or US$699 company said the continued decline in the celebrity fragrance business and door closures [email protected] Advertising to its distribution network in China impacted sales. By region, sales in North America were [email protected] down 15.7% to $227m, while revenue in international markets decreased by 19.9% to BW Confidential is published by Noon Media 513 746 297 RCS Nanterre $118.9m. Sales of the Elizabeth Arden brand during the period dropped by more than Copyright © 2015. All rights reserved. Reproduction in whole or in part without 24% to $107m, while fragrance sales fell by 17.9% to $226m. permission is strictly prohibited. For the first six months of fiscal 2015 sales came to $604m, a decline of 20.7%.n n n

www.bwconfidential.com - February 19 - March 4, 2015 #107 - Page 3 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL The buzz Retail cheek. Theresultcanbesharedonsocialnetworks. upload animageoftheirValentine(orthemselves),andwatchasakissisplacedon Day e-card.UsingGoogletechnology,consumersselectaRevlonUltraHDlipstickcolor, US-based will launchthisspring. de France.Cofinluxewillcreate,produceanddistributethefragrances.Aneautoilette French companyCofinluxehassignedaglobalfragrancelicensewithcyclingeventTour production ofGuerlainskincareandmake-up,75%whichisforexport. commitment toproductionandresearchinFrance.Thefacilityisresponsiblefortheglobal the facilityemploys350people.ItissaidtodemonstrateparentcompanyLVMH’s France. CalledLaRucheandlocatedinFrance’sindustrycluster,CosmeticValley, French brandGuerlainhasopenedanewmake-upandskincarefacilityinChartres, license isforecasttobecompletedinJanuary2016. the brand’sfragrancesalesmeettargetsforfullyear2015.ThetransferofGaultier property rightsof€69mand€1minshares.Inaddition,abonus€20mwillbepaidif Gaultier brand’sfragrancebusiness.Thetransferpriceof€70mincludesintellectual Shiseido hasbegunnegotiationswithbeautygroupPuigforthesaleofJeanPaul n executive director OlivierCourtin-Clarins. Clarins GroupceoPhilipShearer and French beautygroup.Hewillreport to Jonathan Zrihenhasbeennamed cooofthe Clarins People email, aspecificapporcatalog. website—more thanthosewhofavored to obtaintheinformationthroughshop’s airport shops,45%saidtheywouldprefer would liketoreceiveinformationabout shopping atairports.Whenaskedhowthey travelers goonlinetofindinformationabout reports thatlessthan10%ofEuropean research companym1nd-set.Thesurvey about airportshopping,saysasurveyby to domoreindigitalinformtravelers Airports, News roundup Strategy president and ceo Group Americaspresidentandceo and brands need travel retailersandbrandsneed teamed up with Google to launch an animated, shareable Valentine’s Revlon teamedupwithGoogletolaunchananimated,shareableValentine’s n News roundup

n n n Estée Lauder Companies president travel retail worldwide Olivier Bottrie was appointed to the French National Order of Merit for his work in helping the people of Haiti following the earthquake there in 2010. Bottrie is co-founder of the non-profit organization Hand in Hand for Haiti and initiated the establishment of non-profit school

Lycée Jean-Baptiste Point du Sable, which opened in October 2011. Credit : Frédéric Dupoux The buzz US-based Revlon has appointed Benjamin Karsch as evp and chief marketing officer. Karsch was most recently chief marketing officer at health insurance company Cigna.

Glassmaker SGD has named Thomas Riou managing director Europe and North America for the company’s fragrance and cosmetics division. Riou was previously managing director North America at SGD.

