CTFA Shifts Gears Into the Future

What a difference a year can make, at least for the Cosmetic, Toiletry and Fragrance Association.

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BOCA RATON, Fla. — What a difference a year can make, at least for the Cosmetic, Toiletry and Fragrance Association.

At the first CTFA annual meeting to be held since the retirement of industry icon and longtime president E. Edward Kavanaugh, the new leadership team of president Pamela G. Bailey and chairman Marc Pritchard quickly moved to build a new framework for the future. The conference, which drew 647 attendees, was held at the Boca Raton Resort & Club here from March 1 to 3.

Pritchard, who is president, global cosmetics and retail hair color for Procter & Gamble, even issued what he termed a “five-point road map for driving the agenda on safety and self-regulation.”

Chief among these points: three new consumer-oriented industry initiatives, all of which are aimed at sharing more product and ingredient information with consumers, noted Pritchard. A new battle plan seems more needed than ever amid increased sniping from a growing crowd of grassroots watchdog groups.

They include an industry consumer commitment code, a new consumer information Web site, and a review of the Cosmetic Ingredient Review (CIR) Expert Panel, an independent scientific body that reviews the safety of cosmetic ingredients, which will be made more transparent by consulting with CTFA members throughout 2006 and take effect in early 2007.

The consumer code, Pritchard said, is designed to formalize and strengthen practices that are generally already followed by member companies, as well as add a few new ones. A new dossier program is designed to make cosmetic safety information more easily accessible to the Food and Drug Administration, with adverse event reporting mandatory and compliance with the FDA’s reporting program also mandatory. “Throughout 2006, CTFA will commit substantial resources to educating its members on the practices embodied in the code, and the code will formally take effect on Jan.1, 2007,” said Pritchard.

A consumer information Web site will offer user-friendly sections containing information on cosmetics products and ingredients. It will be tested this fall and officially launched in early 2007. As well, CTFA plans a thorough review of the Cosmetic Ingredient Review in 2006, focusing on enhanced transparency and clarity of the review process, improved communication methods to report findings, and the feasibility of increasing the number of ingredients reviewed by the panel.

This story first appeared in the March 10, 2006 issue of WWD.  Subscribe Today.

The final two points address CTFA’s place on the world’s beauty stage. “CTFA will proactively engage global partners in pursuing global harmonization of safety practices and regulations,” promised Pritchard. “We have already invested resources to develop a new global communications infrastructure for connections between the U.S., European and Asian trade associations. These efforts are important, to create a level playing field that allows all companies to innovate freely and better serve consumers around the world.” Finally, said Pritchard, “we are modernizing the CTFA infrastructure to lead in the rapidly changing world.”

When Bailey was appointed last year, Pritchard said, she began taking steps to strengthen CTFA’s capabilities in national, state and local governmental affairs, international regulatory affairs, public relations and basic CTFA staff operations.

“The consumer information initiatives we will launch this year will take us from being reactive to proactive,” said Bailey, taking the stage immediately after Pritchard. “Over this next year, CTFA will reach out all across the country not only to our entire membership but also to the rest of the industry to explain and implement our programs. In the year ahead, we will build new coalitions in Washington and raise our visibility in the right way with Congress. Over the next 12 months, we will implement a new model of global cooperation — this model will achieve tangible progress toward real consistency of regulation for you in each of your key markets.” Bailey noted that CTFA has established strong new working relationships with counterpart associations in Canada, Europe, Japan, China, the United Kingdom and France. “It is truly a new era of collaboration,” said Bailey.

The new leadership team also dramatically reshaped the content of the general sessions with highly relevant business speakers, including Macy’s West chairman Robert Mettler and Ted Leonsis of America Online. The program, which included breakout sessions, was designed to provide a tool kit of insightful information on everything from the Internet to integrated brand marketing. The new more accessible mood was even highlighted by the seating arrangement. The old auditorium style rows of seats were replaced by swiveling office chairs punctuated by coffee tables.

The meeting even drew the star power of Mark Badgley and James Mischka, the first time in memory that a pair of high-profile designers graced CTFA. “We’ve wanted to get into this market for a long time,” said Mischka, referring to the fragrance the pair will be launching with Riviera Concepts this fall. Badgley added that they hope to create a portfolio of scents. And they promised plenty of glamour: “We’re not minimalists,” Badgley said.

Badgley and Mischka walked into the meeting, accompanied not only by Marg Spasuk, vice president of marketing and sales at Riviera, but also by Daniel Rachmanis, president of fine fragrances, Americas, Firmenich, who is supplying the fragrance.

Asked what he thought of the new CTFA agenda, Rachmanis said, “I am so pleased with the new leadership.” He added that “This is one of the best CTFAs” he’s experienced of the 12 he has attended. As for Pritchard’s road map, Rachmanis said, “I’m so glad the industry is mobilizing behind our agenda.”

“The new meeting structure facilitates discussion,” said Michael McNamara, global president of the Neutrogena Corp. “The speaker choices were excellent and much more forward thinking. CTFA is taking the first steps toward a more relevant meeting.”

Eric Thoreux, president of Coty Beauty Americas, noted that CTFA and its European counterpart COLIPA are working together to standardize global regulations. “This gives us the ability to innovate in a meaningful way,” he said.

Demi Thoman, president of fragrances North America for Quest International, also seemed to approve. “We need to do a more proactive campaign and talk about benefits for the consumer,” said Thoman, who also was upbeat about business prospects. “I just feel very good about this year,” he said.

