Byline: Jackie Cooperman, Milan / Jennifer Weil, Paris / Melissa Drier, Berlin
MILAN — Cosmoprof arrives as beauty companies are grappling with dramatic changes in the world beauty market. Since last year’s meetings in Bologna, European companies have faced increasing pressure caused by radical changes in distribution channels, the impending arrival of the euro and the growing presence of the Internet.
In Italy, manufacturers and distributors are looking anxiously at the arrival of Sephora, which has gobbled up several chains and now has 80 doors, although few of them have been converted into Sephora stores. And Italian chains like Limoni are vying with the German giant Douglas. All of this leaves manufacturers struggling to retain margins and adapt to an open-sell approach.
Long-established French companies like L’Oreal and Dior are looking to expand their product range, from hair care to makeup to treatment. In Germany, companies are grappling with export issues and the presence of the Marbert-Limoni holdings, which have provided a strong example of vertical integration.
And manufacturers say that the pace of the market is so fast that Cosmoprof is much more a networking meeting than a world launch stage. Certainly, companies will use the fair to promote new products — Florbath, for example, will play up its new Fendi’s men fragrance, Pupa will show off new store displays, Eurocosmesi will feature a new color line from Mariela Burani and will launch a new Iceberg fragrance for men, and EuroItalia will put the focus on its Naj-Oleari skin care and fragrance.
But in dozens of interviews, manufacturers repeatedly emphasized the role they expect Cosmoprof to play in solidifying relationships and building new business partnerships overseas. For that reason, companies like Diana de Silva are coming to the fair — after skipping it for years — to seek new partners and new acquisitions.
Alberto Colombo, international division director of Pupa, said Cosmoprof is an opportunity for “meetings and contact both with our Italian clients and our foreign distributors, to examine how things are going and to make plans for company development. It’s not a sales occasion, but a time for contacts. We’ve also launched many projects for merchandising in the last year, and we’ll use Cosmoprof to show our store display units.”
As for hot topics, Colombo believes price harmonization and changes in the distribution network will dominate discussion at the trade fair.
“By price harmonization, I mean that the manufacturers have to be increasingly aware of a price that fits every country,” he said. “With the move to a singular currency, it’s clear that we’ve not arrived at parity, because the cost of living and salaries are not harmonized. It’s a necessary step which we have to take and I think that will lead to a move toward a 5 percent increase in consumer prices, but that’s a maximum. In terms of price harmonization, many years ago, no one thought of this, every country was so independent. Now we have to think of the new conditions to reflect prices, and so I think that there will be a movement toward higher prices for countries with higher earnings.
“In terms of the changes in the distribution,” he continued, “there are increasingly important international chains. That’s causing a movement and a transition that our contacts are becoming a singular point of reference, and it’s pushing toward a singular price point in all the countries.”
Martin Trout, international division director of Florbath, said his company would use Cosmoprof to introduce some new fragrances.
“We’re going to be presenting the new Fendi men’s fragrance, which is the first occasion it will be shown to the distributors,” he said. “We’ll have a special presentation for press and distributors, and we’ll be launching it in the European countries and Saudi Arabian countries in September. We’re also really buzzing on the Fiorucci fragrance that we launched in Italy last October.”
As for price harmony, Trout doesn’t think it is that important.
“From our point of view, it is not a big deal,” he said. “We’ve already been harmonizing prices and quoting prices in euro. I think people haven’t really realized that the euro takes effect next year. We’ve been standardizing our prices since last year and getting on board. I think the general public hasn’t really latched on to the fact that the lira and the franc and everything are going out. That’s the impression I have in Italy.”
But Trout agrees with Colombo about the changing distribution channel. “It is a big thing on everyone’s mind right now, with the big chains,” he said. “I don’t think we can do anything, which is the problem. The obvious problem with the chains is that they’re asking for more, which is normal, but it’s eating away at our margins. So the companies have to find a way to deal with it without going out of business. It’s something that’s been building up over the last three years, the massing together of all the distribution channels. Look at any industry at the moment and look what’s happening. Everyone’s forming big groups. We just have to deal with it.”
