WELLA SALES REACH RECORD $2.4 BILLION

Byline: Melissa Drier

DARMSTADT, Germany — Wella Group scored record results last year as sales rose 7.7 percent to reach $2.4 billion and consolidated earnings after taxes soared 30.3 percent to $87.3 million. Operating profits were up 22.7 percent to $185.5 million.
All dollar figures are translated from the euro at current exchange. This is the first time Wella has stated its results based on the euro.
If 1999 was a record year, it was also “a crazy, nerve-racking year,” outgoing chairman of the board Jorg von Craushaar said at Wella’s annual financial press conference here Wednesday.
As reported, von Craushaar will end his 40-year career at Wella at the next shareholders’ meeting on May 24. His designated successor, Heiner Gurtler, a member of the management board and chief executive officer of Cosmopolitan Cosmetics, Wella’s fragrance and cosmetics arm, was not present at the press and analysts’ meetings and will assume his new duties on May 24.
Last year was crazy, von Craushaar explained, because first-quarter sales dipped 5.8 percent and fourth-quarter sales surged 20.3 percent, the strongest quarterly performance in the company’s history. It was also nerve-racking due to upheavals in world currencies. The collapse of the real in Brazil seriously weakened results in the region; sales in Brazil were down more than 30 percent. (Total Latin American sales lagged 8.2 percent.) The real’s devaluation also canceled out the positive effects of a strong dollar, yen and British pound, according to Wella officials.
Wella (including Sebastian, Kadus and Londa) ranks number two in the world hair care market, the company said. Wella brand hair care products alone posted sales of $1.6 billion, a gain of 5.7 percent over 1998, and now represent 67.2 percent of group sales, down from 68.4 percent in 1998.
Color products were behind the Wella brand’s strong performance both at retail and in the professional hair care sector, and sales of hair colorings were up 8.6 percent.
New products helped push the division ahead. Wella Viva On/Off, a patented hair toner system that can be removed easily, gained a 12 percent market share in Germany in a few months. Von Craushaar also put special emphasis on pyrazole (P5), a pigment featured in the Koleston Perfect range that provides long-lasting, shiny red shades, to be rolled out globally this year.
Wella’s cosmetics and fragrances business under Cosmopolitan Cosmetics generated 1999 sales of $455 million, up 15.4 percent. Prestige fragrances — above all Gucci Rush, which alone racked up $43 million in the last four months of 1999 — contributed almost 55 percent of the unit’s sales.
The new Naomi Campbell range reached the number-one slot in Germany’s mass market, where it was considered the most successful new launch of the year, von Craushaar said. The division more than doubled its operating profits to $30 million for the year.
Wella holds the Gucci license until 2028, “and we’re thankful that we have it,” von Craushaar stated, though he added that Gucci had become a competitor of sorts with its acquisition of Sanofi.
The firms are working together, he said, adding, “What’s important for us is that Gucci [fragrances] reflect the brand Gucci. Tom Ford is in charge of the development of advertising and central to the product, and there’s a good balance between Gucci-Sanofi and Gucci-Cosmopolitan.”
It’s no secret that Gucci is more than interested in buying back its license. Could Wella’s fragrance business continue without the Gucci brand?
“No, I couldn’t envision Cosmopolitan without Gucci,” von Craushaar said.
And Wella without Cosmopolitan?
“At the present time, I’d rule that out, but not necessarily forever,” he said.
More than 70 percent of Wella’s sales are generated abroad, although Germany remains the company’s largest single market.
Domestically, sales grew 6.6 percent, but in Europe sales rose only 3.8 percent, restrained by developments in Eastern Europe. In Asia, Australia and the Pacific, sales were up more than 25 percent, and earnings rose at a far faster pace than sales, Wella said. In Latin America, the Brazilian currency crisis contributed to a 8.2 percent downturn in sales.
In the U.S. and Canada, where Wella focuses on the professional hair care and prestige fragrance sectors, sales were up 25 percent to $291 million.
“We’re happy we’ve made progress in the U.S., where we’re only serving half [the professional and prestige] market,” von Craushaar commented. Sebastian is performing well and the Wella brand, “excellently,” he said, whereas he described the situation for fragrances and cosmetics as “very difficult — 1999 was a loss year, because in 1998-99 we’re tried to push forward in the bridge [fragrance] sector and we’ve now abandoned that attempt. We now expect to reach break-even in fragrances and cosmetics in 2001.”
The first quarter of 2000 has also been strong. Sales for the group were up 23.7 percent and Wella is projecting 7 percent growth in group sales for 2000, with a “better increase in profits.”
New products on the pipeline include an aromatherapy line from Lifetex; new men’s scents from Gucci and Dunhill; the first women’s fragrance from Ghost; new Naomi Campbell, Anna Sui and Rochas women’s scents, and debuts under the new Bruno Banani and Ellen Tracy brands.