Aveda Eyes Overseas Growth

MINNEAPOLIS — Aveda’s Congress Festival, held at the Minneapolis Convention Center here Oct. 20 and 21 with a business college on Oct. 22, brought new meaning to the concept of "reach out and touch someone." <br><br>While it’s...

MINNEAPOLIS — Aveda’s Congress Festival, held at the Minneapolis Convention Center here Oct. 20 and 21 with a business college on Oct. 22, brought new meaning to the concept of “reach out and touch someone.”

This story first appeared in the November 1, 2002 issue of WWD.  Subscribe Today.

While it’s traditional for Aveda meetings to open with attendees turning to their neighbors and giving them a shoulder massage —?a tradition founder Horst Rechelbacher instituted many years ago — it’s a safe bet that it’s a rare group massage session that includes Estée Lauder chairman Leonard Lauder, group president Dan Brestle and senior corporate vice president Evelyn H. Lauder.

The top brass of the Estée Lauder Cos., Aveda’s parent company for five years, was here for the brand’s 13th Congress meeting. The gatherings, held every two years, examine the brand’s preceding two years and look to the future. More than 6,300 salon owners, distributors, hairstylists and other beauty industry professionals from across the U.S., Europe and Asia attended this gathering — nearly double that of the previous Congress, held here in October 2000.

“The marriage between Aveda and the Estée Lauder Companies has been a perfect marriage,” Evelyn Lauder told a cheering crowd. “We are still in the honeymoon phase, and we will be for many years to come.”

Leonard Lauder agreed, adding, “Aveda has evolved brilliantly since it was acquired by the Estée Lauder Cos. We’ve both had a lot to offer each other. In the case of the Estée Lauder Companies, we’ve been able to offer Aveda proprietary technology, new levels of management expertise and increased international expansion.” Lauder was also bullish on the future prospects for the salon industry, which his company addresses through Aveda and sister brand Bumble and bumble.

It was the second Congress for Aveda president Dominique Conseil, who wryly noted that he was glad that “he didn’t have to fire himself.” Conseil had vowed at the last Congress — held four months after he took over as president of Aveda — to cut down delivery delays and create a revamped system to ensure smoother manufacturing and distribution of products. The product service efficiency rate has risen to 99 percent and discrepancies have decreased from 13 percent to 1.5 percent, he said, but “even one problem is too many,” he explained at this meeting. “You are the ones that make Aveda what it is. You own the ship called Aveda; we are steering it in your behalf.”

Falling within that accountability was addressing what Conseil called some “negative buzz,” noting to the crowd that some of that dissonance had arisen during Aveda’s tightening process during the last several years. In the past six years, the Aveda salon network has been slashed from 24,000 salons in the U.S. to about 6,500 salons. Also, when Lauder acquired Aveda, the team shipped directly to about 20 to 30 outside distributors, who in turn serviced close to 24,000 salons. Since December 1997, Aveda has taken over a large part of the distribution responsibilities — it now owns four distribution centers across the U.S. and distributes directly to several thousand salons.

Conseil shared the reasoning behind the trimming of salon doors with the consumers. “We have a brand that is very desirable in the eyes of consumers; in fact, one of our chief complaints from consumers is that they can’t find it,” he said. “However, we maintain the scarcity, the selective distribution, to maintain the network of prosperity. We belong to a company [referring to parent Estée Lauder Cos.] that has been built on the base of selective distribution.”

Conseil also spoke to the group of additional plans on tap for the company, including two new educational Institutes — one of which will serve as the springboard for the company’s launch in Japan next year. The other institute, in Los Angeles, is slated to open in January.

Brestle noted that since the last Congress, the company has instituted several changes intended to maximize Aveda’s potential. “We have internalized a great deal of the brand’s distribution, which has allowed us to go direct with a lot of the business,” he noted. While the firm has not completely eliminated outside distributors — in the salon industry, a great deal of the business is traditionally done through outside distributors — it has cut down on them in the past few years, he said.

