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Changing hands

Brands may be busy thinking about how they will face up to an increasingly consolidated retail environment, due

to recent news that Swiss travel-retail operator Dufry would take over World Duty Free and that German perfumery chain Douglas could be sold by the summer. But the other side of the fence—the brand side—is likely

to see its own rash of M&A too. Rumors continue to circulate about which brands P&G will dispose of. In August last year, P&G announced that it would shed 90 to 100 of its brands to focus on its most strategic lines. In recent weeks,

analysts have speculated that the group could consider getting rid of its entire prestige portfolio to concentrate on its mass beauty business, which includes brands such as Pantene and Head & Shoulders. No doubt a long line-up of industry players are circling to see what P&G spoils they could possibly add to their business. There have also been several small-scale purchases over the past few months,

including Anglo-Dutch group Unilever’s acquisition of natural skincare brand Ren and private-equity company San Francisco Equity Partners’ investment in make-up brand Japonesque. It’s thought that more buys on this scale will continue, partly due to a lack of bigger targets and partly as a way for large groups to add new categories to their business.

Oonagh PhillipsEditor in [email protected]

www.bwconfidential.com The inside view on the international beauty industry April 16-29, 2015 #110

News headlines daily on www.bwconfidential.com @BWCbeautynews

The buzz 2News roundup

Netwatch 6Social media monitor

Interview 7Watsons China ceo Christian Nothhaft

Insight 9Germany’s beauty market

Show review 13Duty Free Show of the Americas

Store visit 16Marionnaud, France

Meet the BW Confidential

team at:

l BeautyEurasia, Istanbul, April 30 - May 2l TFWA Asia Pacific, Singapore, May 10-14l Luxe Pack New York, May 13-14l China Beauty Expo, Shanghai, May 19-21l Beauty World Middle East, Dubai, May 26-28 l Cosmetic Business, Munich, June 10-11


www.bwconfidential.com - April 16-29, 2015 #110 - CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL

News roundup

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At a glance...

Strategy

Shares in US-based direct seller Avon surged more than 17% on news that the group is exploring strategic alternatives, which could include a sale of its North American business. Analysts said a sale of the North America arm would be a good move for the struggling

company, as it would provide the funding needed to turn the business around. North America is estimated to account for 14% of the group’s sales.

French group Interparfums has signed a fragrance license for US accessories brand Coach. The license is for 11 years, and was previously held by The Estée Lauder Companies. Interparfums will begin distributing Coach’s fragrances in the fall of 2016.

US-based Coty has completed its acquisition of the Bourjois brand from Chanel for around 15.43 million shares of Coty Class A Common Stock.

US-based private-equity company San Francisco Equity Partners has acquired a majority stake in make-up brand Japonesque. The brand is distributed in the US, Canada, the UK, Australia and New Zealand and in several European countries.

Results

French group LVMH reported a 3% increase in organic sales for the first quarter of 2015 to €8.32bn. On a reported basis, sales rose 16%. The perfumes and cosmetics division saw a 6% increase in sales to €1.09bn (+16% on a reported basis), fueled in part by Dior fragrances J’adore and Miss Dior and a good performance of the brand in make-up. In the selective retailing division, organic sales were up 5% to €2.66bn (+20% on a reported basis). Travel retailer DFS continued to be impacted by currency and geopolitical developments in some tourist destinations. The group said perfumery chain Sephora saw particularly strong same-store sales growth in North America and the Middle East.

Fragrance house Givaudan reported first-quarter 2015 sales of CHF1.09bn ($1.11bn), an increase of 0.9% on the same period in 2014. The company cited a slowdown in the developing markets of Asia and Eastern Europe as having impacted performance. The fragrance division generated sales of CHF519m ($530.8m) in the period, an

increase of just 0.3%. Fine fragrance sales fell by 1.8% in the first quarter. n n n

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

n Avon could sell North America business

n Interparfums signs license for Coach fragrances

n Douglas could be sold by the summer

n France’s beauty exports up 4% in 2014

n YSL Black Opium, Valentino Uomo win French FIFIs



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n n n Retail

The fate of German perfumery retailer Douglas could be decided by the end of June. It was revealed in February that Douglas’ owner, private-equity company Advent, was preparing to list the retailer on the stock market or sell the company. Advent holds 80% of the shares in Douglas, while the Kreke family owns 20% of the company. Isabelle Parize, managing director of Douglas Perfumeries GMBH and ceo of French

perfumery chain Nocibé, said that several possibilities could be envisaged for the chain. “A range of scenarios are possible: Douglas could list on the stock market, it could be bought by a fund, or it could be sold to another retailer. Douglas would be an ideal entry point to Europe for an American or UK-based group, such as CVS or Boots. It could also make sense for a group like L’Oréal to buy Douglas,” she commented. Douglas is the number-one perfumery chain in Europe with a 16% market share in

the region. The retailer reported sales of €2.5bn in 2014 and an EBITDA of more than €300m, according to Parize.

