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Cosmoprof’s Changing Face

The Cosmoprof trade fair continues to undergo a sea change, reflecting the metamorphosis that bedevils the European beauty industry.

BOLOGNA, Italy — The Cosmoprof trade fair continues to undergo a sea change, reflecting the wrenching metamorphosis that bedevils the European beauty industry.

The four-day beauty fair that ended here Monday offered up a new format and look, and it attracted a raft of newcomers from elsewhere in the world in a period when some longtime exhibitors were reconsidering their commitment to the traditional event in light of the economic stagnation gripping Europe.

The  situation was put into stark terms during a press conference held by Unipro, the Italian association of cosmetics industries, on March 31. Italy’s traditional beauty channel — perfumeries — clocked only 1.2 percent growth to 2.36 billion euros, or $2.94 billion, for 2004 over 2003. The continuing stagnation of the perfumery channel is allowing the mass market to catch up gradually. As of last year, it stood at 2.08 billion euros, or $2.59 billion. The salon business also continues to flounder, sustaining a 2.5 percent decrease to 578 million euros, or $719 million, in 2004. Dollar figures are  converted at the average exchange rate.

Overall, the Italian beauty business grew 3.9 percent to 7.39 billion euros, or $9.19 billion, for 2004, while its exports rose 9.4 percent to 2 billion euros, or $2.49 billion.

However, there are bright spots. The country’s pharmacy channel registered an 8.6 percent increase to 1.05 billion euros, or $1.31 billion. Herbalists and health food stores registered a 6 percent increase to 253 million euros, or $314.7 million.

“Due to the very clear positioning of products in pharmacies and herbal stores, consumers who need special products continue to buy there,” said Antonio Argentieri, export manager of L’Erbolario, a natural-emphasis beauty brand sold through pharmacies and herbalist stores.

“Since the market is changing, we’re trying to be as dynamic as possible to mirror what’s going on in the market,” said Laura Zaccagnini, general director at Sogecos, Cosmoprof’s organizer.

The layout of the show was completely reorganized to separate the retail and professional businesses. Each had its own fair entrances. Also as part of the overhaul, the selective perfumery business was moved from its former home in pavilion 36 into a gleaming new, two-story pavilion that was twice as big, now 222,220 square feet versus the old 88,890 to 100,000 square feet. Tucked within the pavilion was a new concept called Masterpieces, a gallery of what Sogecos calls “artistic” small perfumery brands with highly selective distribution.

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Among the 78 brands showcased in the new section designed with a living-room ambience — complete with oversized low lamps and comfy couches — were Carthusia, Acqua di Biella, Clive Christian and La Colline.

But despite all the added glitz, some exhibitors voiced dissatisfaction with the amount of traffic they were seeing.

“Yes, it’s beautiful, but there’s no one there. We could say that it is no longer a fair for perfumeries,” said Augusto Mazzolari, the owner of one of Italy’s leading perfumery chains.

“It’s filled with brands that seem to be more mass market,” continued Antonella Mandelli, general manager of Mazzolari.

Other executives bemoaned the timing of the fair, which falls a mere two weeks before the duty-free show in Fort Lauderdale, Fla., and six weeks before another fair in Singapore.

“It’s bad timing,” said a brand manager, who requested anonymity. “Why would a distributor come here?”

Some believe the fair’s focus has altered. Michael Edwards, internationally known author of fragrance guides, maintains the profile of the show is changing. “It has becoming a showcase for small and medium-size manufacturers,” he explained. “But where are the big, international players that used to come here?”

He was referring to the absence of L’Oréal’s prestige division starting two years ago and the Estée Lauder Cos., which disappeared from the show floor this year.

“In my opinion, a few companies left the fair for personal reasons,” said Roberto Martone, president of ITF and newly named president of the Academia del Profumo. “In any case, I hope they come back.”

Yet, the biggest hurdle facing the industry is the European economy. Said Mazzolari: “I have to say, we’re in a period of change. I’ve never seen the market like this before.”

“This is not an atmosphere of enthusiasm,” continued Silvio Usellini, export director of Satinine, who added his schedule was busy the first two days of the fair, but the third looked slow. Generally, all three days were fully booked. Usellini also noted that in the past his company would have a lot of unannounced walk-in visitors, and that there were fewer this year.

