CONFIDENTIAL CONFIDENTIAL CONFIDENTIA L · Burberry Beauty Box stores in London and Seoul. Shiseido subsidiary Beauté Prestige International (BPI) is already the distributor of Burberry

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The Douglas deal The buzz 2News roundup

Netwatch 7 Social media monitor

Interview 8World Duty Free Group global head of beauty Antonin Carreau

Insight 10Mexico analysis

Show review 13 China Beauty Expo, Shanghai

Store visit 15Erborian, Paris

Oonagh PhillipsEditor in [email protected]

www.bwconfidential.com The inside view on the international beauty industry June 11-24, 2015 #113

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l MakeUp in Paris, June 18-19l Cosmoprof Las Vegas, July 12-14News headlines daily on www.bwconfidential.com @BWCbeautynews

The fate of German perfumery retailer Douglas has been sealed—for the next few years at least. The

chain, which had been publicly up for sale since the beginning of the year, announced that it would list on the stock exchange before declaring a few days later that private-equity group CVC Capital Partners would buy the company. Industry reactions have been mixed, but most see the deal in

a positive light. For one, the element of uncertainty over who will buy the chain has been eliminated, meaning the retailer

can get back to business. Secondly, most suppliers are relieved that a competing retailer such as LVMH’s Sephora or UK-based Boots did not manage to get their hands on the German group. Another positive, according to analysts is CVC’s past experience in beauty retailing. CVC took over Danish beauty chain Matas in 2007 (the group has since exited this investment) and was said to have done a good job with the retailer.What is certain is that Douglas now has a good deal of work to get through. In a

conference call with journalists, Douglas ceo Henning Kreke said the chain will look to expand its footprint in Europe and that it has the strength to become a global brand. Under former owner Advent, Douglas managed to consolidate its position in one of its weaker markets, France, with the acquisition of Nocibé. Italian chain Limoni, which is likely to go on the block soon, could be another interesting target to boost Douglas’ position in that market. However, industry watchers say that Douglas should be looking first and foremost at the European markets where it is weak and could possibly exit before plotting its international expansion.


www.bwconfidential.com - June 11-24, 2015 #113 - Page 2CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL

News roundup

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Retail

Private-equity fund CVC Capital Partners is to acquire German perfumery chain Douglas from the holding jointly held by Advent International and the Kreke family. The price was not disclosed, although industry sources put it at around €2.8bn. The news came just a few days after Douglas announced that it would list on the

stock market. The acquisition by CVC now scraps plans of a stock market listing. CVC is to reinvest in Douglas through a joint holding company owned by CVC and the Kreke family. Henning Kreke will continue as ceo of Douglas. The acquisition of Douglas does not include the book retailer Thalia and the fashion retailer AppelrathCüpper, which are held by separate holding companies owned by Advent and the Kreke family. In a conference call with journalists, Douglas ceo Henning Kreke said that he sees

tremendous potential in existing markets across Europe and that the retailer will continue to expand its footprint in the region both organically and through acquisitions. He added: “Douglas has the strength to become a global brand and we will be looking at growth opportunities outside Europe, but nothing has been decided and they will be analyzed as they arrive.” Douglas is the second investment by CVC in the selective beauty retail market. In 2007,

CVC acquired a majority stake in Danish health and beauty chain Matas. CVC gradually sold its stake and today no longer has investment in Matas.Douglas is the number-one perfumery chain in Europe with a 16% market share in the

region, and reported sales of €2.5bn in fiscal year 2013/2014.

Italian luxury department store group La Rinascente will acquire a 50.1% stake in German department store KaDaWe. Austrian group Signa Retail, which acquired KaDaWe in 2013, will retain a 49.9% stake in the company. KaDaWe operates three luxury department stores in Germany and does annual sales of €600m.Signa and La Rinascente have jointly invested a three-digit million amount in the

company and are looking at acquiring other stores in continental Europe. They will also open new stores in Vienna, Austria and Prague, Czech Republic for KaDaWe. Signa says the deal is part of its strategy to become an integrated department-store

group in Europe with a focus in the luxury segment of the market. n n n

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n CVC Capital Partners acquires Douglas

n General Atlantic acquires Too Faced

n L’Oréal signs fragrance license with Proenza Schouler

n Maesa acquires P2 Cosmetics

n Jumei takes minority stake in Korean brand It’s Skin

n Shiseido launches major new fragrance



News roundup

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US-based make-up brand Too Faced is to be acquired by investment company General Atlantic. The amount paid for the brand was not disclosed, although industry sources say the deal could be valued at $500m. General Atlantic has taken a majority stake in the company, while Too Faced founders Jerrod Blandino and Jeremy Johnson will retain shares in the brand. Too Faced was recently put up for sale by private-equity company Weston Presidio Capital. The brand was founded in 1998 and is sold in Sephora and Ulta.

