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A good start?
The inside view on the international beauty industry
CONFIDENTIAL
In January, brands were looking to 2012 with much caution.
However, so far, this year seems to be shaping up not too badly
if sales figures of some of the major beauty groups are anything
to go by. French group L’Oréal just announced that it saw sales
rise by 9.4% for the first quarter of the year, while Spanish
company Puig reported 20% growth in revenues for the period.
The luxury segment is performing particularly well. L’Oréal
reported that its Luxe business saw “remarkable growth” in
the first quarter—at +17.8% in sales (12.2% on a like-forlike
basis), the prestige arm saw the highest increase of all
the group’s divisions. And the number of high-priced skincare products coming out this
spring, seems to indicate that beauty’s big brands are not fearing a slowdown in consumer
spend any time soon. L’Oréal’s Lancôme brand for example, will launch a new cream in
its Absolue range costing €300, while Estée Lauder has brought out a duo of creams in its
high-end Re-Nutriv franchise retailing at €950.
Emerging markets also continue to drive sales for many of the majors, even if these
countries are becoming a lot more expensive to do business in and despite some worries
over China, whose economy will see slower growth this year than in the past.
But apart from the inevitable emerging markets, there is also good news from the US.
NPD reported that prestige beauty sales in the first two months of the year in the country
were up 12%, and this comes on top of strong growth in the same period in 2011.
L’Oréal too noted that the North American market continues to see sustained growth.
The only problem then is Europe, where consumers are still watching their euros
carefully and continue to be fearful over increases in taxes. The industry may have
seen a good start in many areas, but many unknowns still lie ahead.
Oonagh Phillips
Editor in Chief
ophillips@bwconfidential.com
Inside
April 19-May 2, 2012 #53
The buzz 2
The essential news roundup
Netwatch 6
The beauty blog review
Interview 7
Essence Corp president
Jean-Jacques Bona
Insight 9
Russia’s fragrance market
Show review 12
Duty Free Show of the Americas
Store visit 14
Jovoy, Paris
Meet the BW Confidential
team at:
l China Beauty Expo, Shanghai, May 4-6
l TFWA Asia Pacific, Singapore, May 13-17
l Luxe Pack New York, May 16-17
l BeautyWorld Middle East, Dubai, May 29-31
l HBA Global Expo, New York, June 19-21
l Make Up in Paris, June 21-22

The buzz
CONFIDENTIAL
News roundup
Coty said it is still committed to buying Avon for $10bn and revealed details of how it
would finance the acquisition, thereby strengthening its position in the eyes of the direct
sellers’ shareholders. In a letter sent this week to Avon chairman Andrea Jung, Bart Becht,
chairman of Coty wrote that he had secured $5bn in equity from various sources, including
parent company Joh A Benckiser. Coty also revealed that JP Morgan Securities had
pledged $9bn in debt financing. Becht stated that Coty cannot raise the price for Avon
without having a look at the direct seller’s books and requested that the groups begin
confidential discussions about the sale. He also warned that he would not wait forever to
begin dialogue with Avon.
Becht also spoke to Avon shareholders on a conference call in a bid to encourage them
to persuade the Avon board to begin discussions.
Coty’s affirmation that it wants to go ahead with a deal comes two weeks after it made
public an offer to acquire Avon, which was rejected by the direct seller on the grounds that
it was opportunistic and undervalued the company.
Following Avon’s initial rejection of the bid, the direct seller swiftly appointed former
Johnson & Johnson executive Sherilyn McCoy as ceo, a position that had been left
vacant for four months after Andrea Jung stepped down. The timing of the appointment
of a ceo was seen as a statement that Avon wants to remain independent and a direct
rebuke to Coty, which had said that the direct seller should hold off naming a new leader
while it was interested in discussing an acquisition.
Since the news broke, analysts predicted that Coty would raise its bid or that other
players would enter the fray. There have been reports that former Avon shareholder John
Rochon, who is also a previous ceo of direct seller Mary Kay was preparing a takeover
bid for the group through his company Richmont Holdings. Rochon had tried to take over
Avon in the late 1980s.
Spanish group Puig saw 2011 net profit rise 19% to €155m, while sales were up
12% to €1.3bn for the year. The group said fragrance sales were driven by the new
launches 212 VIP Men, and CH L’Eau from Carolina Herrera, as well as continued
growth of Paco Rabanne’s 1 Million scent for men, which Puig claims is now near to a
number-one ranking on a global level.
Puig said it saw its market share in the selective fragrance market in 2011 rise to 7.6%,
which places it seventh in the global prestige fragrance ranking. The group’s goal is reach
a market share of 10% or a number-five ranking by 2014.
