By and and  on May 2, 2008

PALM BEACH, Fla. — The sun shone brightly at the National Association of Chain Drug Stores Annual Meeting this week, as the industry did its best to chase away the proverbial storm clouds that for some marked the first part of 2008.

A number of consumer product firms, plagued by sky-high oil prices and financially strapped consumers, felt the pinch of a downward economy in the first quarter. Beauty sales in particular took a hit. After growing 4.4 percent from 2005 to 2006 and 3.5 percent from 2006 to 2007, sales inched up only 1.5 percent for the 52-week period ended April 19, 2008, according to ACNielsen data (excluding Wal-Mart). The bigger picture is painted with units dropping 2 percent. And, several manufacturing companies in attendance, including Kao Corp. and L'Oréal, had just reported weaker than usual quarterly results.

But, firms at the bustling Annual Meeting — held here at The Breakers Saturday through Wednesday — had put most of the doom and gloom behind them, choosing instead to get to work on ensuring a productive second half.

"The big plans are to restore growth to the beauty category," said Carol Hamilton, president of L'Oréal Paris, a division of L'Oréal USA Inc. She noted that the mass market represents only 47 percent of the total beauty category and that the brand's aim is to steadily up that percentage and expand the mass market by enticing the cost-conscious to shift their buying from department stores to mass retail chains.

"Everybody is channel surfing," said Hamilton, adding that with "economic pressures" weighing on consumers, the division is positioned to grab newly value-focused consumers.

She anticipates that the benefits of L'Oréal's latest innovations, such as an Infallible Never Fail Lip Gloss, which lasts six hours, will appeal to department store customers just as much as mass shoppers. "We want to make sure our messages are really powerful," she said.

Steven C. Anderson, president and chief executive officer of NACDS, said the time is right for drugstores to use their natural tie-in with health to help shoppers discover the link between beauty and wellness. "The front-end is so important to drugstores, and cosmetics is the anchor of that. I really think there is great potential for us to merge health with beauty," he added.Mass retailers are doing their part to encourage consumers to defect from department stores in favor of their value-laden doors. For instance, items from venerable prestige brands — including the Estée Lauder Cos. Inc.'s Origins, Clarins and L'Oréal's Kiehl's line — were recently spotted in a number of Target doors in a display called Professional Skin Care. Industry sources said that Target Corp. is testing the display — positioned alongside Procter & Gamble Co.'s Olay lines — in roughly 300 doors. Target declined to comment on the presence of luxury brands, and each of the brands included in the set said they did not have a direct relationship with the mass retailer.

CVS Pharmacy, which has put more of an emphasis on beauty with its year-old Reinventing Beauty marketing and merchandising program, reported that it's pleased with the results that the campaign has produced. Cheryl Mahoney, vice president of merchandising for beauty care, said CVS plans to continue to evolve its beauty offering and find innovative ways to reinvent beauty for customers. It's in-store beauty magazine, published by Beauty Handbook, reflects the change, and is now called "Reinventing Beauty."

Ulta Salon, Cosmetics & Fragrance Inc. participated in the meeting for the first time on the advice of Barbara Zamudio, the chain's vice president of mass merchandising. Ulta's president and chief executive officer, Lyn Kirby, was also on hand to meet with top mass market beauty firms.

At the show, there was an emphasis on health, skin and green products. "We are seeing a lot of products for very deep wrinkles," said one executive from a major drugstore chain. "And also green initiatives that are quality items — not just a natural label slapped on them."

Coty Inc. officially introduced to retail executives its broadened beauty portfolio, which now includes Del Laboratories' Sally Hansen, the budget color line NYC New York Color and La Cross implements. On Saturday, Coty outlined its plans to integrate the Del Labs brand, which strengthens the position of Coty — known largely for its fragrance business — in mass market cosmetics. To that end, in April Coty began rolling out Sally Hansen Natural Beauty, a cosmetics line created in collaboration with the resident makeup artist Carmindy of TLC's "What Not to Wear." From the 140 stockkeeping-unit line, the Luminizing Face Primer, which is designed to smooth and refine skin texture while hiding pores and fine lines, and Your Skin Foundation, are proving to be brisk sellers, said a Sally Hansen spokeswoman.In March, Coty's chief executive officer, Bernd Beetz, said the company plans to fully integrate the Del Labs business over the next 12 to 18 months. He added that Harvey Alstodt, president of Del Cosmetics, and his team will continue to run the Del Cosmetics business. Industry sources who attended NACDS Annual this week said Coty plans to trim about 120 jobs from the acquired Del Labs business.