Luxury-goods group Richemont, owner of The Net-A-Porter Group, is to merge the online luxury retailer with fashion e-tailer YOOX Group. The combined entity, whose creation is subject to approval from YOOX shareholders, will be renamed YOOX Net-A-Porter Group. Richemont will own 50% of the new company, while its voting rights will be limited to 25%. The merger is expected to be completed in September 2015, after which YOOX Net-A-Porter Group is to launch a capital increase of up to €200m. French department-store operator Galeries Lafayette is to close at least two of its stores in France. Located in Thiais, a suburb of Paris and in the southern town of Beziers, the stores are said to be operating at a loss. Galeries Lafayette has not yet indicated whether it would also close a store in Lille in northern France. The three stores employ around 300 people. US drugstore operator Walgreens, which acquired UK operator Alliance Boots last year, is to close 200 stores in the US. The closures are an addition to its three-year, $1bn cost-cutting plan announced last August and will increase savings by $500m, says the retailer.

Germany-based travel retailer Gebr Heinemann is to invest €130m in its business in 2015, some 30% more than last year. The investment will mainly be focused on its new concessions, a new office building at its Hamburg headquarters, e-commerce and improvements in logistics. Over the past 12 months the company has won four major tenders for retail concessions at Sydney Airport, Amsterdam Schiphol, Istanbul New Airport, plus five additional sites in Tunisia. With the opening of Istanbul New Airport in 2017, the company will control retail

space of 150,000m2 (1.6mft2), up from the 85,000m2 (915,000ft2) it has today. Gebr Heinemann currently holds 78 concessions (compared to 61 last year) and is aiming to expand this to 90 concessions by 2020. It is also looking to expand in Russia, where it is a distributor or shop operator at 20 of Russia’s 22 main airports. In 2014 Gebr Heinemann reported sales of €2.4bn. The company claims to rank fifth

among operators in the travel retail market, and has a 20% share of the European duty-free market. n n n

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www.bwconfidential.comISSN: 2104-3302Publisher: Nicolas GrobEditorial Director: Oonagh Phillips [email protected] Editor: Alissa [email protected] Coordinator & Assistant: Katie [email protected]: Sophie Douez, Alex Wynne,

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z News roundup n n n French perfumery chain Beauty Success has signed an agreement with distributor CFAO to open around 20 franchise doors in Sub-Saharan Africa. The first store will open in Abidjan, Ivory Coast in September 2015. French brand Yves Rocher has opened a new concept store in Paris. The 450m2 (4,843ft2) three-story location on the boulevard Haussmann was designed as an homage to the brand’s botanical roots. The ground floor is devoted to skincare and make-up and features a Botanical Beauty Bar, where consumers can test products. The first floor is dedicated to fragrance, and has a scent organ. A Beauty Spa is housed in the basement.

US-based niche fragrance brand Commodity has launched its Mix Bar concept exclusively in 35 Sephora stores in the US. Mix Bar is a display that mimics a cocktail bar, and features eight of the brand’s 10 fragrances, which consumers can blend to create their own personalized scent.

People

Renato Semerari, executive vice president category development of Coty is to leave the company. He will be replaced by Camillo Pane, who will also join the executive committee and report to Bart Becht, Coty’s chairman and interim ceo. Pane was most recently senior vice president global category officer consumer health at Reckitt Benckiser. News that Semerari will leave Coty comes after a string of executive departures at

the company.

President of the French Federation of Selective Perfumery (FFPS), William Koeberlé has also been named president of the FEPD, the European association of fragrance retailers. Koeberlé was reelected as president of the FFPS in March.

Data

France’s cosmetics exports were up by 4% in 2014, representing a trade surplus of €8.9bn, according to French association Febea. France remains the world’s number-one export market for beauty. In 2014, some 48.2% of France’s cosmetics were exported to the European Union, and 16.9% were shipped to Asia. Exports to Asia have seen the strongest growth at +11.7% last year, with shipments to China increasing by 16.5%. Exports to the Middle East saw growth of 7.1% in the period, while those to the US rose by 7.6%. n n n

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z News roundup n n n Prestige beauty sales in France, Italy and the UK increased in February 2015, thanks to a dynamic Valentine’s day sales period, according to NPD. Sales in France rose by 3% for the month, Italy saw growth of 1% and the UK reported a 6% sales increase. Spain, however, saw flat sales for the month. Make-up was the number-one contributor to growth for the four markets, followed

by skincare. Fragrance came in third place.