The group, which took a majority stake in Jean Paul Gaultier brand in 2011, underlined
that it has healthy cash flow to ensure future growth, leading analysts to believe it will
make further acquisitions. Puig now does 80% of its business internationally and said that
it expects sales of more than €1.4bn in 2012. Sales in the first quarter were up 20%.
L’Oréal’s sales were up 9.4% to €5.64bn for the first quarter of 2012. On a like-for-like
basis sales increased 6.4%. The group’s Luxe division saw growth of 17.8% (+12.2%
on a like-for-like basis) to €1.32bn, with the Lancôme, designer fragrance and Kiehl’s
brands performing particularly well. Geographically, North America continued to make
solid progress with sales up 13.1% to €1.26bn (+6.6% on a like-for-like basis). Sales
in new markets rose 14.1% to €2.09bn, while in Asia Pacific growth came in at 22.6%.
Europe’s growth was in low digits, with Western European sales up 2.3% and sales in
Eastern Europe increasing by just 1.5%. L’Oréal confirmed that it expects to out-perform
the cosmetics market in 2012, which it estimates will grow by 4%.
Japanese beauty group
Kanebo Cosmetics has
named Masumi Natsusaka
as its new president.
Natsusaka replaces Tadashi
Uematsu who will retire.
Natsusaka joined Kanebo in
1979 and was most recently
president of the Beauty Care
Business Unit of Kao Corp. He
assumes his new position on
June 20, 2012.
Hair salon operator Regis
Corp is to sell its stake in
European hair-salon company
Provalliance for €80m in cash to
members of the Provost family.
Provalliance’s brands include
Jean Louis David, Franck
Provost and Saint Algue. The
sale is part of Regis’ move to
focus on its North American
business and dispose of noncore
assets. Regis merged
2,000 of its European stores
with those of the Franck
Provost Salon Group in 2008.
The deal is subject to the
Provost family securing
financing for the purchase price.
Private-equity company
Brynwood Partners has
acquired haircare brands
LA Looks, Dep Sport, Zero
Frizz and Thicker Fuller hair,
deodorant brand Soft & Dri and
the Pure & Natural soap wash
brand from The Dial Corporation,
a subsidiary of Henkel.
The acquisitions were made
through Brynwood’s portfolio
company Golden Sun.
Brynwood also acquired the
Coast personal cleansing brand
from Henkel through its High
Ridge Brands company.
www.bwconfidential.com - April 19-May 2, 2012 #53 - Page 2

The buzz
CONFIDENTIAL
News roundup
French retailer Nocibé is to roll out a private-label brand this spring, as part of a wider
strategy it hopes will enable it to become France’s number-two perfumery chain, a
position that is currently held by AS Watson-owned Marionnaud.
The retailer introduced its own brand of nail polish in January and has widened the offer
to include a complete make-up range and a bath and body line for a total of more than
300 products. It will also add a range of six own-brand fragrances in May. “The aim of
the own-label brand is to act as a point of entry and bring in more younger consumers—
our average customer is 43 years old—as well as to bring back some fantasy and audacity
that Nocibé has lost a little of,” explains Nocibé chairman of the management board
Isabelle Parize. Nocibé private-label brand director Maylis Grand adds: “With this brand
we want to provide our customers with a different approach that they don’t always get
with the luxury brands. Customers want to test and experiment, so we need a brand that
is accessibly priced, but of good quality.”
The line costs €3.90 for a bath product, €12 for a mascara and €39 for a make-up
palette. The retailer claims that it has always been a destination for gift purchases,
“more so than other perfumeries,” according to Parize, and wants to highlight this
with the new range. It will offer a complimentary gift box of its own label bath and body
products for any purchase of €25 and over from the range.
Nocibé claims that it has not delisted any brands to make room for its
new range, but rather that it “was more imaginative with organizing
space and merchandising”. The Nocibé branded products will however,
occupy a central position in stores.
The launch of the range marks a new phase of expansion for the
retailer. Nocibé expects to accelerate its store openings with up to 15
new boutiques per year in a bid to move from its third position in the
French perfumery retail market to a number-two rank. Sephora leads
the ranking with around a 26% share, followed by Marionnaud. Nocibé,
which has a 17% share, Nocibé operates 450 stores in France and has
sales of €651m.
The fifth edition of Luxe Pack’s Shanghai packaging show, which was held on March
28-29 welcomed 2,880 visitors, mainly from China, Korea and Japan. “The new access
rules for this private event were very strict this year, and we are pleased to see that the
number of buyers was up by 25% on last year,” says Luxe Pack executive director
Nathalie Grosdidier. Some 100 companies from 12 countries exhibited at the event.
Exhibitors outlined the importance of the Chinese market, but at the same time its
competitiveness. Most companies confirmed they were competing with high-end foreign
counterparts, rather than local Chinese companies, who are more price-oriented.