French group L’Oréal has signed a fragrance license with New York-based women’s ready-to-wear brand Proenza Schouler. The brand will become part of L’Oréal Luxe division’s Designer Brands Fragrances portfolio, along with Cacharel, Diesel, Maison Margiela and Viktor&Rolf. The Proenza Schouler brand was founded in 2002. It has 10 flagship stores and is sold in 100 doors in 20 countries.

France-based beauty private-label and outsourcing group Maesa has acquired P2 Cosmetics, which sells its products exclusively in German drugstore chain DM’s 1,800 stores. P2 Cosmetics, an Austrian company created in 2004, develops 350 make-up skus each year for DM. Maesa says that the acquisition will enable it to become a bigger player in the make-up market in Germany and strengthen its relationship with DM. The deal will also reinforce Maesa’s portfolio of exclusive brands, which will account for 50% of its business, with Flower for Walmart, Circa for Walgreens, Elle for Monoprix and now P2 for DM. Maesa says it plans to bring the P2 Cosmetics brand to other markets, such as the UK and the US, following the model of exclusivity for each retailer in each market. In 2014, Maesa reported sales of €105m, an increase of 18%. Maesa is targeting sales

of €300m by 2020. This year, the group expects to report consolidated pro-forma post-acquisition sales of €170m.

Chinese online beauty retailer Jumei has acquired a minority stake in Korean prestige brand It’s Skin. The brand, which is popular with Chinese consumers, markets skincare, make-up, haircare and men’s products. Jumei had a 22.1% share of the online beauty market in China in 2013, according to market-research company Frost & Sullivan.

Shiseido has inked a deal with Burberry to distribute the British brand’s make-up and fragrance lines in Japan. Shiseido will support the launch of the My Burberry fragrance from June 3. This fall, new Burberry Beauty Box counters will be opened in a select number of department stores in Japan. The counters will be inspired by the standalone Burberry Beauty Box stores in London and Seoul. Shiseido subsidiary Beauté Prestige International (BPI) is already the distributor of Burberry fragrances in several countries.

Fragrance house CPL Aromas officially inaugurated its new fragrance factory in Dubai, UAE at the end of May. The company claims that the 10,000m2 (107,639ft2) facility located in the Jebel Ali Free Zone is the first fragrance manufacturing site to be established by an international fragrance house in the UAE. CPL Aromas says the site will ensure that local companies have better customer service

and will mean that they no longer need to import fragrances from outside the n n n

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z News roundup n n n MENA region. Customers in the MENA region and Indian sub-continent who were previously receiving goods from CPL sites in the UK and Hong Kong will now start to receive their goods from the new factory in Dubai. CPL Aromas has operated from the Jebel Ali Free Zone since 2005; its facilities include a creative center, sales and marketing support and warehousing. The market for finished fragrances in the MENA region was worth $4.9bn in 2014, according to Euromonitor.

Flavor and fragrance company Symrise has invested €5m in a 2,000m2 (21,500ft2) production facility in Brazil’s Ecoparque in Benevides, Para state in the country’s Amazon region. The Ecoparque, which covers 173 hectares, is a sustainable industrial complex created by the Brazilian group Natura in March last year. Symrise is Natura’s first partner in this project. It will use the facility to research local raw

materials. Natura has invested R$217m (US$69m) in the Ecoparque.

People

Japanese group Shiseido has appointed Louis Desazars as president and ceo of Shiseido Europe Region (Europe, Africa and Middle East) and president and ceo of Beauté Prestige International (BPI). Desazars was previously president of Shiseido-owned make-up brand Nars. He will report to Shiseido president and ceo Masahiko Uotani. Desazars replaces Rémy Gomez at BPI, who left the company in March. Barbara Calcagni will succeed Desazars as president of Nars Cosmetics. She was previously senior vice president global marketing at the brand.