E-commerce, Trout added, was another important issue. “It is going to become a matter of increasing concern,” he predicted. “In Italy I think it’s not going to take place for a long time, but in the Americas and the Far East, it’s going to be a big issue. That’s where I see the big problems coming, not just in fragrance, but in all products. It cuts along all territories. Who’s stopping someone in America buying from Mexico or Canada? And with all the different tax structures, it’s going to be a big problem. It’s still a small issue, but it will have to be addressed.”
Mario Usellini, managing director of Satinine, said the most important thing that goes on at Cosmoprof is not the discussion of issues, but the building of relationships.
“Between 70 and 80 percent of our foreign distributors come to Cosmoprof from Saudi Arabia, the Far East and Europe,” said Usellini. “The conference is as strong as Cannes for us. The other thing is to focus on the Italian clients, too. At Cosmoprof, we have a direct contact with the directors of the companies who are busy and have trouble traveling. It gets us up to speed on what’s going in the market.
“We also use Cosmoprof to see the new launches in Italy and the rest of the world,” he continued. “In general, we see Italians showing products to launch for September, which then launch the following year in other countries. We go to many fairs — Frankfurt, Orlando, Dusseldorf, Cosmoprof in Bologna, Hong Kong and Cannes. On a national level, the other fairs are important because they give us a sense of local reality and markets. The meeting and the relationships are important, but the new product launches are interesting, too.”
Commenting on some of the big issues, Usellini said taxes, ingredient legislation and distribution are of concern to him.
“On a European level, I think there’s a good harmonization of rules,” he said. “The real problem is to see whether we’ll be able to improve the situation with taxes on products in various countries. We’re also looking at the technical legislation on product ingredients. For example, we have had problems with some of the Ischia Thermae line in Japan, because they use different preservatives from us.
“As far as the problems related to price unification in Europe, we’ve already unified our product lines in anticipation of the euro, and our differences will be no greater than 3 to 5 percent in the various markets. The problem of distribution I think really hits local markets…and it’s different from Europe than in the U.S. In Europe there are still individual stores while the U.S. has mostly department stores. In the U.S., the discount stores are a bit problem for the manufacturers. For us, we have an advantage because the department stores know that we have a controlled distribution and we won’t finish in the parallel market.”
According to Usellini, one issue on the horizon is discount policies.
“I think there’s a discussion around among manufacturers to deal more stringently against the perfumery chains by harmonizing discount policies, but I don’t think anything will happen,” he said. “But this is against the law and against the free market. Today it’s a market for the buyer, not the seller. That’s the reality, so the competition is based on that. People have to accept competition and also smaller margins. The main problem of the Italian market is the problem of credit. The perfumery world pays its bills slower in Italy than anywhere else; it can take up to 110 days after we consign merchandise.”
Giovanni Sgariboldi, managing director of EuroItalia, said this year’s Cosmoprof was very important for his company.
“It’s no longer a national event. It’s become worldwide,” he said. “The consolidation of Italian beauty companies has brought the attention of foreign beauty professionals. I will use it as an opportunity to meet personally with both our Italian clients and our distributors, and to study the latest strategy aimed at positioning our Naj-Oleari line within each market.”
In 1999, EuroItalia expanded the Naj-Oleari Beauty Care line and launched Naj-Oleari Parfum. “We consolidated our three lines of Naj-Oleari — makeup, fragrance and beauty care — in the national market and our goal by the end of 2000 is to cover all the markets in which Euroitalia is present,” said Sgariboldi. “By April of 2000, Naj-Oleari will be in England, France, Germany, Portugal, Austria, Eastern Europe, the Caribbean and the Far East.”
As far as the major issues of the day are concerned, Sgariboldi said they need to be addressed from a global perspective.
“We, like many other companies, can no longer talk about an exclusively national approach, so the problems we will soon be confronting are tied to the creation of a truly ‘global village,’ even in the beauty sector-price harmonization, international standardizing of ingredients,” he said. “The order of the day will be to create uniform European, and then worldwide, standards, while still maintaining the specificity and unique characteristics that distinguish each company.”