Japan-based Kao Corporation has opened a
cosmetics café for its Est beauty brand in newly
opened Tokyo shopping mall Shibuya Hikarie. The
café features the entire range of Est products for
sampling and for sale and staff is on hand to give
advice. Beauty services and Kao’s branded drinks are
also on offer free of charge.
German fragrance company
Mäurer & Wirtz’ s managing
director Fabian Krone has left
the company after just two
years in the position. The
company said that Krone
left for personal reasons and at
his own request and that the
executive was instrumental
in implementing its recent
restructuring program. Bert
Lehnen, a member of the
advisory board will act as
interim managing director
alongside managing partner
Hermann Wirtz, during the
search for Krone’s successor.
UK-based brand Lush is to open
its first spa in Paris in May. The
70m 2 (753ft 2 ) spa will adjoin a
new 40m 2 (431ft 2 ) boutique in
the Marais district. Lush has four
spas in the UK, one in Japan
and is planning new openings
in New York and Tokyo.
See an upcoming issue of
BW Confidential for a closer
look at the new spa.
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www.bwconfidential.com - April 19-May 2, 2012 #53 - Page 3

The buzz
News roundup
Coty Prestige is rolling out its first fragrance for singer Madonna this month.
The scent, called Truth or Dare, is a white floral and was created by Givaudan
perfumer Stephen Nilsen. It comes in a white and gold bottle designed by
Fabien Baron. The fragrance will be backed by a TV and print ad campaign.
It retails at €35 (30ml EdP), €46 (50ml EdP) and €62 (75ml EdP).
P&G is to roll out a new fragrance for the Rochas brand this year
called Les Cascades de Rochas. The pink-tinted citrus floral eau de
parfum, created by in-house nose Jean-Michel Duriez, is meant to
evoke the freshness of waterfalls, in line with the brands other ‘Eau’
scents. The fragrance will be backed by an ad campaign featuring
American model and socialite Olivia Palermo. Les Cascades de Rochas
launches in July, and retails at €48 for 50ml and €72 for 100ml.
Estée Lauder is rolling out what it calls its “most exquisite anti-aging
ritual yet” for its high-end skincare line Re-Nutriv. The new range, called
Re-Creation, is also the brand’s most expensive. It comprises a face cream
and night serum, which are supposed to be used in conjunction with each
other and are sold together for $950 in the US. An eye balm and night eye
serum are also to be used together as part of a regimen and retail for $450.
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Netwatch
CONFIDENTIAL
Beauty blogger review
The products they’re talking about
The product: Beauty For Real Miracle Mascara. This US-based brand’s mascara
claims to be water resistant and smudge free, but still easy to remove. While this blogger
says she was skeptical about the claim, she admitted that the product did stay on until
she wanted to take it off. She claims it was also easy to apply and did not produce any
clumping, even if the look wasn’t as dramatic as she wanted. The mascara packaging’s
magnifying mirror on the outside of the tube and LED light in the lid was also liked for
making application easier.
[From: http://beautygirlmusings.blogspot.fr/ ]
The product: Paula’s Choice Resist Intensive Wrinkle Repair Retinol Serum. This brand,
created by US-based skincare expert Paula Begoun is liked for its “lack of flowery marketing prose
and no-nonsense attitude”. The information about this serum’s ingredients and what they are
supposed to do is described as being very clear, which helps assess the product. The serum claims
to contain a high amount of retinol to repair skin and improve tone. This blogger says the brand also
sells 1ml samples for $1.25—something she would like to see become a standard industry practice.
[From: http://www.thenonblonde.com/ ]
The product: Rock Cosmetics Designer Liner. This product is an eyeliner ap pliqué,
aimed at consumers who find it difficult to apply a liquid liner. The stick-on liner comes in
a range of different styles and colors. This blogger says that the appliqué can take a few
times to apply before it looks how it should and that while the appliqué can feel strange on
the eyes, once it warms up the product is easy to wear.
[From: http://www.cybelesays.com/ ]
The product: Duri Cosmetics Lush Lips Plumping Lip shine. This make-up brand’s
lip plumping product is said to offer a soft, silky texture and doesn’t produce a tingling or stinging
sensation. This blogger also liked the ingredients of aloe, vitamin and coconut oil, but said she
wished it didn’t contain mineral oil. She also said that the square lid twists and snaps into the
container, which means she is sure that it won’t leak in her bag.
[From: http://www.mybeautybunny.com ]
Their comments & conversations
l Given the approaching summer season talk on the blogs has centered on sunscreens.
