Lorenzo Delpani is determined to run a new kind of Revlon.
He’s no fan of the constant product churn along the cosmetics wall in chain stores, calling the industry’s “hyper-innovation syndrome” a disease that creates turn but not repeat sales.
In the past, Revlon has been guilty of heralding a series of one-hit wonders, and then quickly shifting resources and marketing support to the next big thing.
“My management team and I are redesigning the whole go-to-market strategy for the brand— from a positioning standpoint, a marketing standpoint and a consumer standpoint. The key priorities for this company are about improving the innovation model,” said Delpani, president and chief executive officer of Revlon Inc. “It is coming to market with fewer, bigger, better, incremental innovation. That’s my motto. Many companies are saying that, but nobody is doing it — and most importantly — definitely not in the beauty industry right now. That’s the core problem of the industry and for Revlon,” he said. “Doing fewer is easy. It’s about choosing to do less. The difficulty is to choose what you will bet on. But part of my fewer, better strategy is the creation of true blockbuster initiatives that can become the focus of the investment model and also push for growth.”
Delpani also is out to stop another type of churn at Revlon — the revolving door of ceo’s under the firm’s chairman Ronald O. Perelman, who is also chairman and ceo of MacAndrews & Forbes Holdings Inc. Delpani is the eighth ceo that Perelman has installed at the firm over the 30 years that he has owned Revlon.
His two most recent predecessors Alan Ennis and David Kennedy, whose tenures spanned nearly a decade, were largely seen as professional managers. Both brought deep financial experience, having each served as Revlon’s chief financial officer at different points in their career at the company, but neither one could jump-start meaningful market share growth.
Delpani breaks that mold. He sees himself as a marketer with a penchant for innovation. And he’s already making some progress. The market capitalization of the company grew to $1.78 billion from $1.2 billion from Nov. 1, 2013, to Nov. 1, 2014 — Delpani’s first year as ceo. It has continued to grow. The market cap was $2.01 billion on April 17.
“I am a ceo who has an incredible marketing and innovation focus and that by itself is a change for Revlon,” said Delpani, who took the helm in late 2013 following the acquisition of The Colomer Group, where he was ceo and managing director. He was hired by the private equity firm CVC Capital Partners to overhaul the Colomer business, which it purchased from Revlon in 2000. He succeeded in growing the net enterprise value of Colomer by 10 times, and attracting Revlon enough to buy back the business.
Delpani said the turnaround at Colomer, which took place between 2007 and 2013, was based on a business model and strategic framework that is similar to the one he is in the process of deploying at Revlon. He’s also quick to point out that Revlon is a totally different company than the pre-acquisition Colomer, affected by different market and economic dynamics.
“The key has been the development and successful drive of our strategy of value creation with a special focus and emphasis on the development and diffusion of innovation. Among many other initiatives, at Colomer, we launched Shellac, Vinylux, Orofluido, Uniq One, Style Masters and relaunched American Crew. We created very successful innovation that fueled growth behind these key brands,” he continued. “Despite very adverse market headwinds, Colomer more than doubled its profits, enabling [the company] to repay debt, improve the quality of its brand portfolio and significantly increase Colomer’s net enterprise value.”
As he plans to do at Revlon, Delpani narrowed the focus in hopes of making a bigger impact. “At Colomer, I divested 30 percent of the portfolio [between products and countries], so growth was to drive more on the bottom line. But in the end, it was a portfolio of fewer, better brands,” Delpani said.
Delpani’s Value Creation Strategy relies on four pillars, which are to manage financial drivers for value creation, to grow profitability through intensive innovation and geographical expansion, to improve cash flows and to attract and support employees who foster the company’s mission.
The strategy includes expanding gross profit margin and eliminating non-value-added general and administrative costs; creating fewer, bigger and better innovations across the brands; improving cash flow through, among other things, effective management of working capital and with appropriate return on capital spending, and attracting and developing people within the organization who will drive the company’s vision.
At Revlon, 46-year-old Delpani hasn’t shied away from making sweeping changes.
Shortly after assuming the top post, Delpani relocated the beauty firm from its midtown Manhattan headquarters to sleek, sunlit offices at the southern tip of the island. From his perch on the 50th floor with panoramic harbor views, he’s worked to swiftly integrate the two companies, creating the consumer division, where brands from the Revlon business live, and the professional division, which houses the Colomer portfolio, including American Crew and CND (Creative Nail Design Inc.), among others.
He brought in his handpicked management team, which includes key hires such as Benjamin Karsch, executive vice president and chief marketing officer of Revlon Consumer Division, and Gianni Pieraccioni, executive vice president and global president of Revlon Consumer Division.
He replaced the team assembled by Ennis almost entirely, promoting several executives from Colomer, which raised a few eyebrows of industry watchers. One financial observer said the numbers so far have been good, but driven in large part by the Colomer business, as the Revlon brands continue to struggle.
In Revlon’s most recently reported quarter ended Dec. 31, total company net sales for the period gained 1.9 percent to $501 million from $491 million. Sales in its consumer segment — which includes the Revlon brands — fell 1.8 percent to $383.3 million in the quarter, while the professional segment of the business recorded a 17.1 percent sales increase to $117.7 million in the quarter.
Delpani plans to move the consumer brands to a growth track by changing the way different functions work. During a tour of the company’s offices, Delpani said he is in the process of aligning product development and marketing together, as they were at Colomer and past companies he has worked for.
“When I came onboard, after a very deep diagnostic, I aligned myself with the board. We wanted to go for a complete revitalization. I call it a transformation,” he said.
On a recent spring day, Delpani dressed casually in an untucked, black button-down Polo shirt and black slacks as he detailed the path forward for Revlon.
He is bent on building a relationship with consumers, not simply a transaction. The goal: give consumers a reason to love the brands again.
