Byline: Kim-Van Dang / Pete Born

NEW YORK — ColorStay was just the beginning.
Three years after the groundbreaking launch of its transfer-proof lipstick, Revlon Inc. is working to replicate the same earthshaking effect in other parts of its beauty business. The company that doubled its Revlon brand color cosmetics’ retail volume in the last three years hopes to begin making major inroads into skin and beauty care this year.
Revlon, which is still saddled with debt from its 1985 acquisition by Ronald O. Perelman, turned its first net profit in at least five years — $18 million — last year. Its sales, $2.16 billion in 1996, are expected to increase another 11 percent this year, according to Wall Street analysts. (See related story, page 7.)
In a series of in-depth interviews, top Revlon executives revisited key moments in the company’s dramatic five-year turnaround and unfurled a blueprint for the future.
Most of the conversations took place prior to last week’s promotion of Revlon president George Fellows to chief executive officer, succeeding Jerry Levin in post. Levin will remain chairman while assuming expanded duties as executive vice president at McAndrews & Forbes Inc., which owns 83 percent of the outstanding common shares of Revlon. Levin will concentrate on strategic issues, including possible acquisitions of beauty companies.
Fellows emphasized: “While we will aggressively support our core color business — it is the heartland of what we do — in 1997, we’ll turn our sights on skin care.”
The first major treatment introduction, Almay Time Off Revitalizer, will be shipped at the end of the month. Kathy Dwyer, president of Revlon Cosmetics USA and senior vice president of Revlon Inc., claimed the product represents “the first dermatological approach to rejuvenating skin available at retail in any class of trade.”
A different treatment effort, under the Revlon banner, is slated for the second half of the year.
Levin dismissed conventional industry thinking that the major companies can expect to succeed only in market categories where they have a strong track record.
“We won’t be the market leader in all categories at all times, but I think that we’ve proven that our approach to business transcends just lips and nails,” Levin said, referring to Revlon’s color cosmetics heritage. “We certainly have made major inroads into face, and eyes are starting to come, too. We just don’t know of any reason why we can’t apply those same processes and skills to beauty care, to skin care and to fragrance.”
Declining to stipulate how large Revlon’s skin care business is now, Levin estimated that the category could account for 10 percent of sales over the next few years. While Almay is less than one-third the size of the Revlon brand in retail sales, with a 6.1 percent share of the U.S. mass market color cosmetics business in 1996, or $158.6 million, according to A.C. Nielsen, the hypoallergenic division does a bigger business in skin care.
The company said 60 percent of the Revlon brand volume is in cosmetics and fragrance. Accounting for 8 percent, the latter category includes scents such as Charlie, Fire & Ice and Cherish. On average, new launches account for 20 to 30 percent of annual volume.
The remaining 40 percent is generated by other categories, including beauty care, professional and licensed products.
Levin is aiming to demonstrably build Revlon’s beauty care division.
“When you rack us up compared to Unilever, Procter & Gamble and L’OrAal, you can only conclude that we’re a niche player,” he said. “They don’t even mention us when they talk about the big beauty care companies. We think we have to be more meaningful to the trade to maintain our businesses. We have been spending a lot of time of late looking at different kinds of acquisitions. Beauty care is our number-one focus [there].”
Levin is also looking to bolster two other Revlon businesses: fragrance and the Ultima division. He took the long-term view in discussing fragrance, noting that the mass market category has to resolve some chronic problems such as the dumping of prestige scents into mass chains.
Fellows said he will continue to back Revlon’s fragrance business while watching that market sector carefully. It has been experiencing difficulty.
“Consumer habits swing on a pendulum, and the pendulum is on a downswing right now,” Fellows said.
The Ultima brand, carried mainly by J.C. Penney, will get its distribution expanded by 50 percent this year, Levin said. Industry sources have estimated the brand’s volume at $50 million wholesale.
“If the Ultima strategy succeeds, the brand at wholesale will be $100 million within the next few years,” Levin said. “That is our target.”
He has performed similar feats before, tackling color cosmetics first, three years ago.
