All eyes are on what Walgreens Boots Alliance has in store for its Boots Retail USA portfolio. The brands are coming to America with a proven track record in the U.K. and a robust start with distribution at Walgreens, Target and Ulta Beauty. Plus, the company is always on the prowl for an acquisition.
In the next few months, more than 1,800 Walgreens beauty areas will reveal a gleaming new department with Boots No7 and Soap & Glory as major anchors. The expansion in Walgreens will heat up an already scorching race for shelf space in mass-market beauty doors between giants such as L’Oréal, and up-and-comers like E.l.f. But the company isn’t only shaking up the landscape at Walgreens’ doors as it looks to put the right brands in the right spaces in U.S. retail doors.
Navigating future growth of the budding health, beauty and well-being portfolio in North America for WBA is managing director of Boots Retail USA, Lyle Tick. Tick joined the global pharmacy-led, health and well-being company in January, armed with experience including the title of global chief growth officer at J. Walter Thompson Co. and Bacardi.
At first blush, rum and rouge don’t have a lot in common — although the spirits and beauty industries have been called recession resistant. Tick believes there are many parallels he hopes to leverage.
“Both categories rely on innovation, they both are fragmented and can be overwhelming to shoppers,” said Tick. The two businesses are also linked with deep and emotional connections to brands. “In both industries, it’s critical to be really clear on what your brand stands for and the role it plays in consumer lives to help customers navigate the selection to make the right choices.” Boots Retail is at the forefront of efforts to employ upgraded fixturing, products with clear messages and improved service in the mass arena to ease the path to purchase in a category associated with a preponderance of stockkeeping units in rows and rows on the wall.
As part of Walgreens’ rollout of No7 and Soap & Glory this fall with its Beauty Differentiation concept, select stores will up the ante with beauty consultants, who receive clinical skin-care and makeover training. They’ll have access to technology in the form of tablets to access information and tutorials. “She is being trained in a way we have never done before,” said Lauren Brindley, Walgreens group vice president of beauty and personal care, earlier this year.
Industry sources estimate the brands produce about $200 million in a small slice of the U.S. market now, but one that has the potential to rapidly double. Walgreens Boots Alliance would not comment on sales.
Not only is Tick charged with steering expansion of the lauded No7 and Botanics brands, but also piloting acquired brands such as Soap & Glory, Liz Earle (a premium skin-care line acquired from Avon in July 2015 for $215 million) and Sleek MakeUp, which was added last December.
“Our portfolio is in its infancy in the biggest beauty market in the world. The next couple of years bring tremendous opportunity,” said Tick. “We’re bringing brands with proven traction elsewhere, but in the Americas we are at the beginning of the brands’ life cycle — we’re still new here.”
And, Tick acknowledges, the company is always open to opportunities around the globe. That was confirmed last year by Walgreens Boots Alliance chief executive officer Stefano Pessina, who has proven he likes buying things or partnering with companies in other ways. Not only has he stocked up on beauty nameplates, he’s also about to complete the $9.4 billion purchase of Rite Aid, the nation’s third-largest drug chain. By his own estimates, he’s made at least 1,000 acquisitions.
While installing the international brand portfolio in Walgreens is a logical path, Tick, who likes to cook in his free time with his wife and five-year-old
twins, has additional plans on the front burner.
“These are strong consumer brands in their own right and will be built as such,” he explained. “We are not building the Boots brand in the U.S. We are building the No7, Soap & Glory and Botanics brands,” he said, adding that Walgreens Boots Alliance is putting the muscle behind their growth.
Wendy Liebmann, founder of WSL Strategic Retail, said the pathway makes sense. ” [Boots] have a history of being in other spaces than their own doors. In a sense, they’ve been an incubator for brands in their own and other doors including department stores. They have the expertise and I think bringing brands through global expansion is where they are headed and we’ll see more coming to the U.S.” One example of a brand Boots helped cultivate is the Mark Hill hair-care brand.
