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Beauty Inc issue 06/15/2012

An avid car racer, Philip Shearer is not one to spend much time gazing in the rearview mirror.

This story first appeared in the June 15, 2012 issue of WWD.  Subscribe Today.


Since taking the helm of Groupe Clarins as chief executive officer four years ago, Shearer is clearly focused on powering the brand forward, competing for the number-one spot in worldwide prestige skin care.


According to one industry estimate, that would mean Clarins would have to achieve a global sales volume of 1.2 billion euros to 1.3 billion euros, or $1.5 billion to $1.6 billion at current exchange, solidify its top position in Europe, move up from the number six spot in the U.S. and bolster its Asian sales.


Shearer’s love of auto racing is reflected in his management style. Unfazed by complexity and risk, he seems always to have an eye on the track and a foot on the gas. Shearer’s appetite for new ideas is voracious. His disarming charm and an ironic sense of humor mask a steely competitiveness. That instinct to win is often whetted on the track behind the wheel of his new 460-horsepower Radical racing car that tops out at 180 m.p.h.


“He is a very driven guy,” says Jonathan Zrihen, president and ceo of Clarins USA and president of the Canadian subsidiary. “He tells us, ‘When you race, the car goes in the direction where you are looking. Make sure you stay focused on your goal. You want to end up on the [winner’s] podium. Otherwise, nobody will remember you.’”


Previously a group president at the Estée Lauder Cos. Inc., Shearer became the ceo at the family-run Clarins in 2008, shortly before the Paris-based company went private. “In spite of enjoying being a public company, we felt that being private would allow us to invest at our own pace,” says Shearer, who dismisses outright recent market speculation that Clarins’ owners, the Courtin-Clarins family, may be contemplating selling the company. “We are doing so much for the long run,” says Shearer. “Everything we do is for the long run.”


The company had a strong year in 2011, with record-setting sales in October, driven by muscular showings in France, Germany, Asia, the U.S. and even in beleaguered Spain, according to Christian Courtin-Clarins, president of the supervisory board and son of the late founder, Jacques Courtin-Clarins. He said Shearer has brought a certain philosophical duality to Clarins, because his background is both Latin and Anglo-Saxon and he’s also a naturalized American. This allows him to be both creative with a passion for product development but also pragmatic. “He knows how to focus,” Courtin-Clarins says, adding, “He’s very sensitive to the need for sustainable development. Courtin-Clarins credits Shearer with injecting the discipline needed to allow Clarins to produce realistic, workable budgets. Another source says that Shearer examined the whole operation after he arrived, looking for ways to streamline some mostly back- office operations, like in the supply chain, in order to reinvest in the brands.

According to industry sources, Clarins is aiming for a sales target of 1.3 billion euros ($1.6 billion) for 2012, which would represent a 30 percent jump over the precrisis figures of three years ago. Moreover, the company has paid down half the 880 million euro loan that was taken out in 2008 to bankroll going private, according to industry sources, and the company recently refinanced with a more conventional arrangement.


“The business is better,” says Karen Grant, vice president and global industry analyst at NPD Group, of U.S. sales. She notes a turnaround in the face and body care categories became evident in the fourth quarter of 2011 and gained momentum with the new launches of this year.


“Over the last couple of years, Clarins’ product positioning tends to be clearer than before,” says Serena Jian, beauty and personal care corporate analyst at Euromonitor. “Target consumers were identi- fied between the ages of 18 to 30, demonstrated by its recent product launches, including the Vital Light range in the U.S. in 2010, the Instant Smooth range in Europe, as well as the Energizer skin care range in 2011.”


Yet Jian says Clarins has been under- performing the market overall. “[It] fell out of the top 25 global beauty players in the beauty and personal care industry in 2010, due to its reliance on the developed markets,” she explains. [Clarins ranked No. 26 for 2010 in WWD Beauty Inc.’s Top 100 list.]

About two thirds of the business is beauty, primarily skin care, and the remaining third consists of fragrance, comprised of owned brands like Thierry Mugler and Azzaro, and licensed labels and fashion.


Shearer’s sense of realism shines through when discussing strategy on how he plans to build the skin care business in Asia, particularly China and South Korea, Brazil and the U.S. Like other industry executives, Shearer sees the international business in terms of population groups that travel—the Chinese, the Koreans and the Brazilians—rather than fixed geographic markets. He often points out that the worldwide duty free business is bigger than the U.S. prestige beauty market.


Clarins’ strength is in Europe, where it dominates and has a strong heritage, dating back to 1954, as a pioneer in plant-based natural products. The company also has expertise in perfecting professional services in its own skin care spas, which number about 150 freestanding locations and 70 units in department stores, largely in the U.K. and U.S. They are considered a key building block.


