By  on February 3, 2006

NEW YORK — One reason mass market beauty sales increases are stalled at less than 4 percent is because shoppers aren't inspired to buy beauty on impulse.

That's the theory of Gary Schofield, president of the fledgling Smart Brands Inc., a line offering value-priced cosmetics. He hopes his brands, Tru, Ten and Indulge, can change all that at a time when retailers are struggling to define new assortments on beauty walls.

It is more competitive than ever with new offerings from Revlon, Almay, Maybelline, L'Oréal and Max Factor. Planograms are bursting at the seams, but Schofield thinks there's real estate for Smart Brands.

At the same time, there's been a shakeout of some players, including Caboodles, the line Schofield helped launch and nurture before he left to start Smart Brands. Caboodles cosmetics is no longer in distribution.

"There's always room for a value brand. Keep in mind that the largest demographic of consumers wants value. They may earn a decent wage, but they have mortgages and household costs," he said.

Penny-pinching has eliminated some of the impulse nature of cosmetics, especially in drug, food and discount stores where prices have been creeping up during the past five years. According to ACNielsen, cosmetics sales rose only 3.6 percent to $2.58 billion from $2.4 billion for the 52-week period ended Dec. 31 (excluding Wal-Mart).

"Drugstore prices aren't always perceived as a value," commented industry consultant Allan Mottus. Indeed, some lines approach $15 price points — not that much below Sephora's private label items.

That's where Schofield believes Smart Brands fits in. Industry sources estimate his positioning in the market could help his company hit sales of $20 million this year, on the road to becoming a $200 million brand within five years.

"Customers are shopping mass stores as a destination for beauty and that's good. But they aren't buying the spontaneous item that builds sales. They are buying gum, but not beauty. Manufacturers used to do it with promotional pre-packs, but price points are too high and people are thinking of their pocketbooks and thinking twice before buying," he explained.

That's why Smart Brands' price points are mostly under $2.50, with all of them at less than $5. At next week's ECRM show in Boston, Smart Brands plans to unveil a new look for Tru, which was originally a line for tweens and teens that is now getting a more sophisticated positioning. The full name of the refreshed line is So Devine by Tru."It is really a boudoir look. It has more edge and speaks more to a department customer who buys Urban Decay or Hard Candy. We think people will buy it in lieu of the current specialty lines," said Schofield of the line priced from $1.99 to $4.99.

For retailers looking for beauty at a buck, Smart Brands has a line called Ten, which is currently sold in 99 Cent Stores and Walgreens in the U.S. The majority of the stockkeeping units retail for less than $1. "We have a few items that touch on $2 so we can keep some innovation," Schofield said. He believes Ten holds up well in comparison with more expensive lines.

A third product in his portfolio is Indulge, which is currently a proprietary line for Wal-Mart Canada. Indulge is now available to U.S. retailers, as well. "This line speaks to a different customer — one who is more upscale, but wants opening price points," said Schofield, who expects to announce new U.S. distribution in the next month for Indulge.

Smart Brands also is launching proprietary brands with retailers in America, expanding into soft side cosmetics bags and launching products for Disney in Canada. Also, Schofield said, the company is expanding into the "blockbuster" beauty kit business currently dominated by Markwins. Smart Brands tapped Dallas Miller, formerly of Caboodles, as vice president of sales.

"We expect to do big things this year," concluded Schofield.

***

Walgreens executives celebrated the launch of L'Oréal's HIP cosmetics line during a Chicago-area dinner for Walgreens cosmetics supervisors Monday night. From left to right are Walgreens executive vice president of marketing George Riedl, Walgreens senior vice president of purchasing Robert Kral, Walgreens divisional merchandise manager for beauty Katherine Steirly and L'Oréal field sales vice president Jackie Madsen.

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