L’Oréal has appointed Isabel Marey-Semper executive vice president communication, sustainability and public affairs, general manager of the L’Oréal Foundation and member of the group’s executive committee. She succeeds Sara Ravella, who is leaving the group. Marey-Semper was previously senior vice president of advanced research at L’Oréal.

German cosmetics packaging company Geka has appointed Anne Querard group marketing director. She succeeds Pilar González Gómez, who is now head of sales Germany, northern & Eastern Europe.

Data

Oil and clay are the two skincare textures that are seeing the highest growth in the US prestige industry, according to NPD. Value sales of skincare oils have more than n n n

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z News roundup n n n tripled over the past five years, while clay/mud sales have almost quadrupled.

Sales of prestige skincare oils in the US reached $58.5m in the 12 months ending April 2015, up 22%. Clay/mud sales rose 53% to $27.9m in the period. NPD notes that while oils and clay are seeing growth, some of the more traditional skincare products, such as serums, lotions and milks are seeing declines. NPD notes a similar trend in Europe. Oil sales rose 45% in France and 68% in Spain in the 12 months ending April 2015.

Launches

Japanese brand Shiseido is to come out with a major new fragrance this fall, its first scent since it launched Zen in 2007. Called Ever Bloom, the floral fragrance is intended to bring a new and younger consumer to the brand and be a key driver in Shiseido’s strategy to become a stronger three-axe player. “We have strong ambitions for the launch of this fragrance. We want to re-enter the fragrance category in a bold way and our objectives are for fragrance to reach 10% of sales in Europe by 2020 compared with 4% today,” explains Shiseido Europe vp marketing and communication Florian Hanhausen. He continues: “We are working on so many projects to give a new impulse to the brand and this fragrance is an opportunity to reach a different and younger consumer.” To fulfill these ambitions, the company says it has made a significant investment

in the launch. The new fragrance will be backed by a TV and print advertising campaign and a strong digital push. In-store visibility and sampling will also play a key role. The fragrance will have full distribution in key markets in Europe, such as Germany and Italy.Ever Bloom was created around three main ideas: Paris, a woman and the camellia

flower, Shiseido’s trademark, and is intended to convey the brand’s expression of femininity. It is also the first fragrance for the brand where the main direction came from Europe. Created by perfumer Aurélien Guichard of Givaudan, the fragrance features notes of orange blossom and gardenia. Ever Bloom will launch in Europe and the Middle East this fall, with a roll-out to the Americas and Asia in fall 2016. The fragrance retails at €53 (30ml EdP), €76 (50ml EdP) and €105 (90ml EdP).

Interparfums is gearing up to launch Jimmy Choo’s third women’s fragrance this fall. Called Illicit, the fragrance is a floriental and was composed by Anne Flipo of IFF. An ad campaign fronted by singer, model and actress Sky Ferreira will support the

launch. Jimmy Choo Illicit will launch in the UK in September and in the US in October. In France, it will launch exclusively at Sephora in January 2016. The fragrance will retail at €51 (40ml EdP), €75 (60ml EdP) and €105 (100ml EdP).

Japanese company Kanebo is to launch the first fragrance for its Sensai brand this fall called The Silk. The launch of the fragrance is part of a repositioning effort of the Sensai brand, which has involved the removal of the Kanebo name from its products and communication, new products and a new counter design. “Fragrance is the biggest part of the market in Europe and the timing was right for the brand to go into this category,” explains Sensai Cosmetics president Yuji Naito. “Our main target with this fragrance is existing Sensai consumers,” he continues. It comes in an EdP (€100 for 50ml EdP) and EdT (€80 for 50ml EdT) version

and will launch in Europe in September. n

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

Social media monitor

Face Lace, a brand that creates patterns to be applied to the face, has generated curiosity over its concept. Bloggers love the creativity of the vinyl patterns which adhere to the skin, although many admit they will not wear the lace products. However, some fans predict the lace could be popular for special occasions.

Ciaté’s debut make-up collection has attracted mixed reviews. While some of the products are liked for their quality, others such as the Blush Pops are described as gimmicky and fiddly and more about the packaging than what is inside.

New brand Starskin, which claims to offer the secret to the skin of a star, has been likened to the next Glamglow. The Second Skin mask is a translucent sheet mask based on bio-cellulose formulated with naturally fermented coconut juice. The brand also offers a Foaming Peeling Perfection Buff, which is liked for its wide range of benefits, such as exfoliation, skin texturing, deep cleansing and radiance boosting.

