It’s been a good year for Revlon – Company Profile

Liz Parks

It’s been a good year for Revlon.

The makeup category, which accounted for 36 percent of all mass market color cosmetic dollar sales for the 52 weeks ended December 1995, was up 5 percent in dollar sales for the year, according to Nielsen Marketing Services.

In contrast, Revlon’s makeups, which account for about 16 percent of all makeup sales, were up 27 percent.

The lipstick category, which accounted for 25 percent of all mass market cosmetic dollar sales in 1995, was up 9 percent for the year, according to Nielsen reports.

Again, Revlon outperformed. Its lipsticks, which hold a 34 percent share of all mass market lipstick dollar sales, were up 27 percent for the year.

These are impressive accomplishments, particularly in categories as mature as face and lip.

IPO, here we go

Last February, in its initial public offering, Revlon stock opened at $27.25 a share. It has since reached $29.625.

Investors scooped up 8.625 million shares of Revlon’s Class A common stock, about 15 percent of the total. In the process, Revlon raised about $187 million, well above the original $143 million to $165 million Wall Street had expected Revlon to generate in initial trading.

Revlon has since used the money to reduce its $1.5 billion dollar debt.

In an exclusive interview, George Fellows, president and chief operating officer of Revlon Inc., said the company’s marketing success these past two years and its recent IPO success is essentially the “result of a lot of hard work by Revlon’s many employees,” as well as a testament to their accomplishments.”

Revlon, he said, has been able to generate its exceptional growth by “delivering a significant point of difference to the consumer,” and he said retailers can expect the same kind of performance from the new ColorStay eye shadows and mascara launched recently.

Statistically speaking, Revlon has been something of a marvel in the past two years. According to Nielsen, Revlon accounted for 51 percent of the growth in color cosmetic dollar sales in 1994; its brands generated 67.5 percent of all category growth last year.

That kind of growth happens only when a company succeeds in attracting new users to a category or more traffic to a store. Fellows said Revlon was able to drive its business by making news with a stream of innovative product launches, and by supporting them with exciting promotions and impactful advertising.

In the last few years, Revlon has broken new ground by taking successful brands such as ColorStay and Age Defying, which initially launched in the United States, and marketing them to countries around the world.

Fellows pointed out that ColorStay “is in 100 markets as of today, and it’s been a success in every single one of them.”

Fellows also believes there are valid, perhaps timeless, reasons for ColorStay’s success. “Consumer needs are universal,” he indicated. “The need gaps that exist in the United States exist in other places around the world.

“We are proving that with marketing support and advertising support, products that are successful in the United States will be successful wherever we take them.”

What’s coming down the pike

In terms of both the near and distant future, Fellows said, Revlon will continue to focus on what it has done so well for the past two years: “Making our business grow.”

Revlon, he said, will continue to invest in the research and development initiatives that produced the breakthrough technology for the ColorStay and Age Defying brands.

“The same kind of market segmentation approach that made it possible for ColorStay and Age Defying makeups to grow sales in the $800 million face makeup category last year will continue to make it possible for Revlon to replicate similar feats in 1996 and beyond,” he said.

There is only one significant category where Revlon hasn’t succeeded in driving new sales – fragrances, which has been soft for several years in many chain drug stores.

“The paradigm for fragrances has changed,” Fellows said. “Women are using less fragrances and finding certain fragrances less appropriate in a work environment.”

But he added that Revlon is working hard to find ways to break that pattern.

“We are looking at uncovering new ways to address consumer preferences with fragrances that have inward appeal – fragrances that please the self and have a positive effect on a woman’s state of mind.” he said. “This will give us the ability to change trends.”

Retailers also have a responsibility to help drive growth in the fragrance segment. Fellows said, “More and different merchandising techniques are needed to generate stronger impulse purchases.”

Last Christmas, many buyers raved about Revlon’s innovative fragrance boutiques, a merchandising presentation that helped retailers create an eye-appealing home for all the Revlon brands and gift sets they were promoting.

Fellows said the boutique worked because it was “unique and different,” and he indicated that retailers can expect to see “further development in this area.”

Fellows also noted that chain drug stores can enhance their already significant role as cosmetics and fragrances merchants by continuing to work on developing their cosmetic departments as a “destination stop. This is an objective that we and the stores need to pay more attention to,” he stressed.

Revlon has told Wall Street that it is committed to operating more efficiently than ever before, and although that could be interpreted to mean there may be some downsizing planned for the future, Fellows said that downsizing or cutting back on retail services is not part of Revlon’s overall game plan.

“Growing the business has been our focus over the past several years,” he emphasized. “When we talk about becoming more efficient, we are referring to our ability to grow our sales and make optimum use of our resources.”

Fellows added that Revlon expects to improve its operating efficiencies by ‘enhancing the smoothness of the transition of goods from us to the customer. That reduces costs for both.

“None of our existing programs will be compromised to accomplish this, and our commitment to both R & D and advertising will be up substantially,” Fellows said.

He also said that retailers can expect to see Revlon working hard to offer them a wide range of value-added support services, ranging from assistance with category management to new MIS and EDI programs that will help retailers improve the efficiencies of their replenishment systems and maintain higher service rates.

In the months ahead, Revlon has told Wall Street that it will continue to build market share. Companies often grow through acquisitions. Fellows said that regardless of its current $1 billion plus debt load, Revlon does have a viable acquisition strategy.

“We have sufficient liquidity to accomplish any of our strategies,” he said, “though our strategic focus for acquisitions is primarily on beauty care, not cosmetics, where we are well equipped to serve customer needs with Revlon, Almay and Ultima II.

“However there is always the possibility of an acquisition on a niche basis.”

One of the challenges for Revlon is to stay ahead of its major competitors, particularly mega corporations with much stronger cash flows, such P&G, Cosmair and Benckiser. All three have much less debt than Revlon and much heavier war chests for expansion and acquisitions.

But Fellows is not intimidated. Merely acquiring new brands does not ensure that companies with more money will be able to outmarket Revlon.

COPYRIGHT 1996 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.

COPYRIGHT 2004 Gale Group

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