By  on December 5, 2008

Sharp pricing combined with razor-edged product and promotional ideas and good old-fashioned value are the main defenses being employed by beauty manufacturers caught in the vice of a merciless calendar and a doomsday economy.

Some industry executives speculated that the department store beauty business would finish the year down by as much as 3 percent to 4 percent. Another observer noted, “anywhere from minus two to plus three would be an outstanding result.”

John Demsey, a group president of the Estée Lauder Cos. Inc., who oversees the Lauder brand as well as MAC Cosmetics, observed, “So far it has been a tumultuous ride.” Thanksgiving fell a week later than last year, he noted, resulting in fewer shopping days until Christmas. Cosmetics has also faced in-store competition from ferocious markdowns of apparel. “The silver lining of the deep discounting is that it has brought traffic,” he said. “The business is not what we wanted it to be, but cosmetics, in general, is faring better than the rest.”

Lauder made several shifts in tactics this year: its annual blockbuster promotion was held earlier than last year to give more time for sell-through, the gift-with-purchase event was timed closer to Christmas and the Macy’s national advertising campaign was started on Thanksgiving Day and spread out until Dec. 5, rather than concentrated on the parade, as last year. Moreover, the TV campaign for the Beautiful fragrance landed closer to Christmas, due to the calendar shift.

The Christmas business has been an increasingly last-minute business for a number of years, but now it will boil down to the last seven days and the post-holiday week will be more meaningful than ever, he said. Demsey added that the psychological drivers of the season have been compelling product, easy accessibility, pricing and newness.

Demsey noted that “this fall has been a decent fragrance season, not as dismal as some other seasons past.” He attributed that, in part, to an upsurge in newness. Lauder’s new Sensuous fragrance has been the most successful launch since the company’s introduction of Estée Lauder Pleasures in 1995, he said, noting that there was at least one surprise in the good news. As perhaps a sign of the tight-fisted times, the 30-ml. size of Sensuous, the opening price point at $42, has been the big seller. Usually, it is the 50-ml. size that sells, Demsey noted.

In addition, Demsey spotted signs of consumer self-purchase in the brisker than normal sale of skin care sets. By Thanksgiving, 78 percent of Lauder’s treatment kits had sold through, he added. The brisk sale of treatment was also noticed at Clinique, Lauder’s sister division. “Skin care sets are selling better than anything we have,” said Lynne Greene, global president of the brand. Because of this, the division has been making a point of accentuating value offerings at the counter level. Sharp price points also are a stimulus in the fragrance business, she added. When a trio of pencil applicators for variations of the Happy fragrance recently hit counters, the $30 sets sold out in three days.

Clinique also has been mindful of the fragile economic environment and careful in its inventory management. Greene noted that before the season started, skin care sets that didn’t have a holiday identification were held back so they could be used in the spring for promotions. Also, Clinique took the value mantra to its advertising. The headline in the ad for its three-step trio of products declares, “At Clinique, we don’t inflate promises. Or our prices.”

The third big three of the dominant department store brands is the Lancôme division of L’Oréal USA. Serge Jureidini, president of Lancôme’s U.S. division, said his strategy is to focus on its two high-profile launches of the season, Magnifique women’s fragrance and Oscillation vibrating mascara, a hit that appealed to the consumer’s appetite for innovative newness. TV advertising is being used to promote Magnifique, with a co-op campaign running with Dillard’s. As for Oscillation, which was launched on Oct. 22, NPD Beauty confirmed that it was the number-one selling mascara in terms of dollars for the month. Industry sources estimate that the product generated more than $5 million in retail sales in the first five weeks.

The new product is in a horse race with a similar mascara from Lauder called TurboLash, which Demsey said, “sold out everywhere.”

“For most of our retail partners, Dior is the number-one trending brand both year to date and for November,” said Terry Darland, general manager of Parfums Christian Dior, North America. “The holiday season has started off very solid for us in all categories. J’adore and Miss Dior Cherie are clear winners, and color is hot. Mascara continues to show big increases.”

“We are anticipating being up 6 to 7 percent in December,” noted Darland. “Our strategy [for dealing with market conditions] was to do a lot of TV on J’adore and Miss Dior Cherie. We have done a lot of print advertising.”

Turning to the strategy of the final days, Darland said, “We have most of our in-store efforts focused on the last 10 days. We will be in store week five with an event strategy. Then early January launches a new line of mineral makeup with the most diverse shade lineup in the history of Dior. We will now be able to service all skin tones in both liquid and powder foundation with Diorskin Nude.”