But in terms of the geo-economic dynamic, Shearer says he wants to flip the present ratio of sales from 60 percent European and 40 percent outside of Europe to the exact opposite in the next five to eight years.


“Our strength is in Europe and Europe does not provide the growth that we need in the long run,” he observes. “We’ve got to reinvent ourselves in other parts of the world. We’ve got the brand, it’s a matter of making it work.”


He elaborates, “In Europe, we’ve got a 16 percent market share in skin care. In the U.S., around 4 percent. If we take in individual countries, like in France, we have a 26.2 percent market share; in the U.K., 21 percent.”


Clarins’ men’s skin care line ranks around second in Europe. Shearer adds that he would like to multiply his American share by a factor of four or five. “I know the U.S. market is very difficult,” he notes, comparing America to “a fortress” full of well-armed competitors. “It’s a huge market, the competitors are very strong. But there’s a potential for Clarins to do a lot, lot better.” Shearer sees the U.S. as a linchpin for any global development plan. “You can’t exist long-term in the world if you are not strong in the U.S.,” he declares.


Shearer is an enthusiastic proponent of department stores, professing his “love” for the traditional retail format that other vendors love to hate. However, he takes a dimmer view of specialty chains like Sephora that, he implies, promote their private label brands, disadvantaging their vendors. He says this is acute particularly in Europe. In an interview last year, “brand destroyers” was his personal characterization of specialty stores that collect margins from mainstream vendors and reinvest the money in their own competing brands. “I think that those guys do not fulfill their part of the job for what they are getting in the deal,” he said.


He offers a four-part analysis of why the Clarins brand has such an anemic position in the U.S. compared to Europe. When the brand was established here decades ago, the products were priced too high. “The brand in itself is supposed to be accessible in pricing—that’s what the founder wanted,” Shearer says, adding that the price points are being moderated. “We’ve lowered the prices on basic skin care, cleansing and toning. We’ve recovered; we’ve recouped through volume more than what we have lost in pricing.”

The second problem is that the department store distribution was too wide, up to 1,300 doors. The count is now closer to 900.


Third, Shearer indicates that the U.S. wasn’t viewed as a real opportunity worthy of serious investment. Fourth, he says that while Clarins developed sun and body care businesses in the U.S., it “never really developed the face market, which is where the bulk of the skin care market is.” To plug that gap, a hero face product has been developed, he says, with its launch expected in the first quarter perhaps of next year. According to reports, it’s an antiage serum.


Clarins takes the position that a woman’s best beauty asset is her skin. “We have a number of very smart products that we call bridge products that are between skin care and makeup,” Shearer says. “We use makeup more to enhance your natural beauty than to cover it up. We are more into using a palette of colors and shades and foundation that will enhance your natural beauty.” Shearer points out that “a lot of Asian customers agree with our idea of beauty, which is that your best asset in beauty is your own skin.


“Asia is the land of opportunities,” he concludes.


“In the U.S., we haven’t spent enough time on face. These markets, sun and body, are not categories big enough to sustain a business in the long run.”


But the company is making up for lost time, according to Grant of NPD. “In the face category, we are seeing a strong push this year,” she notes. “They are innovating in the category, so we should expect to see good things.”


Clarins scored with the top launch among age-specialist serums—Super Restorative Décolleté and Neck Concentrate. Moreover, among the top 20 skin care launches in the first quarter, five of them were from Clarins and all of them were designed to deal with the face. By contrast, Grant notes, Clarins placed only one new product in the top 20 last year.


In the U.S. prestige market, Clarins ranks second in both body care and sun care. Although the prestige category in the U.S. is dominated by facial products, Grant adds that Clarins has the advantage of being able to leverage its strong- ly developed body and sun care business. “Others play but Clarins has a strong showing,” she says.


Overall, Clarins tops the rankings in France and the U.K., while placing sixth in the U.S. The brand ranks in the top 10 in seven of the eight countries that NPD tracks.
Shearer’s goal in the U.S. also has been “to make the brand more relevant in its expression.” That was the motive behind repackaging the products with an eye toward sustainability, launching a new ad campaign early last year and revamping its Web site last year with e-commerce capabilities. According to one knowledgeable source, Clarins was late to the digital game, but Shearer came on as a big proponent, opening a complete department in Paris and beefing up the U.S. capability. Clarins even developed an interactive game about a spa that consumers can play online.


Describing the effect of putting a spa in a department store along with a Clarins counter, Shearer says, “When we have a spa, we tend to grow at a much faster rate than when we don’t have a spa. That’s what we call ‘the small wheel and the big wheel’—the traditional counter being the big wheel and the spa is the small wheel. There is a lot of activity between the two locations,” he says, adding that another spa was opened last October in the Chestnut Hill branch of Bloomingdale’s in Boston. The spas are used to display expertise and build the brand’s image. “We are the only [brand] which has a true professional anchorage because that’s where we were born.”


