CONFIDENTIAL CONFIDENTIAL CONFIDENTIA L · PDF filethese brands given the investment needed to develop the critical mass of each ... decision to lower custom duties on imported

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CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL

The trend towards small-scale acquisitions, which began in force at the end of last year, is set to continue.

Following Estée Lauder Companies’ purchase of Le Labo, Rodin Olio Lusso, Editions de Parfums Frédéric Malle and Glamglow, Puig’s acquisition of Penhaligon’s and L’Artisan Parfumeur and more recently Unilever’s takeover of skincare companies Kate Somerville Skincare and Ren, more niche brands are said to be up for sale. In the past few weeks, industry sources have reported that American make-up brand Mally Beauty (which has filed

for bankruptcy) and color brand Too Faced are on the block. It is uncertain who will buy these brands and whether some of the industry’s major multinationals will be interested. But analysts looking at all this activity have questioned major groups’ moves to take

on what are very small brands. They query the logic of a large group buying several of these brands given the investment needed to develop the critical mass of each individual company. Some say that there is simply a race to snap up as many brands as possible before the competition does, especially given the lack of targets in the market. Others argue that large companies need to add something original to their portfolios (especially given today’s changing consumer), and that they are willing to take over and try out as many brands as they see fit to find this point of difference.

Small is beautiful The buzz 2News roundup

Netwatch 6Social media monitor

Interview 7Marionnaud France ceo Eileen Yeo

Insight 9Japan

Show review 12 TFWA Asia Pacific

Store visit 16 Fortnum & Mason, London

Oonagh PhillipsEditor in [email protected]

www.bwconfidential.com The inside view on the international beauty industry May 28 - June 10, 2015 #112

News headlines daily on www.bwconfidential.com @BWCbeautynews

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www.bwconfidential.com - May 28 - June 10, 2015 #112 - Page 2CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL

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Strategy

P&G is to sell prestige haircare brand Frederic Fekkai and its salons to UK-based Designer Parfums and prestige beauty company Luxe Brands. The move is part of P&G’s strategy to divest up to 100 brands. As well as a full product line, the Fekkai business includes seven salons in the US. P&G acquired Frederic Fekkai in 2008. Designer Parfums and Luxe Brands have formed a joint venture called Fekkai Brands LLC to manage the Fekkai brand.

Anglo-Dutch group Unilever has acquired prestige skincare brand Kate Somerville Skincare. The Los Angeles-based skincare brand is distributed through prestige retailers in the US, and according to Unilever has a growing footprint in Asia. This acquisition follows Unilever’s purchase of UK-based skincare brand Ren in March and France-based skincare company Ioma in 2013.

China is to reduce import tariffs on consumer goods, including skincare products from June 1 in a bid to boost domestic consumption. Tariffs on skincare products will be reduced from 5% to 2%. Following the news, French group L’Oréal said that it will reduce prices on

most of its imported products to China. “We welcome the Chinese government’s decision to lower custom duties on imported skincare products from 5% to 2%. […] As a beauty industry leader, and despite the fact that the decreasing custom duties have very limited impact on retail price, we have decided to actively respond to this decision by lowering the prices of most of our imported products, as we believe it will encourage domestic consumption,” L’Oréal said in a statement. Chinese consumers are known for shopping outside China due to high prices

at home not only as a result of import tariffs, but also because of VAT and a complicated chain of distribution.

Direct seller Avon’s shares rose more than 11% earlier this month on news of a hoax takeover bid. A firm calling itself PTG Capital Partners disclosed in a false regulatory filing that it had offered to buy Avon for $18.75 per share. Avon said in a statement that it had not received any offer from the company. It added that it had not been able to confirm that the company PTG Capital Partners exists. n n n

Stay informed with our daily news headlines on www.bwconfidential.com

n P&G sells Frederic Fekkai

n Unilever acquires Kate Somerville Skincare

n China reduces import tariffs for skincare, L’Oréal to reduce prices

n Sephora opens store on Chinese online platform JD.com

n Leading Luxury Group revamps Limoni and La Gardenia Beauty


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LVMH-owned Sephora has opened a flagship store on Chinese online platform JD.com, a move that should give the beauty retailer’s e-commerce business a major boost in China. Sephora’s flagship will be the largest cosmetics store on JD.com, with over 1,200 products from more than 70 brands including Dior, Givenchy and Guerlain. Sephora Asia president Anne Veronique Bruel said JD.com has a reputation for product authenticity, and the store will allow consumers to shop online without the worry of counterfeits. JD.com operates seven fulfillment centers and 143 warehouses in 43 cities, as well as

3,539 delivery stations and pickup stations in 1,961 counties and districts across China. In other news, Sephora said it will open 25 additional stores in department store

JCPenney in the US from May. The move aims to help Sephora enter new and smaller markets in the country and expand JCPenney’s reach as a beauty retailer. In addition, six existing Sephora inside JCPenney shops will be expanded to an average of 3,000ft2 (278m2). Currently, more than 500 JCPenney stores feature a full-service Sephora offering.

