INDEPENDENTS’ DAY

Byline: Pete Born / Julie Naughton / Laura Klepacki

NEW YORK — The alternative is looking more and more like beauty’s main option.
As the new millennium continues to unfold, new directions that first became apparent in the last two years have gathered into trends. New players have moved from the fringe to the mainstream, and fresh blood is pumping through the industry’s veins.
Indie upstarts, retail rebels and Internet hotshots bent on ushering in a new order — this is the cast of characters that is suddenly demanding a place among the established industry leaders and well-versed cosmetics executives.
This is beauty’s class of 2000. Here and on the cover are photographs of a cross section of these new faces that are transforming the industry. They range from a new generation of a very established power — such as Aerin Lauder, the recently named executive director of creative marketing for Estee Lauder USA & Canada — to Michael Malcom, a college student and perfumer who is trying to break into the mass market. And in between is gaggle of cybernauts, whose venue did not even exist two years ago.
Typical of this group is Katherine Legatos, co-founder and co-chief executive officer of Ingredients.com. Her Web site, which has its own brand and a single identity, is different from the dozens of multibrand retailers known as aggregators. But there is little difference when it comes to the need to buck the intense competitive pressure that comes with life on the Net.
Legatos foresees a massive meltdown in the cauldron of Internet competition. The surest path to success, she believes, is product differentiation. “I really believe in the need to differentiate yourself,” she said, “and create value for the consumer. If there is not enough differentiation, the question becomes who is well financed enough to survive.”
She added that one popular strategy is to create alliances between companies with different capabilities so that sites can extend their reach. For instance, it can be a match-up between offline manufacturers of goods and online retailers.
This melding vision typifies beauty’s new terrain. Peter Thomas Roth, one of the newcomer skin care brands, is a hot seller at Sephora, which, in itself, is perhaps most responsible for the dramatic changes in beauty retailing the past two years. June Jacobs, Roth’s president, said the company developed its own manufacturing capability in the past year and is trying to keep up with the industry’s rapid development while looking forward to another record sales year.
“We embrace the fact that the Internet has completely transformed the way business is done,” Jacobs said. “What is so promising about skin care on the Web is that the whole experience of shopping at a traditional brick-and-mortar store has been taken to a new level by adding online services. Today, shoppers can research and create customized treatment programs online through the help of a virtual skin care specialist, and follow up with personal consultations and demonstrations at the store, or at a beauty treatment program at the spa.”
Many indie brands acquired in 1999 — buoyed by infusions of capital from high-powered parents like the Estee Lauder Cos. and LVMH — are ready to unleash expansion efforts this year. Their founders — who, for the most part, are better at product development than at doing the books — say that the freedom to concentrate on the creative side will ensure a greater flow of original products to retail counters going forward.
“Before the acquisition, I ran the business side as well as the product development side,” said Jeanine Lobell, founder of Stila, which was purchased by Lauder last August. “I guessed, and I was lucky that I guessed right a lot of the time. Now, I have real information — I can ask what the cost of goods are supposed to be, for instance. And I’m learning a lot from Leonard [Lauder], who is incredibly savvy about this industry.”
Lobell plans a new line called Stila Sport, which will launch in late May or early June. Despite the name, “this isn’t an aerobic-girl line,” she insisted. “It’s a line of dual-purpose products with an urban edge. There’s a whole generation of women out there who are funky and are urban and don’t have a lot of time to spend doing their makeup.” Stila Sport will include protective treatment lip color, cleansing wipes called H2Off, and eventually Sport Foundation. She’d also like to grow distribution internationally.
Marcia Kilgore, founder of Bliss — purchased by LVMH in March 1999 — also has an eye on expansion. “Our main goal this year is to open at least one more full-service Bliss spa, either in London or in San Francisco — possibly both,” she said. “We’ll have at least one open by the end of 2000.”
Kilgore is also planning a quick rollout for the firm’s proposed Quick Bliss walk-in nail bars. “We will open the first one late this spring, and I want to roll out 50 to 100 or more within the next two years,” she explained. “The more there are — and the more conveniently located they are — the more likely women will be to make them a consistent part of their lives.”
Kilgore will also launch “tons and tons” of new Bliss products this year — and will enter the color cosmetics category in early June with Bliss Gloss, a conditioning lip gloss available in seven colors.
Dineh Mohajer, whose Hard Candy brand was acquired by LVMH last May, was also enthusiastic about new opportunities. “With LVMH, we have the money and infrastructure to really grow,” she said. She’s also had the funds to add new staff. “We just hired new people in product development and marketing, and we’re still looking for the right people in a few other areas,” she said.
