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Seeking to Solve Salon Riddle

NEW YORK — The professional beauty market is just plain misunderstood. At least that’s the judgment of the man who has ambitions of transforming the industry in a fundamental way.<BR><BR>“We’re seeing a world that is completely...

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NEW YORK — The professional beauty market is just plain misunderstood. At least that’s the judgment of the man who has ambitions of transforming the industry in a fundamental way.

“We’re seeing a world that is completely underdeveloped in terms of a retail opportunity,” asserted Bob Salem, a former Aveda executive who cofounded Profound Beauty Inc. with Nikos Mouyiaris, president of Mana Products Inc.

After six years of testing and research, Profound will introduce its 30-item “diversion-proof” hair care collection to salons next week. The company will officially unveil the products — including shampoos, conditioners, treatments and styling products — Saturday afternoon at The Salon Association Symposium taking place in San Francisco.

In a first for the professional beauty industry, the company will also grant stock options to salon owners and stylists who sell Profound products in their salons. This weekend’s event will mark the first time Profound Incentive Equity stock options are granted since the U.S. Securities and Exchange Commission declared Profound’s regulation A offering effective on May 18, 2004.

By offering salons a piece of ownership, Profound seeks to dramatically grow the $14 billion professional beauty products industry and earn a place as a leading player in the market, going head-to-head with brands such as Kérastase, Aveda and Bumble and bumble. According to Salem, “Salon owners have spent years building professional brands that they have no stake in.”

Profound’s full-barreled launch follows a six-month test market of select products in 100 salons across six metro areas.

The fledgling brand has made in-roads with at least one high-profile salon owner. In June, hairstylist Yves Durif cleared front-end retail space and the back bar of his Upper East Side salon to make room for Profound products, ending his long-standing deal with Aveda. Durif opened his eponymous salon seven years ago as an Aveda concept salon and still counts its founder Horst Rechelbacher as a close friend. While his decision to end a distribution contract with Aveda was admittedly emotional, Durif reports his retail sales have doubled since June. Once he gets the entire Profound collection in place, Durif anticipates retail will account for 20 to 25 percent of his business.

The French-born stylist will also present his “straight to the point” haircutting technique — a free-form style requires a mere 15 minutes to a half hour to do — at educational seminars hosted by Profound throughout the winter. Yves Durif is currently the only salon in New York City carrying Profound products, but Durif welcomes more salons to take the line on.

Eligible salons will carry no more than three hair care brands, and will also be considered upper-tier salons. “We are not interested in low-hanging fruit,” remarked Salem.

The shampoos, conditioners and weekly treatment products — all under the name Anatomy — rely on what Salem describes as “proportional cleansing and conditioning.” The formula is built on a ratio of cleansing surfactants and conditioning ingredients. Therefore, each of the four shampoos and conditioners contain varying levels of surfactants and conditioners. The ratio — rather than a benefit description such as “moisturizing” — is indicated on the product label by two numbers and a corresponding graph design.

For instance, the 90/10 shampoo contains 90 percent surfactant cleaning agents and 10 percent conditioner, and the 40/60 conditioner contains 40 percent surfactants and 60 percent conditioning agents. By putting surfactants into the conditioner, Profound is able to mix in high doses of repair and strengthening ingredients because the excess can then be removed by the surfactant, explained Salem.

If it sounds complicated, that is, in part, the intention of Profound. The company wants the client to have to rely on the recommendation of the stylist.

Profound relies on the stylist to make a diagnosis about a client’s scalp condition and hair type, using a chart to determine the appropriate products. The regimen is then passed along to the salon technician who will wash her hair and later to the client at the register. Because the numbers — illustrated on the bottle through a curved graph — refer to the proportion of surfactants and conditioners, shampoos are not matched to conditioners; the stylist must diagnosis each separately. The weekly treatments match the conditioners.

“That [diagnostic] session empowers the stylist and give the stylist more credibility. For the client, she is getting her needs met,” noted Linda Gillette, a former Wella and Aveda veteran who joined Profound as vice president of education in November. “We glorify the stylist’s recommendation,” added Salem.

Mouyiaris noted that Profound’s customized approach makes it easier for salons to sell a regimen of three or four products, not simply a shampoo. He added that robust retail sales could potentially stabilize a salon owner’s business.

According to Salem, the professional salon industry — often dismissed as a collection of mom-and-pop operations — generates $200 billion in services worldwide, double the amount of wholesale dollars produced by the top 100 beauty manufacturers.

In an industry where services — haircuts and color treatments — are salon owners’ bread and butter, retail sales of products generally account for a mere 6 percent of the business.

“Today, 87 percent of the retail products sold through salon in the U.S. are controlled by three multinational companies, which is fine,” Salem pointed out. “But the world is changing and the professional industry is increasingly merging with the mass market.” The most obvious symptom of this blurring marketplace is diversion, he added.

Determined to offer a more compelling incentive to move products on salon shelves, Salem anticipates the company can eventually help salon owners grow their retail business to a startling 50 percent of their total salon revenue.

In addition to stock options, salons earn buying allowances on the back bar based on the amount of product sold to salon clients. Depending on the number of ounces of product sold in the front of the salon, an owner gets certain discounts for products to stock the back bar.

Salem bills Profound as “the first-ever global brand for salons,” and grimaces at the phrase “private label.” Each Profound product contains the name and address of the salon. For example, in Durif’s salon the label on the 90/10 shampoo includes “Yves Durif” at the bottom and the salon’s name, address and phone number on the back of the label — aligned with the flip-up cap.

Profound, which relies on Mana Products in Long Island City, N.Y., as its contract manufacturer, is ramping up to handle more salons, said Howard Friedensohn, the company’s chief operating officer. Friedensohn added that it currently takes approximately 10 days to turn around an order and screen a salon’s name on product labels. Profound aims to cut its turnaround time to three days.

Consumers’ inability to self-select product and the presence of a salon’s name on product label makes Profound just about impossible to divert. “It’s a fundamentally different way to approach marketing,” declared Salem. “There is an entire industry growing up around diverted brands, and the only reason those brands have value is because the hairdresser recommends them. We’re saying to salon owners, ‘Your recommendation is not for sale in the mass market.’”

Profound is rounding out the collection with a seven-item styling line called Ability. The line is divided by styling needs and contains Linear cream and serum, Curl foam and cream and Volume foam and spray.

The company’s product rollout also includes a tightly edited line called Atmosphere, three products said to control the behavior of hair in any given climate. Arctic Chill is a mousse that imparts a distinct cooling sensation when applied and is designed to keep locks pin straight. Desert Sand, a lotion and gel combo, claims to extract humidity from hair even in moisture-drenched locales like Florida and Texas. Tropical Dew is a lightweight gel that does the exact opposite, and is said to drench the hair in moisture. Anatomy, Ability and Atmosphere products range in price from $16 to $24, and the company expects to roll them out to thousands of salons.

While the company does not comment on sales projections, industry sources expect the Profound collection to generate $10 million dollars in sales. Profound has global ambitions as well, and has entered in a partnership with Luis Llongueras, an internationally known hairstylist who became famous for his work with Salvador Dali. The deal calls for Profound’s educational arm to provide tuition incentives for salon professionals to attend the Llongueras Institute in Spain. Llongueras’ brother Enrique is overseeing the effort to bring Profound products into Llongueras-controlled salons in Spain.

“Our ambition is to become one of the leading brands in the professional beauty industry within the next 18 months,” declared Salem.

He added, “Big companies need to fall out of love with their brands and in love with the salon service.”

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