In addition, plans have been put in place to maximize Aveda’s potential internationally. At the last two Congresses, one reason Rechelbacher has often given for selling the company was his desire — and assumed lack of capital — to expand Aveda internationally, and Leonard Lauder expressed his desire at the last Congress to continue to expand Aveda’s international focus.

Brestle noted, however, that the strategy is internally driven. “In the old model, we might have given it to a distributor to handle in another country, but you lose some control over the brand doing it that way,” Brestle said, noting that in some instances, foreign distributors chose to sell the brand to department and specialty stores rather than the salon distribution that is Aveda’s lifeblood.

The brand’s team also plans to continue educating foreign salons about the importance of retailing products to their consumers. “While in many good U.S. salons, product revenue can account for 29 percent or more of overall revenue, in European salons, that number is more like about 5 percent,” Brestle said. “We think that’s a terrific educational opportunity and an opportunity for additional sales.”

Aveda, currently in about 20 countries but with a major presence in about 10 including the United Kingdom and the Benelux countries, will launch in one of the globe’s most hair-focused markets, Japan, in fall 2003. And that’s only the beginning: Brestle said he could easily see the brand in 40 to 60 markets within five years. “We see very few limitations to the potential of Aveda,” he said.

Conseil agreed with Brestle’s assessment. “There is an obvious opportunity in international markets,” he said. “Currently, only 15 percent of our business is done internationally. A company like ours could do 60 percent of its sales internationally. And we could still triple our domestic business.” However, Conseil said he plans to build carefully. “We won’t expand until we’re confident that we can do it in a way that is true to our mission. It could take 10 years to be doing 60 percent of our business internationally. But we want to support all of our existing partners in the right way.”

Part of supporting those partners will come through offering continued product innovation, he noted. The brand is planning a new hair color line for next June called Color Current; the gel-based color line will include 19 mix-and-matchable shades —?two of which Conseil was testing in his own hair at Congress. “We don’t test on animals, we test on presidents,” he laughed. The brand is also planning to develop additional services, including increased offerings for men and ethnic consumers.

The brand’s makeup line has been tweaked for a February 2003 rollout as well, and as reported, Aveda will launch its new styling line, Light Elements, beginning in January 2003. While hair accounts for about 52 percent of Aveda’s business, there are plenty of opportunities in other businesses, including color cosmetics, skin care and fragrance.

But not too much. “Aveda’s core is hair,” Brestle said. “I’d be worried if I woke up one day and 50 percent of Aveda’s business was color cosmetics, because it’s not a color cosmetics brand. I’d worry that it was losing its soul.”

Part of the brand’s soul, of course, is its intense devotion to the environment. “We want to make sure that not only does Aveda have the best products in the world, but that we also protect the world,” Leonard Lauder said. Conseil noted that the company has increased post-consumer recycling packaging from about 45 percent to 80 to 100 percent in most packaging. “We want our packaging to have no environmental footprint,” he said.

As well, the company is phasing in a PVC alternative called PEVA. PVC — polyvinyl chloride — does not break down in any kind of ecosystem or landfill and when incinerated, emits a toxic chlorine gas. Aveda has replaced PVC with a material called PEVA, polyethylene vinyl acetate. According to the company, it possesses the same barrier properties as PVC but in its end use, is not emitting toxic gas, and therefore, is not breaking down ozone layers. Currently, it is being used in Aveda’s hydrotherm massage cushions.

Aveda also put its commitment to environmental sustainability into action at the conference itself. Aveda served a certified organic menu; offered refillable containers for water and coffee, rather than single-use containers; featured plate service, rather than disposable service items for meals, and offered recycling bins for everything from cans to hair. Leonard Lauder applauded the initiatives, saying that “in many ways, Aveda is our North Star.”

While founder Rechelbacher attended the conference and inspired the crowd, he left no doubt as to who is in charge these days. “There is no one that can lead this company better than Dominique Conseil,” he told the crowd. “You’re in good hands.”