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w World Duty Free Group global head of beauty Antonin Carreau

While many changes are likely to come in light of Dufry’s announcement that it would acquire World Duty Free, beauty is still set to be a key priority. BW Confidential spoke to WDFG head of beauty Antonin Carreau about the cosmetics and fragrance category at WDFG and in travel retail. Carreau refused to comment on the acquisition by Dufry and what it would mean for the company

Boosting beauty

How do you plan to boost the beauty business at WDFG? Beauty will be an active driver of the group’s new strategy. One major priority is to improve our performance in Spain, where we are currently working on revamping our existing stores. Beauty is already a large share of the business there in terms of space, brands, services and promotions. Another focus for us is the Americas, where we aim to grow, mainly in the US. We are accelerating the development of our duty-paid stores in the US, which are

branded freestanding units. We opened a multi-brand store with The Estée Lauder Companies in Detroit in 2014, which offers a number of brands from the group’s portfolio, and we are about to open additional branded units with other partners in the airports of Miami, Houston, Los Angeles and San Francisco, to name just a few.

How can you convert more passengers into shoppers?We regularly revamp, enlarge and better position our stores and fine-tune in-store navigation to improve footfall and conversion. There are things we can do in partnership with brands, such as develop complimentary services, like manicures, hand massages or makeovers. These services can last between two and 10 minutes. They allow us to improve how we interact with the shopper and generally create a richer consumer experience. We launched this strategy three years ago and are rolling it out to all our regions as the stores are revamped. Over the past few years, these types of services have had a significant impact on our passenger conversion. We have other initiatives that are less category-oriented, but provide a higher level of

service, such as our concierge service, which launched at Stansted in the UK a year ago. This is a kiosk at the store’s entrance with interactive tablets where staff can answer questions and show customers what they’re looking for. A third initiative is our free gift-wrapping service, which we introduced at Heathrow T5.

Brands can also choose to offer their own gift-wrapping services to provide even more personalization. We’re also putting a click & collect service into place in our stores. A lot of passengers are regular clients—some 60% of passengers are locals—so these

services are a way for us to develop loyalty. Impulse purchases make up a lot of the travel-retail spend, but more and more purchases are from loyal consumers. n n n

”World Duty Free Group global head of beauty Antonin Carreau

We have lost the easy consumers—Brazilians and Russians—in some of our markets in Latin America, and some of our stores were deeply impacted

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n n n Which beauty categories are getting the most focus at WDFG?Different markets offer different perspectives, but make-up is a category we are actively developing. To do this we need bigger stores that can more easily house the different offers and services. Make-up is a complex category to manage, but it allows us to be interactive, offer services and target younger consumers, which is fundamental. We’ve been seeing growth in the category for the past two years.Skincare is also an important category to grow beauty sales, and to create more of a

balance with fragrance. We want to continue to grow our fragrance sales, but we also want to create more balance with the other two segments. Another focus is selective haircare. We’ve started in a few doors with different beauty

groups and are launching our first offers this year. We’re taking our time with this, and the development of haircare will depend on the opportunities on a store-by-store basis.

How is your premium fragrance concept performing?We launched the concept at Heathrow Terminal 5 in January. We want to develop the premium fragrance offer as it is truly refreshing in a market that has become quite saturated with similar types of launches. The consumer craves the creativity and quality that these premium brands offer. Of course, from a price perspective it’s not within every consumer’s means, but premium fragrances are in demand, not only from Middle Eastern consumers, but also Europeans, Asians and to a certain extent Americans. This is great news for the industry, as it is a return to a high-quality olfactory and design approach. The concept at Heathrow is specifically designed for that store, but we clearly want to

develop our premium fragrance segment.

How do you see the Latin American travel-retail market performing?The region is under pressure—economically things are tough, there is the exchange rate issue and the region has been dependent on Brazilian passengers, who are traveling much less today. These trends are not new, but they have accelerated. Our clients in Latin America are essentially locals—Chileans, Peruvians,

Mexicans, Brazilians and Americans. Today we have to rethink our retail offer and how we address our consumers in certain doors. In Cancun, for example, we had a strong number of Russian customers, but that clientele has basically disappeared due to the current problems in Russia. One issue in the region is that brands put up their prices too much during the

boom years, and now value isn’t attractive to either local consumers or North Americans. We have lost the easy consumers—Brazilians and Russians—in some of our markets there, and certain stores were deeply impacted. As a result, we’ve had to temporarily increase the promotional aspect of our business, although other categories have been more flexible than beauty in this area. Different partners are reviewing their suggested retail price strategy.