Leading Luxury Group (LLG), which owns Italy’s two major perfumery chains Limoni and La Gardenia Beauty, says it has reached a turning point in its restructuring plans for the two retailers. The group, formed in December 2013, initiated a restructuring effort for the chains, which were facing bankruptcy, and invested €15m to reposition Limoni and take it more upscale. Some 128 of Limoni’s 380 boutiques have been revamped over the past 18 months. LLG also renovated 33 of La Gardenia Beauty’s 168 stores in 2014. LLG claims that Limoni is Italy’s leading chain in terms of market share, while La Gardenia Beauty is the number-two beauty retailer in the country. LLG claims a 50% share of the retail chain market in Italy and a 21% share of the market as a whole. In a beauty market where consumption declined 2.2% in 2014, LLG’s sales of selective

products grew 2% to €356m during the period, and EBITDA was more than €15m. LLG is to open three flagship stores (one in Milan and two in Rome) in the next few months.

UK-based health and beauty chain Superdrug (AS Watson) plans to open 100 new stores in the next three years. The company will focus particularly on London and the south east of England for the new openings. Superdrug says it is already in negotiations to secure sites covering a retail space of between 2,000ft2 (186m2) and 5,000ft2 (465m2).This expansion plan will bring Superdrug’s total number of stores to more than 900 and is expected to create around 1,350 new jobs.

French perfumery retailer Nocibé is to launch a tailor-made fragrance creation service on its website for Mother’s and Father’s day. Users create personalized fragrances by choosing the type of scent from five categories and by selecting up to six notes from a range of 50. Customers can choose their fragrance bottle from 15 designs. The bottle can be personalized with a message, name or a photo. Nocibé says up to 150 billion unique fragrance compositions are possible through the service. The personalized fragrances start at €69.90 for a 50ml EdP and the creation and delivery

of the scent takes five-to-seven working days. Nocibé says that if the client is not satisfied with the fragrance he or she can create a second scent free of charge or be reimbursed. Nocibé teamed up with Unique, a specialist in bespoke fragrances for the service. Each

fragrance is created by perfumers in Unique’s laboratories in Berlin or New York. n n n

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The mascara market in Europe put in a good performance in April, with new product innovation driving the category. Sales generated by new launches in the past twelve months doubled compared with April 2014 in most European countries, according to NPD. Major launches included Grandiôse from Lancôme and Benefit’s Roller Lash. The UK saw the best growth, with sales up 17% for April. Sales rose 11% in Spain, while France put in only 3% growth for the month.

Manufacturers’ sales of global natural personal-care products were up by 9.7% in 2014 to reach nearly $33m, according to Kline & Company. The category continues to perfom well, with Asia and Brazil seeing the fastest growth. The market is comprised of brands classified as truly natural, which accounts for 25% of the sector, and natural-inspired, at 75%. Kline says that products positioned as truly natural are gaining in importance, with more brands reformulating their products with a higher proportion of natural ingredients.

Launches

Swiss brand La Prairie is focusing on its Skin Caviar collection this fall with two new launches: Skin Caviar Luxe Cream Sheer in September, and a new foundation in October. La Prairie Group svp global marketing Greg Prodromides describes the products as a ‘new milestone in our iconic collection.’ “Our objective with both launches is to reach a new high-value consumer and one who hasn’t necessarily been a user of Skin Caviar Luxe Cream. Foundation is a dynamic market so it was important for us to be active here; foundation is also a product that recruits new consumers,” comments Prodromides. “Skin Caviar accounts for around a third of our business and for this year we expect the collection to grow by 20-25%, with a big part of this driven by these new launches.” Skin Caviar Luxe Cream Sheer is intended to provide a more lightweight texture and

subtler fragrance than the original cream version (which launched in 1998). Like the cream, the Sheer version claims to have lifting and firming benefits. Skin Caviar Luxe Cream Sheer retails at $430 for 50ml.La Prairie has reformulated its Skin Caviar Concealer Foundation with a new peptide

for increased skin firmness and new pigment technology. The foundation comes with a concealer incorporated into the cap and a brush. It is available in 17 shades, with 12 pre-selected shades for each region. Skin Caviar Concealer Foundation retails at $215. Also for Skin Caviar, La Prairie has partnered with French crystal-maker Baccarat to

produce Caviar Spectaculaire, a limited-edition crystal caviar server that includes a 75ml jar of Skin Caviar Luxe Cream. Once empty, the jar can be replaced with a caviar bowl. Some 1,500 pieces of the server have been produced. It retails at €1,500. n n n

European mascara sales by country April 2015 Country % change April

2015/April 2014France +3Italy +5Spain +11UK +17

Source: NPD BeautyTrends

Natural personal-care market sales growth by region 2014Region % change

2014/2013Brazil +15.3Asia Pacific +12.2US +7.5Europe +4.8

Source: Kline & Company


www.bwconfidential.com - May 28 - June 10, 2015 #112 - Page 4


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peony, freesia and musk. It comes in a black bottle with a gold-colored cap meant to evoke a bobbin of thread. The fragrance will be supported by a print ad campaign. BPI says it will build the fragrance slowly and will put a strong focus on the performance

of each door. The fragrance will be sold in around 6,000-7000 doors globally. “We plan to support this launch as much in store as with media. The brand is well known in fashion, but we need to work on visibility among fragrance consumers,” BPI chief brand officer Nathalie Helloin Kamel told BW Confidential. Alaïa Paris will launch in June in the brand’s boutiques in France and will also have a

podium at department store Galeries Lafayette. It will roll out internationally from July to September, priced at €58 (30ml EdP), €88 (50ml EdP) and €124 (100ml EdP).

