Byline: Faye Brookman / With contributions from Andrea M. Grossman / Laura Klepacki

SCOTTSDALE, Ariz. — Weathering the storm. Chain drugstore beauty executives hope their business climate clears up as quickly as the unseasonable rainstorm that threatened to dampen the spirit at the National Association of Chain Drug Store’s Annual Meeting, held from April 21 through Wednesday.
Word from Eckerd Corp. that the drugstore chain would be bringing cosmeticians back to its beauty departments helped brighten the mood.
Still, outdoor informal business meetings were cut short on Saturday afternoon by torrential winds. Rain-soaked executives prowled the hallways at the luxurious Phoenician resort hoping to find their appointments. And, the scheduled outdoor Chairman of the Board Reception and Dinner — with a performance by Carole King — was quickly moved inside at lightning pace.
The next day was perfect with blue skies and temperatures in the 80s.The NACDS meeting was back on track.
Drugstore retailers also hope to get their beauty business steaming ahead once again. For the 52-week period ended Jan. 28, drugstore dollar sales sank 2 percent to $1.2 billion in facial cosmetics. Sales of color cosmetics at discounters like Wal-Mart expanded 6.7 percent and even food grew at 4.6 percent. Drugstore beauty sales have remained stalled over the past few months.
Retailers said they are ready to take action to regain their franchise in cosmetics. “This is a critical point for drugstores to build cosmetics and fragrances back into a destination department,” said Eric Thoreux, president of Coty Beauty, who said shoppers have been lured by the experiences of Sephora, Victoria’s Secret and mass volume retailers.
For many drugstore chains, the linchpin is the health of Revlon. “Everyone wants to see Revlon survive,” said Kathy Steirly, vice president beauty merchandising for Eckerd Corp.
Even its competitors keep rooting for the brand. If for no other reason, some said they miss the sport that comes from a good race.
Although Revlon isn’t first in sales rankings, it holds the distinction of throwing the first bash of the festivity-filled meeting. On Friday evening, the newly married Jeffrey Nugent, Revlon chief executive officer, welcomed retailers to a gala event with entertainment by Kenny Loggins. Nugent hopes retailers are in the honeymoon phase with his revival plan, including advertising from a new agency.
Alan Levin, chairman of Happy Harry’s Inc. and the current chairman of NACDS, applauded the new campaign. “It is absolutely fabulous to be a Revlon retailer,” he said, paraphrasing Revlon’s new tagline “it’s absolutely fabulous being a woman.”
But fabulous wasn’t the adjective all retailers were using to describe Revlon.
Gregg Heller, buyer for hair care at May’s Drug Stores, is one retailer not pleased with Revlon’s new trade terms for retailers. Heller said he has “stopped buying new Revlon items” due in part to Revlon’s diminished allowances for damaged products. “They are also not taking back product except for what has been discontinued,” complained Heller. And now, he added, ad funding is being based on point-of-sale data rather than purchases. But Revlon may already be backing away from some of those stringent requirements. Larry Aronson, president of North America sales, said its beauty care terms are being rethought.
Others, like David Morocco, senior vice president, marketing of Brooks Pharmacy, were a bit more optimistic. “We’ll wait and see whether the customer responds to their product innovation,” Morocco said.
Although many agree the company has made progress, Revlon’s sales are dipping for many accounts.
Skinlights has been a hit, but Absolutely Fabulous, the new lipstick, has been slow out of the gate. “It is not doing as well as we expected,” said Nugent who quickly added that repairs are being made. While praising the advertisements for Absolutely Fabulous, Nugent said more needs to be done to communicate the attributes of the lipsticks to consumers. Also, Revlon is already tweaking point-of-sale materials to reinforce the advertising. Although a few retailers questioned the packaging of the lipstick — which doesn’t have the weight of some lipstick cases — Nugent said consumer research shows lighter products do not turn off women.
On the bright side, in addition to success with Skinlights, Nugent said he’s been pleased with movement of Illuminance Creme shadow, as well as response to Almay’s Kinetin and Fluoride nail products. Nugent said Revlon is continuing its course of raising consumption by improving in-store service, reducing out-of-stocks and launching innovative products. Retailers said Revlon plans to expand on its Absolutely Fabulous franchise by launching a fragrance this summer. However, several retailers who asked not to be named questioned the bottle. “It has a fur ball on top of it that makes no sense,” said one major retailer. Another problem they foresee: a $28 price tag.
The health of Revlon, however, can’t make or break the entire beauty business. To rev things up, several companies are taking things into their own hands. “Productivity has to be improved [or else] top management will start wanting to cut space allocations and shorten cosmetics footage,” said Arnold Zimmerman, chairman of AM Cosmetics. “Drug chain prices are no longer reasonable in comparison to department or specialty store. We aren’t listening to customers who want a better shopping environment and value.”