Bloggers and readers confess to being overwhelmed by the number of sunscreens on the market
and confused about SPFs, ingredients and filters. Readers and commentators say they have
difficulty knowing the difference between physical and chemical sunscreens and also dislike that
so many brands are “heavy on silicones” in their suncare products. Another area of confusion is
how long a sunscreen lasts before losing its potency and how often it needs to be re-applied.
l Several bloggers commented on L’Oréal Paris’ new digital magazine called La Sélection De
Paris. The magazine is said to be dedicated to “all things color” and coincides with the launch
of Colour Riche Nail, the brand’s new nail polish collection. Standout features of the magazine
are the color palette, which allows readers to select shades that fit their personality and also get
insider tips, and the Interactive Colour Map, where users can vote for their favorite shade and see
the shades friends and other users like, which is described as a good way to see current trends.
www.bwconfidential.com - April 19-May 2, 2012 #53 - Page 6
The views expressed in this section are those of bloggers and do not represent
the opinions of BW Confidential

Interview
CONFIDENTIAL
Essence Corp president Jean-Jacques Bona
Latin lessons
Miami-based Essence Corp distributes a range of prestige
beauty brands in travel retail in the Americas and is Clarins’
distribution partner in the region. Essence Corp president
Jean-Jacques Bona gives his views on the shifts in the Americas
and how he sees the travel-retail channel evolving
How is the business shaping up this year?
We are in line with our forecasts so far. In terms of like-for-like sales growth
we are below last year’s rates so far in the first half. But we were prepared for
this as we felt a slowdown beginning to happen at the end of last year and we
predicted that the first half of 2012 would be in line with this trend. Since 2009,
we have seen like-for-like sales growth of between 25 and 30% and for the full
year 2012 we are forecasting an increase of 15%.
We rolled out Montblanc and Jimmy Choo from Interparfums, and Montblanc,
has done exceptionally well as the brand has high recognition in Latin American
markets. Jimmy Choo is also performing well, but we are still in the launch and
consolidation phase for the brand.
How do you see the evolution of the Brazilian traveler?
Brazilians have a huge impact on the market as they are big consumers and
are not bothered by spending beyond their means. In some airports they
can represent 50% of our sales for a brand like Azzaro, which has strong
recognition in Latin America. For other brands, such as Burberry or Clarins,
Brazilian shoppers represent around 20% of sales.
Domestic retail prices in Brazil remain two or two and a half times higher than
in the US, and I don’t see this changing as the economy is growing and it’s
a way to protect the local industry. Of course local brands are doing a lot of
lobbying [to maintain this].
Are travel-retail operators in Latin America giving more attention to
non-fragrance categories like skincare and make-up?
Our entire portfolio is made up of fragrances, with the exception of Clarins. Over
the past five years, there has been a movement in travel retail to grow the skincare
category more than make-up, as the assortment is easier to manage and of
course it is a more profitable category. With Clarins, for example, the skincare
offer is in all of the airports in the region, while the brand’s make-up offer is in a
smaller number of points-of-sale.
Retailers aren’t necessarily asking for more skincare or make-up, but it is in
their interest to offer the most complete assortment possible so as a result they
are giving more room to skincare. It seems that they have now struck the right
balance between the three categories and I don’t see any major shifts n n n
Essence Corp
l Brands distributed:
Travel retail Americas
including Caribbean:
Burberry, Montblanc, Jimmy
Choo, Van Cleef & Arpels, Lanvin,
Versace, Moschino, Oscar de
la Renta, Lolita Lempicka, Gap,
Banana Republic, bebe
Caribbean only:
Clarins*, Thierry Mugler,
Azzaro, Swarovski, Hermès,
Issey Miyake, Jean Paul Gaultier,
Narciso Rodriguez, Bulgari,
Elizabeth Arden
Latin America local market:
Oscar de la Renta, Lalique,
Grès, Jaguar
*The company also acts an an agent
for Clarins Group in travel retail and
in Latin American local markets
www.bwconfidential.com - April 19-May 2, 2012 #53 - Page 7

Interview
CONFIDENTIAL
Essence Corp president Jean-Jacques Bona
n n n in assortment in the near future. You have to remember that Latin America
is predominately a fragrance market—in the travel-retail channel the category
makes up 70% of sales, while skincare accounts for 20% and make-up just 10%.
How are travel retailers’ strategies in the region changing?
One positive change has been their motivation to grow their sales space and work
more with airport authorities to have walk-through areas, which are essential
in travel retail. The consumer needs to be in the ambiance of the store and
each time the retailer has been able to create walk-through areas, sales have
grown exponentially.
How is consolidation affecting the industry in Latin America?
All of the airports in the region are in the hands of major groups now, and being
large groups, their margins have a tendency to increase. Medium-sized cities will
still have regional operators, but a fewer number of them.