Coty is launching a new fragrance for Calvin Klein’s Eternity franchise. Eternity Now, for men and women, will be introduced worldwide from July 2015. The women’s fragrance is a floral scent and retails at €66.90 (50ml EdP) and €85.90 (75ml EdP). Calvin Klein Eternity Now for men is an oriental fougere, retailing at €65.90 (100ml EdT). The launch will be backed by an ad campaign featuring models Jasmine Tookes and Tobias Sorensen.

Trade shows

Trade show Cosmopack, organized by the BolognaFiere Group, is to launch the first edition of its International Business Forum & Exhibition in New York on September 16-17. The forum is focused on business meetings and is an evolution of the Cosmopack Symposium, which took place last year. Companies from contract manufacturing, machinery, and the packaging and raw materials sectors will be offered meetings with buyers at the event. Organizers will invite American retailers, importers of packaging, manufacturing companies and brands to attend the meetings. The event will also host workshops and round tables focused on the North American market. The event is organized with US beauty

trade bodies Professional Beauty Association (PBA) and Independent Cosmetics Manufacturers and Distributors (ICMAD), as well as Cosmetica Italia and Polo Tecnologico della Cosmesi, which represent the Made in Italy beauty supply chain. n

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BW Confidential reports on what’s being said about beauty on social networks

Social media monitor

The trend for selfies has been driving new trends in beauty, say bloggers, and inspiring new products, such as US brand Too Faced’s Selfie Powder. Reviewers report that Instagram filters have also sparked trends in plastic surgery in the US, with clients requesting procedures to make them resemble their Instagram image.

A collaboration between Swedish niche fragrance brand Byredo and luxury eyewear company Oliver Peoples has garnered interest from bloggers, who praise the creative thinking behind the concept. Byredo created three scents based on the neurological phenomenon of synesthesia to highlight the connection between smell and sight.

Inspired by the Asian trend for sleeping products, or skincare that is applied overnight, items such as Garnier’s Miracle Sleeping Crème and Origins Sleeping Peel have become popular online. Although they are liked for their textures and promise of a more radiant complexion, some bloggers say the products under-deliver.

Nail polish brand ncLA has caught the attention of bloggers with the launch of its limited-edition black nail polish for men. Developed with apparel company HUF, the varnish is seen as a novel way to start up conversations about the brand.

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Marionnaud France factfile

l Number of stores: 519 l Market share: 20.6%

l Number of stores being revamped:

80 this year; 60 in 2016

Marionnaud France ceo Eileen Yeo

Marionnaud France ceo Eileen Yeo talks to BW Confidential about her strategy for the French chain, and the challenges facing the country’s prestige retail market

Time for change

Marionnaud has announced a string of new initiatives this year. What is behind this?We are currently revamping our store network. Since 2011, we have refitted more than 360 stores, and our goal is to refit the entire network of 519 stores. We plan to refit 80 stores this year and 60 in 2016. In addition, we will relocate some boutiques and open new stores. We’re trying to change the décor to be more warm and inviting as we had feedback that our stores were a bit cold. When we developed the new concept in 2013 we tried to introduce a lot of wooden elements in tables, as well as new lighting and flooring to make the store more cozy. The merchandising is now easy for the consumer to navigate and the store is easier to explore. We are also bringing a lot more digital experiences to the store, which is quite a big step

for us. We’ve had iPads in store as of April for skincare and fragrance diagnostics and more make-up applications. We’re also looking to use our internal Facebook and intranet to communicate with our 3,800 beauty consultants. It’s a way to modernize the company and change the way people speak and connect with one another. It also changes how we serve and connect with our customers. We’re trying to make the experience on the e-store and the physical store as close as possible by replicating the in-store experience online.

What are the challenges facing the skincare category in France? The skincare market in France is quite challenged. Last year was nearly the sixth year of consecutive decline for the category and it registered a particularly big decrease. The parapharmacy market, however, has been increasing substantially. One reason for this is that in selective skincare we haven’t seen blockbuster products in quite a while, but just more of the same; however, brands have been increasing their prices. In the past five years in France, pricing in the selective market all categories combined has gone up by 25%. Given the economic context, it’s quite obvious why consumers would switch to products

sold in the parapharmacy channel, as these products have a lot of credibility. A lot of these brands give you the no-frills basics. I see many consumers who are loyal to traditional blockbuster products, like Clarins’ Double Serum, Estée Lauder Night Repair or Sisley, but I don’t see a big increase in selective purchases over the years.