Realizing that the environment for beauty in drugstores is lackluster, retailers are putting new programs into place. Perhaps the most notable is Eckerd, which is making a bold statement by returning to cosmeticians. CVS also said it would begin a test with store service. Other industry initiatives include the continued push into private labels, improvements in fixtures and inventory reductions.
Steirly announced Eckerd would start putting cosmeticians back into its stores as part of an effort to differentiate the chain from competition. Eckerd has a strong heritage in service — its stores used to sell Elizabeth Arden because of the presence of beauty consultants. Eckerd abandoned advisers in the Eighties as a cost-cutting measure as most of the industry moved to self-service.
Larry Zigerelli, executive vice president of marketing at CVS, said that at least 10 percent of the chain’s stores are slated to get staff dedicated to assisting in beauty. CVS has service in select stores.
Isaac F. Cohen, president of New Dana Perfume Corp. is a supporter of adding service back into the equation. “Drugstores need to offer service to improve the environment,” he explained.
Karen Fondu, senior vice president of sales for Maybelline, added, “I think that is one of the best things they could do and we’ve been pushing that for years.” Marc Pritchard, vice president of cosmetics at Procter & Gamble, who was not present at the meeting, but spoke on behalf of his colleagues, is also excited at the prospect. “We’ve actually seen that stores that have help like cosmeticians, even at the mass end, tend to do up to 50 percent better in retail sales than stores without,” remarked Pritchard.
However, Happy Harry’s Levin — one of only a few chains still left with cosmeticians — cautioned that the consultants must be well-trained. “You have to do more than just have a body behind the counter.” Walgreens, Longs and Shoppers Drug Mart are other major retailers who have not backed off of service.
One retailer, however, thinks having a consultant in the beauty department of stores is not necessary. Michel Coutu, president and chief executive officer of Brooks Pharmacy, argues that since there is no exclusivity in drugstores, except perhaps for private label lines, “it does not make sense” for cosmeticians to be placed in beauty departments. “We have people working in our departments, but not cosmeticians.” Coutu believes prestige brands would warrant a cosmetician. But the likelihood of prestige brands entering drugstores? “Everywhere else in the world consumers can buy [prestige] cosmetics in drugstores. Canada and Europe offer them. It will be for us to prove to them that we can sell and service these products, too.”
Not all drugstore chains can afford the staffing to put a beauty consultant into place. Instead, several are focusing on improving fixtures. The push to install chain-created universal fixtures, however, has been tempered. Although Eckerd, HEB, Target and Wal-Mart are continuing with plans to make the move, the displays are being tweaked and suppliers are having more of a say as to how their merchandise is presented. And, suppliers continue to improve their own fixtures to counteract universal efforts. L’Oreal’s new fixture, dubbed “The Great White Wall,” has been well received. “It is a magnet to the wall,” said Carol Hamilton, senior vice president and general manager of L’Oreal. Many of L’Oreal’s top executives, including L’Oreal Retail president Joe Campinell and Hamilton, left Annual early to attend the Metropolitan Museum’s Jackie O party in Manhattan. But Hamilton did manage to speak for several minutes about L’Oreal’s business plan in the softened economy.
“L’Oreal is looking to drive business with business programs, and is going after the customer rather than pulling back,” Hamilton said. For example, rather than implement its buy-one-get-one free promotion with hair colors, L’Oreal will instead offer high-value coupons. “The BOGO’s kept customers out of stores,” she explained, noting that when consumers were given free product, they could wait longer before buying more.
Several retailers said they are also awaiting Revlon’s final fixturing plans. Revlon has scrapped plans to roll out its “Max” fixture. Revlon has said it expects to begin testing a new fixture later this year.
CVS is adopting a hybrid of universal fixturing. According to Zigerelli, CVS currently favors a style tested in a Philadelphia suburb with elegant wood cabinetry that incorporates supplier racks.
Fixturing isn’t the only business retailers are getting into. Retailers said their own brands are selling well. “Mira is doing well and we’re excited,” said Steirly of Eckerd’s new house color brand. Steirly admitted keeping up with fashion changes will be a challenge, but that Eckerd is committed to making sure the products are on target.
Mary Sammons, president and chief operating officer of Rite Aid Corp., said her chain’s three new private label bath and body collections are off to a good start. Despite that success, Sammons said there are no efforts to branch into private label color cosmetics.
David Bloom, president and chief executive of Shoppers Drug Mart, explained the importance of private label to his chain of stores. “It’s more than just margins. We can be very innovative with the quality of products we offer. The exclusivity of the label encourages customers to be loyal so your store becomes a destination.”
Not all firms want to take a gamble on private labels.
Anne Marie Kehoe, divisional vice president for Kmart’s beauty business, said Kmart experimented with a private label brand several years ago, Image Essentials, but it didn’t provide “enough of a value added” reason to keep it around. Instead, Kmart carries Body Image by Paris Presents, a relatively exclusive line of bath products. “It’s our number one bath brand,” Kehoe said.