Tick is ready. He’s been a quick study in the U.S. mass-beauty business. With his bold Warby Parker spectacles and youthful vibe, he added a hip factor at the National Association of Chain Drug Stores’ Annual Meeting in April at The Breakers in Palm Beach, Fla., which is so needed in an industry eager to reach younger consumers. He noted it was a great opportunity to meet potential partners at the bustling meeting. “It’s like speed dating,” he joked.
The financial community is bullish on the addition of the premium Boots products in Walgreens’ doors. Deutsche Bank’s George Hill believes beauty, which carries higher margins, will be key in getting customers who come into the stores for prescriptions to fill out their baskets and bolster front-end volume.
But Walgreens isn’t the only benefactor. No7 and Soap & Glory exist in other retailers, too.
Two years ago, when Alliance Boots and Walgreens merged, the industry was abuzz with conjecture that the company would pull No7 out of Target. Target rolled out No7 in the U.S. in 2007 with great fanfare and the addition the next year of highly trained beauty concierges. In 2011, Ulta Beauty added No7, which has been gaining traction in the U.S. from women who know the name from traveling to the U.K. or those who have discovered it Stateside. Estimates are the brand produces at least $60 million in yearly sales in U.S. doors.
Target remains part of the strategy. “Target was a founding partner for No7,” Tick said.
Added one seasoned retailer, “And why not? It is all plus business and it helps build recognition to have the Boots brands in other doors.”
Ulta Beauty was the entry for U.S. penetration of Soap & Glory, the beloved brand created by Marcia Kilgore of Bliss fame when it was repositioned as masstige and sold to Walgreens Boots Alliance in 2014. In addition to bubbling into select Walgreens, the line is now in small distribution in Target and in Canada at Shoppers Drug Mart.
Recently, Ulta’s chief executive officer Mary Dillon gave the line a nod, mentioning Soap & Glory on a conference call with investors, crediting the line with bringing “newness and innovation that drives the business.”
Other brands in the portfolio include Botanics, sold at Target and Ulta, as well as No7 Men. The company hasn’t announced specific plans for the newer additions Liz Earle and Sleek MakeUp, an on-trend cosmetics line for all skin tones, at other retail doors.
“Sleek is a very interesting line,” said industry consultant Allan Mottus. “It could be a good competitor to NYX.” And Liz Earle, he added, has some very beloved items such as its Cleanse & Polish Hot Cloth Cleanser. “The brand grew globally with little advertising,” he added.
Tick said, “As we move forward, we will employ a choiceful, whole-market strategy — one that establishes the brands’ footprint in the market and brings real value to our partners. We won’t be everywhere, but we will trade beyond just our owned route to market.”
The company has a great deal of innovation in the pipeline. Among the moves is a No7 Match Made Service rolling out this month that customizes not only foundation, but also concealer, lip and blush shades.
Also in the toolbox is an Early Defense line for No7 targeted at Millennials.
Soap & Glory has several new cosmetics sku’s rolling out at Ulta, including products for the booming brow category such as Archery Brow Putty and DIY Brow Bar and new Ultimatte Collection eye shadow palette. There is a new lipstick sporting 24 shades at Walgreens. With mass-market lipstick sales soaring 11 percent for the most recent 12-week period, ended Aug. 7, Soap & Glory is hitting the market briskly while sales are sizzling. With nine months of beauty experience under his belt, Tick has formed some clear theories on where the beauty business is headed. He thinks the industry has historically created segments that are less about how the consumer sees her beauty and more about how the industry wanted her to navigate it.
“Really being customer-centric is important. If you asked any woman to empty her makeup bag, there would be products from mass and prestige,” he said. Brands are thinking more about distribution that way, but with access to everything from car services to groceries changing so quickly, the beauty business needs to go beyond the status quo. While that favors an omnichannel position, Tick is passionate about making physical stores vibrant.
“Executional excellence is a big focus and a huge opportunity. It is a big topic of conversation for us and our retail partners,” he said. With his team in place and the muscle behind him, Tick plans to build the brand portfolio to the level of reverence enjoyed abroad. “I don’t think I’ve ever worked with such an incredibly ambitious company from the top down with a commitment to deliver.” The ongoing rollout, he said, will help show shoppers what No7 and Soap & Glory have in store.