“We intentionally picked color as the place where we were going to rebuild this company. That’s where the brand’s strength was — that’s what we knew the most about,” he said.
The pivotal moments in Revlon’s turnaround came about in the spring of 1994, with the introductions of Age Defying makeup in April and ColorStay lipstick two months later. ColorStay now reportedly generates $180 million to $200 million annually. The company’s reversal of fortune is also evident in consumer spending figures. In 1993, Revlon had a 15.6 percent share of the $2 billion U.S. mass color cosmetics market, or $312 million, according to Nielsen. By 1996, it had risen to 21.5 percent of a $2.6 billion market, or $559 million.
Levin laid the groundwork, recruiting executives with business acumen, instilling new management philosophies, emphasizing consumer research and marrying fashion marketing with proprietary product technology.
He took the helm as president at Revlon in 1991, succeeding Sol Levine, who had balked at Perelman’s decision to divest portions of the company.
Perelman jettisoned most of Revlon’s prestige brands and Max Factor. A wrenching reorganization ensued. At that point, Levin drafted a blueprint for Revlon’s future, at the center of which was a belief that the mass market customer preferred self-service shopping.
“That meant an enormous challenge in terms of changing everything,” Levin said, “the products, the packaging and, more than anything else, the communication, because we no longer had the beauty advisers to sell our products.”
Levin sought to rebuild Revlon’s culture by applying consumer-product disciplines to a business that had been driven by intuition. He recruited Fellows, a veteran of Colgate-Palmolive Corp., to be chairman of Revlon North America in 1993 and promoted him to president and chief operating officer two years later. Dwyer was vice president of consumer products marketing at Clairol Inc. when Levin tapped her.
“Our industry was changing,” Levin said. “We were developing much more sophisticated customers. It became necessary for us to maintain all the creativity and fashion sense and yet get the products to the customer properly bar-coded on the right day to the warehouse. The hard part was blending people who had these professional analytic skills with the creative people. How were we going to get them to work together and maintain a unique culture at Revlon? We didn’t want to become a traditional packaged goods company. We knew that would be the ultimate downgrading of our imagery and of our brand and these things are vital to us.”
Under Levin, Revlon instituted the Charlie Awards to spur creativity. To sharpen business skills, he launched week-long courses called “Shades of Leadership” and “Shades of the Future.” Dwyer embarked on a new management approach that incorporated viewpoints from all staff levels.
“I held meetings once a week with different levels of people — from associates to secretaries to directors — for 18 months,” she said. “It established very quickly that people could talk to very senior-level managers. This process allowed ideas to percolate up and assigned people at every level the responsibility for fixing what they see that gets in the way of progress. The idea that people owned the solutions became part of the message.”
Starting in mid-1993, Dwyer began plucking people from different departments — from accounting to creative services — to form cross-functional task forces that handled specific product and promotional initiatives.
She and Fellows also introduced a heightened appreciation for consumer data among the ranks.
“When we started work on the transformation of Revlon, one of the fundamentals was our connection to the consumers,” Fellows said. “We’re a consumer-driven business, and in order to get more than lip service, we had to do consumer research. We found that consumers were getting a lot smarter. Good enough was not good enough anymore.”
Dwyer said Revlon became meticulous about consumer testing, trying out ideas even before producing prototypes.
“We would start with a concept and then let consumers react to it,” Dwyer explained. “We screened everything quantitatively, from the beginning, before we turned on the research-and-development machine.”
Post-launch support became another priority.
“The old ‘six months and out’ syndrome is certainly history,” Fellows said, referring to Revlon’s past reputation for dropping support shortly after major introductions.
“The question is: What’s enough marketing support?” Dwyer asked. “Our standard rule of thumb now is that you have to get to 70 percent of your target audience at least three times. In our category, that means you have to load up somewhere between $10 million and $15 million worth of media over a year to hit that number. People need to hear a message more than once before it sinks in.”
Advertising and total sales promotion expenditures have climbed an average 20 percent annually since 1993. Last year, Revlon spent $355.2 million, or 16.4 percent of net sales, on advertising. That’s up from $302.7 million in 1995, or 15.6 percent of that year’s net sales.