There are pros and cons to the consolidation that is happening; we deal less with
local teams and the negotiations are more on a global level, which can make for
a collaboration that isn’t as fruitful. Certain groups have left regional teams in
place, and they are doing better than those that are managed from the outside.
Managing on a global level is more costly and less efficient; in our business, it is
easier for us to work with local operators who are on-site.
Dufry, which has made a number of acquisitions, has made Latin America its
priority, and it has done so in an intelligent way. I wouldn’t be surprised to see
them grow further, but at a certain point the market will reach saturation.
How is the US duty-free market developing?
It’s progressing, but very slowly, which is mainly due to the inflexibility of the
US airport authorities, as customs officials are very involved in the space allotted
to the retail concessions. This is the
opposite to other regions where airport
operators are the main decision-makers.
Part of this is because airports in the
US are public domain and there are few
airports that are privately owned.
This is beginning to change as airport
operators are setting aside more space
for retail. The new concession at Los
Angeles International Airport will see
some changes, as when a new concession
opens up it’s back to the drawing
board, the overall space increases and
the shops get bigger.
In addition, the consumer in US airports
today is not American, but Asian, Latin
American and European, especially in terms
of fragrance purchases. This channel is not
yet part of the American culture. n
“ There are pros
and cons to the
consolidation; we deal
less with local teams
and the negotiations
are more on a global
level, which can make
for a collaboration
that isn’t as fruitful. In
terms of our business,
it is easier for us to
work with local
operators who
are on-site
”
s Travel retailers in the Americas are allotting more space to the
skincare category; Essence Corp sells Clarins skincare at all of
its Latin American airport accounts. The company has also seen
brisk business with its Montblanc fragrances in Latin America
www.bwconfidential.com - April 19-May 2, 2012 #53 - Page 8

Insight
CONFIDENTIAL
Russia’s fragrance market
Scent shifts
Russia’s fragrance market is back on track, but consumer
tastes may be beginning to change. BW Confidential
analyzes the sector’s performance and retail trends
The fragrance category in Russia has bounced back, after having been hit
quite hard by the 2008-2009 financial crisis. During the recession, consumers
postponed purchases or switched to cheaper and mass-market brands. The
fragrance category was also said to be losing out slightly to skincare and
make-up, which began to see higher growth rates.
However, the beginning of 2010 saw a rapid increase in fragrance sales, as
consumers began to replenish their scents. Premium fragrances saw sales up
15.3% in value in 2010 to
Russia fragrance sales* 2010 $m, forecast CAGR
2010- 2015
Fragrance category Sales $m
2010
% change
‘10/’09
% CAGR**
‘10-’15
Premium women’s 619.23 +15.4 +8.6
Premium men’s 243.63 +15.0 +7.5
Premium unisex 2.54 +11.8 +3.8
Total premium 865.39 +15.3 +8.3
Mass women’s 951.83 +9.9 +7.0
Mass men’s 388.58 +9.6 +5.8
Mass unisex 3.18 +12.6 +3.3
Total mass 1,343.5 +9.8 +6.7
Total prestige & mass 2,208.8 +11.9 +7.3
Source: Euromonitor *retail sales price **forecast
Rub25.68bn ($865.39m),
while the total perfume
category reported an increase
of 11.9% to Rub65.56bn
($2.21bn), according to Euromonitor.
Final figures for 2011
were not yet available at press
time, but estimates from Discovery
Research Group for fragrance
show a 7.5% increase
in 2011. Fragrance is said to
have accounted for 18% of the
total beauty market in 2011,
and Discovery puts the total
beauty market’s growth n n n
“ We have customized
Arbor Mundi’s
strategy to expand
our marketing
activities, improve
service and to offer
exclusive products
”
Arbor Mundi director general
Alexander Loginov
www.bwconfidential.com - April 19-May 2, 2012 #53 - Page 9

Insight
CONFIDENTIAL
Russia’s fragrance market
n n n last year at 11.1% to $12bn. However, part of this growth corresponds
to an increase in prices. The unit price for fragrance increased by 6% in 2010,
due to the ruble’s devaluation at the beginning of 2009.
Analysts say that growth will be driven by Russians’ increasing interest in
luxury goods. A survey by market research group Synovate Comcon for example,
stated that 72% of consumers bought fragrances in 2008, while this figure had
increased to 75% in 2011.
The number of men buying fragrance is also set to fuel growth. “Men’s
demands and brand awareness has gone up. Around 20 years ago, men used
a couple of cologne brands for hygiene or after-shave purposes. But now they
have become real experts in fragrance,” explains Parfums Christian Dior general
manager Russia and CIS countries Laurent Kleitman.
Euromonitor predicts that the prestige fragrance market will see a cumulative
annual growth rate of 8.3% between now and 2015, and for the total fragrance
market this growth will be in the 7.3% range.
