As the coronavirus pandemic spreads, each European country has unleashed a financial aid package to try to bolster its economy. These are complicated, multifaceted programs to navigate, and it’s not always clear how they might be best used to the advantage of midsize beauty companies.
Here, a look at how industry insiders in Europe’s four largest beauty markets view the situation.
As part of its 45 million euro economic aid plan, the French government unblocked an emergency loan facility for companies hard-hit by COVID-19.
The French state has said it will guarantee loans worth 300 billion euros to help companies maintain cash flow, pay suppliers and keep staff employed. Beginning on March 25 and running through Dec. 31, companies can apply to their bank for a loan guaranteed by the state worth up to three times their monthly revenues in 2019. Start-ups or younger companies can ask for the equivalent of two years of salaries.
No repayments are due the first year and then after, companies will have up to five years to pay back the loans at interest rates expected to average 0.25 percent. Separately, the government has allocated 32 billion euros to deferring business taxes and social charges.
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Also as part of the aid plan, it has earmarked 8.5 billion euros over two months for workers facing partial unemployment.
“The French government is doing whatever it can to help businesses survive,” said Rupert Schmid, a co-chairman of Biologique Recherche.
Olivia Guernier, director of communication and public affairs at the Fédération des Entreprises de la Beauté, or FEBEA, France’s beauty federation, outlined some of the many challenges faced by beauty companies right now.
“Dozens of decrees and orders were issued in a few days, which is very difficult to follow and implement for a medium-sized business,” she said, also ticking off complications resulting from shifting gears to manufacture hydro-alcoholic gel, as many have done, plus late payments and delayed deliveries.
“The challenge for medium-sized beauty brands is that cash is not unlimited,” said Marion Assuied, chief executive officer of By Terry. “This is how the initiatives from the government are very helpful.”
She noted strong solidarity among all the players to save jobs.
Germany passed a pandemic emergency aid package worth more than one trillion euros last week, but depending on where businesses are located, midsize companies may fall through the rescue net.
“We are still assessing the available subsidiaries for German cosmetics companies,” said Martin Ruppmann, managing director of the German VKE Cosmetics Association. “Each state may implement the aid package differently. There are 16 different [federal states’] answers to whether midsize companies are benefitting from the aid packages. We’ve registered cosmetics companies that were already granted funds. Some are still waiting to apply. For others, there’s no eligible option at all.”
Meantime, there is a thicket of public subsidiaries available, including immediate financial aid, bridge loans, state-supported short-time allowances and rent deferrals. Solo entrepreneurs and small companies with up to 10 employees on one end and companies with more than 50 million euros in sales are covered, but for midsize companies available aid remains unclear.
Luxury beauty brand Dr. Barbara Sturm is evaluating possibilities and considering short-time allowances for some employees, whereby their hours are temporarily reduced and the state job agency pays the difference.
“Now that the state of North Rhine-Westphalia has expanded the emergency aid to companies with up to 50 employees, we’re eligible to apply. I’m positively surprised by the quick decision-making and un-bureaucratic possibilities for financial bridging,” said Barbara Sturm, founder of the namesake label.
“We also have employees in Düsseldorf who can’t work because of the shutdown and could file for short-time allowances,” said Sturm, adding she’s not ruling out possibly filing for governmental aid in the future.
Natural cosmetics company Annemarie Börlind is also assessing options, such as short-term allowances, according to a spokeswoman.
The U.K. government has promised to pay 80 percent of workers’ monthly wages, up to 2,500 pounds, if companies in the country agree not to lay people off. Consequently many British beauty brands are furloughing a large number of employees.
For Sarah Brown, founder of Pai Skincare, the number-one priority is to retain her full staff.
‘It’s too early to know the full impact on revenues, particularly in wholesale. With so many doors closed, we expect a significant downturn, but we are seeing strong sales from our pure-play [online] accounts,” Brown said, adding sales have remained strong on Pai’s own web site and Amazon.
Still, Brown said cash flow is tight with suppliers requesting upfront payment for raw materials and packaging, as well as retailers slowing down payments.
“This has been painful to absorb, and we may need to utilize the government’s furlough funding initiative to achieve this as time goes on,” Brown said. “We’re seeing most companies in our sector taking advantage of it.”
Pai has also tapped into the three-month tax freeze awarded by the U.K. government to businesses affected by COVID-19.
Millie Kendall, chief executive officer of The British Beauty Council, agreed that the freeze on tax has been very positive. However, she’s not sure how many brands may be entitled to the government grant registered for small businesses.
On March 16 Italy’s Prime Minister Giuseppe Conte presented the “Cure Italy” initiative, a 25-billion-euro package intended to support the Italian health-care system, companies, workers and families during the coronavirus crisis.
As part of what was also called the March Decree, the government allocated 10 billion euros to support employment. Of that, 3.3 billion euros helps to extend the “cassa integrazione,” a wage support measure usually applied to manufacturing companies, to commercial activities and to all entities with fewer than 15 employees. But in this case, it was extended to companies with only one employee.
The decree additionally postponed March’s tax deadlines to May 31 for both self-employed citizens and companies, and included a moratorium on loan repayments for small and medium-size businesses.
Last week, Italy’s ministry of economy and finance, the Bank of Italy, the Mediocredito Centrale — specialized in medium-term loans to companies — and the Fondo di Garanzia guarantee fund for SMEs established a taskforce to coordinate and ensure the efficient and quick implementation of the measures supporting financial liquidity as well as to strengthen the action and increase Fondo di Garanzia’s resources.
The Cure Italy initiative also includes allocations for parental leave, babysitters and paid leave to assist family members, among other elements.