Many industry executives believe Revlon’s resurgence is due largely to its bolstered advertising efforts. The company has assembled a collection of marquee faces, including supermodels Cindy Crawford, Claudia Schiffer and Vendela. Actress Melanie Griffith is the spokesmodel for the Age Defying franchise. Another actress, Halle Berry, represents the company’s desire to reach ethnic consumers without having to market different lines for different groups.
“In 1996, we discontinued ColorStyle, an ethnic brand,” Dwyer said. “What we heard from our users is when you have a megabrand, like Coca-Cola, people don’t want to be ‘separate but equal.’ They want to be incorporated.”
The multicultural nature of Revlon today will be reflected in 1997 introductions of face powders, under the New Complexion, Age Defying and ColorStay umbrellas. The products will be an extension of a growing foundation business under those brands.
Having revamped its U.S. business, Revlon is building momentum offshore. Levin said that when he took over, the percentage of Revlon’s foreign business was “in the 30s.” It is now 43 percent.
“It will become 50-50 whether we want it to or not over the next couple of years,” Levin predicted.
“In many respects, we are using the U.S. experience as a template for a lot of what will follow throughout the international organization,” Fellows said. “The key is to determine what portions of the U.S. experience are directly applicable as you expand throughout various regions of the world, and what parts require some modifications or adjustments. Largely, what we have found is that the similarities as you go around the world far outweigh the differences.”
China tops the list of key markets that Revlon is currently developing. Previously, Revlon did business there through distributors. Now, under a joint-venture agreement, the company is setting up production. The company’s new Shanghai factory is now rolling out its first lipsticks.
Revlon is now also in India, and in such Eastern European countries as Hungary, the Czech Republic and Poland. It is the largest cosmetics brand in the Russian cities of Moscow and St. Petersburg, said Levin, who also sees opportunity in Kazakhstan and other southern republics of the former Soviet Union. Another hot spot is South Africa, from which Revlon plans to export into other sub-Saharan countries. Its business is spotty in South America.
“We have a particularly strong franchise in Argentina in the cosmetics business, and we have a particularly strong beauty care in Brazil,” Fellows said. “Mexico is a strong franchise and growing, but not as strong as those two countries in their respective categories.”
The same uneven picture applies to Europe, where Revlon has a “decent presence” in the U.K. and Spain, according to Fellows. The company’s footing is less solid in France and Italy.
“Part of what we are attempting to do is bring everybody up to a level playing field,” Fellows said. “There are changes in each region that are important to the way in which we do business.”
One example he cited was the spread of self-service retailing overseas. While the company is attempting to build up its foreign sales, it is consolidating factories around the world at a rate of 1 1/2 plants a year.
“We are taking control [of our international business], and we are running it in a globalized fashion,” Levin said, noting that 5 1/2 years ago, Revlon “was 27 different businesses with their own factories, their own products and different packaging from country to country.”
“We have now conformed our packaging and our products,” he continued. “It just gave us enormous operating efficiencies, because now we are able to consolidate our factories. We just don’t need them anymore.”
Because cosmetics are expensive, small, light products, Levin said it makes sense to produce the goods in centralized plants and ship them to other markets. Beauty care items such as shampoos, in contrast, are bulky, heavy and bring less return. Therefore, it is more efficient to produce them in the local markets.
Levin said Revlon’s factories now number “in the mid 20s.”
“My guess is that five years from now, we’ll be talking about probably three major cosmetics production locations in the world and seven or eight toiletries facilities. That’s about the rate we are going.”
Finally, Levin — who will be working on acquisitions in his new capacity — raised a number of hypothetical questions about the direction his company might take.
“Does Revlon a few years from now want to be a $3 billion company, which you can see happening, or does Revlon want to try to be a $5 billion company?” he asked. “Given that we have all this talent, is it possible to take on a whole other challenge? As the world changes, as cosmeceuticals become important, is there something we need to do in that direction? Those are the kinds of questions that the top management team and myself are spending an increasing amount of time on. But we don’t have the answers yet.”