“We’ve been concentrating on our key items — those products with a proven record of success, like Opium and our color range,” said Marc Rey, chief executive officer and managing director, YSL Beauté. “We think it’s a great time to focus on winners. We are trying not to be gloomy, as we are seeing double-digit growth in several areas, including lip products and fragrances. The customer might not buy three lipsticks at a time, but she is still buying.” The brand’s new Rouge Volupte line — with lipsticks retailing at $34 each — is a particular standout, he said.

“The reality of the recession has certainly altered people’s shopping habits and, undoubtedly, our entire industry is being affected,” said Heidi Manheimer, chief executive officer for Shiseido Cosmetics America. “The best strategy during a time like this is continuing to offer superior service and great products that offer results. There is no question that consumers are going to be looking for value and service.

“With fragrance such a popular item during the holiday season, for the first time in many years, we entered the season with a new fragrance launch, Zen, which has been meeting expectations in terms of sales,” said Manheimer. “With a very strong spring under our belts, despite the challenging fall season, we are hopeful to wind the year up flat or slightly up by 1 percent.”

“We’re planning to maximize every dollar we spend on promotion,” said Nicholas Munafo, president of Beauté Prestige International. “We have not cut back in store support at all, and we will continue to spend there. We think this will allow us to succeed during what will undoubtedly be a very difficult holiday season.”

While Munafo noted that he expected the overall beauty industry to be down “high-double digits” in holiday sales, he firmly believes that classics will hold their value, even in a difficult economy. “Many of our brands have been on the market 10-plus years, and people are attached to them as affordable luxuries. We have been conservative in distribution over the years, which also keeps them desirable.”

Mass suppliers have such lead times that they can’t change promotional plans, but most said buyers bought for a tense season. Value, they echoed, is what will drive beauty sales this holiday.

Esi Eggleston Bracey, vice president and general manager of global P&G cosmetics, overseeing the Cover Girl and Max Factor brands, said, “I view the holiday as an opportunity for Cover Girl. We have really high quality products at a great price. An example of what we are doing for holiday is with Exact Eyelights Eye-Brightening Mascara, which is meant to highlight your eye color. This is a good value and is hitting Target endcaps soon. LashBlast is a great value, too. As consumers are thinking of more simple things for the holiday, I see that cosmetics can make a comeback.”

Shawn Haynes, senior vice president of marketing, global brand development at Markwins, said the company is “100 percent committed to value, and in tough times when shoppers are looking to save, our brands tend to thrive.” The maker of Wet ‘n’ Wild added, “We do not plan on increased promotional activity in the middle of the season, because we complete a program for our retail partners when they buy Christmas.”

Lisa Yarnell, president and chief executive officer of Jane, also pointed to shopper demand for value — but without sacrificing quality. “Jane products, which are good quality at value prices, continue to produce double-digit increases with an increase of 27 percent at point of sale last week versus comp stores last year as consumers are looking to trade down in cost without losing the benefits,” she said. Jane had planned ahead and has value-oriented pre-packs in the market.

For the holiday season, Ingrid Jackel, Physicians Formula’s chairman and chief executive officer, feels that the mass color cosmetics market will be less affected than other categories because “it’s a way to indulge at lower price points.”

“We’re a problem-driven brand, not a color fashion line, so our approach is never impacted by the holiday season,” said Jackel.

She said she feels that retailers are more hesitant to transform their walls and less likely to change things around. Some new initiatives the brand is involved with includes a change in their promotional strategy. Instead of investing in kits, which was a focus in 2008, the company has tailored specific retail marketing programs for individual retailers including CVS and Walgreens.

Things are looking promising at Coty despite any fears of fragrance slowdowns. “Our sales will be up,” said Mary van Praag, senior vice president of sales for Coty Beauty. “We are having another very good year of sales and market share growth and we expect that to continue through the holiday season.” She added that the McGraw men’s scent is a “blockbuster” success and on track to be the biggest new men’s brand since Stetson launched 25 years ago. Ditto for Celine Sensational, which landed in the top five during its launch and is expected to reinvigorate the overall Celine portfolio.

“Our strategic plan for holiday focused on brand and value — two early trends we’re seeing in the marketplace — so we feel very well positioned to see our early sales success continue through the remainder of the season,” she added. Results from Black Friday vary by retailer, she said, but that sell-through at mass and midtier is ahead of last year. Big brands are captivating consumers, she said. “In some [retailers], our Playboy gift sets were already over 50 percent sold through by the end of last week,” van Praag said.

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