FORT LAUDERDALE, Fla. — The debate on how to fix the beleaguered mass market cosmetics category intensified this week, as retail buyers and beauty manufacturers gathered at the Efficient Collaborative Retail Marketing’s Cosmetics & Fragrance Efficient Program Planning Session, held here July 19 to July 21.
Fresh on conference goers’ minds was Revlon’s recent announcement that several big-box retailers planned to cut distribution of Vital Radiance, the beauty firm’s new cosmetics brand for women older than 50, from a number of their doors.
But Revlon was not the only source of concern. Despite the onslaught of new product initiatives, mass market cosmetics sales ticked up a mere 1.4 percent year-to-date for the period ended June 18, according to Information Resources Inc. data, which excludes Wal-Mart.
“Revlon has a five-year [turnaround] plan. If Vital Radiance had been successful, it could have been a three-year plan,” said William B. Chappell, an analyst with SunTrust Robinson Humphrey Capital Markets. As for whether the fledgling brand sours Revlon’s relationship with retailers, Chappell said its distribution partners likely will say, “Revlon took a shot, it didn’t work. Now let’s move on.”
All eyes are now on Revlon’s management team, and many observers are waiting to see if the company’s primary owner, Ronald Perelman, will call for new leadership. Chappell, however, doubts Perelman will revamp the current roster.
“This management team is leaps and bounds better” than its predecessors, said Chappell, adding that the company’s previous management would not have been able to convince retailers to clear room for Vital Radiance.
During a conference call with analysts last week, Revlon president and chief executive officer Jack Stahl noted that Vital Radiance seems to resonate better in the food and drugstore channels — venues visited more frequently by Baby Boomers — than in mass retailers. However, as Revlon’s competitors pointed out, on average, big-box stores — such as Target and Wal-Mart — generate three times more sales per linear square foot than drugstores. So, in general, the loss of productivity in one big-box store roughly equals lost business in three drugstores.
Many beauty firms — a few of which lost display space this year as retailers made room for Vital Radiance, Almay and L’Oréal Paris’ HIP — grumbled that the megalaunches have failed to prove their worth. Several of Revlon’s competitors said the list of retailers ousting Vital Radiance from a portion of their chain include Wal-Mart, Target and CVS. These retailers could not be reached for comment. When it’s all said and done, industry sources estimate that Vital Radiance could lose distribution in roughly 3,800 doors. Industry sources said Physicians Formula stands to benefit from Vital Radiance’s lost space in Wal-Mart, and Coty Beauty’s Rimmel London brand may pick up the available space at Target.
Revlon started this year with gusto, gaining 22 percent of additional shelf space for Vital Radiance and its revamped Almay brand. Yet, the company’s sales trail behind. Revlon said it expects second-quarter sales to grow in the midsingle digits. It is not yet known how much of that 22 percent space gain Revlon will retain next year. Retail buyers also said Revlon plans to expand Vital Radiance with a skin care range due out this spring.
Vital Radiance is hitting its stride in several regional outlets, including Meijer, a chain of 173 stores in the Midwest, and Lewis Drugs, a drugstore chain based in Sioux Falls, S.D.
“We’re actually very happy with Vital Radiance,” said Mark Griffin, president and ceo of Lewis Drugs. He noted that Lewis’ customers, who, for the most part, fit Vital Radiance’s target demographic, have shown their willingness to buy premium price for [color] cosmetics that address their needs. “It’s a value perception that, so far, Revlon’s been able to pull off,” Griffin added. As for when new product programs should begin to hit their stride, Griffin said: “Typically, we like to see them come out of the box strong. But you need to leave them in long enough if there is an initial [sales] lag. We’re patient, and I think that’s very key these days.”
A number of other retail executives surveyed said they can now gauge a success in a mere three months, down from a year time frame in years past. Almay is not immune to retailers’ growing impatience, either. A cosmetics buyer from one leading drugstore chain said the retailer plans to trim Almay space’s from 6 feet to 4 feet next year. Several buyers at the ECRM show also expressed disappointment about L’Oréal Paris’ HIP brand, originally positioned to retailers as the MAC Cosmetics of the mass market. Slower-than-expected sales have deflated L’Oréal’s expectations for HIP, said one cosmetics buyer. The buyer noted that L’Oréal had planned to build HIP into an 8-foot line by 2008. “I think L’Oréal has scaled back that request.” The line does appear to be gaining traction at Target, where industry sources said it’s already generating an estimated $2 million in retail sales.
“Companies make mistakes. We all do,” said one beauty manufacturer. “It’s the size and the frequency of the mistakes that matter.”