More men in the US are purchasing eaux de parfum, while women are buying more colognes, according to figures from NPD Group. Men’s EdP sales in the US were up by 30% in the 12 months ending February 2015 to reach sales of $51m, while EdT and perfume formats rose by just 4% each. Women’s cologne sales grew 29% to $69.6m in the same period, compared to +12% for EdT and +1% for perfume. Smaller fragrance formats are also gaining ground. The sales of women’s purse/

travel sprays and rollerball/roll-on formats were up by 67% in the year ended February 2015, while for men’s fragrances these categories’ sales rose by 54%.

Industry events

Yves Saint Laurent Black Opium and Valentino Uomo took home the French Fragrance Foundation’s FIFI awards for best women’s and men’s fragrance in selective distribution this year. Black Opium was also awarded the FIFI for the best ad campaign in women’s fragrance, while Valentino won best men’s bottle’s design. Valentino also won a new award called the FIFI D’Or (The Golden FIFI), which recognizes a men’s and a women’s fragrance for their overall qualities and is judged by a jury, which was presided fashion designer Jean Paul Gaultier. The women’s FIFI D’Or went to Burberry for My Burberry. Guerlain’s L’Homme Idéal won best men’s ad campaign, while the FIFI for the best

women’s fragrance bottle went to Cartier’s La Panthère de Cartier.

Launches

French brand Clarins is to launch a major new serum this spring that focuses on correcting dark spots called Mission Perfection Serum. The product is set to be a key launch and marks the beginning of a new line for the brand. Mission Perfection Serum is expected to generate 3 to 4% of Clarins’ skincare sales in the first year of launch, says the company. It will be backed by a press and TV ad campaign. The product claims to be different to other dark-spot correctors as it targets

the spot and does not lighten the surrounding skin. The main ingredient of the serum is acerola extract, which is combined with hexylresorcinol, a dark-spot correcting ingredient. Mission Perfection Serum will launch in May and retails at €73 (30ml).

French brand Courrèges is to launch a new women’s scent this summer, a move that it hopes will boost the company’s efforts at rebuilding its fragrance business. Called La Fille de l’Air, the fragrance puts the focus on orange flower absolute and was created by Fabrice Pellegrin of Firmenich. n

US Men’s & women’s fragrance types, % change 2014-2015*Fragrance type % change

2015/2014*Women’s EdP +4Women’s EdT +12Women’s cologne +29Women’s perfume +1Men’s EdT +4Men’s EdP +30Men’s cologne +5Men’s perfume +4

Source: NPD Group *12 months ended Feb 2014 & Feb 2015

European prestige beauty sales,* % change Feb 2015 vs Feb 2014Country % change Feb

2015/Feb 2014France +3Italy +1UK +6Spain 0

Source: NPD BeautyTrends *Value sales

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

Social media monitor

Estée Lauder’s make-up collection created with fashion brand Courrèges has intrigued bloggers, with many saying that the launch calls to mind MAC’s collaborations with artists and celebrities. The launch, backed by an ad campaign featuring Lauder model Kendall Jenner, is expected to attract younger consumers to the brand.

Shoe designer Christian Louboutin’s first beauty boutique, which opened in Paris earlier this year, has been described as “thoroughly unique”. The store’s minimalist design is praised for the way it showcases the brand’s collection of multi-faceted nail polish bottles, which are positioned in niches along the boutique walls.

Cult Korean skincare product Mizon Returning Starfish Cream, which is said to be composed of 70% starfish extract, has been a talking point on the blogs. Despite the product’s unusual composition, it has been popular with beauty aficionados and consumers in the US, where the cream is now sold at retailers including Urban Outfitters.

Make-up videos on YouTube by five-year-old Colombian Danna Gomez have fueled a multitude of responses online. Despite the millions of views garnered, her videos have sparked criticism regarding the use of children to promote the beauty category online.

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Watsons Chinal N° of stores: 2,100

l Store openings 2014: More than 450

l Target n° of stores end 2015: 2,500-2,600

Watsons China ceo Christian Nothhaft

Self-confessed ‘China bull’ Watsons China ceo Christian Nothhaft outlines the company’s ambitious expansion plans and the opportunities for brands in the country

Still bullish on China

How has the slowdown in China affected Watsons’ expansion plans? We have more than 2,100 stores and by the end of this year we’re planning to have somewhere between 2,500-2,600 stores. We opened more than 450 locations last year. There may be a slowdown in some areas, but our business is good. We will continue to expand at the same pace and maybe accelerate a little bit. In China we are in more than 350 cities. We’ve covered the tier-one and tier-two cities

100%, while in tier-three cities we’ve covered about 70%, and in tier-four about 30%. The tier-one and tier-two cities are still growing and there are still shopping malls and new trade zones coming, so the opportunity to expand is still quite big. I’m a China bull —every economy has its ups and downs, but I think there is a slight slowdown, partially because gift giving has reduced. However, awareness for quality product and self-service shopping formats is going up, which works very well for us.

