BENEFIT STARTS A NEW CHAPTER

Byline: Janet Ozzard

PARIS — In less than a year, LVMH Moet Hennessy Louis Vuitton has lassoed three hot indie companies — Bliss, Hard Candy and now Benefit — to make up a small, but very high-profile, U.S.-based beauty stable.
For small beauty brands, even the rumor of an LVMH acquisition is a sign of having arrived.
As reported, LVMH took a majority equity stake this week in the San Francisco-based Benefit, a four-year-old beauty firm founded by identical twins Jean Ford and Jane Ford-Danielson.
Patrick Choel, fragrance and beauty chief of LVMH, made his company’s interest in U.S. acquisitions very public in March, when he announced the Bliss deal at the yearly analysts’ meeting here, and added that the company was looking for other acquisitions and partnerships in the U.S.
Since then, Choel, who is “scouting all the hot start-ups,” said he sees an inevitable shakeout in the U.S. market. Right now, there are plenty of hot independent brands, he said, but eventually “those that survive will be with major groups.” LVMH has been one of those groups, but so has Estee Lauder, which snapped up Stila last month — reportedly out from under LVMH.
On Thursday, Choel was already in Benefit’s San Francisco office, going over expansion plans and talking growth.
“The concept is good, the brand is right and the management has certainly proven what it can do,” he said during a brief telephone interview.
He noted that LVMH is cognizant of the importance of the U.S. market and the company’s need to become a larger player. Moreover, he sees Benefit’s potential as looming well beyond U.S. borders.
“Internationally it has a lot of potential,” Choel noted, adding that the brand is already carried in Sephora’s French stores and there are plans for expansion into 25 more doors there, plus in the upcoming Tokyo store. “We need a strong development plan,” he said. LVMH’s moves are “perceived as a positive strategy overall,” said Cedric Magnelia, equity analyst at Credit Suisse First Boston in London. “LVMH already has a good stable of French beauty brands — Dior, of course, but also Givenchy, Guerlain and Kenzo — but those occupy a certain niche. In addition, those businesses have a strong tilt toward fragrance, and with these acquisitions they are diversifying to skin care and makeup. “The LVMH beauty businesses in general are a cash generator, so they have the means to invest in small businesses,” he added.
Unlike Bliss, which started as a spa and retail business and then ventured into its own product lines, and Hard Candy, known as an edgy color cosmetics brand, San Francisco-based Benefit takes a problem-solver approach that often combines makeup with skin care. It has about 225 stockkeeping units, and tends to launch one or two products at a time — usually with a quirky name — rather than a complete line.
Cult products include Lip Plump, a lip sealer; the undereye makeup La Lift, and Dr. Feelgood, a face balm that contains light diffusers. Its annual sales are estimated at about $20 million.
“We like everything we do to have an attitude,” said Ford.
She and her sister will maintain creative control of the company and headquarters will remain in San Francisco.
The sisters like to point out that they have been in the beauty business for more than two decades, since they opened a makeup store called The Face Place in San Francisco. A few years ago, Ford said, the two decided to go wholesale and build that business. But the store name wouldn’t work as a company name, they said.
“We literally had two hours to come up with a new name. I had just come back from Italy, where everything is ‘bene, bene, bene.’ I remember thinking, ‘I wish I could fit ‘bene’ in somehow,”‘ said Ford.
The targeted products and odd-ball names gave the company good momentum. And the acquisition seed first got planted about a year ago, said the sisters, when LVMH executives asked them to come to New York for some meetings.
“We had a nice afternoon with them and that was that,” recalled Ford-Danielson in a telephone interview Wednesday. “About six months later, we heard from them again, and the negotiations really picked up three or four months ago.”
The sisters aren’t worried that LVMH might have ulterior motives in their acquisition.
“LVMH is very entrepreneurial,” said Ford. “There are not the layers of bureaucracy you see at other companies. And the resources! If I need a jar, I can go right to one guy who will handle it for me. I don’t know how to negotiate for retail space in Canada, but they do. This deal gives us the opportunity to be more involved in the creative. And they took great pains to reassure us that this deal isn’t just about owning our name, but about us, and our team.”
With the crop of beauty retailers that has sprung up on the Internet, competition has become fierce for exclusivity with hot brands. And it’s well known that LVMH doesn’t allow any of its brands to be sold via web sites other than Sephora. Asked if the group were putting the freeze on any pending e-tail deals, Ford said: “We’ve been inundated with requests to go on sites, but we’re committed to our existing group of retailers and to our own web site. There are no hands around our neck.”
Benefit has three freestanding stores in Northern California, with a fourth set to open soon. There is also a mail-order catalog and a U.S. toll-free number. Benefit plans to have e-tail on its site by February.
Meanwhile, the sisters are anticipating learning to schedule meetings around a nine-hour time difference as well as a language difference. They’re also looking forward to a grand tour of the LVMH facilities here in October.
“We’re going to do a little business in the U.K., then see all the stores and get a tour of the R&D facilities,” said Ford-Danielson. “But we won’t be in Paris more than a few times a year. They want us here, working.”