Does that mean there should be more masstige offers in the region?Masstige is a marginal part of the answer. There is more demand for value, but still in the prestige arena. We are looking at other ways of attracting the more price-conscious consumer, such as how to better sell new launches, travel-retail exclusives and improve the presentation of value offers, which complement the brands we sell and their services. n

”World Duty Free Group global head of beauty Antonin Carreau

There is more demand for value, but still in the prestige arena. We are looking at other ways of attracting the more price-conscious consumer, such as how to better sell new launches, travel-retail exclusives and improve the presentation of value offers

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s WDFG claims its premium fragrance concept at Heathrow Terminal 5 is a refreshing offer in a saturated market

World Duty Free Group global head of beauty Antonin Carreau



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BW Confidential analyzes the opportunities and challenges facing the Mexican beauty market

Mexico’s mixed picture

Mexico

The beauty market in Mexico shows a mixed picture. Beauty and personal-care sales there were up by 3.9% to $10.46bn in 2014, according to Euromonitor International.

However, prestige sales, which make up less than 10% of the beauty market, fared better. Prestige beauty sales increased 7.1% in value in 2014, says market research company Segmenta, nearly on a par with the 7.7% growth recorded in 2013. Unit sales for prestige rose slightly more than value sales last year, at +7.2%. The Mexican economy has had its share of challenges over the past 18 months,

including government-implemented tax reforms which have seen consumers rein in spending. These new measures include an increase in the number of audits, which is an additional worry, especially for the prestige consumer. “Consumers slowed down their purchases as they didn’t want to get into trouble with the government. This translates into less money circulating in the economy and less disposable income for the consumer,” explains Mexican distribution company Pavel ceo Federico Velez. He continues: “We still have an epidemic in Mexico, which is the lack of spending power. There are 110 million people in the country, but only 3% can afford to buy selective beauty products. With such a young population—55% of Mexicans are under the age of 35—this is very limiting. Everyone is questioning whether there is a consumer to purchase prestige brands, as the one who does has the means to travel and can find these products much cheaper elsewhere,” adds Velez. Yet, the prestige business this year is said to be off to a strong start—in the first

quarter, value sales all categories combined were up by 13%, according to Segmenta. “Although this is an encouraging start to the year, it is in comparison to a very weak first quarter in 2014. However, the bulk of sales are made in the second half during Christmas and Buen Fin, a nationwide promotional event that takes place in November,” explains Segmenta client service director Latam Samantha Grand.

Make-up: a key categoryMake-up was the star category last year, accounting for 28% of prestige sales versus 25% in 2010, according to Segmenta. Prestige make-up sales increased by 14.3% in 2014, and in the first three months of this year, grew by 22% (Segmenta). The category was boosted by the continued success of Estée

Lauder-owned MAC, as well as a strong showing from Sephora’s private-label color offer. Make-up (all brands combined) is said to account for nearly 65% of Sephora’s sales in Mexico. There are also newer entrants in the color category, such as Polish brand Inglot, which opened its first door in Mexico four years ago and will finish the year n n n

Mexico beauty sales* 2014 by category Category Sales 2014

$bn% change 2014/2013

Skincare 2.08 +3.1Haircare 2.02 +3.6Fragrance 1.37 +0.9Make-up 1.22 +4.6Men’s grooming 1.03 +7.5

Total mass beauty & personal care

8.06 +3.4

Total prestige beauty & personal care

0.90 +5.8

Total beauty & personal care**

10.46 +3.9

Source: Euromonitor International *Retail sales price**Categories do not add up to total as some segments are not included. Total mass and total premium do not add up to total beauty & personal care market as some premium categories are not listed

men’s fragrance18.5%

women’s fragrance

26%

make-up 28%

skincare 27%

Source: Segmenta *Value sales

Mexico prestige market by category* 2014



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n n n with nine locations in addition to its shop-in-shops in Sears outlets. The brand is performing well, says Velez (Pavel manages Inglot’s business in Mexico). He adds that this is due to its extensive offer and its price positioning, which is around 30% cheaper than MAC.The fragrance market remains sluggish, although celebrity scents are said to be

performing well. According to Segmenta, women’s prestige fragrance sales were up by just 4.9% last year, while the men’s category grew by 4.3%. “Last year was not a good year for men’s fragrance due to the World Cup, which tends to have a negative impact. In Mexico, a football jersey is a more desired gift than a fragrance,” says Segmenta’s Grand.Prestige fragrance is off to a better start this year, with the women’s segment growing

