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Since the preservation of youth is one of the holy grails of the beauty industry, it seems fitting some of the most promising players in the business today are under the age of 40. Although they’ve created some of the most compelling new brands in beauty, even these wordly wunderkinds couldn’t have predicted the global economic crisis or the seismic shift in consumer behavior it provoked. To discover how the young ones are confronting these challenges, we asked five international industry whiz kids about their approach to growing business in a contracting market.
This story first appeared in the May 8, 2009 issue of WWD. Subscribe Today.
IDO LEFFLER, 33,
YES TO CARROTS
Perhaps the only executive who would take being called a “yes man” as a compliment, the San Francisco-based Leffl er has based his budding beauty empire on positivism and paraben-free personal care products. The executive, who has a penchant for wearing Day-Glo orange clothing and goes by the offi cial title of “Carrot Lover,” runs Yes To Inc., which now comprises carrot-, tomato- and cucumber-based skin, body and hair care lines. Leffler, who recently became a father, is also working on a baby-care line. Today the brand is sold in approximately 25,000 doors in 29 countries; industry sources estimate its sales in the $50 million range.
MARIA HATZISTEFANIS, 38,
Inspired by her Greek grandmother’s rustic beauty recipes, Hatzistefanis launched Rodial in 1999 with the mission to garner skin-boosting results while nixing the need for needles filled with Botox, collagen and skin fillers. The high-end treatment brand, which taps the antioxidant power of pomegranate, offers an often cheeky take on serious skin care, with product monikers such as Bum Lift and Boob Job. Today, the brand is sold in approximately 350 doors in 20 countries; industry sources estimate its sales in the $7 million range at current exchange.
MAUREEN KELLY, 36,
With her Irish roots, Kelly is well-placed to promote the idea green can be glamorous. Dubbing her makeup brand’s positioning as “health couture,” Kelly launched the naturals-packed Tarte in 2000 after being underwhelmed by traditional brands, which she found staid and unhealthy. The line is now sold through retailers including Sephora and QVC. By the end of the year, Tarte will be in about 500 doors in the U.S., Canada and Australia; industry sources estimate its sales in the $24 million range.
ETIENNE DE SWARDT, 38,
ETAT LIBRE D’ORANGE
De Swardt burst onto the beauty scene in 2000 as part of the team behind Oh My Dog! — the now defunct perfume for pooches. His predilection for subversive scents, however, hasn’t evaporated and he launched fragrance brand Etat Libre d’Orange in 2006. Some of his more evocative concoctions include Sécrétions Magnifiques (or Magnificent Secretions, in English) and Putain des Palaces (Whore of the Palaces). Etat Libre d’Orange’s flagship store is located in Paris’ vibrant Marais neighborhood. Today the brand is sold in approximately 90 doors in the U.S., U.K. and France; industry sources estimate its sales at $1.4 million at current exchange.
RAMDANE TOUHAMI, 34,
Touhami’s age belies lengthy experience in the fashion and beauty industries. He founded L’Epicerie, a concept store, and Parfumerie Générale, a beauty boutique, in Paris, where both have since shuttered. Touhami is now artistic director and buyer for men’s wear at Liberty department store in London, as well as creative director for apparel brands Resistance R.T. and Antidollar. In 2006, he took on the creative direction and running of Cire Trudon, a French candle manufacturer, which has been operating since 1643. Today, the brand is sold in about 180 doors in eight countries; industry sources estimate its sales at $7.8 million at current exchange.
Q1: HOW HAS YOUR BUSINESS BEEN IMPACTED BY THE GLOBAL RECESSION AND WHAT HAVE YOU DONE TO ADAPT TO THE CURRENT CLIMATE?
It’s a combination of challenges and opportunity. As a young, emerging brand we have an amazing opportunity to grow in a market where people are looking for value. They’re looking for newness and for exciting things while maintaining a budget. We’ve made some minor adjustments and we’re making sure we’re not overzealous. We also take a little more time to make certain decisions, which we might have taken more quickly in the past. We’re looking at marketing plans and the things we’re spending incremental money on and asking, ‘What delivers a direct return to the brand?’ ‘Can we use that money in a way that makes the experience better?’ People, including myself, are asking themselves more and more, ‘Do we need to live beyond our means on excess credit or can we live without having to spend the world?’ More people are now looking for things that give them more than just a product. They want a brand experience and a personal experience. I call it ‘the love experience.’ When you love something you stay with it for life. We’re thinking about what we can do to make our value and offer better. Rather than taking away, we’re asking how we can give more. Now is a time when people are looking for things to fall in love with.
We’re growing at a 50 percent rate over last year, which is amazing. That’s because we launched new accounts and new products. If you have a well-developed philosophy and your product has a unique positioning, you’re going to do well. Our products are very specific and they solve specific problems, which is what customers want. They want something that makes them feel better. Rodial started very small and still doesn’t have external investors. We’ve grown organically and we’ve always been careful with our fixed costs. We only spend what we need, which has really helped us, as we haven’t had to make huge cutbacks. If you’ve always been careful with fixed costs and expenses it becomes second nature. A company that’s backed by private equity and is used to having huge expenses might not be used to that. We froze recruiting in non-sales positions, as our sales team has to grow in line with new accounts. We’re not hiring for other office positions — we try to get everyone to take on more work. We’re subcontracting where we can. For instance, we’re launching a new Web site and there was a question over whether we would hire someone in-house for the design and maintenance. We decided it was better to outsource, since if things get rough it’s easier to end a contract than to make someone redundant.
