AVEDA’S CONGRESS: OUTLINING THE FUTURE OF THE BRAND

Byline: Julie Naughton

MINNEAPOLIS — After founder Horst Rechelbacher kicked off Aveda’s Congress Festival last week with a group massage, the company’s new president reached out and touched the crowd — at least figuratively.
Dominique Nils Conseil — formerly president and representative director of Cosmelor Ltd., the Japanese subsidiary of L’Oreal’s Parfums & Beaute division, based in Tokyo — joined Aveda in July. And although he had met many of the brand’s salon owners earlier, Congress was the first time they’d all been together in one room.
And as Conseil stood onstage at the University of Minnesota’s Northrop Memorial Auditorium in front of a packed house, he told the crowd of more than 4,000 that he appreciated the work they had already done to build Aveda as a brand — and that he hopes to further raise the bar.
“I’m here to serve you,” Conseil told the group. “You own the brand. Together, we’ll work out the means to grow Aveda even further.”
The crowd of salon owners, distributors and hair stylists, which came to Aveda’s birthplace from across the U.S., Europe and Japan, applauded Conseil’s first priority — a revamped system that will ensure smoother manufacturing and distribution of Aveda products.
“Our most sacred duty is to provide you with products — it doesn’t do a bit of good for us to come up with innovative items if they aren’t making it to the market on time,” he said.
That motion was quickly seconded by Fred Langhammer, president and chief executive officer of the Estee Lauder Companies, which acquired Aveda in December 1997 for an estimated $300 million in cash.
“The company’s doing extremely well, but we have a few areas we’d like to strengthen,” said Langhammer, to whom Conseil now reports. “We’re not quite there in terms of all of the sourcing and implementation, but we’ll work hard on that over the next 12 months. Our first priority [after acquiring the brand] was to get the right team in place, then to clean up the distribution structure.”
When Lauder acquired Aveda, Conseil explained, the team shipped directly to about 20 to 30 outside distributors, who in turn serviced close to 24,000 salons. Three years later, Aveda has taken over a large part of the distribution responsibilities and now distributes directly to several thousand salons.
Through Lauder’s efforts, over the last year Aveda’s distributor list has been narrowed to those who focus on the Aveda brand; the number of salons carrying the brand has been slashed from 24,000 to 8,200. Many of the salons now carrying the Aveda brand carry it exclusively, as Aveda Concept salons; none are permitted to carry more than three non-Aveda brands.
Another challenge is simply the nature of the products themselves. “Because many of our products have 100 percent natural essential oils, much depends on the seasons and the harvests,” Conseil noted. “What we need to do now is to make sure we have the right tools to move forward with order taking and with the overall structure of the business.” While Conseil noted that the company’s distribution rate is certainly not a disaster — it’s currently at about 93 percent efficiency — he’s determined to raise the efficiency rate to 99 percent. “Unless the rate is at 99 percent, that means there’s someone who is not happy,” he said. “And because I’m new, I’m naturally looking at things with a critical eye and determining where we can improve.”
Conseil has called in Tom Wellen, now vice president of business operations, to further strengthen the area. “He’s one of the corporation’s top manufacturing and logistics specialists,” he noted, adding that Wellen helped to integrate MAC into Lauder’s systems after its acquisition.
But with efforts to date, “existing Aveda salons are up 56 percent in business over the last two years,” said Langhammer.
Aveda does not break out sales projections, but industry sources say that Lauder’s aim is to triple Aveda’s business — recently estimated at $250 million — over the next five years.
According to Daria Myers, senior vice president of marketing, new products will continue to fuel Aveda’s business, with at least one new product being introduced almost every month for the next two years. The new introductions will span every category, from body and aroma to hair and makeup.
“While hair is 52 percent of our business, and we’ll be introducing much there, 48 percent of our business is in other categories, which we will be exploring to the fullest,” she said. “In addition, we’ll focus on converting customers who are already loyal to one area of Aveda — say, hair — to other domains within the Aveda brand.” In addition, a new advertising and promotional plan is on tap, she said.
All in all, the tone seemed more upbeat than it had been at Aveda’s last Congress gathering — held in September 1998, nine months after Lauder’s acquisition — when salon owners, still shell-shocked from the news, weren’t quite sure what to expect.
“A few things have changed since the last time we talked,” said Langhammer to the crowd, referring to his last Aveda Congress speech. “We’ve made a few acquisitions — among them, Stila, Jo Malone, Bumble + bumble and Gloss.com — and we’ll be launching a multibrand Web site in March. But one thing hasn’t changed, and that’s our commitment to keeping this brand out of department stores.
“Two years ago, there was a great deal of skepticism about what Lauder intended to do with the brand,” Langhammer said. “Be assured, we realize that Aveda is a philosophy and a way of life, and we appreciate your support of the brand.”
In fact, founder Rechelbacher addressed the sale issue head on. “Some of you may still have anger toward me for selling the company,” he said. “But I did it for the good of the company. It’s very important to think about the future — I’m not getting any younger, and neither my son nor my daughter wanted to run the company. I consider Aveda my second daughter. I married Aveda; I didn’t sell it. I am here as long as I live.”
Another reason Rechelbacher has often given for selling the company was his desire — and assumed lack of capital — to expand Aveda internationally. Leonard Lauder, chairman of the board of the Estee Lauder Companies, is looking forward — like Rechelbacher — to expanding the brand’s international focus.
“The hair care market is much larger outside of the U.S.,” said Lauder. “We have a major interest in making Aveda a big international business, and we’re picking markets now.” The brand is present in about 24 countries, although it’s strongest in Canada, the U.K., Germany, Taiwan, Korea and the Benelux countries, said Conseil. The plans are reportedly to make it much broader, although Lauder wouldn’t give a ballpark number of countries. “It’s a big world out there,” he stated.
Langhammer and Conseil narrowed the globe down a bit — specifically, to Conseil’s last country of residence, Japan. The news isn’t a huge surprise, however; Jeanette Wagner, vice chairman of the Estee Lauder Companies, had alluded to the possibility earlier this year.
Market research is already under way, but there won’t be a rush to shelves. “You never get a second chance to make a first impression with Japanese consumers,” said Conseil. “When we go there, it must be our priority.” There is not yet a fixed date for Aveda’s entry into Japan, he said.
Between the two of them, however, Langhammer and Conseil have spent 19 years in Japan and seem to relish the challenge of adapting Aveda to a new market.
“The Japanese are an incredibly hair-involved people, and the market is very important,” Langhammer said. “We see a lot of potential for the brand in Japan.”
There will be an increased focus on domestic business as well. “Most of the growth percentage-wise may come from abroad, but we have a lot of room to grow here,” said Conseil.
The Internet may also play a bigger part in Aveda’s future. While Lauder wouldn’t confirm if Aveda would be sold on Lauder’s revamped Gloss.com Web site, he did reiterate that the Internet would continue to be an important marketing tool for the brand going forward.
“Few product companies seem to realize the informational power that is available on the Internet,” he said, adding that there is a plan to redesign Aveda’s Web site in the near future. “We do. And our purpose is to use it to drive people into our markets. We’re not looking to be anyone’s competitor, just their partner. In fact, we see it as being sort of our retailers’ marketers.”

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