By  on May 10, 2007

One of the salon industry's hottest hair care brands — PureOlogy — is now in the hands of L'Oréal, which purchased the Irvine, Calif., company for an undisclosed amount of cash Wednesday.

The acquisition signals the importance of the hair coloring market — PureOlogy is designed for color-treated hair — and also extends L'Oréal's reach into the aspirational luxury hair care category.

PureOlogy Research LLC, which generated $207 million in retail sales for the most recent 12-month period, will relocate to New York, where L'Oréal has its headquarters, and join the L'Oréal Professionnel, Kérastase, Matrix, Redken and Mizani brands within the L'Oréal Professional Products division of L'Oréal USA. PureOlogy will operate under the Redken umbrella once it relocates, a move L'Oréal expects will give fashion-focused Redken entrée into additional upper-tier salons. L'Oréal said the acquisition would not affect corporate earnings for the financial year ending Dec. 31. In addition, it is expected to add to earnings, starting in 2008.

PureOlogy took salons by storm in 2001 when it was introduced with formulas specifically designed for consumers with color-treated hair. Jim Markham, founder of PureOlogy, pinpointed a gap in the marketplace, which was ripe for a luxury, high-priced hair care line that would meet the needs of color-treated hair. Since colored hair tends to fade and be dry, formulas are sulfate-free and contain an "anti-fade" complex. At the time, industry estimates calculated that more than 50 percent of women colored their hair. Now, the percentage has risen to about 65, further bolstering PureOlogy's potential customer base.

Packaging innovations were intended to instantly give PureOlogy a spotlight: Custom-molded containers were designed to fit in the corner of a bathtub, easy-to-pour grips were made to fit a woman's hand and bottles were color-coded to help differentiate among the various items in the line. Products were priced in the $16 to $20 range, unusually high for an unknown brand. What further separated PureOlogy from other hair care launches was that despite being a premium-priced brand, it reached a breadth of salons, not just the most exclusive outposts. Today, PureOlogy consists of hair care and styling items with prices as high as $50 for NanoWorks shampoo, which incorporates nanotechnology into formulas. At a recent industry trade show, Markham credited the high-tech hair care wave for a 70 percent revenue growth in the company's 2006 sales over the year before."Consumers are not concerned with price; they are concerned with performance," Markham said in February. "It is really important for salons to recommend a product they feel good about."

It has long been rumored that L'Oréal would at some point get its hands on the brand, since PureOlogy would fit well in L'Oréal's existing portfolio of professional products. Interestingly, while PureOlogy seems a great fit for L'Oréal's newly stamped Professional Prestige Brands, which include the Kérastase and Shu Uemura Art of Hair brands, PureOlogy's distribution model best meshes with Redken.

"If you are a distributor line, you remain a distributor line. That's why I'm sure it went under Redken," said Jody Byrne, a Streetsboro, Ohio-based trend forecaster for salon manufacturers. Kérastase and Art of Hair do not use distributors.

David Craggs, president of L'Oréal Professional Products Division, said PureOlogy was sold in about 11,000 salons and had the potential to double that. The responsibility will be on the "Redken sales and marketing machine."

"It is a great brand. [Jim and his wife, Cheryl Markham] have done a fantastic job and it is going to be a tremendous asset to our portfolio," said Craggs. "It is a luxury brand, but what was unique is, they distribute in quite a democratic way."

Redken is a good match for PureOlogy, he added, since Redken's hair care and styling business has grown dramatically in the past seven years, as has its educational arm devoted to teaching stylists about the brand. And, since PureOlogy is a brand for color-treated hair, it fits well with Redken's arsenal of loyal colorists who can recommend the product to customers. Expanding PureOlogy outside its existing customer base is an opportunity and "something we will evaluate," he said.

The brand's international allure is another characteristic that drew L'Oréal to PureOlogy, Craggs said.

When the company relocates to New York, Craggs aims to take as many of its existing employees as possible; the Markhams have committed to staying with L'Oréal during the transition.

Craggs said now was the right time to purchase the company, since taking it to the next level required new resources and a bigger enterprise. Markham owned the company along with TSG Consumer Partners LLC, a San Francisco private equity investment firm that recently expanded offices to Manhattan.In the next several months, L'Oréal will meet with PureOlogy's current distributors to discuss the company's evolution and marriage into Redken's distribution base.

Byrne said Redken had been consistently showing up in high-end salons that the industry hadn't taken note of yet.

"They are a big brand, but not massive, and their execution on things is flawless," she said of Redken. "Their salon relationships are strong. They have done everything that an ‘A' salon wants as far as imagery, intimacy and the feeling of connection. Many brands have a face, but Redken has a chorus. They have many people who are beloved in the industry, and the salon industry is an industry of relationships. These days, everything except the bottle is what separates one brand from another."

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