Lornamead Inc. is attempting to entice value-conscious shoppers with its expanding portfolio of heritage brands (defined by the company as well-trusted names with high consumer awareness). In 2006, Lornamead, which also owns Yardley and LypSyl, acquired Finesse and Aqua Net from Unilever.

George Russell, the firm's ceo, said Lornamead has already had success dialing up Finesse's message of self-adjusting hair care summed up in the tag line, "Sometimes you need a little Finesse; sometimes you need a lot." Finesse's new packaging, backed by more than $4 million in advertising, lifted the brand's productivity by 26 percent, said the firm's vice president of sales, Pete Columbia. Russell said the strategy is to refresh Finesse's packaging every 18 months toward a more premium look.

The company has also updated the look of Yardley in a bid to play off its English heritage and also to grab a younger consumer, and created new scents like Lemon Verbena with Shea Butter. The bath and body line is sold in more than 80 countries worldwide. It also introduced a spa line, called Yardley Lavender Spa, in the U.K. and to Rite Aid stores in the U.S. Its LypSyl brand — said to be a leading lip balm in Europe — also has refreshed packaging, complete with a sliding bee-click delivery system that the company introduced about nine months ago. To enhance the Swedish beeswax balm's natural positioning, Lornamead plans to replace the current formula with a paraffin- and petrolatum-free version, said to be more than 90 percent natural. LypSyl's marketing strategy will include a 2 million piece sampling effort, and trial sizes tossed in drugstore shopping bags.

He added that Lornamead also plans to acquire a brand consistent with the company's "rich heritage" theme in 2008, to round out its portfolio.

Jane Cosmetics also is positioned to weather the economic downturn, said Lisa Yarnell, president and ceo of Jane Cosmetics. Pointing to ACNielsen data indicating that value cosmetics grew 8 percent in food, drug and mass stores for the 12 weeks ended March 22, she declared, "The $5 price point is the place to be." In 2009, the cosmetics firm plans to expand its Be Pure mineral makeup franchise, now some 88 items big, with products suited for a slightly older woman. The upcoming products, which she hinted will focus on both preventing and treating the signs of aging, will be backed by clinical claims.Markwins International Corp. has introduced its new mineral-based makeup range under the Wet 'n' Wild nameplate called Beauty Benefits to about 500 doors, including select Wal-Mart doors, Meijer, Pathmark and H-E-B, and aims to expand its distribution to drugstores. To acquaint consumers with the lotus extract-infused cosmetics line, Beauty Benefits' web site will feature key words — including blemish, redness, oil and dryness — that when clicked trigger a video tutorial on how to solve each beauty issue. "Retailers told us we are really getting it right," added Shawn Haynes, senior vice president marketing, global development.

To fete the 30th birthday of Wet 'n' Wild in 2009, the company has launched a marketing effort with the tag line "Discover Your Wild Side." Ad visuals will be a touch more wild looking than in years past, said Haynes, and will focus on the face category. The company also is attaching a sweepstakes to the effort, where online visitors can enter to win a designer handbag. The goal of the contest is to grow its opt-in customer database to about 400,000 women from the current 50,000, said Haynes.

Elizabeth Arden Inc. is injecting more celebrity into the mass market fragrance arena with the fall roll out of M by Mariah Carey, which launched in department stores last fall, and Britney Spears' Believe, said Jeff Arnold, senior vice president mass sales. The firm will also distribute Liz Claiborne Inc.'s Usher scent to the masses this fall. Arden will merchandise the Mariah Carey and Usher scents on a large display unit at Walgreens. E. Scott Beattie, chairman, president and ceo of Arden, declined to comment when asked if the company had an interest in acquiring Claiborne's fragrance business, which industry sources said is up for sale. Coty also discussed its plans to keep the pipeline open for more celebrity scents to filter into drugstores.

— With contributions from Faye Brookman and Andrea Nagel

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