However, Sogecos said that  visitor attendance increased by nearly 4 percent for the four days — 137,247 people this year versus 132,267 last year. Zaccagnini of Sogecos pointed out Cosmoprof has built up a lot of savoir-faire and momentum over 38 years of putting up shows. Zaccagnini ticked off the number of new government-sponsored pavilions that were present and backed by foreign countries whose industries are trying to build an export business.

For the first time, there were freestanding pavilions for Thailand, Argentina, Poland and Australia. The Brazilian contingent, which was making its fifth appearance at the fair, boasted a roster of 32 individual companies.

Brazil’s beauty exports last year rang up $340 million, and this year the figure is expected to reach $400 million, said Joao Carlos Basilio Da Silva, president of ABIHPEC, the Brazilian Association of Personal Hygiene, Perfumery and Cosmetics Association. Two years ago, it predicted the business would generate $600 million in 2010, but now it expects to reach that goal by 2006 or 2007.

“That means that within three or four years, our goal is to celebrate $1 billion,” he said. “At a Unipro dinner, I was talking to the president, who said Italy exported five times what we exported in 2004. And he made a joke that in three years from now we will be equal.”

Brazil will export beyond Latin America, where 80 percent of the country’s beauty products are currently sold abroad.

“It’s a continent where companies have ups and downs in their economies,” he said. “Because of this, we decided to look for new markets and not to be damaged by ups and downs.”

On April 22, the 500th anniversary of the Portuguese discovering Brazil, Natura will open its first freestanding store, a 2,200-square-foot boutique in Paris.

Even though Natura is a direct seller in Brazil, the company decided to open a retail location to double as a showcase. The store will employ five people and represent an investment of $16 million over three years, according to Thomas Buckup, head of the Natura Europe project.

The brand also is to extend its reach through travel retail, said Fernando P. Del Mar, international manager at Natura. The company now sells its Ekos brand in travel-retail shops in São Paolo and Rio de Janeiro and plans to expand into Cancún, Aruba and elsewhere in the Caribbean. 

Perhaps the export fever was epitomized by Sheila Farah, brand owner of Amazon Secrets, a grassroots start-up. She was using the show to springboard her cosmetics and lifestyle collection into retail for the first time. Amazon Secrets includes two personal-care lines, plus baskets, candles, incense, potpourri and fragrances, all inspired by the rain forest.

Much more established — but also looking for a further global reach — is Korres, from Greece. The problem-solving line’s birthplace was Athens, in Greece’s first homeopathic drugstore in 1966. Giorgos Korres started working at the drugstore in 1987 and took over the business in 1991, then founded Korres in 1996 with a total of 15 to 20 customers. Eight years later, he has 5,800 customers at home, exports to 20 countries and generated 15 million euros, or $18.7 million, of business last year. By the end of 2005, Korres expects sales to reach 22 million euros, or $28 million.

The company plans to open its first freestanding store in New York this year, followed by a location in Munich in 2006. Korres already has boutiques in London, plus two in Barcelona. Other openings include doors in Belgium, Australia and Korea.

To help launch these markets, Korres will introduce its first color collection, with 120 stockkeeping units, in September. Another one of Korres’ new initiatives was a line of body, foot, hair and oral care products using mastiha, a tree resin found on the Greek island of Chios.

With the industry becoming more global by the day and the profusion of new product launches, local manufacturers often lack the resources to build overseas businesses. That’s why Selective Beauty has set itself up as a full-service distributor.

The company started in 2000 is headed by Christophe Cervasel and Corrado Brondi. After only three years, the firm broke even. And, by 2004, it turned a $1.5 million profit on a volume of 70 million euros, or $87.1 million.

Cervasel said that, especially after Sept. 11, companies would like to have a subsidiary overseas but can only afford a distributor or an agent. Selective Beauty has a unique structure, composed of a separate team for each market to smooth cultural differences.

“Our main target is to develop market share,” said Cervasel.

While clearly the company does not want to go into the manufacturing business, it also is intent on forming stable relationships with brands. Moreover, Selective Beauty goes well beyond the role of distributor by advising clients in the creative process as they develop product.

“We’re looking to develop our worldwide partners and add some world distribution contracts,” so for that reason Selective Beauty not only works as a distributor and an agent, but is also open to signing licensing agreements, said Cervasel. One such deal has been reached with Benetton, which is a worldwide distribution agreement. “We provide the service that no one ever provided before, as a world distributor,” he said.

