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MILAN — Emerging from one of its worst spells in memory, Italy’s beauty industry is attempting to innovate its way back to prosperity.
This story first appeared in the March 25, 2011 issue of WWD. Subscribe Today.
Some of Milan’s leading retailers, including La Rinascente, Mazzolari and Gruppo Coin, plan to open new floors, departments or concept stores devoted largely to niche perfumery. Meanwhile, Intercos, the industry’s premier color cosmetics supplier, is flirting with the prospect of going public in 2014.
“I think that the perfumery channel of distribution is realizing finally there’s a different way to run business,” said Fabio Franchina, president of Unipro, the Italian association of cosmetics companies.
Italy’s perfumery segment registered a 0.7 percent gain to 2.26 billion euros, or $3 billion at average exchange, in 2010 after a couple of years of losses. The domestic improvement primed the pump for Italy’s export machine, which soared 17 percent on-year to 2.39 billion euros, or $3.17 billion. Exports to Hong Kong, for instance, spiked 54 percent.
“It’s the intelligent way to enter China,” said Franchina. “More than 200,000 people come from China to Hong Kong to shop daily.”
On the eve of opening its 13,993-square-foot store — including a 3,767-square-foot perfumery — in Rome’s main train station, Paolo Valerio, Gruppo Coin perfume and cosmetics manager, discussed future openings. Slated for August on Milan’s Corso Vittoria Emanuele on the site of a former cinema is Excelsior. Valerio described it as a boutique, concept and department store hybrid. It should include a corner of “emerging” brands, such as Aesop, Kiehl’s and Organic Pharmacy, and a brow bar, which he called the first of its kind in Italy. There’s also to be an “olfactory” fragrance bar featuring a large selection of niche brands “to give character to the perfumery,” said Valerio.
Such concepts are meant to continue fueling Coin’s strong growth. In 2010, its perfumery business registered a 15 percent gain, while the rise was 5 percent on comparable-store basis.
Expanding on its high-end niche concept, Mazzolari is building a nearly 4,305-square-foot addition to its 17,222-square-foot store, devoted entirely to the category. Scheduled to open in September, it’s one floor under the main retail space and has a turn-of-the-century perfumery feel. Antique cabinets line walls and will stock “brands with history” such as Amouage, Cartier and Tom Ford, according to Augusto Mazzolari, founder of the perfumery chain.
Antonella Mandelli, general manager of Mazzolari, in discussing the selection of niche brands, explained it’s not just about their having a limited distribution, but “they need to have class.”
Mazzolari likened today’s perfumeries to fruit and vegetable sellers. “The idea is to do something different,” he said.
Also hot on the trail of something different is La Rinascente, which is revamping its beauty area for later this year with the addition of organic and natural skin-care brands plus niche fragrances among products to meet the ever more sophisticated consumer. One such initiative is the introduction of Tom Ford’s 80-unit makeup collection — an extension of his lipstick line — which will be the department store’s exclusive for Italy most likely starting in October.
Talking about the evolving retail experience, Celso Fadelli, founder and chief executive officer of Intertrade Europe Group, said, “People are changing the way they buy. Consumers consider shopping more of an experience than just using their credit card.”
Fadelli has been introducing new retail concepts. He opened a 2,368-square-foot store in Modena in December. It takes a similar selling strategy as that of his Avery Fine Perfumery in London, which is fitted out like an apartment and downplays branding.
“Niche is no more than 5 percent of normal perfumery. What is interesting is that the space is growing,” said Fadelli, adding major names are trying to elbow their way into the segment.
He ticked off numerous department stores devoting more space to niche fragrances, including Liberty, House of Fraser and Selfridges in the U.K.; France’s Printemps, and Japan’s Isetan and Takashimaya.
When asked why so many small brands fail to flower, Fadelli said, “the missing part is investment.”
He is adding Sweden’s Agonist to his beauty portfolio.
Coming up on March 31 is the third edition of Esxence, a niche fragrance trade show Fadelli organizes with Silvio Levi, owner of Calè Srl, that is gaining traction fast. Last year, it drew in excess of 4,000 visitors from more than 30 countries. “We are expecting more this year,” said Fadelli.
Also putting on its annual show was Intercos, which opened its trend forecast on March 15 at company headquarters in Agrate Brianza, Italy, outside of Milan. With a 40th anniversary coming up in 2012, Intercos turned to its roots by framing its presentation with vibrant colors. For the first time, Intercos showcased a new technology, called Prisma Shine, said to be a next-generation powder giving pure, luminous color.
On Intercos’ radar is a possible public offering in Milan in 2014, according to Dario Ferrari, the company’s founder and president.
“I’d like to keep control of the company,” he said.
Meantime, Intercos aims to generate sales of about 345 million euros, or $487.4 million at current exchange. Last year, revenues gained 20 percent to 245.2 million euros, or $325.6 million at average exchange, driven by restocking and new products.
“Last year was very good in terms of numbers; it was almost back to 2008 levels, which was the best year ever,” said Ferrari.
For 2011, Intercos’ sales target is set at 280 million euros, or $395.6 million. Ferrari said international business can help spur growth. In Brazil, Intercos’ new production facility near São Paulo is expected to be operational in six months.
China’s another key frontier. In its trend presentation, Intercos featured a budget-priced cosmetics line targeting that market.
“We need to compete with the local brands,” said Ferrari. “We want to be a little bit Chinese.”
He said the overall game has altered.
“The recession changed the rules,” said Ferrari. “We need to keep innovation but have to focus on cost. We want to be fast and cost-effective. Speed is becoming more and more important.”
A case in point: Intercos expanded its Ready to Go offer, a line of 80 makeup solutions for regional beauty needs.
Following Intercos’ acquisition of Vitalab, a biotechnology concern, Ferrari plans to sell active ingredients to large corporations.
“They’re not interested in [buying] creams,” he said. Ferrari hinted at a development of a serum involving plant stem cells.
While other companies continue to churn out new products, Euroitalia is determined to capitalize on the rollout of its Vanitas by Versus women’s fragrance. Giovanni Sgariboldi, company president, said Euroitalia’s sales grew between 38 percent and 39 percent in 2010.
“Growth last year didn’t come from new products but by new markets growing and improving,” he said.
Sgariboldi is also launching the Moschino Forever men’s scent. But during an interview at company headquarters in Cavenago, Italy, he seemed contemplative on how to protect the new Versus fragrance from the market’s hurly burly.
“We don’t want to burn the Vanitas launch. We need to give it time before launching new products,” said Sgariboldi. “We want to slow down despite great sales last year.”
He underlined his company’s success comes from lines remaining on the market rather than flankers.
Building on the momentum of D-Squared fragrance collections, Roberto Martone, president of ICR-ITF, said the brand will launch a men’s scent in September. Also this year, Martone is set to introduce a men’s and a women’s fragrance under his new Trussardi license.
Martone said sales at ICR-ITF grew about 30 percent last year after registering a loss of approximately 12 percent in 2009.
Gaining ground, as well, is 13-unit niche skin care brand Bakel, of Udine, Italy, which will introduce its first eye cream, Cool Eyes, at Esxence. Bakel came out with Oxyregene — its first cream — two months ago, and it’s now the company’s best seller.
Bakel is carried in 200 doors worldwide and in 2010 generated 450,000 euros, or $597,550 at average exchange.
“I think this year we will close at 1 million euros [or $1.4 million at current exchange],” said Raffaella Gregoris, Bakel’s co-founder.