How high do you see pricing going?Some 12 to 15 months ago a lot of brands were in denial about the price hikes, but it’s become impossible because prices are simply too high. For the market to grow, you need to price products more affordably or at least have introductory products at accessible n n n

”Marionnaud France ceo Eileen Yeo

In the past five years in France, pricing in the selective market all categories combined has gone up by 25%. […] I see many consumers who are loyal to traditional blockbuster products, but no big increase in selective purchases over the years

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n n n prices. Skincare, for example, is a category that consumers use regularly, so once they get comfortable with a product, they typically don’t change. We need to convince consumers with the first purchase, but we can’t if we keep increasing prices.

Is the solution to discount? In the past couple of years the only way that has been found to encourage consumption is through discounting, and it’s become very aggressive. However, I don’t think it’s the way to go, as at the end of the day the shopping experience becomes an afterthought. We don’t want to evolve in this kind of market, where everything is so competitive. Instead, we want to give consumers something different. What is missing at retail are additional services—instead store staff are just pushing products on the consumer.

How can you increase skincare’s sales?As a selective retailer, we need to offer what parapharmacies do not: skin diagnostics and advice, and in terms of pricing, we need to make the skincare category more accessible. I’ve been talking with a lot of brands that are coming out with smaller or jumbo sizes for everyday use to make them affordable. One option would be to offer trial sizes and if the consumer likes the product she can come back to the store and get a coupon to buy it at a special price. This is similar to a fragrance initiative we did last year with L’Oréal when we offered 5ml perfume miniatures and classified them into different fragrance families. For skincare we need a similar approach: we need to segment the category more in store, then provide trial sizes so that the consumer can get comfortable with the benefits. Retailers also need to be more dedicated when it comes to sampling.In April we launched our Beauty Code initiative. Although there is a heavy emphasis

on skincare, the idea is to offer a holistic solution for the consumer, so we can also use it for fragrance and make-up. The idea is for our BAs to give a skincare diagnosis to our consumer, to understand her lifestyle and her areas of concern, such as anti-aging. Then we propose three products from different brands that will meet her needs.For fragrance, we ask about the consumer’s tastes and lifestyle and our algorithm will

propose a few different scents. The same for make-up, depending on the look she wants to have. This is not a partnership with brands as we want to be impartial and give the customer what is right for her skin or her personality. The diagnosis is based on the beauty advisor’s expertise and she is required to give samples. After the diagnosis, we email or print out the diagnostic sheet. If the consumer really likes the sample, they can return and get the regular size. When we manage to get trial sizes from brands, we offer the trial size. We want the consumer to trust us and feel that we are not pushing products or brands on them and that they are getting honest advice. That’s the only way to differentiate what we offer from what parapharmacies offer. All store staff will be trained in this service and they will use an iPad app. The idea is to collect and store information so when the consumer returns we can see how we can complement the advice that she got last time. Brands are very excited about this new program as it hasn’t been done before in France. n

”Marionnaud France ceo Eileen Yeo

In the past couple of years the only way that has been found to encourage consumption is through discounting, and it’s become very aggressive. However, I don’t think it’s the way to go, as at the end of the day the shopping experience becomes an afterthought

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s Marionnaud is currently revamping its store network in France



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BW Confidential analyzes the current state of Japan’s beauty market

Ups and downsJapan

Japan’s prestige beauty market saw growth of around 7% in 2014, according to industry sources, while the country’s Ministry of Economy, Trade & Industry put the

growth of total wholesale beauty sales (prestige and mass combined) at 4.2% with sales reaching $12.4bn.One of the biggest talking points in the beauty market last year was the impact of the

increase in the country’s VAT from 5% to 8%, which went into effect on April 1, 2014. “Japan’s selective market was boosted by both a purchasing peak prior to the VAT increase and growth in consumption from more wealthy Japanese consumers,” L’Oréal Luxe Japan vice president Philippe Archambault tells BW Confidential. However, while consumption picked up just before the implementation of the tax rate

change, the market saw a sharp drop after it went into effect. Domestic sales at Japanese beauty group Shiseido, for example, fell by 24% in April 2014 and 14% in May compared with the previous year. The tax is to increase by an additional 2% in October 2015 to reach 10%, raising fears of a further slump in sales.

Tourism good news for beautyJapan’s beauty market has been positively impacted by an increase in tourists stemming from the devaluation of the yen and the initiation of government programs to promote

tourism. These programs include a new VAT refund system for tourists launched in October 2014, which sources say is having a positive effect on beauty sales. The number of foreign visitors to Japan reached 13 million last year—a record, according to Shiseido—with most tourists coming from China, Taiwan and Thailand. Industry sources report that tourist numbers were up by 29% in 2014, with tourism from China seeing a robust increase of +83% compared to 2013. According to L’Oréal, this growing consumer segment is generating additional sales in n n n

”L’Oréal Luxe Japan vp Philippe Archambault

Japan’s selective market was boosted by both a purchasing peak prior to the VAT increase and growth in consumption from more wealthy Japanese consumers

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Japan beauty sales* 2014 by categoryCategory Sales