What are the challenges in tier-three and tier-four cities? Consumers in undeveloped markets are becoming more sophisticated when it comes to personal care and more demanding of beauty products. We are quite positive about the beauty market and we believe there are still many opportunities in China. We will continue to open more stores to serve more customers.

How do you see the performance of malls? Chinese shopping malls are pretty good and there are some extremely good new developments featuring a very wide variety of merchants in each category and price level, and this is something that really appeals to the Chinese customer. In China, cities are very big, so shopping malls have become more of a sub-center and a community, which plays in our favor because our focus has been on malls.

Do you see more Chinese brands trying to enter the prestige segment?One of the things that attracts Chinese customers overall is not just brand names, but innovation. If you are an innovative local company and are able to follow local trends, there are good opportunities. There will be a time, and that time may be slowly starting now, when this will provide an opportunity for [local] prestige brands. What is really driving sales is innovation, so every year we develop 400 to 500 new

own-brand products. The young customer picks up ideas quickly, so innovation provides a huge opportunity for foreign brands, and most of all local brands as they are really quick to innovate. n n n

”Watsons China ceo Christian Nothhaft

Companies are realizing that it is not online against offline, but that it has to go together. They increasingly start to underpin their launches or brands with good digital campaigns

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w Watsons China ceo Christian Nothhaft

n n n Many industry players talk of an e-commerce revolution in China, what is your view? For us, this isn’t really a revolution. It’s already been roughly five years since customers have been going online to listen to opinion leaders and to their friends [about products]. This underlying trend has accelerated over the past three years with the rise of social media. We see this as a great opportunity to capture consumers and to capture traffic. If you’re very active in the digital space you can connect very well with your consumers. The customer wants to get information from the web, but now we know they also want to buy more from the web. Why? Because now the payment gates are safe, so sales volumes will pick up.

How important is it for beauty retailers to integrate online and offline operations, particularly as they try to penetrate smaller cities?It is important to have both elements. You will always have shoppers who are very detail-oriented—they look at the packaging, read the detailed ingredients and ask questions. A lot of people prefer to do this in a store, where there are people around to ask. But when it’s convenient they will want to do that online. As a connecting point you need a very big digital environment where you can communicate with consumers and try to attract them either into stores or online. The most important thing is that you keep talking to the customer every day through your digital space.

How do you see Western brands reacting to changes in the market? Three years ago when I talked to retailers and brands, some said online wasn’t really for them, or that they would only [sell] online through their own website, and that they would never go on a [third-party] platform. Now, even prestige brands are opening online stores on popular public platforms. Companies are realizing that it is not online against offline, but that it has to go together. They increasingly start to underpin their launches or their brands with good digital campaigns.

How will the Chinese beauty market perform over the next 12-18 months? The market still provides a good environment for opening more stores and introducing more products directly to the consumer by talking to them in stores and providing good service. E-commerce will continue to grow. Our e-commerce sales from 2014 doubled, and we expect similar numbers again this year. We will continue to see up-trading, especially from mass to masstige, and we also see a little bit of conversion from masstige into luxury. Brands exposed to department stores will face further challenges

because traffic is declining and stores that offer open formats where people can browse and shop quickly will get part of that traffic. I see this in the numbers everyday through our traffic counts. There is opportunity for innovation in China and local companies

will seize that opportunity faster unless foreign brands are more open minded when it comes to their consumer understanding. Korean brands are popular, and K-style is hip at the moment, so I’d expect that more Korean brands will have the chance to get a good market position. n

”Watsons China ceo Christian Nothhaft

Brands exposed to department stores will face further challenges because traffic is declining and stores that offer open formats where people can browse and shop quickly will get part of that traffic

“

s Watsons opened 450 stores in China last year and is targeting 2,500 to 2,600 stores by the end of 2015



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BW Confidential analyzes the state of Germany’s market and what lies ahead

Holding steadyGermany’s beauty market

Consumer spending is up in Germany thanks to a strong labor market, an uptick in wages and low inflation.

Consumption is forecast to continue to grow this year as oil prices continue to fall. According to news agency Reuters, a survey conducted in January 2015 showed consumer sentiment in Germany at its highest level in 13 years.While the country’s beauty business is not seeing strong increases, it is holding its own.