Morocco of Brooks agrees. “There’s not enough traffic to justify having private label bath,” he said. “I’m doubtful how profitable it really is for retailers who are in it.”
More and more retailers, however, are looking for brands that will help boost productivity in the beauty department, especially as top management casts a keen eye on the relatively slow turns, yet high inventory commitment the category requires. Jeff Rogers, senior vice president of sales for Physicians Formula, said the brand’s space has been doubled in many accounts. “According to Information Resources Inc. statistics, Physicians Formula is the fastest growing mass brand,” he added.
Bill McMenemy, executive vice president, marketing for Del Laboratories, said his company is doing its share to move product. It is conceivable for some accounts to sell as much as 18 pieces within four or five days of the Sally Hansen Chrome nail makeup, retailers said.
McMenemy predicted a shakeout in the plethora of teen lines vying for young customers. Del is revamping its Naturistics brand, which already has a big youth following, to be targeted at tween and teen shoppers and he expects its market strength will help it become a staple in youth-oriented planograms. Naturistics will also only be offered on a promotional basis, as opposed to a day-to-day basis.
Productivity will continue to be a push for Neutrogena, according to company president Michael McNamara. One thing the company told ceos about during the meeting was a new shipping unit that cuts down on the pieces from three to two, which he said should help control inventory. To further boost Neutrogena color cosmetics volume, McNamara said there would be a tighter knit connection between color and skin care promotional programs.
In fragrances, Thoreux at Coty said consumers are waking up to the “emotional” aspects of fragrance. “This is the right time for the mass fragrance environment. Retailers need to boost front-end sales because of pressures at the pharmacy and fragrance can raise the market basket total.” Thoreux is pushing for retailers to get fragrances out from under glass and to offer more promotions on a year-round basis. This fall, Coty will put a major emphasis on some new twists behind its successful The Healing Garden franchise.
As Revlon struggles to get back on its feet, Maybelline, which has taken the top spot in color, has a weighty lineup planned for the back half. Come August, it will unveil a new mascara — Lash Discovery, a mascara with a mini-brush to get at hard-to-reach lashes. There will also be PureStay pressed powder and Intimate Shine, a high shine nail top coat.

The small chains of today, might be the big chains of tomorrow. Speaking at the business session at NACDS, Alan Levin, chairman of the organization and ceo of Happy Harry’s, told the audience to remember small chains. “Think before putting an account on phone service,” he advised. Levin, the head of a regional power, has agreed to stay on until December as the current NACDS chairman, following the departure of Andy Giancamilli from Kmart. Giancamilli was scheduled to become the next chairman. Expectations are for Mark Griffin, president of Lewis Drugs Inc., to assume the chairmanship during the NACDS Board of Directors meeting later this year. Mary Sammons of Rite Aid has been elected to the board as treasurer. Traditionally, the treasurer is promoted up the ranks to eventually lead the association, which would make her the first female chairman of NACDS.
Ethan Foster, senior vice president of sales for Soft Sheen, responded to the recent surge of media attention on the use of the word “ethnic” when used to describe products for people of African descent. “It’s a misnomer,” Foster explained. “The word ethnic occurred in the early Seventies because in the early years HBA buyers were generally white males, and to walk in and say ‘I have some products for black people’ wasn’t well received.” Foster believes “the time has come” for the industry to change the word “ethnic” to something more politically correct. “Perhaps we could evolve [a broader definition of] ‘personal care,”‘ Foster said.
Many NACDS attendees were buzzing about who will be buying Clairol. The usual players, Unilever and Procter & Gamble were mentioned. However a new name, Kao Corp., has been added to the list. Kao, based in Tokyo, owns Andrew Jergens Corp. and is parent to Goldwell, a European firm which markets hair care products for beauty salons and makes and markets Sofina cosmetics. Kao posted annual sales of $7.98 billion for the period ended March 31, 2000. According to industry sources, the earliest that Clairol is expected to announce its buyer is in the third week of May.
White Rain will relaunch and repackage several of its smaller, yet still desirable brands. In July, both The Dry Look, a men’s styling line, and Adorn hair spray, will hit shelves. A repackaged Toni Home Perm will follow in August.
Kmart’s Blue Light specials have already shone on beauty. Maybelline’s Full ‘n Soft mascara has been featured with great success in the retailer’s new promotion. According to Maybelline president John Wendt, Kmart moved 47,000 pieces of the mascara in one day.
The honeymoon for Revlon president Jeff Nugent continues. This one’s for real. The day before leaving for the NACDS meeting, Nugent wed Carla Gervasco at City Hall in Manhattan. Gervasco stepped right up as Revlon’s first lady. The following evening she lined up with the Revlon team welcoming guests at its annual gala.
Beauty manufacturers win the spelling bee. At Del Lab’s Saturday night bash, Bill McMenemy along with Physicians Formula Jeff Rogers joined the band on stage for a performance of the Village People’s “YMCA.”