Specialists look to new strategies
In terms of distribution, direct sales continues to lead in the mass sector. In this
channel, Avon and Oriflame have the highest market shares at 25% and 19%
respectively. However, recently Avon has seen poor sales in Russia, which it
attributes to an increase in taxes for entrepreneurs and weak response to some
of its cosmetics launches.
In prestige, the specialist beauty retailers are the most important. According to
Synovate Comcon, some 32% of Russians prefer to buy fragrance in specialist
stores, compared with 19% who like to buy in supermarkets or hypermarkets.
The internet as a
Consumer preferences
As far as consumer preferences are concerned, Russians prefer
eau de toilette to stronger fragrances. They are also still conservative
in their choice of brands and tend to be quite brand loyal
and not open to testing new scents, despite the number of new
launches on the market. During the crisis consumers went back
to the well-established brand names, which resulted in a drop in
sales in segments like celebrity scents.
French prestige brands still hold sway, but this could begin to
change. “Today luxury is a fast growing segment. Imports play
a critical role in the fragrance market—60% come from France
and many are now also imported from Italy and Spain, which are
among some of the most promising brands today. Competition
among foreign brands is severe, and French companies face
serious rivals,” comments Svetlana Laferova, brand manager of
Parfum Palace Group, one of the biggest distribution companies
in the country.
At the same time, there is a bigger trend towards consumers
looking for more exclusive fragrances, which is seeing the niche
segment report good growth.
distribution channel
for both mass and
premium fragrances
is also gaining
ground, and it
is thought that
consumers of
prestige scents will
turn to the web
before they would
trade down or go to
another channel,
such as direct sales.
“Women who like
visiting retail stores
would not surrender
to catalog shopping.
Presumably, the
future of perfume
is either in a
shop where n n n
Recently the Russian
perfumery and
cosmetics market has
changed dramatically
with a large number
of stores and new
perfumery chains and
a record number of
brands rolling out
a lot of novelties
every month
“
”
Parfums Christian Dior general
manager Russia and CIS
countries Laurent Kleitman
www.bwconfidential.com - April 19-May 2, 2012 #53 - Page 10

Insight
CONFIDENTIAL
Russia’s fragrance market
n n n people will go to indulge themselves or on the internet, similar to what
is happening in the West,” says perfumery chain Rive Gauche vice president
Corinne Jacques.
Discounting continues to be strong among the specialist fragrance retailers,
especially in light of the rise in prices in the past few years. This has seen chains
launch aggressive promotions to win back customers who switched to cheaper
brands and distribution channels during the recession.
Retailer Rive Gauche, with 140 stores and which recently took over Douglas
Rivoli in the country, is capitalizing on offering an accessible product mix and
reasonable prices, an approach that has proved quite successful. However,
it points out that it is refraining from making extreme price promotions or
aggressive discounting campaigns.
The Ile de Beauté chain, which is majority owned by LVMH’s Sephora and has
125 stores, also claims not to play the price game. Rather than offer discounts,
it says it prefers to focus on providing better customer care and extra services,
such as treatments. If also focuses on gifts-with-purchase and gift cards.
As for L’Etoile, Russia’s largest perfumery chain with 650 stores in 120 cities
in the country, it has sought to adapt a more aggressive marketing strategy.
The company is said to be one of the biggest advertisers of all the country’s
perfumery chains.
Better marketing is a strategy that Arbor Mundi, which has 18 stores, also
claims to be implementing. The company has put a focus on rewarding its loyal
customers with discounts and gifts and also arranges various events at its stores,
such as raffles with holidays as the prize. “We have customized Arbor Mundi’s
strategy to expand our marketing activities, improve service and to offer exclusive
products,” comments Arbor Mundi director general Alexander Loginov. For
example, the retailer recently launched niche US brand Demeter Fragrance Library
at its stores. “We have also increased our number of staff and have been working
to improve the teams’ motivation,” he continues.
Niche and exclusives
Indeed, niche brands and exclusive products are becoming a more important
part of the market, which is resulting in a bigger offer and more new-format
stores. “Recently the Russian perfumery and cosmetics market has changed
dramatically with a large number of stores and new perfumery chains [mainly
regional chains with two to three doors] and a record number of brands rolling
out a lot of novelties every month,” comments Dior’s Kleitman.
There has been a strong development in independent stores offering high-end
fragrances and personalized service. These so-called “concept stores” are not
only opening in the main hubs of Moscow or St Petersburg, but in other major
Russian cities as well.
While there may have been some trading down to more mass-market
products, there is still a large set of consumers buying luxury fragrance. And
although consumers still go for well-known brand names, there is likely to be
more segmentation in the luxury sector too. This, combined with more brand
launches in the country and increased store openings, is set to push up value
sales of the fragrance market. n
“ Today luxury is a fast
growing segment.