Data

Chinese shoppers spent 18% more on tax-free shopping in 2014 Top-10 globe shopper nations 2014 compared with last year, according to travel spending experts Global Rank Country % growth Blue. Chinese shoppers now account for almost one third of all tax- 2014/2013 free shopping spend, followed by Russians (14%), Americans (4%), 1 China +18 Indonesians (3%) and the Japanese (2%). Chinese spend is on average 2 Russia -17 €736 per transaction. Global Blue noted that due to the plunge in the 3 US +8 Russian ruble, Russian travelers’ spend fell by almost 17% compared to 2013. Despite this, Russia remains more than three times as valuable as 4 Indonesia -10 the next most valuable nation of shoppers, the US. It also highlighted that 5 Japan -12 shoppers from Taiwan spent 29% more last year than in 2013. 6 Taiwan +29 7 Hong Kong +25 Prestige beauty sales in the US were up by 3% in 2014 to $11.2bn, 8 Thailand -10 according to US-based NPD Group. By category, make-up sales reported the strongest growth at +6%, with lip color products driving growth. 9 Saudi Arabia +15 Fragrance sales were up by 2% in 2014, while skincare saw an increase of 10 Kuwait +18 just 1% in the period. The price of prestige beauty products saw average Source: Global Blue growth of between 2 and 4% for the year.

Local independent perfumeries in France saw sales drop 5% in 2014, following a decline of 9.8% in 2013, according to the French Federation of Selective Perfumeries (FFPS). However, despite this, these stores managed to maintain their market share of 14.5%. The country’s perfumery chains, which account for 76.6% of the market, reported a sales decline of 0.1%. Department stores in France, which represent 8.7% of the beauty market, reported growth of 2.6% in 2014.

Launches

Fragrance brand Jean Patou (Designer Parfums) is to launch a coffret of four miniatures for its key fragrances: Joy, Joy Forever, 1000 and Sublime. Each fragrance comes in a 5ml bottle and the coffret will retail for €69. It will launch in January in France and in May internationally. 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 on thelips,whichtheysaylooksjustlikeagloss. nourishing texturesandnovelpackaging,somereviewersaredisappointedintheresult Clarins, havegenerallybeenwellreceived.Althoughpraisedfortheiroriginalformulas, Tinted lipoils,recentlylaunchedbybrandsincludingYvesSaintLaurentBeautéand described ashaving“sweetsweat”and“freshtowel”notes. Consumers arealsocuriousaboutwhatthefragrancewillsmelllike,asithasbeen due toitsquirkydesign—thelimited-editionscentcomesinasneaker-shapedbottle. Moschino designerJeremyScott’sdebutfragranceforAdidashasattractedattention containing beevenomasanaturalalternativetoBotoxtreatments. using beevenomtreatments,bloggersareparticularlykeenontheideaofproducts collagen andelastin,hasseenalotinterestontheblogs.Followingreportsofcelebrities Beetox, abrandwhichissaidtousebee’svenomstimulatetheskin’sproductionof Lip Smacker,whichtheyfearwillchangeordisappearfromthemarketaltogether. topic ofdiscussion.BloggershaveexpressednostalgiaforproductslikeDrPepper-flavored News ofUSgroupMarkwins’acquisitionBonneBellandLipSmackerhasbeena Social mediamonitor BW Confidential BW reportsonwhat’sbeingsaidaboutbeautysocialnetworks Yves Rocher md international markets Jean-Luc Foucher-Créteau Interview Standing alone Yves Rocher managing director international markets Jean-Luc Foucher-Créteau talks to BW Confidential about the French brand’s blueprint for developing its travel-retail business

