www.bwconfidential.com The inside view on the international beauty industry Jan 8-21, 2015 #104 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Comment Inside The buzz 2 More of the same? News roundup t may be the beginning of a new year, but the beauty Netwatch 5 Iindustry is likely to be in for more of the same in 2015. Markets in Europe continue to be sluggish (the situation Beauty blogger review in some countries in the region may well worsen this year, according to some industry watchers), more volatility is Interview 6 expected in emerging-market currencies and two of the Cartier managing director BRICS—Brazil and Russia—continue to worry economists. fragrance Léa Vignal-Kenedi On the bright side, the US is forecast to continue to grow again this year. Insight 8 All this may sound familiar, and is even something companies M&A Update have got used to post 2008. But another factor that the industry is likely to see again this year, and one that is perhaps in some ways more daunting, is the fast-paced change Store visit 12 in consumer behavior. Largely driven by digital developments, brands and retailers will Burberry, Seoul no doubt find that this year again they will have to constantly re-think how they reach and sell to consumers and try to make sense of a market whose rules continue to shift and where tried and tested strategies are no longer always relevant. Another challenging year lies ahead. Oonagh Phillips Editor in Chief [email protected] Meet the BW Confidential team at: l PCD, Paris, February 4-5 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 News roundup At a glance... n ELC acquires skincare brand Glamglow n L’Oréal buys Israeli hair technology company Coloright The buzz n French Competition Authority fines beauty groups for price-fixing n Douglas rebrands 43 stores in France to Nocibé Stay informed with our daily news headlines on www.bwconfidential.com Strategy Estée Lauder Companies (ELC) continues to ride the acquisition trail with the announcement in December 2014 that it would purchase California-based treatment mask brand Glamglow. Founded in 2010, Glamglow has a strong Hollywood following and has created a buzz on social media. It is sold in 112 countries in prestige distribution and had sales of $103m in 2013 with just three products. It now markets five mud-based facial skin mask products, formulated with a patented Teaoxi leaf-steeping technology. This month, the brand will launch a new range of mud-to-foam daily cleansers. Glamglow is ELC’s fourth acquisition since October 2014. In a move to reinforce its haircare R&D capacities, L’Oréal acquired Israeli hair technology company Coloright in December. The Tel Aviv-based start-up is specialized in hair fiber optical reader technology. Coloright ceo Sagiv Lustig will continue to manage the company and will join L’Oréal’s international research and innovation network. P&G announced in December that it was selling its soap brands Camay and Zest to Unilever. The deal involves the global sale of the Camay brand, as well as the sale of Zest outside of North America and the Caribbean. P&G will also sell a manufacturing facility in Mexico as part of the transaction. The deal is to close in the first half of this year. Private-equity player TPG Growth has acquired a minority share in California-based skincare brand Beautycounter. Founded in 2013, Beautycounter offers a range of beauty and personal-care products that claim to use only ingredients that are “safe” for the skin. The brand is sold through channels including direct sales, e-commerce, and third-party vendors, such as fashion retailer J.Crew. TPG Growth acquired a share in make-up brand e.l.f. Cosmetics in February 2014. German group Henkel is considering a large haircare acquisition, according to press reports. The company is reported to have said that it wants to improve its position in consumer-goods sectors where it is already strong. Henkel markets the Schwarzkopf haircare brand. US-based private-equity company Catterton is to acquire a minority share in Italian contract manufacturer Intercos. The deal will fuel expansion in the US, China and Latin America. Intercos had announced plans to list on the Italian stock exchange in September 2014, but withdrew its offer citing unfavorable market conditions. n n n www.bwconfidential.com - Jan 8-21, 2015 #104 - Page 2 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL News roundup n n n The French Competition Authority handed down a decision in December that fines personal-care product manufacturers a total of €605.9m for alleged price fixing between 2003 and 2006. The 11 companies ordered to pay fines