11.4% in the first quarter, Segmenta says, and men’s scents up by 13.2% for the period.Although niche scents remain a tiny part of the selective fragrance market, they are

becoming a focus for some retailers. Department-store operator Saks Fifth Avenue, for example, which operates three stores in Mexico, is currently working with Pavel to build a niche fragrance concept in its stores following strong success with brands such as Creed and Kilian. For Saks, this move is a way to differentiate its offer from the secondary market—Mexico’s biggest channel for prestige fragrance.The bulk of the secondary market is done through door-to-door sales, says Velez.

“Anyone can download a catalog, buy from wholesalers and then sell to their family, friends and coworkers.” He explains that there are currently five wholesalers who buy merchandise directly from either distributors or prestige brands’ subsidiaries. The second-biggest channel in the secondary market is drugstores, and the third is bulk retailers Costco and Sam’s Club.

The skincare slowdownSkincare’s share of the prestige market continues to decline. Skincare accounted for more than 31% of value sales in 2010, according to Segmenta, while in 2014 the category made up 27% of the market. Last year, prestige skincare sales were up by 4.3% (Segmenta), with traditional prestige brands suffering from curbed consumer spending and the rise of dermocosmetics brands. “The brands that are coming down are the mid-tier skincare players, which are losing share to brands like La Roche Posay and Vichy. Clinique, however, is doing well as in Mexico it is positioned as a dermocosmetics player and is sold in drugstores,” says Velez.Younger, more accessible brands like L’Oréal-owned Kiehl’s are also performing well.

Kiehl’s currently has more than 20 stores in the market, including shop-in-shops in Palacio Del Hierro department stores and one location at Saks Fifth Avenue in Mexico City.High-end items also appear to be bucking skincare’s downward trend—industry sources

say this segment’s sales were up by 10.8% last year. “Premium skincare is doing well as those consumers who are able to buy La Mer, Sisley and La Prairie are less affected by economic troubles. It’s the consumer who treats herself every once in a while to a prestige product who is doing so less frequently,” explains Segmenta’s Grand.

Challenges in prestige retailDepartment stores, which make up around 81% of the prestige market, are said to be entering a new age in Mexico, with updated information systems that are resulting in tighter inventory management. “In the past, retailers in Mexico didn’t have information systems or relevant benchmarks, but now they do, so not only are they delisting n n n

”Pavel ceo Federico Velez

We still have an epidemic in Mexico, which is the lack of spending power. There are 110 million people in the country, but only 3% can afford to buy selective beauty products. Everyone is questioning whether there is a consumer to purchase prestige brands, as the one who does has the means to travel and can find these products much cheaper elsewhere

“



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n n n brands that haven’t performed well, they’re shortening the inventory period in stores. They send orders on a weekly basis and have become very strict with inventory management,” explains Pavel’s Velez. One Spain-based fragrance executive agrees: “Mexican department stores are ejecting any brand that doesn’t perform well. They are giving shorter orders and don’t keep stock as they lack the funds to do so,” she says. Prestige brands in department stores continue to struggle as their sales don’t cover the

cost of doing business in the channel. “Drugstores are a more profitable option, and brands’ business in this channel allows them to pay for staff, gifts-with-purchase and other costs in department stores,” remarks Velez. From the consumer’s point of view, department stores continue to be a draw due to

their strong CRM programs and increasingly attractive credit offers. Today, for example, consumers can buy their beauty products in 10 interest-free installments. With interest rates still high in Mexico, interest-free payments are a good way of attracting consumers.

Sephora & standalone storesLVMH-owned Sephora ushered in some changes to the market. Sephora is growing its network, although at a much slower pace than it anticipated when it entered the market in 2011. It now has 10 stores in Mexico and has plans to open three to four more stores this year, say sources. Sephora has given consumers an alternative to department stores, as have branded standalone boutiques which are on the rise in Mexico. “Before, the prestige market was nearly exclusively department stores, but then MAC and Kiehl’s entered Mexico, followed by Sephora. Other branded boutiques started popping up, including Chanel, which opened a beauty-only store in Mexico in 2013. Since 2012-13, we’ve seen an acceleration in the number of standalone store formats,” explains Segmenta’s Grand. Pavel’s Splash concept, a shop-in-shop format targeting younger consumers, operates 10 locations within Palacio del Hierro stores, and the company plans to roll-out a network of standalone doors beginning in 2017.Space in shopping malls, where the majority of standalone stores are located, is much