We haven’t yet been impacted, but we’re bracing for a blow. It’s more about anticipating what could come around the corner and bracing for impact. Overall, we’ve been making our budgets. The climate is similar to what it is for big businesses, but since we’re smaller we’re more nimble and can react more quickly. Big machinery can go slowly. We can implement changes that can affect our business in a positive way quickly. We haven’t seen a tremendous softening as green beauty has not seen a big impact. When dollars are tight you want to feel good about the money you’re spending, if you have any. Our packaging uses post-consumer recycled [materials] and we use soy ink, which the consumer appreciates. We did it because we care, but it was a gamble that we hoped would pay. In this economy, it’s paying off. We’re calling out value more. We didn’t speak about value in the past, as we’re a prestige brand, but customers want to feel like they’re getting value, even if they can afford to spend. It’s not about discounting, but there are ways around that by being creative. We did a campaign — Be Good To Your Mother Earth — where we sold a bag of products worth $62 for $35. Customers know it’s a great deal, but you don’t get that bargain-basement discount feel.
ETIENNE DE SWARDT
We do feel the situation. Niche and independent perfumeries are not as affected as the department stores. There’s more pressure on us from suppliers as some cannot extend credit because they are suffering from tight cash flow and treasury. It’s also difficult to be paid in advance by small perfumeries. So funding stock is more and more difficult. It’s an opportunity for us, as the crisis will reshape the landscape. It’s a revolutionary period during which we can set ourselves up for tomorrow. As niche brands, we can react more promptly and we can shape the future. We are six people, not 600 to transform, so we can take advantage of potential new opportunities.
For us it’s still good. We are still growing at plus-30 percent for the first three months of the year. In beauty we have not yet been impacted. We also do candles for churches and, strangely, that’s been impacted. So, we are selling our church candle business, which represents 20 percent of our turnover. It’s impossible to tell what’s going to happen next month. It’s harder for big brands. We are so original. We still have products that sell well in stores and we’re still exciting. Since people are staying at home more, they’re buying candles for their homes. We have to work 10 times harder. We are more present in stores, we visit our clients more and do a lot of training. We’re also launching a new cheaper line and offering smaller sizes. I wasn’t planning to do smaller sizes for Cire Trudon but we will for Christmas. For people who can’t afford a 50 euro [$66] gift, we needed one for 30 euros [$40]. We’re also doing candles for hotels. Crisis or no crisis we were going to act the same.
Q2: HOW DO YOU MANAGE EFFECTIVELY THROUGH CRISIS?
The greatest secret is to surround yourself with positive people. Within the industry, we have also become good friends with the people who sit next to us on the shelves. You want to be friends with your neighbors. Collectively, if we grow together we’ll all be successful.
We have meetings where we evaluate our performance on a weekly basis. I want to make sure the team is excited when we have a fantastic week or we get a big order. I want to make sure everyone in the company is in the loop. It’s about keeping everyone excited and up to speed on what’s going on, so that they feel a part of it. Rather than talking about how bad the economy is, we try to talk about the company’s successes, even if they’re small ones.
It’s about downplaying the doom and gloom and making sure everyone is careful about [profit and loss]. We continue to offer value through innovation and you can’t go wrong there. You’ve got to keep your head down and focus and don’t freak out. We’re bracing for a blow but nevertheless going headfirst straight on. We’re trying to keep lean and positive.
ETIENNE DE SWARDT
I try to stay positive and stay excited. I’m giving the team time and opportunity to create something to which they can bring their own added value. I want everyone to be aware of everything. As we’re a small team of six, it’s easy to get everybody on board and be positive and excited.
I have a team of four to five people. I’ve known each person for more than 10 years. I call them my gang. They would kill for me and I would kill for them. You have to have a strong team around you. Everyone works 10 to 12 hours a day; we have no choice.
Q3: AS RETAILERS CUT BACK ON INVENTORY AND SERVICE, HOW DO YOU COMPENSATE FOR THE LACK OF SUPPORT?
We’ve found our retailers to be very supportive, but there’s not a single brand that’s not noticing a style change in inventory management. For us, we’re very much aware of operations. Our products are still selling, so we’re quite comfortable. We love in-store promotions and we’re constantly looking to add value. When things were good we always had a value vision, it’s not something we’ve just discovered.
We have seen retailers cutting back on stock levels, especially in the U.K. If typically they’d keep 12 weeks of stock now they only hold two to three weeks’ worth. What we’re trying to do is to boost our Web business, as there is demand for products there. We’re launching a new Web site, as we want to make sure we don’t lose a customer because a store doesn’t have a product in stock. On the site customers can have a great brand experience and the margins are higher.