Imports play a critical
role in the fragrance
market—60% come
from France and many
are now also imported
from Italy and Spain.
Competition among
foreign brands is
severe, and French
companies face
serious rivals
”
Parfum Palace Group brand
manager Svetlana Laferova
www.bwconfidential.com - April 19-May 2, 2012 #53 - Page 11

Show review
CONFIDENTIAL
Duty Free Show of the Americas
A brisk business
BW Confidential brings home the highlights from this year’s
Duty Free Show of the Americas, which took place in Orlando,
Florida from March 11-14
Growth in traveler numbers and generally positive economic indicators gave exhibitors
at this year’s edition of the Duty Free Show of the Americas much to smile about.
“We’ve had a very positive and busy show this year. The fragrance and cosmetics players
are returning with most of the majors present and the only negative point is that there
isn’t enough space,” notes show organizer International Association of Airport Duty Free
Stores (IAADFS) executive director Michael Payne.
Beauty’s presence continued to grow at the show with companies, such as L’Oréal’s
travel-retail division Parbel division returning after an absence. “This is the second year
that the event is showing that it is back on its feet, and there are a lot more major brands.
The show slowed down several years ago, but now it’s come back,” says BPI Americas
travel retail & Latin American local markets general manager Gérard Pichon-Varin. The
health of the duty-free market also contributed to the mood at the show. “Traffic is up,
corporate business travel is on the rise and leisure travel is coming back. We are seeing
more customers in the stores spending a bit more per item,” Payne added.
Cause for concern
However, some trends cast a shadow on this optimism, such as the specter of further
consolidation following recent retail operator acquisitions in the Americas. (Swiss travel
retailer Dufry acquired Argentine retailer Interbaires in August 2011 as well as retail operations
in airports in Ecuador, Uruguay and Martinique.) “Given the consolidation happening,
soon we’ll be talking about a single retail operator in Latin America. I hope Dufry
will become more professional as it has the potential to do twice as much business. The
group is saying that if it doesn’t sell enough of one brand, it’ll simply drop that one and
chose another,” bemoans one beauty executive. Coty travel retail & export Americas
regional director Tanguy de Buchet, however, sees this as a potential plus for bigger
beauty groups. “Dufry’s acquisitions in the region mean a reduced number of brands
and suppliers, and perhaps a more limited assortment. It’s going to be relatively tough
for the smaller players, but for us it’ll be an opportunity as we can group our prestige and
celebrity brands together,” he explains. The majority of industry executives polled at the
show foresee further consolidation in the region.
The 2013 edition of the show will take place in Orlando from April 7-11. n n n
“ Traffic is up, corporate
business travel is on
the rise and leisure
travel is coming back.
We are seeing more
customers in the
stores spending
more per item
”
IAADFS executive director
Michael Payne
www.bwconfidential.com - April 19-May 2, 2012 #53 - Page 12

Show review
CONFIDENTIAL
Duty Free Show of the Americas
Heard in show
Shiseido is looking to “new opportunities”
to open a second standalone store
in the Americas for its Bare Escentuals
brand this year or in 2013. The company
operates a Bare Escentuals store in Hawaii.
Following growth of 44% in its Latin
American travel-retail business in 2011,
Spain-based Puig is ramping up its
‘retailtainment’ initiatives in the region.
For the launch of Valentino’s Valentina
fragrance the company is introducing a
two-week retail operation featuring
four bell-shaped smelling funnels—
the first three let consumers sample the
fragrance’s base, heart and top notes, and
the fourth features the fragrance itself.
Coty Prestige’s travel-retail division is
taking on duty-free distribution in Latin
America of its mass arm, Coty Beauty,
whose brands include OPI and Lady Gaga.
France-based L’Occitane is bringing the
brand’s distribution back in house for the
Caribbean and has hired an area manager
to oversee the region. On the product
front, L’Occitane is launching Aroma-
cology, a new haircare range for color-
treated hair in travel retail in June. “There
are few haircare offers in travel retail, so
there is a lot of potential for this kind of
product,” explains L’Occitane trade marketing
specialist Maria Carolina Villaneuva.
Caribbean distributor Tairo is looking to
expand into affordable luxury categories
that won’t cannibalize its beauty offer.