Mettler’s speech, titled “The Future of Retailing,” was of particular interest for many of the attendees in the wake of the Federated/May Co. merger.

The affable Mettler, who is certainly one of the forces behind Federated’s beauty business, suggested that beauty retailers need to deliver “newness, discovery, surprise and delight, a sense of connection, an experience that makes you say ‘wow’ and a moment of relief from the concerns of life.

“In beauty, much of that fun and excitement is being delivered by new brands that project a young attitude and a fresh, distinctive personality,” Mettler continued. “Trend and artistry lines continue their double-digit growth. And niche brands are becoming increasingly important. In 2005, eight of the top 20 beauty brands were artist and alternative brands. Department stores can be fabulous partners for new brands because we understand what they need to grow.”

As well, the importance of celebrity endorsements continues to increase, Mettler said. “In fragrance, celebrity endorsements are creating relevance and have energized the business. Celebrity fragrance brands and those with celebrity endorsement have grown from 10 percent of the top 100 brands to 23 percent.” Case in point: a personal appearance by Sarah Jessica Parker promoting Lovely, her first scent. The event drew thousands of people, some of whom waited two hours to meet Parker, he said. “What’s that about? A chance to connect with someone who has made a lifestyle and emotional resonance with consumers,” he said.

Fashion fragrances are also offering solid growth, he said.

“Today, change is a life-threatening proposition for businesses,” he said. “Either you understand what piece of the pie you want and who else is competing in that world or you don’t survive.

“There is a world of new competitors out there — what I call the ‘new old’ and the ‘new new,'” he continued. “We have Wal-Mart talking about trading up, and companies such as P&G, who have made a strong entrance into solution-based cosmetics, with interesting national marketing forging a powerful connection with customers. We have to be increasingly alert to companies we haven’t been thinking of, who have very different capabilities than our traditional competitors.”

“Retailers and manufacturers both need to be continually learning what the customer wants, what we can do to surprise and delight her and gain a greater share of her wallet,” he said. “At Federated, we’ve done a lot of studying and listening in the last few years. We have a core customer, and you all know her. She is a woman [around] 54 years old. She is most likely married, with children. She shops for herself, for her family, and her home. Here’s what’s different: She loves the department store. She’s in our stores 70 times a year — more than once a week. Every time she visits she wants to see something new. She spends more with us than any of our other customers — two-and-a-half times as much, in fact. Although she makes up only 30 percent of our customer base, she is responsible for almost 80 percent of our sales. Her spend in beauty is close to 15 percent of our total business. As much as she spends with us, we don’t capture her total spend in any one area. And that’s what our efforts are designed to change. We want to please and delight her every time she’s in the store, so that more of her shopping visits become buying visits.”

Mettler sees a particular opportunity in beauty. “NPD reports that women are purchasing beauty products more frequently than they were five years ago — with 15 percent of women saying they are purchasing fragrance more frequently, increasing their makeup purchases and a 40 percent increase in skin care purchases. And there is considerable room to build loyalty in those purchases. Forty percent of women say they do not have a favorite beauty brand and about 50 percent say they do not have a favorite store for their beauty purchases.”

Areas of great opportunity include marketing to non-Caucasian consumers, to men, to aging Baby Boomers and to plus-size women, he said. Services are another untapped opportunity. “Right now, we offer a makeover,” he said. “And maybe a brow shaping. But how many other services could we provide? And what new customers would we attract if we offered new services?”

Leonsis, who is vice chairman of AOL, also championed the idea of change in a keynote address titled “The Future of Communications: How to Reach Today’s Consumer.”

“TV viewing is down, and advertising is shifting to the Internet,” said Leonsis. “New media has emerged as the most powerful way to connect with consumers.” More often — as with Arden’s blockbuster Fantasy Britney Spears scent, he added — advertising campaigns are beginning on the Internet. AOL has done Internet promotions with Revlon, Dove and Spears’ Fantasy scent, he said. “With [Fantasy] we cross-referenced a Britney video on the AOL homepage,” Leonsis noted, with purchasing ability through Spears’ Web site. “This is the way people are shopping. We are training this generation of users to be comfortable with one-click purchasing.”

During the sessions, there were other organizational announcements. CTFA reelected Pritchard and named three vice chairman: Dan Brestle, chief operating officer of the Estée Lauder Cos.; William Gentner, president and chief executive of Kao Brands Co., and Jack Stahl, president and ceo of Revlon Inc. Linda Marshall, president of Elysee Scientific Cosmetics, was elected secretary and Scott Beattie, chairman and ceo of Elizabeth Arden, was elected treasurer.

Richard Goldstein, who is expected to retire as chairman and ceo of International Flavors & Fragrances Inc., perhaps was the best at summing up the significance of CTFA’s change of tactical direction. While praising Kavanaugh as “a great leader,” he described how the regulatory battlefield has radically changed shape. In decades past, the industry was preoccupied with winning over Congress and the Food and Drug Administration. But since then power has shifted to the cash register. “Today the biggest challenge comes from activist consumers,” he said. “The Greenpeacers [of the world] are very sophisticated and very focused. It is very difficult for them to win the day in Washington. But they learned that they don’t have to. If they can win in California, they have won,” he said, referring to popular ballot measures like Proposition 65. “So whose mind has to be changed? It isn’t a congressman; it’s mom, stupid.”

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