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From Clay Pots to $8 Million

SAN FRANCISCO -- Bare Escentuals, a purveyor of natural-based beauty products, is charting a path of steady growth that is expected to culminate in an $8 million volume this year.

It wasn't always smooth sailing for the company, which was...

SAN FRANCISCO — Bare Escentuals, a purveyor of natural-based beauty products, is charting a path of steady growth that is expected to culminate in an $8 million volume this year.

It wasn’t always smooth sailing for the company, which was founded by entrepreneur Diane Richardson in 1978. A peddler of small clay pots from India that contained crushed minerals used as blush, Richardson realized early on that many women were allergic to major color cosmetics collections because of the many preservatives and chemicals they contained.

She soon filled that void and over the next decade added natural fragrances, bath gels, lotions, potpourri and aromatherapy oils to the line, which she sold out of a small shop in Los Gatos, Calif.

Bare Escentuals now also offers everything from Habit, its skin care line, to hair care, foot care, PABA-free sun care products, massage products and even men’s toiletries under the Mesa for Men label.

Priced at 20 cents to $20 retail, everything is free of animal ingredients and animal testing. The products are also biodegradable, and the minimal packaging is made of recycled material.

About 25 percent of the company’s sales are now done in the bath and body category, chiefly with the California Spa line. The collection ranges from Seamud Soap, priced at $6.75 for a 6.9-oz. bar, to Seaweed Bubble Bath, $11 for a 6-oz. bottle, to Seamud Body Mask, $20 for a 12-oz. container.

In addition, 70 different custom scents can be added by customer preference to the company’s wide range of unscented items.

Terranomics, a group of venture capitalists here, bought the company in 1988 and set out to expand it. Terranomics opened four more company-owned stores, three franchised stores, launched a mail-order operation and hired chemists and a staff to manufacture products in-house.

Two years later, Bare Escentuals found itself financially overextended. In came Dolphin Associates — an investment company here specializing in retailing and led by John Hansen — to acquire the company and turn it around.

Although Richardson left the company at this point, Hansen’s efforts soon paid off. In 1993, Bare Escentuals grossed $6 million, and Hansen, now the company’s president, projected gross earnings of $8 to $10 million this year.

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“When I came around in summer 1990, the company was having severe cash-flow problems,” he recalled. “Still, people were coming in to the stores, trying to buy products. And the employees stayed even though their paychecks bounced every two weeks. I thought, ‘There’s something to this company.”‘

That year, to address its service-oriented customers, the company designed a new store concept, and the last two years have been spent refining that concept as well as expanding the product line, Hansen said.

Aside from core products — including its hot-selling french vanilla lotion — the company is constantly introducing new items to its 13 stores statewide, including its shop inside Macy’s Union Square, which is staffed by four Bare Escentuals employees.

“We come out with something new every month,” Hansen said. “It might be a new flavor or fragrance. It might be a major category like our men’s line.”

Next up on the company’s plate is an enzyme peel mask with alpha-hydroxy acids for the Habit line, lipsticks and lip glazes free of animal fat, custom color, loose and pressed facial powders and a spray hair fixative.

The mail-order catalog business — reintroduced last October — now serves customers nationwide.

In addition, the company is expanding its retail arm. This month Bare Escentuals is unveiling a store in Reno, Nev. — its first store outside of California — as well as one in San Mateo, Calif.

By yearend, Hansen hopes to have 18 or 19 company-owned stores open.

In another positive sign, he is looking for 1,400- to 1,500-square-feet retail spaces, a notch up from the existing 1,000-square-foot ones.