Shearer points out that there are two ways of sampling products: at point of sale at the time of a transaction, or through the spa. “The spa is a means to an end at which to sell products.” Calling this process “fuel for business,” Shearer explains, “If anyone could be the MAC of skin care, we would be. We are professionals selling products. What MAC does so well is that they sell you a foundation or a lipstick or an eye shadow with a method that you can apply, so that is looks professional. That’s what we can offer.”


Zrihen says that one of Shearer’s strengths is knowing which battles to fight. Shearer talks about “scoring goals,” and his rhetoric is laden with motivational power for the troops. Of the beauty business, he says, “It’s a way. And it’s a tough one. You’ve got to be very ambitious but realistic.”


He continues, “You have to play the battles that you can win. I say, for instance, ‘Let’s focus on one store or two stores. I known I can win this one.’ [Winning] is always important in a company–people have got to learn how to win. Because once they start [enjoying] the sweet smell of victory, they want more. It’s addictive.”


The most dramatic application of this philosophy was used in the American market. Out of the 900-door distribution, Clarins carved out the 250 most-promising stores and poured on the resources. One of the doors was Bloomindale’s 59th Street flagship in Manhattan. Sources say sales there soared from $1.6 million to $3 million to $4 million last year. Without commenting on the numbers, Shearer attributed the increases to highly motivated sales people, the appeal of the product and help from Bloomingdale’s, both with their clienteling system and the store’s support. “They loaned us some space,” Shearer observes, “and there has been an investment in us, which has been very, very powerful.”


“The brand has been terrific,” says Michael Gould, chairman and chief executive officer of Bloomingdale’s. “They have been a great partner. We more than tripled the business in the last three years. It goes to show what a relationship can do.”


Howard kreitzman, Bloomingdale’s vice president and divisional merchandise manger, recalls that goals were set starting in year one and everyone at the counter was focused on the finish line. In addition, there was a well-organized, disciplined event calendar. “They didn’t do anything that couldn’t be done by everyone else. They just executed it better than anyone else. They were determined to outpost as much as they could and they worked to make it happen,” Kreitzman said.


The grand push also bore fruit in Macy’s in Dadeland, Fla., where sources say sales hopped from $600,000 to over $1 million; in boston, the volume rose from $400,000 to $1 million. One observer notes that four years ago, before Shearer’s arrival, Clarins had three $1 million doors in the U.S. Now it’s almost 10.


Clarins also is doing well at Nordstrom, according to Laurie Black, general merchandise manager and executive vice president of cosmetics. “It’s performing very well,” she says, adding that a couple of products have been hot sellers, as part of the industry-wide wave of special-item product innovations. Also, Clarins and Nordstrom have teamed up to provide mini-spa services that have gone over well. One opportunity that clarins may be missing, Black cautions, is the need to be more aggressive in offering a more ambitious color cosmetics assortment.


Shearer has hitched the company’s future to the beauty side of the business, particularly skin care, while giving due respect to the fragrance side. “The fragrance business is great,” he observes, “but it is strong in pretty mature markets that are not growing at very fast rates, like europe or North America. So that’s why it’s an attractive business, but it’s not as attractive as other businesses.”


That being said, Clarins has a huge pillar of strength in its Thierry Mugler fragrance brands, foremost Angel, which has been a global top-10 fragrance. Its sister scent, Alien, which was launched in 2005, has come on very strong. The third scent in the series, Womanity, has a mixed record–”okay in Europe but not good in the U.S.” The company’s other owned brand, Azzaro, is doing pretty well, particularly in South America, where it ranks number one in Brazil. Chrome sells well in the U.S.


Clarins also has a number of licensed fragrance brands, such as David Yurman, Porsche Design and Swarovski. Of those, Shearer is less enthused. “I have to say candidly that we have not been as successful with our licensed product as we have been with our own products. That’s across the range, if you will. We’re happy, it’s a decent job, but we’ve not been as successful.

When the conversation turns to geography, Shearer says he is focused on China, as is the rest of the industry. HJe tells a story of a product introduction in Asia that also illustrates how Clarins has always operated. In the late Nineties, Jacques Courtin-Clarins was in Japan, listening to customers complain that their faces were round, instead of V-shaped like Caucasians. It is caused by the fact that there are five concentrations of fat deposits in Asian faces, resulting in the round shape. Courtin-Clarins developed a product, Shaping Facial Lift, which puports to slim the fat deposits. It launched in 2000, was followed by another version four years later, then upgraded recently and introduced in China “to extraordinary results.” He noted, “that’s one way of developing Asia.”


Shearer says the company will do more products tailored for Asia and “we are staffing up, as is everyone.” The idea is to market the brand to the people and the country. “The Chinese travel a lot. China is on fire. Hong Kong is growing at rates you would not imagine. The travel retail business in that part of the world is very strong.”