include L’Oréal, Beiersdorf, Unilever, Procter & Gamble and Henkel. L’Oréal has been ordered to pay the The buzz heaviest fine, at €189.5m. The beauty group is appealing the decision. In a statement, L’Oréal said the fine was “totally out of proportion” with the accusations. Retail Walgreens shareholders approved the merger of Walgreen Co. and Alliance Boots on December 31 to form Walgreens Boots Alliance Inc. Walgreens is now a wholly owned subsidiary of Walgreens Boots Alliance Inc. Existing shares of Walgreens common stock were converted into shares of Walgreens Boots Alliance common stock. Following the acquisition of French perfumery chain Nocibé by German retailer Douglas in June 2014, some 43 Douglas franchise stores in France have been rebranded Nocibé. The stores will no longer operate as franchises, but will be wholly owned. Nocibé also signed an agreement to sell 13 of its wholly owned stores to Athénaïs, a perfumery chain with 10 locations in France owned by French group Jacques Bogart. Following these two transactions, Nocibé will operate more than 600 stores. People Canadian retail group Hudson’s Bay has named Gerald Storch as ceo. Storch was formerly ceo at toy retailer Toys R Us. He will be responsible for Hudson’s Bay, Lord & Taylor, Saks Fifth Avenue, Saks Off 5TH, Home Outfitters and HBC Digital. American pop star Lady Gaga is fronting a new ad campaign this month for Shiseido in BW Confidential 4 avenue de la Marne Japan. The campaign will feature a series of selfies taken by the celebrity. 92600 Asnières sur Seine, France [email protected] Tel: +33 (0)1 74 63 49 61 Fax: +33 (0)1 53 01 09 79 Data www.bwconfidential.com ISSN: 2104-3302 Publisher: Nicolas Grob The number of consumers shopping in France’s selective channel is declining, Editorial Director: Oonagh Phillips [email protected] according to a report from Kantar Worldpanel. One in four consumers shops for beauty in Deputy Editor: Alissa Demorest [email protected] selective retail, and the channel (department stores, perfumeries and their websites) has Editorial Coordinator & Assistant: lost 1.6 million shoppers since 2011. This has penalized the fragrance category the most, Katie Nichol [email protected] as some 45% of consumers visit the selective channel only to buy fragrance. Contributors: Tina Clark, Alex Wynne, Renata Ashcar, Mayu Saini, Raphaëlle Choël, However, despite value sales of personal care and beauty products rising just 0.5% Corinne Blanché between January and November 2014 in France, consumers’ average annual budget Subscriptions 1 year: electronic publication (20 issues) + is said to be increasing year-on-year. Between June 2013 and June 2014, the average print magazine (4 issues) + daily news: €499 or US$699 annual spend reached €168, and consumers are said to make 14 purchases per year. [email protected] Advertising Kantar notes that personal-care products are the biggest growth drivers. [email protected] Other channels continue to encroach on selective retail’s shares. Pharmacies in France BW Confidential is published by Noon Media 513 746 297 RCS Nanterre were said to account for 15% of all beauty sales between June 2013 and June 2014. Copyright © 2015. All rights reserved. Reproduction in whole or in part without Online sales, meanwhile, made up 7% of beauty purchases in the period, with 12% of permission is strictly prohibited. French consumers buying online and spending an average of €60 per year. n n n www.bwconfidential.com - Jan 8-21, 2015 #104 - Page 3 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL News roundup n n n Sales of prestige make-up in the US increased by 6% to US prestige make-up sales Dec 2013-Nov 2014 $4.3bn between December 2013 and November 2014, Category Sales % change according to NPD Group. The category’s main driver, lip color $bn Dec 2013-Nov 2014 products, saw an increase of 13% in the period and reported Lip make-up 0.7 The buzz +8 sales of $417m, due mainly to a rise in unit sales. In November 2014, prestige lip color sales were up by 24% Lip color 0.4 +13 in the US, with close to 1.8 million units sold in the period, an Total make-up 4.3 +6 increase of 22% over November 2013. Source: NPD Group/Beauty Trends NPD research shows that some 33% of women in the US use a lip color product more than once a day. Sales of fragrance gift sets were disappointing in Europe for Fragrance gift set sales* in Europe the month of November 2014. According to NPD, value sales % change Nov 2014 vs Nov 2013 fell 5% in the UK, were down 11% in Spain and declined 2% Country % change in Italy. In France however, fragrance gift sets put in a growth Nov 2014 vs Nov 2013 rate of 4%.