2014 $bn% change 2014/2013

Skincare 5.65 +5.1Haircare 3.45 +4.0Make-up 2.57 +3.3Fragrance 0.32 -3.8Total beauty 12.40 +4.2

Source: METI (Japan Ministry of Economy, Trade & Industry) *Wholesale value sales



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n n n key destinations, such as the Ginza and Shinjuku districts of Tokyo and in Osaka. A spokesperson from Kao Group-owned brand Kanebo says that the company is now dispatching interpreters to stores with a heavy flow of Chinese tourists, such as in Shinsaibashi in Osaka and Shinjuku, Ikebukuro and Ginza in Tokyo. “As the number of foreign visitors keeps growing, we plan to increase our [multi-lingual] staff and offer more language services, in addition to Chinese,” explains a Kanebo spokesperson. Kanebo says that sales of its lipstick brand Chicca have been impacted by demand from

Chinese visitors. “Following the brand’s popularity on Chinese blogs and beauty-related websites, Chicca’s counter at Isetan Shinjuku is now being visited by such a large number of Chinese customers that it has become Kanebo’s number-one sales counter in Japan,” says the spokesperson. The number of Japan-bound tourists is forecast to increase through 2020, when the Tokyo Olympic Games will take place.

Focus on anti-aging Skincare, by far the market’s biggest, and most competitive category, accounting for more than 45% of wholesale sales in 2014, saw growth of 5.1% last year, according to the Ministry of Economy, Trade and Industry. Anti-aging continues to fuel the category’s growth. Given Japan’s aging population and low birth rate, the mature consumer is still a major

focus for brands. This year Shiseido launched Prior, a new line targeting women aged 50 and over that spans the skincare, make-up and haircare segments. L’Oréal’s Archambault says the group’s Luxe division is continuing to reposition its Helena Rubinstein brand to target more premium skincare clients. It is also capitalizing on what it says are its strong skincare pillars in Japan: Lancôme’s Génifique, with its market-specific formula developed by the group’s local R&D team, and the brand’s Absolue and Blanc Expert lines. In addition, L’Oréal is developing the cleansing device category in the market with Clarisonic in collaboration with Luxe division brands Lancôme, Yves Saint Laurent and Kiehl’s. Kanebo’s skincare offer suffered in

2014 according to the company, with disappointing results from its Evita and Freshel brands. Kanebo is focusing investment on seven brands in Japan, of which four are skincare-specific, including Twany, Evita and Lissage, its first prestige men’s skincare line launched in February in specialty stores and drugstores. Kanebo is also looking to merge several of its mid-priced skincare ranges into a single brand that will rely heavily on in-store advice. In addition to skincare, another major

project this year for the company is the development of a new haircare brand, also with a focus on advice, to be sold across several distribution channels. “We will n n n

”Kanebo spokesperson

The structure of distribution is undergoing major changes in Japan, especially with the spread of online retailing

“

Shiseido to build local business Recovering market share in Japan is a priority for the market’s number-one beauty group, Shiseido. Under the leadership of ceo Masahiko Uotani, who joined the group in April 2014, Shiseido has mapped out a strategy called Vision 2020. In its home market, the company is focusing on building both its prestige and masstige cosmetics business, as well as developing sales in the personal-care segment, says a Shiseido spokesperson. The program entails focusing on its ‘power brands’, such as Shiseido and Maquillage, and revamping the brand portfolio so that its top-selling 15 brands make up 90% of group sales in the country by 2020. This focus on power brands includes more investment in advertising. Shiseido is also looking to build its self-selection offer, including suncare brand Anessa, men’s line Tsubaki haircare and Integrate make-up.Shiseido aims to tap newer growth areas, such as the tourist spend, which

it aims to make up a larger portion of its domestic sales, and says it wants to maintain its top market share at Japan’s four main airports. Online sales is also a strategic priority.In terms of changes to its corporate culture, Shiseido has embarked on a

new approach called Ichigan (Japanese for work as a team), which aims to have its sales, corporate, manufacturing and research teams collaborate more closely.


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n n n tap into Kao’s expertise in haircare technology to expand into haircare and styling. Advice will become a key element of our business activity,” comments the spokesperson. Haircare is a category to watch. It made up 28% of wholesale beauty sales in Japan last year, and saw a sales increase of 4%, with scalp treatment and anti-aging products a major growth driver.Accounting for 21% of the market, make-up has been a strong engine for growth, with

lipstick the best performing segment. L’Oréal Luxe claims that lipsticks from its Yves Saint Laurent brand have seen strong success in Japan and adds that Lancôme has regained momentum in the market largely due to its innovations in the color category—Grandiôse mascara and the Cushion Foundation, which launched in February.