The capital has also provided the chance to head into a few long-dreamed-of product categories: Mohajer will launch her first fragrance in January 2001. “It will roll out slowly at first, and we’re still working on a lot of the details, but I’m really excited about the project,” she said. “We’re planning ancillary products that are totally different from what’s out there now.”
It’s not just the newly acquired who have plans to expand their reach. “We want to be a one-stop-shopping experience,” said Jon Bresler, owner and president of Lafco, which produces pricy personal care items. “We can’t just do high-end soaps and say we’re serving the whole industry. We’re servicing an urbanite who has many different moods, not just providing bathroom decoration.”
To that end, Bresler will begin shipping a new Australian line called Stuf this summer. “I don’t want to call it a teen line, but it has a young focus — its target audience is 15 to 35,” he said. “It’s slightly kooky without being completely off the wall, and includes personal care for both men and women and color cosmetics. Most of these items will retail for about $10.”
That price point puts the new items at a lower retail than most of Lafco’s soaps, but that’s Bresler’s point. “The level of design is consistent across the board, and retailers now get a great package at all price points,” he said. Bresler, in fact, hopes to eventually do Lafco retail stores. “Not because it’s another way to make money, but because we can present a unified brand image and offer that one-stop-shopping convenience,” he said.
Another quickly growing makeup artist brand is Laura Mercier, which entered the treatment market last year and launched a Web site. This spring, the company will consolidate its gains with a number of new products. Janet Gurwitch Bristow, the company’s chief executive officer, said the firm also has its eye on the bath and body market, with plans for launching a line, perhaps in 2001.
One of the hotter market trends, the spirituality of beauty, is embodied by Red Flower, a line of candles and teas. “You live your life as a total aspect of beauty,” said Yael Alkalay, Red Flower president, who previously was a creative director at Shiseido and lived in Japan for three years. Her approach embraces the intimate, sensual aspects of the rituals of daily living, and the products are based on flowers. Within the next six months, she plans on opening a 1,500-square-foot experiential and conceptual space on New York’s 14th Street. Farther ahead is a color cosmetics line.
The indie spirit is alive and well at the mass market, as well. Brands owned by major corporations — Revlon, L’Oreal and Procter & Gamble — may dominate mass market cosmetics, but determined entrepreneurs still abound.
Twenty-year-old Michael Malcom, founder of Michael Malcom & Co., an upstart fragrance firm, has high expectations for 2000. His first fragrance, Loquetion, which he created while a student at the University of Nebraska, had better-than-expected holiday sales, he said. Currently, in a handful of drugstores, Loquetion, a unisex scent targeted to the under-25 crowd, will be formally launched midyear. Malcom is already planning to add gift sets and other ancillary items.
Kristin Penta, creator of Fun Cosmetics, started the brand as a mass market pencil line in 1996 and has since expanded into color, accessories and face makeup. Penta has broken class of trade barriers with the Fun Exclusively at Bloomingdale’s label and will enter the specialty market with its debut at Bed, Bath and Beyond later this spring.
In the cosmetics industry this year, predicted Penta, “There is going to be a lot of cross-shopping. There is going to be a lot of clutter in color, and [industry] growth will be in other categories.” She pointed to eyebrow kits, cosmetics sponges and other ancillary segments as areas to watch.
Despite a clutter of color, innovators who are even newer to the market than Penta believe their brands can be successful.
Marria Yaqubie left her spot as a financial analyst at Lehman Bros. to launch Traffic Jam last year, a new teen cosmetics brand owned by Momtaz USA. After covering consumer products — and specifically Revlon — during her three years at Lehman, Yaqubie saw an opportunity for a teen brand presenting an upscale look at mass prices.
Now a promotional line, the goal is to get the brand permanent placement. A wall unit was designed and is being presented to retailers, said Yaqubie. “The U.S. market is very competitive so buyers are looking for trendy new packaging and new ideas and want to test products in prepacks first,” said Yaqubie. With items like a two-in-one lipstick and blush stick, Gloss and Go rings, and Nail Art Pen and Polish, Traffic Jam thinks it can grab retailers’ attention.
Meanwhile, celebrity makeup artist Sonia Kashuk has been doing in-store appearances to promote her new Sonia Kashuk Professional Makeup collection, available exclusively at Target. Kashuk co-authored the beauty book “Basic Face” with Cindy Crawford, and it was during those book tours in 1997 that she became inspired to create a line that would be simple for women to use. With a limited product selection and wearable shades, Kashuk wants to provide women with items to achieve a clean and polished look. For spring, Kashuk will introduce three new lip colors, two new powder eye shadows and four cream eye shadows, and expand the line with two lip color palettes of eight shades each, along with a lip balm.
The store tours will not cease, but will be an ongoing part of Kashuk’s efforts to update and improve the collection.

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