Revlon, Inc.

views updated

Revlon, Inc.

FOUNDED: 1932

Contact Information:

HEADQUARTERS: 625 Madison Ave.
New York, NY 10022
PHONE: (212)527-4000
FAX: (212)527-6946
TOLL FREE: (800)4-REVLON
URL: http://www.revlon.com

OVERVIEW

Revlon, Inc. sells cosmetics, skin care products, fragrances, and personal care products under three major brands—Revlon, Almay, and Ultima II—plus over 20 regional brands. While the cosmetic industry is extremely competitive, Revlon's innovations and technologies led it to become the number one manufacturer of mass market color cosmetics in the United States. The company believes the key to staying on top is knowing the consumer, the markets, and the science. Revlon is constantly introducing new product lines and expanding existing ones in order to stay competitive. Aging women need products that are different from those of teenage girls, so Revlon developed product lines for each of those markets, as well as cultivating ethnic markets.

Continued growth means new markets. Revlon looks internationally to increase sales. Offering products through mass-merchandisers in Europe and opening new markets in Russia and China, as well as developing regional brands all over the world, allows the company to expand.

COMPANY FINANCES

Revlon, Inc. has been a public company since May of 1996. Since then, net sales have risen from $1.94 billion in 1995 to $2.17 billion in 1996 and $2.39 billion in 1997. The increase in net sales was 10.2 percent from 1996 to 1997. Domestic sales rose 15.3 percent in 1997 over 1996, and international sales rose 3.2 percent during the same time. Net income for the company went from a loss of $41.2 million in 1995 to gains of $18.2 million and $43.6 million in 1996 and 1997, respectively. Net income per share of stock was reported at $.85 per share in 1997, up from $.37 per share in 1996. During a 52-week period in 1997, Revlon's stock saw a high of $54 and a low of $29.

ANALYSTS' OPINIONS

The cosmetics industry is a tough one, with each company scrambling for shelf space for their products. Analysts say those who survive and prosper are those who market aggressively and continually introduce new products. Store merchants grant the most space to the products that sell. The company with the most innovation gets the most space, with those who imitate the leaders getting little or no space.

Analysts say the number of new cosmetic products introduced in 1997 rose 13 percent from 1996. However, that figure includes old products that have been updated and labeled "new and improved." Others put the figure of truly new products at 5.7 percent in 1997 over 1996.

With U.S. personal income rising 4.9 percent in 1997 and projected to rise another 5.2 percent, consumers have more disposable income, this is considered a good sign for the cosmetics industry. In order to increase market share, analysts say cosmetic companies must innovate, spending more on research and development (R&D) for better technologies. Revlon, Inc.'s R&D spending has risen about 15 percent per year. Another way to gain market share is to develop new niches. Aging baby boomers are a prime target for anti-aging cosmetics, while younger consumers like fresh colors. Some analysts say ethnic groups are a good target market.

HISTORY

Revlon, Inc. was founded by two nail polish distributors and a nail polish supplier in 1932. Brothers Charles and Joseph Revson, along with Charles Lachman, developed a new process for manufacturing nail enamel. The process used pigments instead of dyes, creating a richer looking enamel. Using pigments allowed the company to offer nail enamel in more colors than any other company to date. As a result of this innovation, Revlon, Inc. became a multimillion dollar company in only six years.

In the 1950s, Revlon began introducing new colors for their cosmetics twice a year, to coincide with the fashion industry's clothing announcements. It was during this time that Revlon also began advertising on television. In the 1960s, Revlon aggressively attacked the international market. Using models, the company introduced the "American Look" to the world.

Revlon has a long history as a cosmetics company. Yet in the early 1990s, the company was said to have become staid and somewhat dated in its approach to the market. In 1993, Ronald O. Perelman took over the company and put in place a management team led by Jerry Levin and George Fellows. By the late 1990s, Revlon had become an "industry powerhouse that dominates its competitors," according to one press report.

The team of Fellows and Levin was credited with putting Revlon on the top of the industry by using new technology and marketing strategies with core brands such as Revlon, Almay, and Ultima II. With the company moving forward, Revlon offered stock to the public in an initial public offering (IPO) in February 1996. The IPO raised $188 million through the sale of 8.625 million shares of Class A common stock for $24 per share. On October 28, 1997, the stock was trading on the New York Stock Exchange for about $42 per share, up 75 percent from its initial price. The IPO gave Revlon the funds to better support its core brands and expand its international operations. One such expansion included building a manufacturing plant in China in late 1996.