Department stores still a focusOn the retail front, although department stores continue to suffer from the rise of other channels, including cosmetics stores and e-commerce, they still represent the lion’s share of prestige sales. The growing tourist spend is benefiting department stores. L’Oréal’s Archambault says the group’s Luxe division has implemented specific marketing and retail activities to cater to the growing tourist business in some locations. Shiseido is tailoring its offer to tourists in department stores by hiring multi-lingual staff in relevant stores and equipping some of its beauty assistants with iPads as a multilingual communication tool. While advice is key in securing the Japanese consumer’s beauty spend at

the department store, prestige players are also looking to the internet as a way for the beauty advisor to communicate with the consumer. “The structure of distribution is undergoing major changes, especially with the spread of online retailing,” affirms a Kanebo spokesperson.L’Oréal says it aims to be a pioneer in emerging channels, such as e-commerce, open-

sell perfumeries and [branded] boutiques to recruit the younger consumers’ spend. With this in mind, the division is driving what it qualifies as its more edgy brands in the market, like Yves Saint Laurent and Shu Uemura for make-up and Kiehl’s in skincare. Shiseido, meanwhile, says that it wants to boost its presence in the drugstore and general merchandise store channels.Newer retail formats include Isetan Mitsukoshi Holdings’ multi-brand concept store

Isetan Mirror, which now operates 10 locations in Japan. The retailer has opened four new stores over the past 18 months and the concept is said to be performing well. Cosmême, the multi-brand format launched by retail estate conglomerate Aeon in 2011, now has five locations. The chain launched a new concept called Cosmême Naturel, which offers natural and organic brands including Weleda, John Masters Organics, The Body Shop and Le Couvent des Minimes. New openings also include Los Angeles-based luxury retailer Fred Segal, which

launched a flagship store in Tokyo’s Daikanyama district in April this year. The store will feature an extensive beauty department on the second floor. (At press time the beauty area had not yet opened.) Another new move, which is predicted to shake up the retail scene, is the opening of

Tokyo’s first downtown duty-free shop. Located in Isetan Mitsukoshi’s Ginza flagship store, the shop is to open next fall. “The challenge will be for this new channel to find its own positioning without penalizing the existing neighboring domestic stores too much, which today are being revived by tourism,” comments L’Oréal’s Archambault. It is hoped that new formats like this and the rise in tourism will give this difficult market a boost. n



The increasingly difficult business climate in Asia was a major talking point at this year’s TFWA Asia Pacific trade show. Exhibitors bemoaned the decline in Chinese travelers

to Hong Kong and the fall-off in business in the territory, as well as major currency fluctuations, from the Indonesian rupiah to the Japanese yen. And while the number of Chinese travelers continues to increase, they are traveling less in Asia and more elsewhere, and are spending less, according to suppliers. In addition, Chinese consumers traveling to Korea are now looking to buy trendy Korean brands rather than Western products, a trend that has seen many selective beauty brands’ business there suffer. Another worry when it comes to Chinese travelers is the upcoming reduction in import taxes on foreign products to China in a bid to boost domestic consumption. This measure may see purchases in travel retail decline.

The fast-changing Chinese consumerAlmost all at the show agreed that the behavior of Chinese consumers and Chinese travelers is changing fast. Industry players said that these consumers are much more informed about products and are demanding more value for money. At the opening conference of the show, TFWA president Erik Juul-Mortensen said

that the industry needs to do more to attract these evolving consumers. “The travel-retail landscape needs to adapt to more informed and demanding consumers,” he commented. This view was echoed by LVMH group president Greater China Andrew Wu, who highlighted the fast pace of change in China in terms of digitalization, consumer habits and physical retail. “It is not a time to be arrogant; we need to focus on connecting with the changing consumer in China,” he said. Another key issue discussed at the show was consolidation among travel-retail

operators in light of Swiss travel retailer Dufry’s announcement that it would acquire World Duty Free. Many large players said this trend is a sign that the travel-retail industry is maturing, and that these bigger operators will be able to better negotiate with airports. However, smaller brands said that the more retail consolidation there is, the worse their business becomes. Some even talked of consolidation being responsible for killing brands. Many brands fear that their power to negotiate with operators is fast eroding, while others asked what the lack of competition among travel retailers will do to the channel. However, despite these challenges, there are still many bright spots in the region. Sales

in Asia Pacific duty free and travel retail rose by 5.5% to $23.56bn in 2014, according to preliminary data from Generation Research Sweden. This outpaced the growth of global travel-retail sales, which were up by 4.3% to $62.57bn last year. Cosmetics and fragrances accounted for 37.6% of travel-retail sales in Asia Pacific last year at $8.85bn, making it the largest product category. Some major retail developments are taking place in the region, which are likely to n n n

BW Confidential reports on what was seen and heard at the 20th edition of the TFWA Asia Pacific show, which took place in Singapore from May 10-14

A volatile market

TFWA Asia Pacific

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TFWA Asia Pacific Took place: May 10-14, 2015 Number of Exhibitors: 292, +12% on 2014Number of fragrance & cosmetics exhibitors: 62; 21% of total New or returning exhibitors: 73 Visitors: 2,655, on a par with 2014

”LVMH group president Greater China Andrew Wu

It is not a time to be arrogant; we need to focus on connecting with the changing consumer in China

“


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n n n give the industry a boost. These include DFS’s project to create a Galleria for fashion, beauty and accessories in Siem Reap, Cambodia, the renovation of Incheon Airport and new downtown stores in Thailand, Japan and Korea. There are also untapped markets that have been pinpointed as places to watch, such as Cambodia and Myanmar. As for the show itself, the 20th edition covered 9,118m2 (847ft2), up 9% from last year

and the biggest floor space in the event’s history. There were 292 exhibitors (+12% on 2014) on 285 stands, and 2,655 visitors, on a par with the 2014 show. All proof that Asian travel retail remains attractive despite recent challenges.