Yves Rocher entered travel retail in 2012. What are the next steps for the brand in the channel? Yves Rocher is currently present in about 12 travel-retail doors with gondolas in We’re surprised at airport locations including Singapore, St Petersburg, Paris, and a few stores in Eastern Europe. However, being in a multi-brand environment isn’t our specialty, “the enthusiasm we’re so we are looking to develop a network of standalone stores within airports. seeing from airport These will be in addition to our 4,000 freestanding doors in domestic markets worldwide. Going into travel retail with standalone stores isn’t the same level operators to develop of investment as in a multi-brand store, but our aim is to mirror the brand’s the [standalone store] presence in domestic markets. What’s important to note at this stage is airport operators’ interest in our model. This is partially brand, as up until now, the majority of standalone stores in travel retail a result of the strong were in the luxury-goods segment. We are surprised at the enthusiasm we have been seeing from airport operators to develop the model. This is increase in floor space partially a result of the strong increase in floor space that is happening in in airport travel retail airport travel retail. We’re seeing some very open-minded travel-retail operators who are looking to differentiate their product offer, and they recognize that Yves Rocher is a brand that has the ability to appeal to consumers with more Yves Rocher md international limited means. markets Jean-Luc Foucher-Créteau Why is Yves Rocher choosing to implement the standalone store ” model in travel retail? Yves Rocher We are less experienced when it comes to retailing within a multi-brand store, l Worldwide sales 2014: but operators see us as capable of offering a strong branded environment. We More than €1.5bn know the retail business, how to develop relationships with shoppers and we l N° of doors: 4,000 recognize the importance of having qualified beauty advisors, especially when it l N° of travel- comes to the facial skincare segment. retail doors: 12 l N° of travel-retail Where are your first standalone stores for travel retail? standalones: 1 in Budapest, Currently, we have one store in Budapest, Hungary and a second location is set a second to open this year to open in Frankfurt this year, and this will be the real test. These are n n n in Frankfurt

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n n n purely retail stores and don’t offer skincare treatments. In the long term, we are aiming for travel retail to make up around 10% of our sales, while today it accounts for less than 1%, as we are just at I don’t think Interview the beginning of our journey in the channel. At this stage, our airport freestanding stores start-up operation cannot be compared with our four other retail channels: “ standalone shops, with 4,000 doors worldwide, e-commerce, mail order in travel retail will be and direct sales. extremely profitable, It’s an expensive proposition to open free-standing airport stores. but they will be How will you create a profitable standalone store business in the channel? profitable. It’s a I don’t think it will be extremely profitable, but it will be profitable nonetheless. win-win situation It’s also a win-win situation for both our brand, given the huge flow of passengers we will come into contact with, and the airport operators. for both our brand, Today’s airport environment is a bit cold, and we can provide a sort of nature given the huge break through our botanically inspired product range, and offer consumers a retail experience that will perhaps include an enriched offer of beauty services in flow of passengers the future. we will come into

What regions will be your initial focus for travel retail? contact with, and Our priority for development in travel retail will depend on passenger flows airport operators in the channel, but for the moment we are focusing on Moscow and other important Russian cities, as well as airport locations in Istanbul, Kiev, Bangkok and Kuala Lumpur. Our strategy is to open standalone stores whenever possible. Yves Rocher md international The second priority region will be Western Europe, followed by certain markets markets Jean-Luc Foucher-Créteau in Latin America. n ”

s Yves Rocher opened its first travel-retail standalone store in Budapest, Hungary. A second location will open in Frankfurt, Germany this year

www.bwconfidential.com - February 19 - March 4, 2015 #107 - Page 8 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Insight Turkey Room for growth Turkey’s beauty market may be growing, but what is the real potential of prestige in the country?