In early 1997, Revlon, Inc. merged its existing retail business, Prestige Fragrance and Cosmetics, into The Cosmetic Center. The new Cosmetic Center offered a wide variety of cosmetics and other beauty products at low prices and it is an independent subsidiary of Revlon.

STRATEGY

In the mid- to late 1990s, Revlon's basic business strategies were to expand sales through mass market outlets and to introduce new products with unique consumer benefits. One of the most successful examples of this strategy was Revlon's creation of a unique, patented polymer that led to the development of what it called the first "won't rub off, won't kiss off" lipstick in 1993. The first Revlon product in this area was the Ultima II Lip Sexxxy brand. Following the success of this product, Revlon expanded distribution of the product and introduced it to the mass market in 1994 as Revlon ColorStay. According to Revlon, ColorStay quickly became the bestselling lipstick brand in the U.S. mass market.

Revlon considered ColorStay to be a major competitive weapon. The company introduced a new ColorStay collection each year, including products for face, eyes, and cheeks using similar transfer-resistant technologies. The Age Defying cosmetics collection, another Revlon innovation, was introduced in the mid-1990s using a similar strategy. The Age Defying products were designed to appeal to the U.S. "Baby Boomer" market. Revlon continues to invest heavily in research and development, getting innovative products to the market. Premium products, those with advanced technologies and perceived added value, can charge a premium price. For example, in 1998 ColorStay Lipstick retailed for $8.95, while regular lipstick retails for $1.99.

CURRENT TRENDS

As more women began working, they needed makeup that stayed on all day. This, coupled with the aging of the "Baby Boomers," women born between 1946-1964, led Revlon to develop its ColorStay and Age Defying product lines in the mid-1990s. Skillful advertising, featuring well-known celebrities such as Cindy Crawford, helped build awareness of the new lines. The Color Stay lines vaulted Revlon to the number one position in the industry in 1998, up from number three in 1993.

In the mid- to late 1990s, Revlon was developing and taking advantage of the growing trend for women to buy cosmetics through self-service, mass market outlets, rather than through "beauty advisors" at outlets such as department stores. In fact, by 1996 60 percent of Revlon's U.S. sales and a growing portion of its sales worldwide were generated through distribution channels without beauty advisors. From 1993 to 1996, the company increased advertising and consumer promotion spending by a compounded annual rate of 19 percent a year in order to support its mass market sales.

FAST FACTS: About Revlon, Inc.

Ownership: Revlon, Inc. is a publicly owned company traded on the New York Stock Exchange, but the company is majority-owned by MacAndrews & Forbes Holding Company, controlled by Ronald Perelman.

Ticker symbol: REV

Officers: Ronald O. Perelman, Chmn. of the Board.; George Fellows, Pres. & CEO, 1998 salary $1,350,000; Frank J. Gehrmann, Exec. VP & CFO

Employees: 16,000 (1997)

Principal Subsidiary Companies: The subsidiaries of Revlon Inc. include: Revlon Worldwide; Consumer Products USA; Consumer International; Professional USA; Professional International; Revlon Technologies; and The Cosmetic Center.

Chief Competitors: Revlon, Inc. competes against makers of color cosmetics and hair color products. Through their different brands, Revlon, Inc. competes against both mass marketers and department store marketers. Main competitors include: Clairol; L'Oreal SA; Maybelline; Max Factor and Company; and Procter & Gamble.

Revlon hopes to take advantage of another late 1990s trend—U.S. women's growing desire to color their hair. The rate of American women coloring their hair was a reported 50 percent 1996, up from 35 percent in 1990. The $1 billion per year U.S. hair-color market was said to have grown more than 30 percent between 1994 and 1997. In October 1997, Revlon began running television ads featuring supermodel Cindy Crawford in a $40 million "Color Stays In. Color Stays Alive" advertising campaign for ColorStay Hair Color. Revlon held only 6 percent of the hair-color market in 1996, but it was planning to increase its share at the expense of market leader Clairol, which held 47 percent of the market, and L'Oreal.

The younger consumer trends are for "hot," non-traditional colors. This was the motivation for the unveiling of Revlon's StreetWear line in 1996. Initially the line carried only nail color. It has since expanded to mascara, eyeliner, and lip gloss to capture a larger share of the youth market.