The company signed skincare brand
Strivectin and haircare company Oscar
Blandi this year, as well as lingerie company
Hanky Panky. “Retailers are looking
for points of difference. We continue to
launch fragrances, but we see skincare
growing. Haircare is also getting more
attention,” says Tairo vp Bryan Hollander. n
Industry soundbites
On Latin America:
“We are surfing a wave—the business in Latin America is booming,
apart from Argentina. Brazil continues to progress, but the retail offer
needs to become more professional. However, things will move fast—
the country has a population equivalent to that of the US, but with three
times fewer doors”
BPI Americas travel retail & Latin American local markets
general manager Gérard Pichon-Varin
“Brazil is working very well both in terms of the local market and duty-free;
the market is pulling growth in the region, but we must be cautious about
the exchange rate. There will be a slowdown this year versus 2011, but this
is natural as growth rates between 30 and 50% are hard to maintain”
Coty travel retail & export Americas regional director
Tanguy de Buchet
“Latin America was very strong in 2011, but 2012 has been a bit more
complicated. The business is driven by Brazil, but the high growth rates are
now coming down a bit as changes in terms of overstocking, for example,
must be managed. Brazilian travelers are having a huge impact—at Miami
airport they make up at least 30% of passengers. The Chinese and the
Brazilians have a point in common, which is their vision of consumption”
Actium beauty & lifestyle division president Paul Petit
“The region is doing well. At the macro level, people complain, but at the
micro level everyone is growing. I believe 2012 will be a year of stability”
Pupa export director Rossano Muraro
“Travel retail has historically been a strong part of the beauty business in the
region and it will remain so as the industry is healthy enough. However, it’s
a question of balance—can we foresee a future with just three or four major
retailers? I don’t think consolidation will be a good thing for the industry”
Idesa Parfums international division manager Carlos Dogliani
On the future of the business:
“We see the overall market growing between 8 and 12% all categories
combined this year, while travel retail in the region will grow by 4 to 6%.
Brazilian travelers will continue to have a major impact as will the Chinese”
Shiseido travel retail Americas md Michael Gebrael
“2011 was a very good year and we were happy with the bounce-back.
However, it wouldn’t be healthy if 2012 were as strong as last year, and
we’d like to see steadier growth at around 10%”
Tairo International vice president Bryan Hollander
www.bwconfidential.com - April 19-May 2, 2012 #53 - Page 13

Store visit
CONFIDENTIAL
Fragrance first
Jovoy’s new and larger concept store puts rare fragrance on show
Niche perfumery Jovoy has opened a new concept store in Paris, which it sees as an
“ambassador” for rare fragrances in France. The new store, located on Paris’ rue de
Castiglione replaces the Jovoy boutique, which opened in 2010, and is bigger at 175m2 (1,884ft2 ) than the first 50m2 (538ft2 ) outlet. “The concept was borne from the need
to have a space that does justice to rare fragrances in France, which is not possible in
traditional distribution. The first store saw good success and we needed more space to
showcase fragrances. The challenge is to keep the human touch in this bigger space and
make it like a concept store,” says store founder François Hénin.
Hénin sought to offer this human touch through vintage furniture and warm colors. The
boutique has kept the same novel way of testing fragrances as its first store: in addition to
being displayed in its own pack, each scent comes in a brown bottle, whose cap is used for
smelling the scent so that shoppers can smell the heart and base notes of the fragrance,
rather than just alcohol and top notes, which is the case with a paper blotter.
The main new features in the boutique are a wider range of brands (60 are on offer) and
a selection of fragrance accessories, such as candles by Cire Trudon. But perhaps the most
interesting new element is the Perfume Trunk, which Hénin says could constitute a “small
revolution in the distribution of rare fragrances”. It is essentially a vintage-looking trunk
featuring 16 of the store’s best-selling fragrances, which in addition to being displayed at
the boutique, will also be placed in luxury hotels, perfumeries and stores around France,
almost like a shop-in-shop. “If the Jovoy store is the embassy of rare fragrances, the trunk is
the consulate that will travel to other places. We are open to where it could be placed, from
perfumeries, to high-end spas or pharmacies—the idea is to give these rare fragrances
exposure outside Paris,” Hénin explains to BW Confidential. He adds that for the retailers
involved there is no risk as they will not be dealing with stock and if a consumer wants to
buy a scent it will be shipped from the Paris store. n
Boutique Jovoy
l Opened:
March 2012
l Location:
rue de Castiglione, Paris
l Size:
175m 2 (1,884ft 2 )
l No of brands:
60 rare fragrance brands,
candles and
scent accessories
l Special features:
vintage furniture, bottletop
testers, ‘perfume
trunk’ for bestsellers,
workshops, events
www.bwconfidential.com - April 19-May 2, 2012 #53 - Page 14

Store visit
CONFIDENTIAL
s All scents are displayed in their original packaging, but are also featured in glass bottles for sampling
s The store features a vintage trunk displaying its best-selling fragrances. The trunk is meant to travel to luxury
hotels and other stores in France
www.bwconfidential.com - April 19-May 2, 2012 #53 - Page 15

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