urkey’s geographic situation between Europe, Asia and the Middle East makes it Tunique, and this singularity extends to the country’s prestige beauty market, which despite its resounding appeal, also has its share of challenges. With its population of 81 million, an estimated 60% of which is under 30, there is no denying the market’s potential. But while certain industry players are already seeing strong results, others maintain that Turkey’s potential is overestimated, its distribution is immature and that diverse business challenges prevent the market from bearing fruit. “Everybody thinks the Turkish market in our industry is huge, but in reality it is tiny. It’s a huge market for mass, but for luxury, it’s small,” says Clarins Group Middle East president Osama Rinno. “It’s going to take some time for the Turkish market to develop.” Everybody thinks the A growing share for prestige However, the country has come a long way since its economic crisis of 2001, with per “Turkish market in our capita GDP increasing from $2,000 to $12,000, according to Estée Lauder Companies industry is huge, but (ELC) Turkey general manager Ahmet Ramiz, allowing for higher levels of disposable income. Education levels have increased significantly, and more women have joined the in reality it is tiny. It’s workforce—all factors that help drive the emergence of the prestige beauty category. a huge market for Growth in the selective sector is outpacing that of mass, according to Euromonitor International, and most prestige players have reported double-digit increases for 2014. mass, but for luxury, “A decade ago, selective cosmetics used to be only 4% of the total cosmetics business it’s small (prestige and mass), and today we estimate that of the total cosmetics market, [that proportion] has doubled to almost 8%,” ELC’s Ramiz explains. ELC claims to be the leader in prestige beauty, with a market share of between 25 and Clarins Group Middle East 26% thanks to standalone stores (MAC, Bobbi Brown, Clinique, Aveda) and a presence president Osama Rinno in hair salons (Aveda) and pharmacies (Darphin) as well as in department stores and perfumeries. The company has reported double-digit local-currency gains in Turkey in its ” three most recently published quarters. Yet, other players say that there is still a long way to go. In fragrance, for example, which outside Asia is generally the largest selective category, prestige products only represented 13% of the market in 2012, according to Clarins’ Rinno, citing Euromonitor data. This compares to 72% in the UAE. “It gives you a good idea of consumer behavior,” he says. “We should not forget that the heritage of knowledge about cosmetics is not very old,” says Ramiz. “A mother rarely educated her daughter on beauty rituals. We can see this at the counter or even in our freestanding stores, as daughters bring their mothers to discover cosmetic brands—this is different from other western countries.” Turkey’s location between Europe, the Middle East and Asia has a distinct n n n

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n n n effect on consumer tastes, according to observers. Consumers are focused on skincare as in Asia, and the cleansing category is culturally very important. Yet, when it comes to make-up, tastes are more in tune with European trends, Insight and in fragrance, Middle Eastern tastes are prevalent, according to ELC’s Ramiz. As a result, he says, consumers are willing to invest in premium skincare brands. “Estée A decade ago, Lauder and Clinique are among the top-sellers in Turkey, with strong brand awareness selective cosmetics and a strong skincare positioning in the market. Our niche brand La Mer is performing “ well within a more selective distribution,” says Ramiz. Sisley regional director for the used to be only 4% Middle East and Africa Sébastien Gautier concurs: “In skincare there is a real education and knowledge about products. There is purchasing power and we have an established of the total cosmetics customer base that is very loyal, especially in Istanbul.” business, and In make-up, however, the situation is more complex, with consumers switching between mass and prestige brands indiscriminately. According to observers, there is little brand today we estimate loyalty. “[The consumer] is very willing to try different make-up brands and experiment that of the total with color. In her handbag you can find different brands based on fashion trends,” explains Ramiz. cosmetics market, [that proportion] has Moving East The selective market is still largely concentrated in the main cities of Istanbul and Ankara, doubled to almost 8% and to a lesser extent Izmir, Bursa and Adana, which together account for around 60% of the country’s population. The three main cities account for an average of 80% of business for most selective players, and moving beyond them remains a challenge given Estée Lauder Companies Turkey the limitations of distribution, as well as lower purchasing power and brand awareness. general manager Ahmet Ramiz Despite an ongoing boom in mall development, most retail real estate is still being built in ” the country’s biggest cities. The lack of distribution and wholesale infrastructure around the country and the fact that local businesses still operate under traditional models that lack transparency adds to certain players’ reticence when it comes to developing beyond the major cities. This is despite the increasing numbers of wealthy consumers in the country’s central and eastern regions to whom prestige products appeal. Pharmacies are one potential avenue for growth as a result, especially in Turkey beauty market sales* by category 2014 skincare, where Ramiz reports strong business and little prestige Category 2014 sales % change competition for ELC’s Darphin brand. $m 2014/2013 E-commerce is also seen as a game-changer in this context, Haircare 949.6 +13.2 and its share in beauty sales is expected to grow exponentially in coming years. “In the next five years, e-commerce will be Skincare 646.1 +10.4 our top Turkish door for MAC,” says Ramiz. ELC operates Fragrance 479.2 +4.3 e-commerce for MAC, Clinique and Estée Lauder in Turkey, and Color cosmetics 472.5 +13.3 will add sites for Bobbi Brown and Aveda in coming months, Men’s grooming 339.8 +9.3 he says. Mass beauty & 3,400.0 +10.8 Perfumery push personal care Nevertheless, local perfumery players Sevil (which accounts for Premium beauty 301.5 +13.3 around 40% of the prestige market with 51 high-end doors) & personal care and Tekin Açar (with 78 doors) are expanding across the Total beauty & 4,540.0 +10.5 country. Certain players believe that local chains are the key to personal care growth in the future, providing they are able to adapt n n n Source: Euromonitor International *Retail sales price