According to Euromonitor International, Germany’s prestige beauty market saw an increase of 2.9% last year to sales of $3.79bn, while the mass market was up by 2% to $12.43bn.Figures from German industry association IKW put beauty sales, mass and prestige

combined, at €13bn last year, an increase of 1.6% on 2013. “The market’s growth was based on an increasing per-capita spend on beauty [which reached] €148, supported by strong marketing initiatives from German beauty companies,” IKW general manager Thomas Keiser tells BW Confidential. He points out that natural beauty products and value-added, premium priced products saw the strongest performance last year, while the private-label segment also put in a good year.The market’s top-performing category last year was make-up, which was up by 2.7% to

reach sales of $2.14bn, according to Euromonitor International. More trendy color brands, such as L’Oréal-owned Urban Decay, entered the market last year. Candemir Ergen, head beauty buyer at department-store operator Galeries Lafayette, which operates a store in Berlin, says that the strongest focus in its beauty department over the past year has

been on make-up, which accounts for about 41% of beauty sales at the Berlin store. Fragrances, meanwhile, both for men and women,

saw below-average sales, according to IKW’s Keiser. However, the category did grow by 2.4% to $2.75bn, says Euromonitor. More consumers are said to be purchasing smaller formats, such as 30mls. “At the end of the day, this means that brands have less margin to invest in marketing tools and support, and it makes for an overall lack of focus on the category at retail,” explains one prestige fragrance executive.Skincare, the biggest beauty category in Germany,

also had a sluggish year. Prestige skincare sales reached $4.58bn, a rise of 2.3% on 2013. “Prestige brands are increasingly challenged to compete, especially within skincare. The market is constantly evolving and we see new niche brands emerging all the time,” explains La Prairie Germany general n n n

Germany beauty sales* 2014 by category Category Sales

2014 $bn

% change 2014 /2013

Skincare 4.58 +2.3Haircare 2.96 +2.2Fragrance 2.75 +2.4Make-up 2.14 +2.7Mass beauty & personal care

12.43 +2.0

Prestige beauty & personal care

3.79 +2.9

Total beauty & personal care**

19.50 +2.3

Source: Euromonitor International *Retail sales price **Categories do not add up to total as some segments are not included

”IKW general manager Thomas Keiser

The market’s growth was based on an increasing per-capita spend on beauty [which reached] €148, supported by strong marketing [initiatives] from German beauty companies

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n n n manager Britta Bartholomae. She adds that promotions among brick-and-mortar retailers have been especially strong over the past year. At Galeries Lafayette, where skincare accounts for around 39% of sales, the retailer

has introduced new niche skincare brands, such as Danish company Tromborg. Luxury skincare brands are also a focus, and this year the store will open a counter for La Prairie. “Brands in the high-end area are seeing the strongest growth within beauty. We are working a lot with our beauty treatment rooms where we offer specialized treatments,” explains Ergen. La Prairie’s Bartholomae says that services are crucial to retain and attract the premium shopper in Germany. Despite this move towards service by some, Germany continues to be a promotionally

driven market. To compete with the promotional strategies of players like Douglas, independent retailers are now also looking more to discounts.

Douglas looks to new modelsPowerhouse perfumery retailer Douglas, which accounts for more than 44% of Germany’s selective market according to industry sources, has seen its share of disruption since it was acquired by private-equity fund Advent International in 2012.In September 2014, the head of Douglas Holding’s perfumery division left the company

and there have been a number of staff cuts. More upheaval is on the horizon as the group has confirmed that it is up for sale. “A range of scenarios is possible: Douglas could list on the stock market, it could be bought by a fund, or it could be sold to another retailer. Douglas would be an ideal entry point to Europe for an American or UK-based group, such as CVS or Boots. It could also make sense for a group like L’Oréal to buy Douglas,” Douglas Perfumeries GMBH and ceo of French perfumery chain Nocibé Isabelle Parize commented earlier this month. Given the price of Douglas, which some say could be as much as €3bn, analysts say that

a buyer is more likely to be a supermarket group, such as France’s Carrefour, for example. “We hope that the Kreke family will retain at least a part of the company. They are basically responsible for the development of the German prestige market, so the expertise is there. However, as of today, it’s all speculation,” comments one German industry association executive. Douglas has already re-focused on beauty

by exiting its other businesses. It sold jewelry stores Christ and confectionery stores Hussel last year and plans to spin off its Thalia bookstore division. It also bought French retailer Nocibé in 2014 and is said to be looking to expand in Germany by acquiring independent perfumery retailers. Some suppliers worry that this focus could mean Douglas will impose even more stringent negotiating conditions. Other players are more optimistic, especially

if Douglas is sold to a strategic buyer rather than another private-equity company. “We’re looking forward to the group’s restructuring [in light of its impending sale] as we hope n n n

Prestige beauty brand executive

“In the past, you knew what to expect from a Douglas store—a wide range of prestige and masstige brands. But today it is stocking more trendy brands to attract younger consumers, and it is also pushing the development of its private-label offer

s Douglas is rolling out a new store concept in Germany that focuses on more trendy brands. The retailer is also developing its private-label offer and launched a color line earlier this year