PRODUCTS

In 1997, Revlon expanded its ColorStay and Age Defying product lines with a new generation of enhanced-performance products. The company also launched its new Almay Time-Off Revitalizer, which featured a technology that visibly rejuvenates skin. StreetWear, a trendy new color cosmetics and nail color line for young consumers, was introduced in 1996 and expanded in 1997. Also in 1997, Revlon launched Top Speed Nail Color, designed to dry in 90 seconds, as well as ColorStay Hair Color.

Revlon continued introducing new products in 1998 to keep and expand its market share. Three new products were added to the Color Stay line in 1998—Liptint, Lite Make-up, and Powder Shadow. The Almay division expanded in 1998, adding Stay Smooth Anti-Chap Lipcolor and the One Coat Collection. The newest product line of Revlon, introduced in 1998, is Moisture Stay Lipcolor.

CORPORATE CITIZENSHIP

In the late 1990s, Revlon increased its commitment to women's health programs and other important community concerns. These programs included such prominent events as the annual Revlon Run/Walk in Los Angeles, which raised millions of dollars for the Revlon/UCLA Women's Cancer Research Program. The company has committed over $20 million to women's health causes since 1989.

GLOBAL PRESENCE

In the late 1990s, Revlon was pursuing an aggressive strategy to expand its global sales. The company designed global brands with a distinctive but uniform image, while allowing flexibility to tailor products to local and regional preferences. These brands were sold in global markets using consistent packaging, in-store merchandising, and advertising. According to the company, this strategy allowed Revlon to transfer successful concepts from one market to another.

Revlon produced regional brands in other parts of the world. In South America, for instance, Revlon produced the Colorama brand of toiletries and cosmetics in Brazil. This accounted for a major share of the Brazilian market in 1996, which is said to be rapidly expanding.

Revlon's sales in international markets increased 12.6 percent in 1996, accounting for 42 percent of the company's net sales. Revlon expected similar increases in future years. For example, in September 1996 Revlon received approval from the Chinese government to manufacture, distribute, and market Revlon products in China; the first products were manufactured in December.

Established markets, such as Europe and Japan, are those where Revlon expects to increase sales by installing more self-service displays in mass market retail outlets. Eastern Europe, Russia, and other emerging markets are also expected to offer significant market potential.

CHRONOLOGY: Key Dates for Revlon, Inc.

1932:: Revlon Products Corporation is founded by two nail polish distributors and a nail polish supplier
1940:: Revlon begins marketing lipstick
1955:: Revlon reorganizes and goes public as Revlon, Inc.
1962:: Revlon products debut in Japan
1973:: Introduces Charlie fragrance
1985:: Pantry Pride buys Revlon
1996:: Revlon releases an initial public stock offering
1997:: Launches ColorStay hair color

The company also grows internationally through acquisitions. In 1997, Revlon Consumer Products Corp. purchased Bionatura S.A. and Len S.A., the distributor of Bionatura's products. Bionatura, a South American company, produced hair and personal care products, which it sold primarily under the brand name Plusbelle.

To promote its products internationally, Revlon distributes The Revlon Report, a free guide to new fashions, color trends, and Revlon products. As of 1997, the report was available in 34 countries and published in 18 languages.

EMPLOYMENT

Revlon, Inc. employs 16,000 people worldwide and attributes much of its success to these employees. In its 1996 Annual Report, Revlon said the company "has always been intuitive and creative. Today, we also have the vision, marketing savvy and discipline of a well-run packaged goods company." The company described its working environment as fast-paced, oriented toward action, and thriving on challenge. "We champion collaboration and team management. Professionals from throughout our company—in research and development, operations, marketing, sales, advertising and other departments, work in cross-functional teams to achieve common goals. Employees are encouraged to speak out and make their opinions heard."

SOURCES OF INFORMATION

Bibliography

abrams, bernard. "quick-cure inks rev up bottling speeds." packaging digest, december 1996.

born, pete. "majors see repeat of strong spring." wwd, 11 july 1997.

much, marilyn. "industry snapshot." investor's business daily, 13 april 1998.

parker-pope, tara. "tossing tinted manes, stars heat up hair-color wars." the wall street journal, 22 july 1997.

revlon home page, may 1998. available at http://revlon.com.

"revlon, inc." hoover's online, may 1998. available at: http//www.hoovers.com.

"revlon reports record first quarter reports and captures the lead in u.s. mass market cosmetics." company press release, may 1998. available at http://biz.yahoo.com.

"try and smudge this: revlon sues competitors." drug & cosmetic industry, may 1996.

wilke, michael. "revlon's new line of vitamins eyes niche for women." advertising age, 1 january 1996.