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NEW YORK — The battle between beauty’s behemoths and niche players is coming to a rolling boil.

At last year’s National Association of Chain Drug Stores’ Marketplace Conference, power vendors such as L’Oréal and Revlon convinced retailers to give them additional footage because their 2006 launches would fill gaps on the cosmetics wall. According to sources, executives at these brands suggested that retailers get the extra space from the smaller brands they merchandise, such as Del Labs’ N.Y.C. New York Color, Bonne Bell and P&G’s Max Factor, whose products tend to sell much slower due to a lack of presence. Also last year, leading beauty firms told retailers to optimize their assortments by looking for ways to eliminate duplications of stockkeeping units.

Fast forward to a year later.

Revlon’s Vital Radiance has been underperforming, leaving the door open for smaller players to nab shelf space. Already a handful of mass merchants have decided to whittle back on Vital Radiance. Market reports indicate that Wal-Mart will trim the line from 2,500 doors to 500, while Target will cut it from 1,500 to 500. CVS only had the line in select stores and has opted to eliminate it from Osco and Sav-On stores.

“Last year, this meeting was about the big players saying retailers don’t need other lines,” said Robert Wallner, executive vice president, sales, of Jordana Cosmetics Corp., the owner of Milani. “This year, retailers are more open to what we have to say,” he said of the Milani line, which has racked up impressive sales growth with a multicultural audience.

The tug-of-war between niche and nationally advertised beauty brands is hardly new. Large vendors have always tried to dominate the shelf wars with big advertising, and even slotting allowances.

In the beauty business, however, new and unique often rules. That’s one reason why the Meet the Market format at NACDS Marketplace last month was so successful, as retailers were likely searching for smaller players to help fill growing gaps on their beauty wall. At Meet the Market, vendors and buyers utilize one-on-one meetings to hear about new items from small firms. For some retailers, beauty companies with sales under $25 million are the lifeblood of sales.

This story first appeared in the July 14, 2006 issue of WWD. Subscribe Today.

A representative of one retailer, who declined to be identified, shared numbers revealing that all major brands for her chain were down, whereas small brands were the only area showing growth — double-digit growth, too.

Already some winners are beginning to emerge, as industry sources said Rimmel is likely to gain freed-up shelf space at Target, and Physicians Formula is being considered to gain footage at Wal-Mart in 2007.

For Lisa Yarnell, president and chief executive officer of Jane & Co., retailers need up-and-coming brands to fill an important market segment. “The growth at mass is coming from the value portion of the business — prices [of] $3 to $5 from companies such as Jane, Prestige, Rimmel and Milani. Also, these are the brands that can bring an increase in productivity.”

Industry consultant Allan Mottus said some of the bigger beauty brands are indeed pricing themselves out of consumers’ budgets.

“Even a shopper trading down from mass isn’t going to pay what seems like a high price at a drugstore,” he said. Pricing has been one of the obstacles, he added, to Vital Radiance’s success.

But not all is bright and rosy for small players. Wal-Mart is said to be looking closely at eliminating smaller players to concentrate on big brands. This decision is a nod to the belief that 20 percent of beauty sku’s produce 80 percent of sales. During a session at Marketplace, executives from Costco, Procter & Gamble, Meijer, CVS and WSL Strategic Retail talked about the need for simplifying the shopping process to make it easier for consumers to make choices in confusing categories such as beauty.

However, most retailers think a full presentation of colors and selection is paramount in giving shoppers the confidence to buy at the mass market. “Even though they buy the same red, they want to see many choices of red,” said Mark Griffin, president of Lewis Drugs.

Another retailer, who also declined to be identified, said she’s often thought of reducing duplicative sku’s. “But if you listen to the big companies, you’d be eliminating the wrong items. They just want to be the last ones left. If you are the only girl left at the bar at the end of the night, you look more attractive,” she joked.

Going out on a limb for little-known brands and items seems to be working for Sephora. And chains such as Walgreens and CVS are trying that idea with European names. As planograms are being mapped for 2007, hundreds of small beauty firms are hoping to strike the right chord with buyers and earn a chance to be the brand that will bring shoppers back to the mass market.

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