Talking heads: industry players on Asia Pacific travel retail “Asia has always been considered a changing and volatile region and this is even more the case this year. In China, import taxes will be lowered from 2016 to boost domestic sales. Will this encourage Chinese consumers to buy more locally rather than in the airports? We will see. In the short term, we need to better understand Chinese consumers who have specific needs. We need to follow them wherever they travel because they have an impact everywhere. It is more essential than ever to have a global vision of the consumer in travel retail, which is a global market.In terms of assortment, there is greater interest for premium brands in fragrance.

Operators have made efforts to integrate these brands, and we see a shift towards a more quality-driven area, together with a sales ritual offered to the consumer. This is seen in hubs like London, Singapore or Dubai. The offer is becoming more premium.”Puig global travel retail managing director Patrick Bouchard

“The region is still very dynamic and is growing in the high double-digits. To cater to increasing traffic, a lot of new projects are appearing. There are two kinds of projects: renovation for a better retail experience, like in Incheon Airport, and new downtown stores to face higher demand, as is the case in Phuket, Thailand, Japan and Korea.The industry is preparing future routes by developing retail stores in countries where

Chinese tourists are not yet dominant, but are a growing part of the business.” Lancôme & Clarisonic gm travel retail Asia Pacific Morgan Cohen

“We see an increased focus on the productivity of stores by maximizing the number of brands and profitability per square meter, and also a diversification with new segments and more accessible brands. Shiseido introduced the Aupres brand for that purpose: to satisfy Chinese consumers’ budgets and to target younger travelers. In terms of pricing, this has been an issue for a long time, especially due to swings

in key currencies. Maintaining the price advantage of the travel-retail channel is becoming more of a challenge. Even if [pricing] is the number-one reason to purchase in travel retail, consumers often get confused as the price is not easily readable. On top of that, travel retail will need to do more as a channel to compete with e-commerce and the high street in the future. We are joining our partners in more online activities, with successful results in developing pre-travel communications. This is a direction we are very keen to follow as operators and brands could benefit from more CRM and drive-to-store operations.”Shiseido marketing director global travel retail Elisabeth Jouguelet-Aparicio n n n


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TFWA Asia Pacificn n n “Chinese consumers are starting to change and they are becoming more price-conscious. We also see lifestyle brands gaining ground, as well as Korean brands. The Chinese customer increasingly buys in Korea, a country that is launching new trends and brands. South East Asian consumers are also becoming more sophisticated. In Thailand, we recorded a +90% increase in sales in travel retail for the first quarter, not only due to the Chinese buying, but the locals as well.”La Prairie head of travel retail worldwide Laurent Marteau

“Asia is becoming complicated and Hong Kong is difficult, and this is where we have put major investment. China used to be the Eldorado, where growth was faster than anywhere else; this is no longer the case.” L’Occitane group country managing director Marcin Jasiak

“The travel-retail consumer is increasingly informed and knows brands well. They are looking for value-for-money, especially in Asia and even more so in travel retail. These customers travel a lot and know exactly how much each item retails for in each market; they have this culture of comparing before buying.” Interparfums marketing manager Marine Obin-Ratto

“Consolidation will negatively impact both brands and travelers. Airports all look the same today, and too much consolidation makes the offer flat and uniform; the shopping experience is becoming boring. For a brand, it makes it more difficult to enter and to express itself. In terms of emerging markets, today they are like what they were three years ago:

the sleeping tigers are still sleeping. Vietnam, Indonesia, and the Philippines still have limited potential for selective products. Vietnam did not take off and even in Indonesia, infrastructure and regulations are an issue. However, we decided to enter Indonesia as we are confident things will change in the future. Malaysia is more international and there is infrastructure, just like Thailand.” Collistar international director Paolo Bevegni

Seen in showThree-year old New Zealand organic skincare company Beebio was at the show for the first time. The brand’s anti-aging products are based on Manuka honey, which is said to have healing and anti-bacterial properties. The company has strong plans for international expansion and travel retail. It is already listed on Singapore airlines, Hong Kong Airlines and Cathay Pacific and is aiming to be sold on 12 airlines by the end of 2015. “Our aim is to be in two or three large duty-free stores in Asia by the end of the year. We will go through travel retail to enter China. Asia is a very receptive market [for our products] and is where our focus will be, before expanding to Europe and the Middle East,” says Beebio sales director and founder Liz Kolovos.

