SMALL FIRMS GOING GLOBAL (WITH A GOVERNMENT PUSH)
Byline: Jim Ostroff
WASHINGTON — Small cosmetics companies can read the future as well as anybody. Facing U.S. market saturation and ever-increasing competition, most realize their very existence likely depends upon cracking fast-growing overseas markets.
But unlike their industry titan competitors, small firms don’t have a global network of overseas sales reps who can identify new opportunities and work the deals needed to distribute in countries that may not have existed five years ago.
However, they do have a friend in Uncle Sam — more specifically, a tiny program within the Commerce Department that has helped small beauty firms rack up millions of dollars in overseas sales since 1989.
Each year, officials with the agency’s consumer goods office escort about 70 small and midsized U.S. firms to Cosmoprof, a trade show in Bologna, Italy, widely acknowledged to be one of the world’s foremost exhibitions of cosmetics.
Commerce officials are more than chaperones, though.
“Before each show, we provide export counseling to the participants, ranging from analysis of fast-growing markets to information on doing business in foreign countries and dealing with the logistics of exporting,” said Troy Cribb, a Commerce deputy assistant secretary in charge of consumer goods, as well as textiles and apparel.
In addition, for a $4,000 fee per company, Commerce provides an exhibition booth at the show’s American Pavilion, including fixtures, signs, lighting, tables and electricity. There also is a private U.S. exhibitor lounge that provides telephones and serves refreshments.
Commerce also sends out invitational fliers and materials about each firm to potential foreign buyers and provides a host of translators and trade specialists who are on call at the show to help U.S firms in their business dealings.
Typically, about 80 to 85 American companies participate in the show as exhibitors at the American Pavilion, said Edward Kimmel, a director of overseas trade shows for Commerce’s International Trade Administration. The pavilion is cosponsored by the Independent Cosmetic Manufacturers and Distributors.
In addition, Kimmel said, another 20 to 30 companies list their products in a show catalog, which includes participants’ goods, too. The charge for a listing alone is $375.
During last year’s Cosmoprof show, Cribb said U.S. firms reported they concluded 108 sales agreements worth $6.5 million. Show sales are hardly indicative of the participating firms’ success, though, Cribb said.
“The companies reported they got more than 3,000 leads for new business last year, and it is these that provide the long-term payoff for our exhibitors,” Cribb said.
“It is especially important for smaller cosmetics firms to seek opportunities in countries — whether they be China, India or Latin America — where there is enormous potential for sales down the road,” she added.
More established markets are booming, too. South Korea’s cosmetics imports from U.S. firms soared 93.7 percent to $115 million for the first three quarters of 1996, according to Commerce data.
Japan’s market for American cosmetics was pegged at $317 million during the first three quarters of 1996, up 23.6 percent from a year earlier.
Exports of skin care products to Brazil jumped 77.4 percent to $16.1 million for the first three quarters last year, while American firms’ exports of eye makeup to Australia grew nearly 164 percent to about $6 million.
Cosmoprof certainly offers the potential for a U.S. firm to meet foreign buyers. In 1996, the fair drew 122,000 visitors from over 100 countries, an 8 percent increase in attendance compared with 1995.
For firms like Mana Products Inc., the American Pavilion is the place to be.
“Attendance at Cosmoprof is critical for exposure and to make contacts,” said Sharon Garment, vice president of marketing for the manufacturer, which is based in Long Island City, N.Y. “The important thing about this show is that you’re able to meet in one place potential buyers from Asia, Africa, Europe, the Middle East and even Australia,” she said, “and make presentations to them and have the opportunity to talk one-on-one, which is vastly better than doing overseas business on the telephone or by fax.”
Nikos Mouriaris, founder and president of Mana, said the firm “this year is looking to double our exports, which have accounted for about 7 or 8 percent of our sales.”
For Inverness Corp., of Fair Lawn, N.J., maker of salon, hair removal and jewelry cleaning products, Cosmoprof has been the key to finding vital overseas distributors. “We found that distributors actually come to the show looking for lines to represent, and since we began participating with the U.S. eight years ago, we’ve picked up [accounts] in the Middle and Far East, parts of North Africa and even in Latin America,” said Anthony Vlahides, Inverness’s international division vice president.
“You can’t underestimate the importance of this activity, since the U.S. market is saturated, and it’s not that easy to find good distributors in places other than Europe,” Vlahides said.
His firm is looking to expand its overseas business “substantially” from current levels, which account for about 30 percent of it total business.
Dr. Shelly A. Friedman, president of the Scottsdale, Ariz.-based Estelle Cosmetics Inc., which makes time-release “facial rejuvenation” products, concluded no deals during last year’s Cosmoprof, but is enthusiastic about the show and Commerce’s program nonetheless.
“It gave me the opportunity to learn what people in the international marketplace really want, and I did get a great number of leads that are being pursued,” Friedman said.
Like the other participants, he asserted there is no substitute for being part of the U.S. contingent under Commerce’s umbrella.
“Certainly, any company can go it alone at Cosmoprof, but it would cost a company at least $10,000 to register, set up and equip a booth,” Friedman said. “Then you’d have to hire a translator and do your own studies of foreign markets, and when you add up all of these costs, it would be prohibitive for small companies to attend.”
Ursula Wagstaff-Kuster, vice president of CA Botana International Inc. in San Diego, maintains a firm easily could spend $20,000 to participate in Cosmoprof on its own and that firms must make a five-year commitment before they can hope to secure foreign sales and distribution contracts.
She also believes the U.S. needs to do more to help its firms export.
“The French and German governments, for example, will do almost anything to help their exporters, especially startups, with everything such as shipping and even translating your product labels into foreign languages,” said Wagstaff-Kuster.
Commerce’s Cribb noted, “This is a Catch 22 situation for us, since on the one hand we may be seen as not doing enough for American companies, but on the other, we hear stories that we’re subsidizing companies to participate in Cosmoprof and other shows, which is not the case. The companies pay their own way, and we facilitate their participation.”
She added, “There is a very real concern that other governments do more for their companies, and so either we receive a bigger budget to counteract what [other governments] are doing, or we need to encourage these governments to do what we do.” Commerce also provides similar support services for U.S. cosmetics firms at several other foreign trade shows each year.
One of these, Premiere, in Frankfurt, Germany, was held Jan. 29-31. There will be a U.S pavilion at Cosmetica ’97, a show for cosmetics and personal care products to be held in Sao Paulo, Brazil, Sept. 26-29, and another at Cosmoprof Asia, to be held Oct. 6-8 in Hong Kong.