Procter & Gamble Co. is out to transform the “soap-and-water-guy” into a proper skin care consumer.
On Tuesday P&G announced it had purchased Zirh Holdings in a deal industry sources said is worth about $40 million, twice Zirh’s annual sales.
Zirh, best known for its high-end skin care products, including face washes, masks and antiaging serums, marks P&G’s second major men’s grooming acquisition in two weeks, with the first being The Art of Shaving, a deal said to have been in the $60 million range.
The Zirh buy gives P&G entree to a retail base that includes Barneys New York, Bloomingdale’s, Saks Fifth Avenue and Sephora, while The Art of Shaving deal gives P&G a crack at growing a retail chain, as well as an immediate outlet for its bevy of razors and blades.
“As a company we have been pretty transparent,” said Chip Bergh, group president for P&G Male Grooming. “Strategically, we are committed to winning with men. And how we fulfill that strategic objective is we need a portfolio of brands. What we have done over the weeks is assemble brands [and add them to] Braun, Gillette and Old Spice and our fine fragrances. Zirh is a tremendous asset. It is a relatively small brand but strategically in skin care, and the assets it represents, it’s a great fit.”
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P&G’s insatiable appetite for men’s grooming began to emerge earlier this year at the National Association of Chain Drug Store’s Annual Conference in Palm Beach, Fla. There, for the first time, P&G set up a men’s pop-up shop, Male Zone, atop a portion of The Breakers hotel, and outfitted it with plasma screen TVs, styling and massage chairs, along with drinks and snacks. Hairstyles, shaves and massages ensued among vast merchandising displays of Gillette shave and hair care products, Old Spice body care and Fusion razors.
Men, it seems, are the new women. That said, most men’s product categories are down in food, drug and discount stores. According to sales data from ACNielsen for the 52-week period ended March 31, including Wal-Mart, sales of men’s hair products are down 5 percent. Total toiletries in men’s declined 7.3 percent to $520 million. Men’s cologne sales totaled $247 million, a steep decline of 16.4 percent. Aftershave sales declined 3.7 percent to $118 million. Even shaving is off 0.4 percent to $2.9 billion.
But Euromonitor estimates the men’s grooming business in the U.S. will reach $5.3 billion by 2012, up from $5 billion in 2007.
As for the premium men’s market, which P&G has been building upon with its recent buys, the sector has felt the negative effects of the recession. The U.S. skin care market ended 2008 with $69 million in sales, a decline of 3 percent, according to The NPD Group. Karen Grant, vice president and global industry analyst for beauty at NPD, recently said men’s skin care, in particular, had been growing each year but last year “it took a dive because the shaving business didn’t do so well.”
Facial moisturizers, which accounted for 27 percent of the skin care category, were up 1 percent; shave treatments, which comprise about 24 percent of the market, decreased 5 percent.
“There are some bright spots but it’s a tough category overall,” she said.
Growing its newly acquired skin care firm is on the back burner — for now.
“At this point in time it’s just business as usual. The key is not adding but drilling where we are and bringing in the soap-and-water guys to using skin care,” said Brian Robinson, Zirh’s former president and owner. “As they try the products they wind up being loyal customers. That’s the key to growing the business where we are, without a doubt.”
Bergh said getting both newly acquired brands deeper into the minds of consumers is an immediate goal.
“Both The Art of Shaving’s and Zirh’s awareness of brand is relatively low, but guys who know it are highly loyal. There is a lot of opportunity there. And, the footprint of both businesses are U.S.-centric. There is a big world out there and we have scale and global reach,” said Bergh.
While Zirh is made up mostly of skin care, it also markets two fine fragrances, Ikon and Corduroy. Whether the scents will be rolled into P&G’s existing fine fragrances portfolio remains to be seen. Robinson added that Zirh’s October announcement of a distribution deal with direct-seller Jafra Cosmetics International never came to fruition; future HSN appearances (which have taken place over the past several months) are not necessarily a goal either. Robinson said he will stay on board “for a period of time to help with the transition.”
Barneys, one of the first retailers to sell the line almost 10 years ago, said Zirh has the right positioning and price point for its particular men’s shopper.
“For us, what we saw was that it was the first men’s skin care line that had cool packaging, the right price point and it was innovative,” said Bettina O’Neill, vice president and divisional merchandise manager for women’s cosmetics and fragrances at Barneys New York.
But the two have not always been partners. In 2004, when multinational cosmetics group Shiseido bought the brand from Robinson, distribution was almost immediately widened, a move that didn’t sit too well with high-end retailers. “It was not the right fit,” said O’Neill of Zirh, after the acquisition. But, in 2007, Robinson bought Zirh back — and the brand reentered Barney’s in April 2008 with the launch of Platinum, an ultrapremium skin care brand with prices as high as $145 for Repair, a gel serum targeting deep lines and damage.
“The Platinum line has been strong for us,” said O’Neill. “It is one of the top brands. We were excited when [Robinson] got [Zirh] back because he had done a great job. There is a magic. The male customer feels comfortable with it.”
Whether P&G will be the right fit for the brand — and be able to preserve Zirh’s “magic” — is something the industry “will have to wait and see,” added O’Neill.
Bloomingdale’s Howard Kreitzman, vice president of cosmetics and fragrances, said the Zirh business is very important to the retailer and he “looks forward to its having the resources to develop new products and effective marketing campaigns.” Zirh had been growing nicely before the onset of the recession, he said, and “it still is outperforming many things.”
Meanwhile, Zirh’s future plans include introducing new shower gel and soap collections at Bloomingdale’s and Macy’s West in September. The five-item shower gel line is called Zirh Warrior and features names such as Alexander the Great, Julius Caesar, Charlemagne, Cyrus and Ulysses — and a bust of each historical figure is featured on the packaging. Each will sell for $22.50 for 12 oz. The soaps are called Cocktail Bars and have names like Cucumber Martini, Hurricane, Screwdriver, Sake Bomb and Long Island Iced Tea. Each 5.3-oz. bar will be priced at $15.