We’re getting a lot of support, as the brand is green and it’s growing. Our comps are up and on QVC, beauty is the fastest-growing category, so they’re giving it a huge focus and more airtime. If our sales slow down, retailers will stop ordering as often, so we’re making sure our sales team is out there pushing and educating. There are opportunities for companies like ours to steal market share as long as you have a point of difference and you’re being creative. If you have innovation and value, people will buy it.
ETIENNE DE SWARDT
Like the car industry we have to reinvent ourselves. We have to promote and push the Web site and store more and extend into new types of partnerships. In China, for example, we’re looking at a new partnership deal that’s outside the beauty business — it’s not a fashion firm, it’s not in luxury, but it’s close to it.
We’re giving out more catalogs and doing a maximum of press. We’re trying everything. We’re not feeling the crisis, as we’ve just been distributed for a year and a half and we’re still growing. We’re clearly OK, but I act like something’s going to happen tomorrow because I’m paranoid.
Q4: HOW DO YOU IDEATE NEW PRODUCTS TO DEVELOP?
We’re quite lucky as we have 15,000 ‘carrot lovers.’ Within that, we have a group of ‘carrot fanatics,’ who help us drive our growth and I get tons of e-mails asking me for things. On Facebook, they ask for new products and give suggestions. Our Lip Tints were created because consumers asked for them. We have a small group of what we call ‘very important carrots.’ These people have my e-mail address and some have my mobile telephone number, so they can call me. We have monthly conference calls with them. One of the keys to our success is that the brand is different and gives a feeling of belonging, to being a part of something. It’s more than a feeling — we make our customers part of the entire experience. They’re as much a part of the family as the retailers or the teams that work on the brand. They are integral, if not the most important part of what we do.
They come from certain needs I or my friends may have that we feel aren’t addressed by existing products. We have brainstorming sessions in the office, where everyone from the sales to management teams offer ideas. We may have 10 ideas and only work on two. There have been launches planned we’ve pulled back from because we’ve come up with better ideas. It’s a collaborative effort with the team.
We talk to our customers and we talk to our teams in the field about what they’re looking for and what they’d like to have tweaked in what we already have. As a brand, coming up with new ideas comes easily but because the business is small it’s more a question of ‘Do we have the money to launch, do the clinical testing, etc.?’ We have great collaborations with our retailers, too. We don’t create in a vacuum; we always talk to QVC and Sephora and they always have feedback.
ETIENNE DE SWARDT
For Sécrétions Magnifiques, for example, I was thinking of a comic from the end of the Seventies that talked about the four S’s—sperm, sweat, saliva and blood [or sang, in French]. My mission is to assemble talent and to leverage emotion for the perfumer. I love to walk the road less traveled. It’s everyone’s mission to do that and to take people with you. The first 12 months [of the brand] were about pure creation. Now, we have to keep that alive, to take care of logistics and finances to make sure it lives long term.
We have to do things for our clients and not just for ourselves. I work alone in my office. I don’t look at what other brands do. I try to be as original as I can. I travel a lot and I know all the stores that stock the brand and I know their needs. The most important thing is not to look at what the others do.
Q5: WHERE ARE YOU FINDING GROWTH?
On April 15, we launched in 11 new markets. Europe for us is a growth market. We have at least 12 to 14 new products planned. We have weekly NPD meetings and we’re constantly looking for new ways to improve our existing lines and to bring newness to the market. We’ve been fortunate as a brand that we’re priced for this type of economy. Last year, people were walking into a store with a credit card, whereas this year they’re coming with a 20 euro or 20 pound or $20 note. With us, when they walk out of the store they can carry a nice array of products.
We’ve had significant growth in Asia. Hong Kong is a great market for us. We opened in Joyce six months ago and it’s been flying. The U.S. has been our second-biggest growth market. In the U.S., even if it’s a difficult time, customers are going for our more expensive products as they’re so unique. We’ve built bigger brand recognition and we’ve opened key accounts, so we’re seeing the results of the past five years’ work.
We’re seeing tremendous growth at Sephora and QVC. We’re focusing on our online business, as we’re seeing growth there. We’re doing a lot of social media, like Twitter and Facebook, as you can only tell so much of the story on the carton. We haven’t felt a softening yet, but we’re not stupid. We’re not spending money we don’t need to spend. We’re a small company so that’s not new. We’ve only ever spent money on things we need to have, rather than on what we’d like to have.”
ETIENNE DE SWARDT
At the beginning we were in 10 doors and now we’re in 90. Rolling out is one of the ways we’re growing. We did a partnership with Henri Bendel on a fragrance called Bendelirious and we’re doing the same thing with a music studio in 2009. We’re going to more niche perfumeries and we’re seeing a lot of growth from our Web site and shop. Opening more of our own stores is one option for development, but to finance a new store on cash flow is difficult.
With new clients, by developing new markets and doing new collaborations with brands. We’re doing smaller-sized candles for people who can’t afford the large sizes. We’re also launching Carrieres Frères, which is a line of candles that’s half the price of Cire Trudon’s. We have to develop new things and keep excited. We’re developing Korea, Japan, Hong Kong, South Africa and Morocco. We also have countries like Portugal, which is doing well, and Switzerland and Luxembourg.