Germany’s beauty market

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n n n that there will be less of a focus on the financial aspect of the business and a bit more on the products,” comments one prestige brand executive. Douglas has also embarked on new retail formats, which feature a focus on younger,

trendy make-up artist brands. The retailer launched a new store concept in November 2014 in Düsseldorf. In addition to introducing cutting-edge brands, the new store was designed to create more interaction with consumers. A central area, called the Catwalk, spotlights the latest launches, promotions and special offers. “Douglas has changed a lot in the past few years. In the past, you knew what to expect

from a Douglas store—a wide range of prestige and masstige brands. But today it is stocking more trendy brands to attract younger consumers, and it is also pushing the development of its private-label offer,” says one supplier. Private label has been highlighted as an area of expansion for the retailer. In March,

Douglas launched its own-brand make-up line with around 300 skus, including products for the eyes, lips, nails, and complexion as well as brushes and tools ranging in price from €4 to €29. “In-house brands are, and will remain, an important success factor for perfumery retailers. These offers give Douglas a specific profile that sets us apart and contributes to consumer loyalty. However, customers also expect attractive products from major brands; our challenge is to find the right balance between these two categories,” Douglas Perfumeries ceo Dr Henning Kreke told BW Confidential earlier this year. Douglas also opened a Nocibé private-label standalone store concept Les Bellista by

Nocibé in Germany, and the retailer is considering additional openings in the country. Another strategy is Douglas’ partnership with other retailers. In January, the retailer

launched its first shop-in-shop concept inside a department store in Germany. The 400ft2

(37m2) store in Ahrens department store in Marburg, near Frankfurt, offers a full range of products and services. Kreke says Douglas will expand the concept to other department stores as well as fashion retail stores.

The department store challengeMeanwhile, on the department-store front, retailer Karstadt was acquired by real-estate group Signa in August 2014 and continues to be mired in difficulties, say sources. Although Signa is said to be investing around €300m to turn the ailing retailer around, there have been numerous management changes and executive-level departures in the past two years. The retailer announced last year that it would close six stores, including two department stores, in Hamburg and Stuttgart in June 2015. At the end of February it announced an additional round of staff layoffs. Beyond the impact of store closures on the n n n

Mass gains traction

Germany’s mass market saw value sales growth of 4.4% in 2014, according to AC Nielsen, although Euromonitor puts growth at +2%. “German consumers look for the best-quality products at the cheapest price, and today it’s possible to offer quality at cut-rate prices,” explains German supplier Bomo Trendline managing director Adolf Brodscholl.Budget brands, or those in the €3 and less price range, are becoming strong

contenders, as are low-cost, private-label brands from mass discounters such as Aldi and Lidl. According to data from AC Nielsen, value sales of entry-level make-up products priced €3.50 or less accounted for 16% of the German mass market in 2002 compared to more than 45% in 2014.Drugstores, which control 80% of the country’s mass beauty market, are

the fastest-growing beauty channel in Germany, with a sales increase of 6% last year, due to an expansion in the number of points of sale and a focus on improving merchandising for the category. “Drugstores were clearly the market’s winning channel last year, as they expanded their number of outlets and worked on creating a more attractive beauty-care offer,” says IKW’s Keiser. Retailer DM-Drogerie Markt has a more than 9% share of the country’s health and beauty market and saw growth of 6% in 2014. Last year the retailer opened 174 new doors. Rossmann, another strong contender, saw its sales up by nearly 8% last year and announced plans to open 155 new locations in 2015.

n n n business, this uncertain state of affairs means that brands cannot plan beyond the short term. In all probability it also means a lack of investment from the retailer to develop the category.

Online: room to grow Online sales are a bright spot in the market. The channel is said to account for 9% of Germany’s beauty sales, or 7% of make-up, 4% of fragrance and 1% of skincare revenue, according to market research company L2’s Digital IQ Index. Douglas is strong in e-commerce and is putting a focus on the channel. “We are

accelerating links between distribution channels—online and brick-and-mortar—to be as flexible as possible,” Kreke says. Douglas has launched a Click & Collect service for its stores and consumers can now also book their appointments for beauty services online.Other online beauty players are likely to develop in the market. “We will see a growing

number of online sales platforms emerging in the coming years, which might significantly change the retail structure in the long run,” says IKW’s Keiser. US retailer Amazon, for example, launched its premium beauty site in Germany last year, but apart from Burberry, few prestige players have signed on.As to market performance for the rest of 2015, suppliers forecast increased online sales

and similar category growth to 2014. But all eyes are on what will become of Douglas under new owners and how that will affect the structure of the market and its brands. n