Discussing the company’s past problems, Euromonitor’s Jian notes, “Clarins has been in China for many years. However, it did not benefit significantly from that market’s huge growth potential. The company’s limited brand and product portfolio, the unwillingness to adapt to the local market, the limited distribution network were to blame. Clarins has a good herbal focus in its products, which in theory sits really well with Chinese consumers, who have a high level of trust on herbals and plants, thanks to their heritage of traditional Chinese medicine. But they haven’t been active in customizing products to suit local preferences. In addition, its limited spending on marketing and advertising were overshadowed by heavyweights of the likes of L’Oréal and Estée Lauder, restricting brand and product awareness among consumers. There is a lot more to be done for Clarins to fully enjoy an uplifting premium cosmetics market locally and globally.”


Shearer also is paying attention to South Korea. “The Koreans are extraordinary people, among the best-educated people in the world, extraordinarily competititve and hard workers.” He speculates that one day North and South Korea will be combined. “The potential for growth in that country is still very big.”


A number of executives remark on the versatility of Shearer’s background, having worked for Elizabeth Arden, L’Oréal and Lauder and served in Mexico, Japan, the U.K. the U.S. and now France. This gives him an intimate knowledge of the inner workings of many of the major brands in the world and relationships with top retailers around the globe. As a result, he is both attracted personally and put on his guard by the subject of Japan.


The land of the rising sun has long been described by industry executives as the most competitive beauty market in the world, and Shearer compares it to the bloodiest battle of World War I, the Somme. “Today the market is not growing,” he says. “I am a challenger and there are some very strong competitors. In terms of locating resources, I have to be careful. The payoff to a huge effort is actually small to what I could get in other countries.”


Latin America, however, is another story. Shearer sees the opportunity there and he’s trying to puzzle out the difficulties, particularly the lack of retail infrastructure and the high import duties in Brazil.


“It’s a big hurdle to have duties and all that stuff, but that the same time there’s no distribution, so we’ll have to create it and I think that’s fascinating.”


He suggests that the key for Clarins can be found in the spas. “The question is, do you have a brand that has the attributes that can work in different channels?” he asks. “The spa channel for us is a good way to demonstrate expertise, sell products and relay it.”


Referring to untilled emerging markets in general, he adds, “You could couple [the spas] with all sorts of Web sites and e-commerce and that’s how you could mushroom it into a new distribution way.”


In Brazil, which has a large fragrance market, Azzaro Pour Homme ranks number on in the men’s market, giving Clarins a platform for future growth. “We are working around anchoring the brand around a couple of concepts, meaning probably a couple of freestanding stores- spas coupled with a digital way to promote and sell the brand. He admits that brazil is particularly complex. “Every state has a different tax. It’s very complicated.” But he observes, “The complexity will go away within 20 years.”


When that day comes, a new idea of distribution will emerg, perhaps a combination of stores and e-commerce. He points out that Brazilians have become partial to the direct selling model, as evidenced by the success of Natura and Avon. “I don’t think Brazil will repeat the same investment in brick and mortar that the U.S. made,” Shearer says.


Mexico is another bright spot, due to the strong presence of the Liverpool department store chain, which has a 55 percent market share. “We’re pretty strong in Mexico,” he says.


Shearer shows signs of having been engaged in a long process since joining Clarins, but it is an effort that he clearly relishes with all the confidence of knowing he is on the right track. He seems to feel right with it, just like the racing, which he cannot stay away from. AFter winning the The Ferrari Challenge F355 for North America in 2001, he gave up racing seven years ago, then recently began edging back into the sport. His return was partially prompted by a desire to team up with a fellow racer who is coping with a serious form of arthritis.


Shearer knows the value of endurance. Most mornings he can be found jogging in a nearby park. On May 6, he completed a half marathon in the Humboldt Redwoods State Park in Northern California, near Eureka. Called the Avenue of the Giants, the course threads its way through a forest of giant sequoia trees, perhaps a reminder of the towering competition Clarins faces in the global cosmetics industry.  —With contributions from Jennifer Weil



1. Winning Is Everything: Identifying achievable goals and nailing them gives the team the confidence to score big successes.


2. Focus on the Face: With well-developed body and sun care businesses, Shearer is concentrating on the sweet spot of the U.S. market: facial skin care.


3. Less Is More: Shearer lowered both product prices and door count in the U.S. and increased investment. Consequently, sales soared, with the number of $1 million doors increasing from three to nearly 10.

4. Service Station: Clarins is capitalizing on its in-store spas as a key point of differentiation as it develops markets around the world. 5. Staying the Course: Be it building emerging markets like Brazil or China or filling the holes in product assortment, Shearer always stays adamantly focused on the finish line.


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