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n n n their concepts to market changes. “Perfumeries are very important for us,” says Ramiz. “Perfumery operators are entrepreneurs, [and] if they are willing to invest in socio-economic changes, they will be Insight among the winners.” He reveals that the development of perfumeries in Turkey, including Sephora and Douglas as well as the local players, has meant that department stores’ market share of the prestige category has dropped in recent years from between 60 and 65% to just 40%. Despite this, department-store players remain important, with national chain Boyner/ YKM reportedly gaining market share since its 2012 merger. Beymen, meanwhile, after removing its cosmetics departments some years ago, has brought back beauty in its most recent store opened in 2013, according to sources, with a very high-end environment. At the top end of the market, while brands praise the quality of stores—Harvey Nichols has doors in Istanbul and Ankara, and Galeries Lafayette’s Istanbul store is set to open in 2016—some report that footfall is low in beauty departments despite strong business in fashion. The biggest change the market has faced, meanwhile, is the incursion of Sephora. With its 23 doors, the LVMH-owned retailer is seeing success in attracting younger consumers, and has refined its model to cater to the market’s demand for service by employing brand-specific beauty advisors. “It is working very well. Sephora is in interesting malls, and is really gaining importance in this market,” says Sisley’s Gautier, who believes that the retailer’s young positioning means it does not compete with market leader Sevil, which caters to a more traditional demographic with luxurious stores. “Each has its niche,” he says. Despite recent excitement in the market over rumors that retailer Tekin Açar was for sale and may be acquired by an international player, sources say that plans appear to have been set aside in favor of maintaining its independence. The retailer is still criticized by some for not offering a more high-end environment and services. In general, says Gautier, “the presence of beauty advisors makes all the difference, and you find that at Sevil, at Sephora, and in the department stores.” His opinion is shared by ArtDeco vice president of sales Stefan Scheucher: “A beauty advisor is necessary in every store and for each brand, which means high costs.”

Diverse challenges “This market needs proper retailers, those who are very aggressive and are developing the market,” s ELC claims to be the leader in prestige beauty, thanks in part to says Clarins’ Rinno. “The problem with the Turkish standalone stores with MAC, Bobbi Brown, Clinique and Aveda, and its market is that it’s very discount-oriented, and n n n presence in pharmacies with Darphin

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Meet The Leaders of the Insight ' s Largest Digital Market move towardsmaturity. for thefuture,therearestillplentyofchallengestoovercomeasmarketcontinues hamper development. in thefuture.Interest-rateincreasesandstatemeasurestocontrolprivatedebtcouldalso which couldrepresentachallengeinattractingnewconsumerstotheprestigesegment have hadtoraisetheirpriceslocallyasoflateduethedevaluationTurkishlira, enter aresometimestough.” are alreadyahighnumberofbrands,sospaceislimited.Theconditionsforretailersto not veryeasyforbrandstoentertheTurkishmarket,”saysArtDeco’sScheucher.“There the onlyones.Itisalsoanexpensivemarkettoenterwithhighoverheads.“Ingeneralit rampant graymarket,remainchallengesforprestigebrandsinTurkey,buttheyarenot than discounts. past, brandsneedtousetheirresourcesforbrandbuildingandeducation,rather n a commodity.” Turkey While prestige beauty players remain focused on the opportunities that Turkey offers While prestigebeautyplayersremainfocusedontheopportunitiesthatTurkeyoffers Currency fluctuationsareanotherongoingchallengefacinginternationalbrands,which Discounting, alackofbrandbuildingandopaquebusinesspractices,aswell He claims that while discounting is already becoming less of a focus than in the He claimsthatwhilediscountingisalreadybecominglessofafocusthaninthe this only kills brands and kills the luxury aspect of our industry, turning it into this onlykillsbrandsandtheluxuryaspectofourindustry,turningitinto n www.chinaconnect.fr