in demand, resulting in inflated prices. “It’s a little like what happened in Brazil—brands flocked there but they miscalculated how difficult it would be to do business,” comments Crabtree & Evelyn managing director Latin America and Caribbean Juan Carlos Delgado. The saturated retail market has seen operators looking beyond the capital Mexico City

for growth. Although the capital accounts for around 42% of the prestige beauty spend, sales there were up by just 5% last year. “This shows perhaps not a decentralization, but that Mexico City’s importance may be decreasing in the prestige market,” comments Grand. There have been major new shopping malls opened outside Mexico City in the past 18 months. These include a new mall in Toluca, a city that is seeing strong urban expansion, and the Toreo Parque Central mall near Mexico City, which features beauty stores including Sephora and L’Occitane en Provence.E-commerce, meanwhile, is still embryonic in Mexico when it comes to beauty. “The

channel will develop at a fast pace, but we’re still four to five years away from that. We opened an online shop with a partner, but had to shut it down due to insufficient sales. For now consumers are buying trips and hotels online, but not products. It’s challenging to get products to the consumer in time and there are also logistical issues with returns,” explains Velez. Credit card security is also a concern for the Mexican consumer. This year has started out well for prestige beauty. It is hoped that credit terms will further

buoy the overall market and that categories like make-up will continue to grow. n

”Segmenta client service director Latam Samantha Grand

Before, the prestige market was nearly exclusively department stores, but then MAC and Kiehl’s entered Mexico, followed by Sephora

“



The 20th edition of China Beauty Expo proved to be its biggest yet. The show, which took place in Shanghai from May 19-21, welcomed 312,000 visitors,

a 14% increase from the previous year. Some 2,120 exhibitors attended the show, up 15% from 2014. This year’s event hosted a string of new features, including a new mobile commerce

section, an Asian Brand Building Lab in partnership with creative agency Centdegrés, which was dedicated to consulting for Asian brands, as well as the show’s biggest packaging area to date. Many said that the show had more of an international flavor this year. There

were 15 international pavilions, including the show’s first Australian pavilion, and international participation increased by 24% compared with last year. “Through our joint-venture with [trade show organizer] Informa, we will become more international. We are a platform not only for Chinese brands, but also for international players,” China Beauty Expo chairman Jingmin Sang told BW Confidential.

BW Confidential reports on what was seen and heard at China Beauty Expo, which took place in Shanghai from May 19-21

An international flavor

China Beauty Expo

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China Beauty Expo Took place: Shanghai, May 19-21Exhibitors: 2,120, +15% vs 2014Visitors: 312,000, +14% vs 2014

Talking heads: industry players on China “Everyone dreams about the fragrance market in China. We wonder if it is wishful thinking or if fragrance will really take off. The challenge is to educate Chinese customers, make them curious and seduce them, just like what was done for wine and coffee a few years ago. This will take time and we need to find the proper strategies, such as creating specific notes and fragrances just for them. We need to talk to them differently from European or American clients. We need to develop products specifically for Asian people rather than offer so-called Asian versions of products that were developed for the US or Europe. And as surprising as this can sound, men might be the ones who will help make the move, as they talk increasingly about elegance and refinement.” Firmenich fragrance development director Luc Bernet

“The make-up category is growing well, with more young people using these products, which was not the case before. I am not talking about women only: men are starting to use make-up as well and this clearly a new opportunity for us. E-commerce is also becoming more popular. However, customers still try the product in brick-and-mortar stores, but then they shop online.” Axilone Shunhua sales representative Bella Yang n n n

”China Beauty Expo chairman Jingmin Sang

We are a platform not only for Chinese brands, but also for international players

“


www.bwconfidential.com - June 11-24, 2015 #113 - Page 14CONFIDENTIAL CONFIDENTIAL CONFIDENTIALCONFIDENTIAL CONFIDENTIAL CONFIDENTIAL


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Trends seen in showFacial masks continue to be popular and competition is becoming fiercer. Korean brands like Umask, Secret Key, Tencell and Feverlet are well represented in this segment. Chinese brands, such as MG Mask, Bovey, and My Beauty Diary are also gaining in popularity.

