By and  on October 26, 2007

CANNES, France — A number of beauty executives toasted the 60th anniversary of the travel-retail industry with an equal measure of soul-searching and unwavering confidence in the channel's resilience.

While the cosmetics and fragrance category chalked up a 12.9 percent increase last year to total sales of $8.6 billion, the self-congratulation competed with a creeping feeling of unease.

During conversations in many booths scattered through the cavernous Palais du Festival at the five-day Tax Free World Association trade show here, starting Monday, beauty executives spoke proudly of how the travel-retail industry has recovered time and time again from one catastrophe after another. Attendees, which reached on Tuesday 4,833 visitors, up 9 percent versus the same day in 2006, reminisced about the abolition of intra-EU duty free, to the attacks of Sept. 11, 2001, to the SARS epidemic in Asia, to financial meltdowns in Latin America.

The latest setback came a year ago with the alleged terrorist attempt in August 2006 to explode airplanes scheduled to fly from the U.K. with bombs fashioned out of everyday liquid products. That resulted in the ban of carrying onboard liquid- or gel-based cosmetics or fragrances in bottles larger than 100 ml.

The problem was partly solved when governments allowed travelers to carry onboard such liquids in see-through plastic bags.

Many companies already have seen a rebound in the market. Eric Henry, chief operating officer of Beauté Prestige International SA (Shiseido's fragrance arm), for instance, noted that, since August, his company has posted a double-digit increase in travel-retail sales. And the momentum is gaining.

However, difficulties remain overall, partly because airports outside of the EU lack guidelines that would be consistent with EU legislation regarding transfer passengers. This could be solved by application for government clearance, but there are political disputes around the world regarding aviation law.

So far, only five governments have applied, according to Frank O'Connell, president of the European Travel Retail Council, during TFWA's opening speeches. He added that it should take two to three years to develop a detection machine to be able to scan liquids fast enough for practical use in crowded airports.

There also was a worry that cosmetics and fragrances were taking the backseat to liquor and candy when it comes to in-store merchandising, a specialty the beauty industry once pioneered. There was a call, as well, for stepped-up creativity and innovation in product development, and above all, to make shopping a pleasurable, exciting experience, rather than what many now see as an exercise in drudgery.

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