“I am positioning the brands so that they are clearer, stronger and more meaningful for the consumer,” Delpani said.
“The quest for meaning is universal,” he continued. “That’s why we spend a lot of time and energy and passion in creating a meaning behind our brand. In the case of Revlon it is venturing into Love Is On [marketing effort], in the case of Almay it is making people proud of the American heritage of the brand, and for [the deodorant brand] Mitchum it’s about performance.”
He continued, “To be loved a brand must have intangibles. It can be glamorous and bold, and pretty much every brand in the industry is glamorous and bold. We looked for a different space, which I believe is the true meaning of the brand. I call this one step to happiness… You can believe in many things, but love is a universal motivator and value.”
As for whether Love Is On, which launched in November, has turned on sales, he said, “Initial signs are positive. I expect more….It will take some time.”
Through his lens, Revlon’s marketing effort Love Is On isn’t really a campaign; it’s a complete repositioning of the brand and what it stands for.
In the past, Revlon has heralded glamour and celebrity above all else. But not anymore.
He continued, “I really believe that brands must take a side. The brands that don’t take sides get blurred. They mean the same thing that other brands mean and they can only succeed if they have a huge amount of resources.”
Delpani, who after three weeks of brainstorming ideas, discovered the word love within the word Revlon. The idea, he said, is that women open themselves up to the possibility of love when they wear makeup. “If you are open, everything is possible,” he said.
The effort includes a digital billboard in Times Square that streams updated romantic images of people and photos snapped from a camera stationed in Times Square, which telecasts the images onto the pulsing billboard overhead.
He has taken a similar approach to Almay, which the previous management team struggled to turn around. Delpani acknowledged Almay is a more distressed brand, but noted it’s smaller in size than it may seem and warrants less marketing resources.
Delpani tapped Carrie Underwood and a new tag line, Simply American, to breathe new life into the brand. “The meaning of the Almay brand is about American beauty. It’s not a London look or a Paris look….The new concept is getting traction and a positive response,” he said.
“But the true growth of market share and true growth of any business comes only if you have repeat purchases….It’s about getting the innovation to be tried by the consumer, have them experience it and like it, and then have them repeat the purchase. These are the real basic fundamentals. Sometimes they are neglected because they are so simple, but they are far from being simple to execute.”
In 2014, Revlon increased advertising spending by $38.1 million, representing a 10.8 percent increase over the prior year, on a pro forma basis, which assumes the Colomer brands were part of the Revlon portfolio for the entire year. On an actual basis, total advertising spending in 2014 was $383.2 million, up from $278.5 million in the prior year.
His career, which began at Procter & Gamble in Italy in 1992, included posts at Reckitt Benckiser and Johnson & Johnson. Delpani fluently speaks four languages and spends 30 to 40 percent of his time traveling.
A conference room near his corner office was filled with products — with some non-beauty items among them — that he lugged home in suitcases from his travels to places like Japan, South Korea and Brazil.
Another bin of beauty products sat in his office with Post-it notes detailing what he liked about each one. One read, “premium product, both masculine and feminine.” Another stated, “A little sweet but interesting.”
For Delpani, the fewer, bigger, better concept can be applied to every aspect of the business, including investment priorities inside each country and its geographic reach. One of Delpani’s first major actions as ceo was to shutter Revlon’s business in China, where the firm was losing money.
“China was a business unit where I didn’t need any more time to figure out what to do,” he said, adding Revlon was losing money in the country despite putting a great deal of resources into the market. “Would we consider China in the future? Maybe. But we’d have to do it with a completely different business model.…The problem is that the gross margin was insufficient to cover the cost of marketing in the channel.” He added, “I look at all the business fundamentals and we didn’t see a light at the end of the tunnel, so we switched off the light.”
He is quick to point out this fewer, bigger, better strategy also applies to people.
“Part of the process is upgrading the people. The people who embrace change and have the talent to work with it, they are having a good ride right now. And some don’t, and that’s part of the process.”
Revlon’s Pieraccioni, who like Delpani has previously worked at P&G and J&J, described Delpani as an inclusive, involved manager. “He passes from creative to strategy to execution flawlessly…He is very much hands-on which is a reflection of his passion for the business,” said Pieraccioni, adding that he only “sticks his nose into things where he can add value” such as marketing and international matters.
He also nodded to his stamina, recalling that after a snowstorm delayed Delpani’s return trip to New York, Pieraccioni’s job interview began at midnight and lasted three hours.
“That’s his style — he is very much focused on the end result,” Pieraccioni said.
Delpani’s tenure at Revlon has not been without controversy. In January, a former employee, Alan Meyers, a former chief scientific officer at Revlon, filed a lawsuit alleging that he was fired in December 2014 after raising safety concerns and also discriminated against for being Jewish.
Perelman quickly came to Delpani’s defense, calling the allegations that he made disparaging remarks against Jews, blacks and Americans “absurd and offensive.”
By March, Revlon and Meyers had reached a settlement, with Revlon stating the case was “amicably resolved.”
Delpani is ready to put the unpleasantness behind him. After all, he’s got work to do. Reflecting on 2014, he said, “In the first year, I would say the deployment of my full strategy is at 20 percent. There’s still a lot more transformation to go.”
He added, “If anything, my biggest frustration is that this change cannot be faster. The frustration comes from the fact that if you want to execute a strategy, you want to see if it is working or not. Doing fewer, bigger, better takes time. So the full impact of this model can take two or three years minimum to start to see the full bloom.”
He may be impatient, but he’s also determined.
“My purpose is to get Revlon back to the love mark status that it deserves.…It is to a large extent still loved and respected. But it’s not as quintessential and iconic as it was and therefore I want to bring it back to that status.”