@ChinaConnectEU 2015 PARIS R PCD Bigger and better

BW Confidential reports on what was seen and heard at packaging show PCD, which took place in Paris from February 4-5

Show review he packaging industry was out in force at this year’s PCD trade show. The packaging PCD Tshow welcomed 5,570 visitors, up 44% from last year, making the 2015 edition the Took place: February 4-5 organizers’ most successful yet. The show was also much bigger than in previous years, Exhibitors: 300, +30% vs 2014 with 300 exhibitors attending, an increase of 30% on 2014. Visitors: 5,570, +44% vs 2014 The level of activity at the show could be viewed as a good sign for the industry. However, opinion was divided about what the year 2015 will bring. Some packagers at the show said that this year will be better than 2014, as brands are going ahead with projects that were canceled last year. Others, however, declared that there is little visibility when it comes to business a few months down the line and there is still much uncertainty, especially given the economic situation in Russia and the slowdown in China. One packaging executive summed up saying: “Even if there is growth on a global level, that growth is sure to be more moderate than what we have seen in previous years.” The 2016 edition of PCD will take place from February 3-4.

Seen in show SGD used PCD to unveil its new version of recycled glass Verre Infini, which first launched in 2008. Called Verre Infini Neo (pictured), the new version’s main improvement is in the transparency of the glass, which better responds to brands’ demands than the green tint of the first Verre Infini product, says the company. Verre Infini Neo is made from 90% recycled materials, and can be decorated using a wide range of techniques. SGD says a major brand has already signed up to use the new version of its recycled glass for its products.

Spain-based Sampling Innovations Europe showed its scented labels, which it claims can be opened and re-sealed between five and 10 times and still keep the intensity of the fragrance. The label can be mounted on any type of promotional material or magazine. The company also presented what it calls Ticket Scent (pictured), to trial fragrance at the point of sale. Developed and patented by Brazilian sampling company Adhespack (Sampling Innovations Europe is Adhespack’s European distributor), the technology is essentially a machine that dispenses tickets which can be peeled back to reveal a scent. The company says that Ticket Scent creates interaction with consumers in-store.

German company Awantys presented new shapes for its marble caps for cosmetics and fragrance bottles and jars. Previously, the caps were only available in round or square versions, but now the company can offer a range of shapes in marble. Awantys also came up with an outer box for a fragrance in the shape of a book (pictured), which it says is a response to brands’ current focus on storytelling. The company claims the book-shaped box is something that consumers can keep, while brands can use the pages to communicate information about their product. n n n

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n n n German company Geka showed five mascaras and three lip products. The mascaras included Catwalk Lashes, which has a 180° arrangement of bristles and discs to provide volume; Lash Passion (pictured), which features a SEPA polish for defined eyelashes, and Twist Sensation, a twisted brush to curl the lashes. The lip applicators include Lip Magnifier (pictured), an extra large applicator with a tapered shape for precise contouring.

Germany-based Oeka Beauty spotlighted new mascara brushes and lip applicators. The Let’s Twist mascara brush has long fibers that claim to push the lashes upwards, while

Show review shorter segments coat the lashes to give volume. Lash Kiss has a curved wand for curling, lengthening and separation. The company developed a precision lip applicator with make-up artist Max Herlant. Its curved edge mirrors the lip’s shape to define its contours.

Sampling company Arcade/Bioplan (Ileos group) showcased a range of facial masks (pictured), which can be delivered as a full service project to clients. The masks, in either viscose or cotton, are imbibed with a moisturizing formula and can be personalized by adding a client’s specific formula. The masks come in a peel-back mono-dose sachet.