Selective Beauty has so far struck three world contracts and developed relationships with 25 brands in different countries.

Another company that is putting its eggs in the export basket is Pupa, whose growth abroad last year was 16 percent, while its domestic business remained flat.

Paolo Bevigne, export manager for Micys, maker of Pupa, said the firm has a new merchandising unit for stores and is introducing some products, including Polly’s Farm bath-and-body line and Eye Designer shadow duo, whose two shades are automatically mixed together when the applicator is slid over the color surface like a credit card going through an old-time payment processor.

Diego Dalla Palma opted out of Cosmoprof this year, but during an interview in its Milan-based office its executives discussed setting their sights abroad.

“We’ve already consolidated our market in Italy, now we are concentrating on foreign countries,” said Grazie Zaccarini, brand manager for Diego Dalla Palma.

The brand will launch Concura, a 10-unit skin care line — its first in the category — next January to kick off business in the U.K. and eventually in the U.S. Zaccarini said it will be positioned somewhere between Philosophy and Kiehl’s. At the same time, Diego Dalla Palma will debut a professional spa line, including 50 references. The company plans to enter the hair care market in September 2006 with a 20-unit collection. 

Intercos, which over the years has built a position as the world’s leading supplier for color cosmetics, is increasing production in the U.S. for the mass market and broadening its strategy to include domestic consumption for the Chinese market.

Dario Ferrari, Intercos’ president, said he expects to open a facility in  domestic China by the end of this year. It will produce promotional kits and boxes, among other things, that then can be used by his original factory for fulfillment in China’s duty-free zone. The domestic factory will also supply to other areas, including the Philippines and India.

Ferrari estimates there’s a $500 million market for production of promotional kits and accessories inside China, and he would like 10 percent of that pie.

Following Intercos’ acquisition of Inter Fila, its production of plastic and mechanical pencils will be started up in China.

In the U.S., through Intercos’ Congers, N.Y.-based plant, the company’s mass market business is now more important than its prestige volume. Overall, Congers contributed 10 percent of the company’s 200 million euro, or $248.8 million, global turnover last year. For 2005, it is expected to claim 15 percent.

Arabella Ferrari, vice president of global strategic marketing at Intercos, stressed that a shift in strategy at the firm has been to collaborate with clients more frequently in sessions designed to help manufacturers plan their product innovation better.

In its yearly product showcase and trend presentation, dubbed “Beauty can change your mind,” in its headquarters in Agrate Brianza, outside Milan, Intercos zeroed in on long-lasting products with talk of new high-molecular-weight polymers. The company used them in long-wear lip glosses, plus eye, face and body powders and emulsions.

For the first time, Intercos claimed that through its new formulas it could create lip glosses that are long-wearing. The company has come up with shiny, wet effects that give lip color liquid plastic, wet metal and glassy effects combined with elastic firming properties. Intercos maintains that its gloss sticks increase color dimension and sharpen the shape of lips.

In the skin category, Intercos emphasized powders billed to make skin look “hyper-perfect.” Some also play with light to enhance the body’s curves. Among its more than 100 new formulations, Intercos was also presenting powder-coated, water-based products for eyes. Compacts containing powder ornamented with jewels were on display as well.

Another resource to be showing compacts with rhinestones implanted in its packaging was Gamma Croma. The company moved beyond laser-printing designs in compact pressed powders to baking different components then fitting them together like a jigsaw puzzle, said Kristin Csaszar, project coordinator for Gamma Croma U.S.A.

As another example of overseas targeting, Milan-based Saledo is producing a bath-and-body line called Sweet Mania that is priced 30 percent less than the company’s main collection. The new effort has been tailored for Claire’s Accessories stores in the U.S.

Saledo’s general line is festooned with clever color novelties aimed at teenagers. These include Rolling Hearts, a lip gloss and eye shadow duo encased in a see-through, plastic ball. There’s also Call Me Up and Makeup, an inventive cellular phone accessory made of an attachable mascara, eye shadow or gloss. 

According to Monica Masini, brand manager of Saledo, the company’s is expected to increase sales by at least 30 percent this year. Saledo closed 2004 with retail sales of $50 million.

“When the situation is not easy, you had better double your efforts,” said Roberto Venini, chief executive officer of Guaber, Eurocosmesi’s holding company.

Guaber will use its Canali fragrance brand to crack the North American market, with a launch at the end of June, following its April introduction in Italy.