There is increased demand for high-end toiletries, from shampoo to body lotion, in China. Anything above $50 is considered high-end in the country. The O2O or online-to-offline and offline-to-online trend is becoming stronger in China. Online retailers are looking more to offline retail platforms and vice-versa. Also of note is the rapid rise of brands using mobile commerce as a distribution channel and the emergence of mobile app Wechat as an important sales channel, especially for entering China. Wechat is liked for boosting popularity and brand awareness among consumers.

Asian brands with their own specificities. Many players highlighted the importance of creating special concepts for Asian products rather than simply applying Western trends to brands for these consumers. n

China Beauty Expo

n n n “The cosmetics market is still growing in China. International brands are slowing down a bit, but local Chinese brands are growing. We are therefore changing our strategy— we still work for international brands, but are developing more partnerships with local brands. In terms of trends, specific products that fight pollution are a new opportunity. Skincare brands are coming out with new anti-pollution formulas, so we have to adapt to this with the right packaging. E-commerce is growing fast and for customers of all ages. Online brands sometimes

surpass traditional retail brands. Delivery is a big issue with online so you need good packaging to make sure the products remain stable and in good condition.” Albéa global marketing category manager foam Scarlett Jin

“E-commerce is very strong and the local market is changing. Chain stores and traditional perfumeries are now selling more imported products, whereas in the past they would focus on local brands. In e-commerce, consumers are selling to consumers mainly through Wechat. This mobile distribution channel has to be controlled otherwise it will become multi-level marketing. Since last year with Tmall Global, people can buy directly from any country in the world, most of the time at a lower price, and this will impact online sales in China.” Fangzi Group general manager Damon Yeoh

“The challenge in China lies in the high cost of doing business, especially the cost and instability of labor. To offset this, we tend to develop more automation in our plant; this was a big part of our investment.” SGD Asia-Pacific general manager Cyril Ruiz-Moise

“We don’t feel any slowdown in China and the cosmetics market is growing. We are seeing brands going more premium and looking for high-quality packaging.” Toly executive director Samuel Xuereb



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Erborian Paris l Opened: May 2015

l Location: Paris, France l Size: 75m2 (807ft2) l Special features:

BB Bar, Hanji Bar, herbal area

France-based, Korea-inspired beauty brand Erborian has chosen Paris for the opening of its first standalone store. The 75m2 (807ft2) boutique, which is located in the city’s

Opera district and opened in May, aims to offer a range of services that cannot be found in traditional beauty retailers. “I had the idea of a store from when the brand was founded in 2007, as we need our own space to talk about the herbs used in the products, the gestures from Korea and to showcase all of our services in three dimensions,” Erborian founder and general manager Katalin Berenyi tells BW Confidential. The idea of opening a boutique was one reason that the brand sold a stake to L’Occitane in 2012. Berenyi stated that L’Occitane’s retail expertise played a key role in the opening of the store. The store, which is decorated in red and white and features Korean-inspired objects,

centers around three service zones and sells the brand’s 45 skus. In the center of the store is a herbal display featuring herbs used in the products. It is described as a playground where consumers can find out more about the products’ ingredients and textures. Another service area is the BB Bar, where consumers can be advised about products best suited to their skin and also avail of contouring and facial zoning services. The third service area is a Hanji Bar, which is devoted to the Korean art of wrapping purchases in Hanji paper and choosing an appropriate ribbon. On the upper level there is a VIP space, where clients and the press can learn more about Korean beauty rituals.Berenyi sees the boutique as a laboratory where she intends to test and fine-tune

services and selling techniques. She is also looking to additional stores and hopes to open a second boutique in Paris within the next year. Asia will be a focus when it comes to new stores, and the aim is to open a boutique in Korea and in Hong Kong in the next year. Erborian is currently sold in 1,500 points of sale in 18 countries. France, where the brand

is distributed in 500 doors, is its largest market accounting for 35% of sales. n

The brand’s first standalone store puts the focus on services

Erborian launches first flagship store



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s The Erborian store is decorated in red and white and features Korean-inspired objects

s The store features a herbal display, where consumers can find out more about ingredients. At the BB Bar, consumers can be advised about products best suited to their skin and also avail of contouring and facial zoning services

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CONFIDENTIAL CONFIDENTIAL CONFIDENTIA L · Burberry Beauty Box stores in London and Seoul. Shiseido subsidiary Beauté Prestige International (BPI) is already the distributor of Burberry