Enrico Scabini, managing director of Eurocosmesi, said his company will be launching several new products at Cosmoprof.
“Our priority launches are Fluid Iceberg for men and women, the makeup line from Mariella Burani, the new male fragrance Le Blue from Les Copains and the completion of international distribution for the Transvital skin care line,” he noted. “As always, Cosmoprof will be an important time to meet with all of our distributors. We’re placing particular importance on the European sales force for the launch of Fluid Iceberg.”
The issue that will dominate the show? “For Italy, without a doubt, the changes in distribution will be the most talked-about issue and will inspire initiatives,” he said. “On the European level, we’re moving toward a standardization of prices and our company is following that standard with all of our new products.”
Daniela Sacerdote, managing director of Collistar, said Cosmoprof represents “the most important display window for beauty on an international level.”
“We’ll be there in our stand in the selective perfumery pavilion,” she said. “Our goal is to create an exchange and an encounter, bringing together all aspects of the cosmetics world: perfumery, cosmetology, suppliers, producers of primary materials and packaging, and designers.
“The contacts with foreign distributors and clients are extremely important,” she continued. “Since we have a widespread organization in Italy, the domestic market is a less important aspect of Cosmoprof for us. As for the problems facing the cosmetics industry, the change is distribution channels is certainly the issue that’s affecting all of the beauty companies. The arrival of large national changes is revolutionizing the beauty industry and our relationships with our clients.”
Giorgio Galli, director of corporate affairs and chairman of L’Oreal Italia, said Cosmoprof was a chance to present the company’s different hair care brands. “It is important for us to show our brands there since there is a whole community of hairdressers present,” he said. “The exhibition is also a very good place for us to introduce our makeup brands. This session will be the first where we show mass market color cosmetics. We will have a stand each for our Maybelline and L’Oreal color cosmetics.”
According to Galli, some of the topics discussed at the show could include possible links between cosmetics and dermatological products, worldwide harmony in cosmetics legislation and the importance of keeping the consumer informed.
For Gabriella Scarpa, chief of the board of Parfums Christian Dior Italy, distribution is the most important issue.
“There are many important subjects right now [being discussed concerning the beauty industry]. Most importantly, certainly, is which types of distribution will exist in the future,” she said.
Scarpa noted that there wa a great buzz right now about e-commerce — especially in light of the current situation in the European Union, where high-end beauty products are not allowed to be sold online.
“In Italy, distribution is changing very fast,” she said. “There is consolidation among chains and [other] very great changes in the structure of distribution.”
Another hot topic for the beauty industry right now is the blurring line between cosmetics and skin care. “We talk more and more about cosmetics in terms of skin care,” Scarpa noted. “Perfumery brands are extending into skin care. There is an evolution in terms of research on the topic.
“We’re really looking to grow through developing our brands and acquiring new ones,” said Roberto de Silva, managing director of Diana de Silva.
He was referring, in part, to Diana de Silva’s acquisition early this month of the Claude Montana beauty brand from Clarins. In September, Diana de Silva also took over the Italian distribution of the French treatment company Payot.
“For us Cosmoprof represents an important opportunity to meet with our foreign clients,” de Silva continued. “From 1993 to 1999, we didn’t go to Cosmoprof, but now we’re refocusing our export department and really looking to foreign distribution, so Cosmoprof is important. We really want to address each country individually and so we’re restructuring our export business.
“As for the main issues to be discussed at Cosmoprof, I think a huge problem is the violent change in distribution channels,” he said. “It’s a serious issue, and as manufacturers, we’re all going to have to confront the changes together.
“Today, the large chains have an enormous contractual power over us, and set conditions that make it nearly impossible to survive. I think we’ll see a lot of discussion about this, because right now we have to pay for advertising, promotions, gifts, and there’s nothing left.”