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There was no shortage of discussion about the fragile state of travel retail in the Americas at this year’s edition of the Duty Free Show of the Americas,

which took place from March 22-25 in Orlando. Industry players said that if 2014 was tough, this year is panning out to be even more challenging, with few, if any, improvements on the horizon. The biggest issues, apart from the impact of continued retail consolidation,

are the devaluation of the Brazilian real impacting the Brazilian traveler’s spend throughout the region, and political and/or corruption issues in Brazil, Venezuela and Argentina. “A few years ago, everyone spoke about Brazil as the new Eldorado, but it’s turned into a veritable roller coaster and I see this lasting five more years,” Groupe Jacques Bogart Western Hemisphere export director Jean-Marc Daviaud tells BW Confidential. In addition, operators say that the number of Asian passengers on the US west coast continues to decline and there is also a projected slowdown of European travelers on the east coast of the US due to the strengthening dollar. Travel-retail operators are hoping that the market in the Americas will remain flat this year compared to 2014.In terms of retail consolidation, news of Korean operator The Shilla’s purchase

of US-based DFASS Group broke during the show. “This is an interesting deal as The Shilla will most certainly bring Korean brands to the market, so this creates more diversity in the offer. I believe this also signals the entry of more Korean retail players into the region,” comments Shiseido travel retail Americas managing director Michael Gebrael.The show floor, some exhibitors complained, was quiet this year, especially in

the fragrance and cosmetics area. However, total exhibitor numbers reached 197, just two more than last year, and visitors numbers came to 2,700, or 150 less than last year. There were 44 fragrance and cosmetics exhibitors this year, or four less than in 2014. A few notable absences included beauty group Coty and Caribbean distributor Tairo. However, newcomers included LVMH-owned Bulgari. “Some buyers stayed away mainly due to the consolidation happening in the industry. The fact that the Baselworld [jewelry and watches] show was happening at the same time also had an impact on visitor numbers, but overall the reaction from exhibitors to this year’s show has been positive,” show organizer IAADFS executive director Michael Payne told BW Confidential, adding that the exhibition space was sold out.The 2016 edition of the show will take place from April 3-6. n n n

Travel retail in the Americas region has seen its share of troubles worsen since last year. BW Confidential reports on the latest news from the Duty Free Show of the Americas in Orlando

A rough ride

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Duty Free Show of the Americas Took place: Orlando, US, March 22-25, 2015Visitors: 2,700, vs 2,850 in 2014Exhibitors: 197, vs 195 in 2014Fragrance & cosmetics exhibitors: 44, vs 48 in 2014


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Heard in showJapanese group Shiseido is building its skincare franchise Ultimune this year in travel retail in the Americas. “Ultimune will remain the driver for the brand in the region and we’ll cross promote and cross-sell it with our other franchises,” says Shiseido marketing manager Jo-Ann Santiago. In the second half of 2015, the brand will launch a 100ml size of Ultimune Power Infusing Concentrate exclusive to travel retail. It will also introduce Ultimune Eye Concentrate, a product that is designed to be applied before using an eye-contour cream. For its Bio-Performance franchise, in the first half Shiseido is launching Glow Revival Serum (pictured), an all-in-one serum. On the retail front, Shiseido opened a standalone store in travel retail in January

at Mexico’s Guadalajara airport. The company is looking to develop the free-standing airport concept in other locations in the Americas. n n n


n n n Industry executives on travel retail in the Americas

“From a market perspective, I’m very pessimistic for the first three quarters of this year. Hopefully the business will balance out in the fourth quarter and the region will get back in the black.”Shiseido travel retail Americas managing director Michael Gebrael

“Although the fragrance market in South America is currently very challenged, it presents an opportunity for us to develop our market share, as some companies are cutting their investments in the region.” Euroitalia export director Gianluca Castagnetta

“Both the Brazilian real and the weakening euro are affecting travel in the Americas. We haven’t yet felt the effects of the euro, but retail sales linked to Brazilian travelers are down by about 10%.”Essence Corp president Jean-Jacques Bona

“Brazilian passengers were traveling and spending but the devaluation of the real means they are traveling less—no one expected such a big devaluation. Domestic and travel retailers’ goal for this year is simply to be flat in the Americas.”Parlux director international marketing & travel retail sales Paola Pinto

“Super-premium brands will be most affected by the devaluation. Brands like ours will benefit, as consumers will turn to more reasonably priced products.”Groupe Jacques Bogart western hemisphere export director Jean-Marc Daviaud

“The power of the Brazilian passenger has diminished. The market is at the mercy of Brazil and with the corruption issues coming to light it won’t improve any time soon. The years ahead will be a period of waiting and reconstruction, not of growth.”Altimetre ceo Arnaud de Volontat


n n n Shiseido-owned BPI is building awareness for Narciso Rodriguez in the Americas. “We’ve begun to invest a lot in fragrance discovery in local markets,” says BPI marketing director Americas travel retail & Latin American local markets Antonio Andrade. BPI is also focusing on the Narciso line this year, with the launch of the EdT in May and Narciso l’Absolu in the second half.

