#385 / April 6-12, 2009 www.CosmeticNews.com Beauty industry weighs up big pay packets INSIDE THIS ISSUE vote by the US Congress last financial services, we can predict pay practices will week to rein in salaries and change because their pay level is so much higher INTERVIEW Abonuses paid to employees of than in other industries,” says Lupo. “But financial institutions receiving govern- in areas like the cosmetics industry, pay levels Friedrich Kroos, Jafra ment bailouts has trained the spotlight aren’t necessarily higher than in other industries; page 3 on executive pay, and beauty industry the reasons to change are more subtle.” executives are coming under scrutiny. Jung, who is widely credited with Joaquín Bueno, Notifications filed with the US driving a turnaround at Avon in recent Sephora Spain Securities and Exchange Commission years, saw her total compensation pack- page 9 (SEC) reveal that Fabrizio Freda, the age jump 76% in 2008—a year when the incoming ceo of The Estée Lauder company’s share price dropped 39.2% Companies (ELC), is eligible to receive and which was followed by the February BUSINESS $12.5m in salary, bonuses and stock announcement of up to 3,000 job cuts, Falic sells Urban Decay options in his first year on the job. as well as salary and hiring freezes. page 4 Meanwhile, an analysis of an Avon In the case of P&G chairman and ceo Products proxy statement by The AG Lafley, who received a $3.5m bonus Players react to new Associated Press news agency estimated in February for his role in the 2005 chairman and ceo Andrea Jung’s total acquisition of men’s shaving brand EU rules 2008 compensation package at $19.6m. Gillette, the “onus of the bonus” is more page 4 While such packages may have easily identifiable. “The Gillette deal was seemed unexceptional a year ago, good for P&G from a number of standpoints— CITY FOCUS they now come at a time when both bringing new brands into the fold, adding signif- Johannesburg, South Africa companies are slashing jobs and trad- icant overseas distribution, bringing skills in con- page 5 ing at heavily reduced share prices. sumer trade-up and merchandising,” notes Both ELC and Avon declined to com- Morningstar chief operating officer for ment when contacted by CosmeticNews. equity research Lauren DeSanto. RETAIL According to the Avon SEC filing, “Certainly high payouts now are especially grat- AS Watson grows in 2008 executive compensation at the com- ing to shareholders given the underperformance page 9 pany is reviewed annually and bench- of P&G’s stock. [But] it’s important to recog- marked against a peer group of 12 nize, given the current environment, how well PRODUCTS beauty and consumer goods compa- run and financially sound P&G is.” nies including ELC, P&G and Revlon. Lupo believes the current scrutiny of ELC boosts Night Repair Peter Lupo, managing director of US- executive salaries will prompt compa- page 10 based compensation consultants Pete nies to more thoroughly review their pay Pearl Meyer & Partners, tells CosmeticNews structures, but notes: “You really wonder that pay levels in the cosmetic sector what will happen once the economy gets better.” are on a par with other industries. “In Sophie Douez with Laure Guilbault 1• CosmeticNews Weekly #385 / April 6-12, 2009 • www.CosmeticNews.com Business CosmeticNews Weekly PEOPLE Yes to…global distribution a publication Israeli natural beauty brand Yes to Cosmédias SA US beauty company The Estée Carrots is launching on 11 European 2, rue Maurice Hartmann 92133 Issy-les-Moulineaux Cedex Lauder Companies (ELC) has markets, under an exclusive deal with Tel. 33 (0)1 46 29 46 00 announced that Daniel Yarosh will LVMH-owned Sephora (500 outlets). [email protected] succeed senior vice president of The launch, which includes Turkey, Subscriptions: Tel: 33 (0)3 44 62 43 80 research and development world- Italy, Spain and Greece, will offset the Fax: 33 (0)3 44 12 57 73 ([email protected]) wide Daniel Maes when he retires primacy of the US market, which US$38/€30 per issue July 1. Yarosh will take up the position accounts for 70% of Yes to Carrots’ € One year subscription: US$1,585/ 1,250 of ELC senior vice president, R&D, sales. The new Yes to Tomatoes and Chief Executive Officer and Publisher Antoine Duarte basic science research, and report to Yes to Cucumbers lines are currently Products Managing Director Harvey Gedeon, ELC executive vice being launched in the US, where the Jean-Louis Potier Editorial Director president of global research, devel- brand is widely distributed at François Kermoal Editor-in-Chief opment and product innovation. Walgreens, Safeway, Riteaid and Joëlle Diderich Maes, an ELC veteran with 22 years’ Duane Reade drugstores. The San ([email protected]) Product Editor service at the company, will see his Francisco-based brand began interna- Naomi Marcoulet ([email protected]) functions effectively divided