AM COSMETICS BUYS ITSELF A MASS NICHE
Byline: Faye Brookman
NEW YORK — In the midst of a color revolution in the mass market, a new player has been born via the merger of several smaller firms.
It is called AM Cosmetics and was created last year when Morningside Capital purchased the Arthur Matney Co. and its Artmatic, Tropez and Emerge brands.
The portfolio was expanded in December with the purchase of RH Cosmetics, which distributes one of the fastest-growing niche players, Sweet Georgia Brown, along with the Ultra Glaze line.
Now, AM is close to completing a purchase of the Cutex label from Jean Philippe Fragrances. The deal includes Cutex USA’s full range of nail polish remover, polish and treatment products.
Morningside Capital is a holding company created three years ago to acquire firms it sees as having untapped potential. In many ways it resembles Renaissance Cosmetics, which lately has snapped up fragrance and beauty brands — like English Leather — that still have cachet but are in need of nurturing.
According to industry estimates, AM generates a wholesale volume of $80 million and is poised for further growth thanks to a new management team and its breadth of selection.
Max Lewis, executive vice president and chief operating officer of the New York-based firm, noted that AM has already hired people away from firms like Avon, MAC, Johnson & Johnson, Halston Borghese and Elizabeth Arden.
“The company already has strength in manufacturing and research and development — it makes more than 200 million pieces a year — and now we are bringing marketing expertise,” he said.
He admitted that the company also needs to update its ordering and tracking systems to be in sync with today’s more sophisticated retail clientele.
However, he thinks the timing couldn’t be better for AM Cosmetics: “Color cosmetics is coming back. The name of our game is bringing exciting color to women.”
Another thrust of the newly formed company is to extend its reach globally. Exports now produce about 30 percent of sales, according to Lewis.
The centerpiece of AM Cosmetics is the Artmatic brand. Artmatic has carved out a healthy niche in the mass market by offering color cosmetics at a value price of 99 cents per item.
Although Artmatic has always been slightly behind its main competitor, Pavion, the brand now has a wide distribution in 22,000 doors. Lewis claimed that Artmatic is the only true “value” brand since Pavion’s Wet ‘n’ Wild is often sold for more than 99 cents.
He also believes retailers have room for more than one budget line.
“You have L’Oreal, Revlon and Cover Girl — why not more than one value brand,” he said.
To breathe life into the venerable Artmatic, AM has produced new fixtures and increased the amount of promotional color launches.
Emerge is similarly positioned to Artmatic, but appeals more to the discount trade channel instead of drugstores, said Lewis. Emerge , currently sold in fewer than 2,000 doors, is undergoing an overhaul in colors, packaging and formulas.
Tropez is also being polished with improved formulas and shade promotions, said Lewis.
While major firms such as L’Oreal and Cover Girl stress the diversity of their shades to reach women of all skin tones, he noted, Tropez is created solely for women of color and is sold in about 8,000 doors.
“We believe this fills a niche that the big companies don’t because it isn’t a big enough business for them. They want mega-results,” he explained.
The properties purchased from R.H. Cosmetics bring more edgy color brands to the party. Sweet Georgia Brown has been singled out by buyers as one of the most promising of the market’s wide range of niche players.
“This is our chance to bring things from the funkier end of the market,” said Lewis. “It is especially popular with teenagers and many chains are going after that business.”
Ultra Glaze is also at the forefront of fashion. The line is targeted as a multicultural makeup line.
“It also has a value price point of $2 and up,” added Lewis.
Despite the umbrella ownership, Lewis said AM plans to keep each brand separate at this point.
“I think it would be too much to ask to give us 12 feet of space,” he said. “Right now, we want to capitalize on our ability to react quickly to market trends.”
He also said that as retailers look to consolidate the number of vendors they deal with, AM will have a competitive edge because of the range of its product assortment.
In the meantime, Morningside will continue to seek acquisitions.
“But not just acquisitions for acquisition’s sake. They must fit into our strategy,” he said.
The pending Cutex purchases caught the eye of several retailers.
“AM is growing and they are impressive. I was most surprised that they are getting the Cutex remover business, too — that’s a big business,” said one divisional merchandise manager.
QVC’s program of Beauty Tuesdays has been such a hit that the shopping channel recently added specialized hair treatments from celebrity hair stylist Cristophe.
Cristophe, who styled a number of attendees and presenters at the Academy Awards, is perhaps best known for a certain haircut he gave President Clinton in Los Angeles.
The three-product introduction, promoted on April 1, sold almost 1,700 units in 25 minutes — with 5 percent of the shoppers new to QVC. The three items, which Cristophe will demonstrate again in June, are Haircare System for Chemically Treated Hair, Haircare System for Normal/Fine Hair and Haircare System for Thick/Wavy Hair.
In June, the Chain Drug Marketing Association will move its corporate offices to Novi, Mich., where it will also have a distribution center to handle its growing private label line. CDMA will hosts its annual Cosmetics Buyers Forum in Chicago, Sept. 24-26.