First-time exhibitor Moroccanoil was at the show to grow its positioning outside the professional haircare channel. The company is working on developing travel retail, where it says haircare is a new category, and is also focusing on other beauty categories, n n n


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TFWA Asia Pacificn n n such as skincare, and becoming a well-rounded beauty brand. “We want to show the Asia Pacific market that we are ready to launch. We are in discussions with Korea, a country that speaks to the Chinese, so it is an entry point for the North Chinese population. In-flight exposure is big for this market, and another interesting channel here is downtown duty free,” says Moroccanoil vice president travel retail and retail sales (global) John Gates.

Newcomer to the show French brand Eclaé is looking to expand in Asia. The anti-aging skincare company, which launched in January 2015, markets products based on an algae called Dunaliella Salina from the salt lakes of Camargue in France. The brand is finalizing its distribution in Singapore and Australia and will look to in-flight and then duty-free stores once it has become established on the domestic market. Unilever-owned haircare brand Toni & Guy has launched a limited edition shampoo and conditioner line for shoe designer Sophia Webster in travel retail. The line, which is for fine hair and comprises four skus, is being sold in the channel from January to July.

Swiss skincare brand Rivoli presented Le Décolleté Crème Liftante Lumière Lifting Neck Cream, which will launch at the end of June. The anti-aging product will retail at €180 for 50ml. The brand is also launching a travel-retail exclusive called Le Voyage Set, which comprises a serum, day cream and night cream and costs €98.

Spain-based De Ruy, which holds the global fragrance license for MTV, is to launch its first scent for the TV station in September. The fragrance line will consist of four fragrances for women and four for men retailing from $14-$25. The launch will be supported by a social media push.

Parlux is gearing up to launch a new fragrance for singer Rihanna in September. The scent, called RiRi, will retail at $60 for 100ml. Parlux will also introduce a new scent for Kenneth Cole called Blue in June. The fragrance will be sold in international markets, but not in the US.

Canada-based beauty brand Lise Watier is looking to relaunch its business internationally following a focus on its domestic market over the past 10 years. The company, which appointed Pierre Plassard as president and ceo two years ago is focusing first on make-up to attack the international market. It will then look to other categories, such as skincare and fragrance. n

• Global duty-free and travel-retail sales reached $62.57bn in 2014, +4.3% over 2013, according to preliminary figures from Generation Research Sweden.• Fragrance and cosmetics duty free and travel-retail sales came in at $17.96bn in 2014, up 4.1% compared with 2013, according to preliminary figures from Generation Research Sweden.• Fragrance & cosmetics is the strongest category in Asia Pacific duty free and travel retail, accounting for 37.6% of the total market.• Asia Pacific reported 521 million visitor arrivals in 2014. It is forecast that the region will see 670 million visitors in 2018.• The Chinese spend 21% more than any international tourist group. • Tax-free shopping by Chinese tourists increased by 18% in 2014 globally.• China is critically short of infrastructure. For a population of 315 million in the US there are 5,143 airports, while in China whose population is more than four times that of the US, there are only around 500 airports.• China will overtake the US for online sales by 2018 (mostly through Alibaba).• At least two out of five shoppers will use their mobile device in airport stores. stores, underlining the importance of personalized digital contact at the airport. Some seven out of 10 merchants do not have an online presence.

The industry in figures



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Fortnum & Mason Piccadilly

l Opened: April 2015l Location: London, UK l Size: 7,534ft2 (700m2)

l Special features: Floor-to-ceiling fragrance chandelier; areas devoted to fragrance

classics and niche scents; skincare treatment rooms

UK-based retailer Fortnum & Mason opened its revamped beauty hall at its London Piccadilly store in April. The new 7,534ft2 (700m2) space features

a prestige offer spanning fragrance, color cosmetics, skincare, haircare and bodycare, as well as loungewear. There are also treatment rooms where skincare and bodycare treatments from UK brand Bamford are available. Created in collaboration with British interior design agency Waldo Works, the

beauty area was inspired by an 18th-century Georgian ladies salon and was designed to provide an environment where beauty shoppers can take their time and consult with beauty experts. The revamped space aims to be the “antithesis of furiously fast-paced, harshly lit beauty halls,” according to the retailer. One of the main decorative features in the hall is a floor-to-ceiling chandelier decorated with fragrance bottles selected from Fortnum & Mason’s offer.Much of the floor is dedicated to fragrance, with brands including Clive

Christian, M. Micallef, Parfums de Marly, Grossmith, Tom Ford and Roja Parfums. The perfumery space is divided into different areas by fragrance sub-segment: The Heritage Hall offers classic fragrance brands, The Scent Room spotlights what the retailer describes as classics of the future and The Contemporary Gallery presents a range of niche brands.The beauty hall’s make-up and skincare offer includes brands such as

Chantecaille, Ilia, Kure Bazaar and Cult51. n

The UK retailer’s newly opened beauty floor puts a focus on fragrance and personalized service

Fortnum & Mason launches new beauty hall

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s Fragrance has a central position on the new beauty floor; a chandelier is decorated with bottles from the retailer’s selection (left). Personalized service is a priority at the revamped store (right)

s Fortnum & Mason designed the new beauty floor to be a place where shoppers can take their time browsing

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