into two tional rollout in 2006 and is now Reporters Courtney Traub roles. Yarosh will oversee new fields available in 25,000 points-of-sale in ([email protected]) of research and overall management 28 countries. “The expansion has been very Sophie Douez ([email protected]) of R&D projects including external quick but we want to keep the special feeling Sarah de Castro ([email protected]) research partnerships in the US, of our brand designed to make people happy,” Contributors Europe and Asia, while ELC executive Yes to Carrots founder Ido Leffler tells Paul Richman Correspondents director of research and development CosmeticNews. A Yes to Babies line is Argentina: Muireann Prendergast Australia: Andrea Ferrari Nadine Pernodet will take over man- set to launch in 2010. CB Austria: Hannelore Hecker Belgium: Laurence Mouton aging several of the group’s laborato- Brazil: Renata Ashcar ries. She will report to Yarosh. Prior to P&G sells Johnson Products Canada: Marjo Johne China/Hong Kong: Serena Cheung joining ELC, Yarosh was president at US consumer goods giant Procter & Germany: Mark Ehrman Italy: Corinne Blanché Applied Genetics Incorporated Gamble (P&G) has sold off its ethnic India: Mayu Saini Dermatics, a company with a com- haircare products business Johnson Japan: Raphaëlle Choël Mexico: Ron Buchanan mercial application of DNA repair Products Company to RCJP Acquisition Middle East: Caroline Zerrini Portugal: Ivan Castano acquired by ELC in 2008. Inc, a newly formed entity comprising Russia: Anna Dycheva South Africa: Nadine Schmal several private-equity firms. California- South Korea: Yoo Soh-jung based Johnson Products Company, Spain: Lola Gavarrón, Ivan Castano Switzerland: Beatriz de Candolle STRATEGY which commercializes around 30 hair- UK: Imogen Matthews US: Kavita Daswani, Laure Guilbault, Lois Pasternak care products catering to African- Travel Retail: Kevin Rozario L’Oréal reshapes Luxury Americans, including the Gentle Suppliers: Laëtitia Bonnet-Mundschau European Legislation: Claire Thévenin Products Division Treatment and Ultra Sheen brands, Finance: Elea Prizzi French beauty group L’Oréal has achieves annual sales of some $23m, Copy Editor: Marie Hawksby Production: Thibaut Lefebvre announced it plans to reorganize according to the company. The newly Advertising its iconic Luxury Products division, formed company will continue to Sales Managing Director Carole Dubourg regrouping production and logistics operate as Johnson Products Int’l Sales Manager: Emanuela Treneva in its northern French plants and Company and will be managed by CosmeticNews.com accelerating the integration of YSL husband and wife team Eric Brown Editor-in-Chief Joëlle Diderich Beauté. The group will build a and Renee Cottrell-Brown, who take Webmaster: Alain Charles Circulation Director 40,000m² global logistics center at on the roles of ceo and executive Nicolas Grob Subscriptions Sales Manager the group’s Roye plant, to be opera- vice president, respectively. Brown Arthur Peys ([email protected]) tional in the second half of 2010. was most recently president of ethnic www.cosmedias.fr Manufacturing of all division brands, haircare firm Pro-Line International CosmeticNews Weekly including Yves Saint Laurent, which (Alberto Culver). Cottrell-Brown also est édité par Cosmédias SA the group acquired last July, will be held executive roles at Pro-Line. CTr 2, rue Maurice Hartmann 92133 Issy-les-Moulineaux Cedex designated to three facilities in RCS Nanterre B.383 160 751 N° de CPPAP 0512 T 79344 Lassigny, Caudry and Gauchy. A RESULTS ISSN 1620-302X fourth unit located in Albesa, Spain Président et directeur de la publication : Antoine Duarte is to be converted into a logistical Shiseido readjusts forecast Imprimeur : Dupli-Print 2 rue Descartes ZI Sezac 95330 Domont center. As a result of the reorganiza- Japanese beauty company Shiseido Abonnement annuel (42 n°/an) : 1250 € / 1585 US$ tion, 85 employees will be reas- has again adjusted its sales and profit Prix de vente au numéro : 30 € / 38 US$ CosmeticNews Weekly n° 385 signed within the group. SD forecasts for the fiscal year ending daté du 6 au 12 avril 2009 2• CosmeticNews Weekly #385 / April 6-12, 2009 • www.CosmeticNews.com Business March 31, 2009 “due to an increase in ments on foreign income. Current put US multinationals at a substantial extraordinary losses”, according to a com- US tax regulations allow multination- disadvantage to foreign competitors. pany press release. The forecast for net als to defer paying tax on foreign “It would be like penalizing a winning US income has been revised down by 30% income until it is brought back into Olympic runner by tacking on extra seconds to ¥21bn/$215.9m from a previous fore- the US. Writing as a guest columnist to his time just because he’s American,” cast of ¥30bn/$308.4m issued in late in The Cincinnati Enquirer, Lafley said Lafley wrote.