Romolo Izzo, vice managing director of Deborah Holding Group, said, “This is only the third time that we’ve come to Cosmoprof. We’re very well represented in Italy with a 7,000-door distribution. We’re at Cosmoprof to give Deborah an international image. In order to do that, the fair is very important,” said Izzo, whose firm owns the mass market brands Deborah, Rouge Baiser, Bio Etyc and Debby.
“In the last five years, we’ve really grown internationally and Cosmoprof is an occasion to build relationships,” he continued. “We don’t do business there, but it’s a time to meet our distributors and foreign clients.
“As far as the most important issues, the theme that’s most current is the concentration of distribution. The Internet really is interesting, but hasn’t taken hold that much in our sector. The euro is important, and of course there’s the concern that it will hamper spending when it’s first introduced as common currency.
“But I really think that concentration of the distribution channels — more than anything, with LVMH’s Sephora and with Douglas — that’s what people will be discussing at the stands. More than anything, this is a big issue especially for the selective brands, which have always predominated in the perfumeries,” he noted.
“They are the companies that move with the most difficulty in this new distribution,” he said of the new consolidated chains. “We feel favored by this because we have always worked in the mass distribution and we have lived the daily reality of free service for years.”
Charlotte Vollmuth, vice president of Juvena International, said her major concern was the Internet.
“Today, the big issue is the Internet. For us, it’s not yet decided, but it’s something the whole industry is discussing, because of those famous rules in Europe,” she said, alluding to the current illegality of selling prestige or select distribution products over the net.
“I think [e-commerce] is a question of time, and not a year, but of months,” she said. “If Douglas goes for it, for example, and you say no to e-tailing, well, you’ll be forced into it. We all have to think about selling our product on the Internet. And of course, nobody’s equipped for it — which is a chance for small, logistically competent firms.”
“In the end,” she continued, “it’s a matter of considering different marketing tools and what you decide to do with your budget. I don’t think in the future we’ll sell more because of e-commerce. We’ll just be selling through more and different channels.”
Concerning price harmony, Vollmuth said, “For us, it’s through. We started three years ago and clearly set rules stating that the maximum could be below the set price. Above the set price,” she pointed out, “is the risk of each country.”
As for the euro, she said, “In principle, we’re still a Swiss company, so our export business is still in Swiss francs, which is strong. We will see.”
For Vollmuth, the changes in distribution in the industry “are exciting, with things like Sephora entering other countries, Limoni coming into Germany through Dr. Borghetti, who bought the Alrodo stores, and Douglas becoming more international. It’s interesting and fascinating.”
Juvena has had positive experience with Sephora as a newcomer in the American market, she noted.
“Our brand wasn’t present in the U.S. Some decades ago, we did some business in the States to protect the name, but for all intents and purposes, we weren’t there,” she said. “It was suggested we start with Sephora when they opened in SoHo with Juvena Q10. We had no American trademark for Rejuven [the name of Juvena’s Q10 products in Europe], so we went into special production under the Juvena name for the U.S. market.
“We were in the famous bibliotheque of Sephora with two Q10 products, and after some months, we were number two in eye care and number three in day care, perhaps because of consumer awareness of Q10,” she said. “We were happy and they were happy. Sephora has since then opened stores like crazy, and we’re now in all stores. And in the big stores, we’re present with the whole range, excluding makeup. Every month, we observe bigger sales being generated than we would have elsewhere, and our business is really increasing. Honestly, we’re quite surprised. We didn’t invest in advertising and we have wholesale sales of almost one million Swiss francs. It’s peanuts for the U.S. market,” she noted, “but for us, it’s great.”
Helmut Baurecht, director of Artdeco in Karlsfeld, Germany, said the further development of open-sell setups in perfumeries was a key issue for Artdeco, one of Germany’s leading makeup manufacturers and an open-sell trendsetter. The company will open several open-sell counters in key Douglas doors this year.
“At the moment, everybody’s building open-sell table solutions, but there’s a consumer move toward more consultation,” Baurecht noted. “The customer wants a broad selection. but she also wants advice. She wants to be told how to use the products she’s buying.