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P&G to Phase Out Max Factor in U.S.

Procter & Gamble has announced it will discontinue the sale of the Max Factor makeup brand in the U.S. beginning in early 2010.

Global appeal just couldn’t carry Max Factor in the U.S. any longer.

Procter & Gamble Co. is discontinuing the U.S. distribution of Max Factor, which was founded in the Forties as the original American makeup artist brand in the early days of Hollywood. P&G cited reasons the brand has only a small share of the market here — especially compared to its strong growth in the rest of the world — and that resources would be better utilized for its leading makeup brand, CoverGirl.

Max Factor, which generates more than $1 billion in sales worldwide in more than 70 countries, claims only about a 1.2 percent dollar share in the U.S., said a company spokesperson, with a very limited distribution, which includes select Wal-Mart, Duane Reade and Ulta stores, as well as smaller regional drugstore chains and beauty shops. Industry sources estimate the brand generated roughly $50 million at retail in 2008.

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“Max Factor is a strong, profitable brand and remains one of P&G Beauty & Grooming’s key engines for global growth, however, we are choosing to discontinue the U.S. Max Factor brand, which has different products, packaging and distribution channels than the Max Factor brand marketed around the world,” said Virginia C. Drosos, president of Global Female Beauty at Procter & Gamble. “This is the right decision to further strengthen our cosmetics business because it allows us to focus our U.S. resources on continuing to grow…CoverGirl,” she stated. Globally, stated the Drosos, Max Factor achieved double-digit growth in the fiscal year ending June 30, 2008, and is the fastest growing brand in P&G’s cosmetics portfolio. It is also the best-selling cosmetics brand in over 20 countries and the second-best-selling brand in key markets such as the United Kingdom and Russia.

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Beauty industry expert Allan Mottus sees the move to cut Max Factor here as a smart one.

“Max Factor kind of works everywhere else except here,” said Mottus, citing its success in countries like Japan.

One beauty source said even P&G, with all of its resources, needs to focus on their most important flagship brand during this retail climate, which has been seeing brands such as Jane Cosmetics and Physicians Formula lose retail space.

“This could be a reaction to what is happening in retail, where they are looking to consolidate space, brands and [stockkeeping units] and vendors. Any duplication is being looked upon very carefully as to whether or not it is needed. In cosmetics it’s very tough to rationalize duplication because the sheer intensity of the sku’s makes it an analytic challenge,” said the source.

One cosmetics manufacturer, speaking not for attribution, interpreted P&G’s decision as a recognition of the difficulties being faced by brands in the U.S. mass market. “The retailers are saying, ‘Let’s get behind the big brands,’” the executive said, noting that small players still represent a burden in inventory dollars.

P&G acquired Max Factor in 1991 from Revlon, and since then has made several efforts to tap into the brand’s theatrical heritage to make it resonate with U.S. consumers. In 1996, for example, P&G launched a Movie Makeup Artist ad campaign that featured actual movie makeup artists giving testimonials about the quality and performance of Max Factor products. That year, the brand generated about $100 million at retail, according to WWD. Fast forward to 2005 when P&G tapped Carmen Electra to represent the brand, and in 2006 when P&G put world-renowned makeup artist Pat McGrath on the case to reinvent its image. That year, Max Factor generated about $65 million in sales, according to WWD, and also slimmed down distribution to 10,000 doors. Most recently, in September, Max Factor tapped supermodel Gisele Bündchen. Her multiyear contract will be honored, said a spokesperson.

Despite its heritage here, beauty veterans were not surprised upon hearing the news. One cosmetics executive asserted that in this age of marquee-driven marketing, brands have to demonstrate an overarching need and authority with the consumer. Max Factor managed to do that overseas, where the brand is retailed in assisted service environments. But in the U.S., the retail reality is different and the needed authority gradually ebbed away.

Another executive said, “It’s a shadow of what it once was. Domestically it’s just so competitive. They have lost considerable real estate over the years and certainly over the last two years. It’s actually long overdue.”