France-based Albéa put the focus on its ‘One-Stop-Shop’ service at the show. This service means that clients can have a single point of contact at the group, even though they may be dealing with a range of different technologies. n

The inside view on the international beauty industry

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Interview Interview Guerlain ceo Interview Coty ceo Laurent Boillot Ferragamo Parfums ceo Michele Scannavini Luciano Bertinelli Market watch: Market watch: Brazil What’s next for Mexico, Travel retail: Europe The ins & outs of doing Argentina & Colombia? How the region is faring & business in the country the continent’s top airports Travel retail: Travel retail Brazilian travelers Market watch: Africa Data, digital & How they shop & how The potential & challenges of the CIVETs to reach them the next big region for beauty

Packaging Packaging Packaging Sector outlook & Decoration techniques How make-up packs luxury trends for 2014 & trends are evolving

Insight: Fragrance Insight: Make-up Insight: fragrance creation Global market analysis Doing color better What’s next for the industry?

ISSN: 2104-3302 ISSN: 2104-3302 ISSN: 2104-3302

www.bwconfidential.com N°16 November-December 2013 www.bwconfidential.com N°17 March-April 2014 www.bwconfidential.com N°19 September-October 2014

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Distribution at all the major international events ...TFWA World Exhibition Cannes • Beauty World Middle East Dubai • PCD Paris Cosmoprof Worldwide Bologna • China Beauty Expo Shanghai • HBA Global Expo New York Duty Free Show of the Americas Orlando • Intercharm Moscow • Exsence Milan Luxe Pack Monaco • Beyond Beauty Paris • Luxe Pack Shanghai • In Cosmetics Paris Luxe Pack New York • Cosmoprof Asia Hong Kong • Pitti Fragranze Florence • Make Up in Paris Elements Showcase New York • Mondial Spa Beauté Paris • TFWA Asia Pacific Singapore...

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DemiPage-210x148NEW.indd 1 07/08/14 11:34 Store visit

Lush builds Brazil The UK-based brand returned to Brazil with a flagship store in 2014, and plans to open additional boutiques in the country this year

K-based beauty brand Lush is looking to expand its store network in Brazil Uthis year. The brand re-launched in the market in June 2014 with a 430m2 (4,628ft2) flagship store in São Paulo after exiting Brazil in 2007. The brand now plans to open three to four new stores in shopping malls in São Paulo, and is also looking at Rio de Janeiro, Belo Horizonte, Recife, Salvador and Brasília. The forecast is to have 30 stores in Brazil in the next five years. Lush first entered Brazil in 2000 with a franchising strategy. However, this time around the company has opted to wholly own its retail operation in the country. Another big change in its second attempt to crack the market is the brand’s decision to open its own factory in São Paulo. (When the brand first launched in Brazil it had a hard time ensuring that products were fresh). Local production will also mean the company will not have to pay heavy taxes on importing products. Lush Brazil general manager Renata Pagliarussi comments: “We have many projects for 2015. In addition to opening new stores, we will start local production and manufacture most products in Brazil, buying raw materials from Lush Brazil local suppliers. Lush has come to Brazil for the long-term and we have a lot of l Flagship store opened: plans ahead.” June 2014 The brand’s new flagship store is one of its biggest worldwide, and includes l Location: São Paulo a spa on the top floor with four treatment rooms. The spa offers the brand’s l Size: 430m2 (4,628ft2) Synaesthesia treatment, which promises to stimulate the five senses in 80 l Special features: minutes and costs R$450 (US$156). The spa also has a lounge area, where Spa on top floor; lounge area consumers can sit and relax. The store features Lush’s signature wooden furniture l Planned store openings: and blackboards with hand-written messages. n 30 in the next five years

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s Lush’s Brazil flagship store features wooden furniture and blackboards with hand-written messages

s The store is home to a spa and there are several areas where consumers can test the brand’s products

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