Clarins Groupe’s focus on its Azzaro brand in the Americas last year has paid off, says travel retail Americas director Galia Sandres: “We relaunched the brand in the second half of 2014, targeting the Brazilian traveler in local and travel-retail markets. By the fourth quarter we had regained our number-one slot in Brazil.” This year, the group is putting the same investment behind the new women’s scent, Azzaro pour Elle. Launching in May, there will be major animations in airports in Brazil, Argentina and in Miami, Florida.

Italian fragrance group Euroitalia is to take a “mega-launch” approach to the introduction of Eros pour Femme from Versace in travel retail and domestic markets in the region. The fragrance launches in April in Mexico and in September in South America, and will benefit from a number of high-profile promotions. The fragrance rolled out to the US and Canada in January and is seeing strong sales, according to the company.

Fragrance dispensing specialist Genie-S showcased its latest Travalo and Perfume Pod dispensers. Travel retail, according to newly appointed Genie-S vice president Ralph Bou Nader, currently accounts for 10-15% of sales. “Travalo and Perfume Pod are products for traveling, so we’d like travel retail to make up 20-25% of our sales,” says Bou Nader.

Crabtree & Evelyn, which debuted in travel retail in the Americas in 2014, now has a presence in 15 DFA doors with personalized gondolas (pictured), including in the US airports of Miami, JFK and Atlanta. The brand is also looking to open in airports in Mexico and is in talks to sign in-flight accounts. On the domestic front, Crabtree & Evelyn has just bought its distributor in Mexico, and will revamp its 13 freestanding stores in the country.

US-based Moroccanoil is building its travel-retail presence. The brand opened its first airport location with Gebr Heinemann in Copenhagen in October 2014, followed by two doors with Nuance in Zurich and Stockholm. This year, it has rolled out to the airports of Miami, Atlanta, Punta Cana and Macau with operator DFA. In the Caribbean, the brand is opening 13 travel-retail doors this year, in partnership with its distributor Tairo.

Distribution company Altimetre was at the show presenting US-based brand Spongelle. The brand, which ranges in price from $9 to $17, markets an all-in-one skincare treatment in a sponge format. Altimetre founder Arnaud de Volontat believes there is a need for non-luxury products in travel retail. “Travelers are now spending less. The brands coming out ahead are those with a masstige and parapharmacy positioning,” he says.

P&G-owned Braun is testing the sale of its beauty devices in beauty travel retail, rather than in electronics, with Heinemann in Istanbul. According to Braun’s agent for travel retail, Tax Free Trade Klaus Mellin GMBH, the brand is developing its sales in Latin America. n


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Marionnaud France new concept

l N° of stores being revamped: 80 this year;

60 in 2016l New services: Makeovers,

skincare diagnoses, Code Beauté, nail bars

AS Watson-owned perfumery chain Marionnaud is in renewal mode in France. The retailer has launched a new store design and is rolling out new services in-store

and online in a bid to create a closer connection with its consumers.Marionnaud’s updated store concept is designed to have clearer segmentation among

product categories, offer more complimentary services and be more inviting. “The store is now much easier for the consumer to understand and navigate as there is more of a feeling of space, and it’s easy to find what you’re looking for,” Marionnaud France ceo Eileen Yeo tells BW Confidential. The new design includes two central tables to encourage product discovery—one is devoted to make-up and the other features a mix of products from other categories. By the end of this year, 80 Marionnaud stores will have taken on the new design: 10 new openings, 10 relocations and 60 renovations. Next year, 60 additional locations will adopt the new design.The new free services include quick makeovers and Ioma Link skincare diagnoses in

partnership with the French skincare brand. In terms of pay-for services, some stores will feature a nail bar.This month Marionnaud is launching a new service called Code Beauté (Beauty Code)

that is comprised of three stages: determining the consumer’s needs, providing advice and suggesting products. Marionnaud BAs use a program developed for the iPad that lasts 20 minutes to identify each consumer’s beauty profile. Following the consultation, the BA recommends products and then sends the consumer her Code Beauté by email. Marionnaud says Code Beauté serves as a bridge between digital and in-store advice and will enable the retailer to forge new relationships with its consumers. Digital innovations are also a major focus. “Our priority is to create a strong link between our digital and physical stores in order to offer our clients a complete shopping experience,” Yeo comments. In France, Marionnaud offers Click & Collect, Store to Door and Reserve and Collect services. n

Marionnaud revamps its stores in France and launches new services

A new approach to beauty retail



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