Eastward, Guaber is searching for a spa location in China, most probably in Shanghai, for its Transvital skin care brand. It is also eyeing locations in Mumbai.

For the mass market, Guaber is introducing Bionsen all-over body deodorant, billed to last for 36 hours. It’s made of volcanic crystals that dissolve in water to form a solution with medicinal properties. The company is putting a 5 million euros, or $6.5 million, advertising campaign behind it with expectations of grossing 7 million euros, or $9.1 million.

Guaber registered sales of 165 million euros, or $205.2 million, last year, a 13 percent increase over 2003. For 2005, it expects a double-digit sales uptick.

Its Eurocosmesi subsidiary is introducing two women’s and one men’s Byblos scent.

Selectiva is the manufacturer of Aqualina, a playful food-oriented beauty brand. The company is launching its first color cosmetics line, made of lipsticks, glosses and balms, for the domestic and export markets, said Antonella Pascale, the company’s export manager. It is called Dolci Baci (“Sweet Kisses,” in English).

Following the introduction of the Pink Sugar women’s fragrance, Selectiva will introduce a men’s version, Blue Sugar, this fall. The company also plans to open a beauty bar in Italy next year. The firm had already opened its Milk Bar in Paris, a cafe selling Selectiva’s beauty products.

“The market is very tough in Europe. There is a lack of confidence,” said Satinine’s Usellini, who described the Continent as a “black hole.”

The company will present Luciano Soprani Donna to Nordstrom at the end of April with hopes of a September launch.

“We are now more focused on Soprani development,” he said, explaining the new company strategy following losing the Ferrari beauty license to Morris. Usellini added that a new men’s Soprani scent will be shown at the tax-free show in Cannes, France, this fall. And a women’s Soprani line will be introduced in 2006.

“It’s a beautiful, established brand that’s traditional, chic and elegant, but its products are old and tired.” That’s how Marcio Dos Santos, export manager at ITF, described the existing Gianfranco Ferré assortment of products while explaining the company’s strategy of “reworking the portfolio.”

ITF is now in the process of launching Eau de Cologne Bergamotto Marino, a unisex scent with a seaside positioning. At the end of the year, ITF plans to unveil a new women’s fragrance from Ferré.

ITF’s Martone added that his strategy is to “clean the market” of most of the Ferré merchandise while rebuilding the franchise based on three present fragrances — the classic scent, Essenza and GF Ferré. In addition to the eau de cologne and new women’s scent expected at the end of this year, Martone hinted a new men’s Ferré will arrive next year.

ITF was also showing its new Exte fashion fragrance, which will be launched later this year.

Morris — which acquired the Ferrari license after Satinine — has launched its first fragrance, called Passion, for the label.

According to Martin Trout, export manager at Morris for the Middle East, Far East and Latin America: “Business is good. It is up compared with last year, but that’s because we took over Ferrari. We expect to do even better this year. We’re going to do it, but it is really, really tough. You have to pay a lot of attention to the markets.”

Morris is introducing a new, yet-to-be named Miss Fiorucci fragrance at the end of this year. The Krizia brand will add a masterbrand, called Istinto.

“We are bringing the kids into the perfumeries, which is key in this difficult moment,” said Massimo Bedin, commercial director of the three-year-old beauty brand Medicea. The company will be introducing a masterbrand, called Mon Droghenia dell’Amore (“My Only Drug is Love,”) targeting young people in June. The products will be under the Sweet Years fragrance license.

Kiko, the Milan-based makeup brand, is concentrating energies abroad and at home. Outside of Italy, Kiko entered England and Ireland last November through House of Fraser and Roches, respectively. In the U.K., Kiko has 11 doors, but according to Stefano Percassi, its president of international marketing, the company expects to have 35 points of sale there within two years. Kiko also entered Australia and Saudi Arabia last year.

On the domestic front, Kiko is in 30 Italian doors and plans to have 460 by yearend. A skin care launch is planned for 2006.

One visitor at the Intercos stand was Sonia Kashuk, star makeup artist and color icon of Target. She was looking around the show with her 10-year-old son, Jonah.

Kashuk noticed that the fair seemed quieter than in years past, with fewer Americans and an absence of big players. However, that didn’t slow down her search for new ideas.

“If I find one thing that’s a spark, it’s worth it to me,” she said. “For me, it’s all about innovation.”

— With contributions from Jennifer Weil and Pete Born