Spa Industry | Niche Canadian cosmetic-makers thrive

Spa Marketing > Strategies for Medi, Day Spa & Salon Professionals

October 25, 2007 |

Profits to make one blush

Niche Canadian cosmetic-makers thrive
.
Karen Mazurkewich, Financial Post | canada.com
.
She calls it “medical chic” but Lee Graff ’s new cosmetic line is becoming a full-blown fashion statement. Cover FX Skincare Inc., a line of foundations and blushes originally designed for people with skin problems, is getting distribution lift-off.
.
The niche cosmetic brand, which was conceived in the CosMedic Clinic at Toronto’s Sunnybrook & Women’s College Health Sciences Centre seven years ago, has widespread distribution in Canada and, this month, is being launched in eight U.S. outlets owned by hip cosmetics retailer Sephora after being discovered by Hollywood trendsetters.
.
“If you asked me five years ago, would we be in these stores, I would have said, no, this is just for my patients,” Ms. Graff says.
.
What started as a small line of cover up and setting powders has morphed into a lineup of 12 product categories and brushes, including bronzers, skin cleansers and moisturizers, that brings in $10-million a year in retail revenue.
.
Move over L’Oreal and Estee Lauder: Private label brands are increasingly taking a bigger bite out of the mainstream companies’ marketshare. In a global study conducted in 2005, ACNielsen reported that total sales for niche cosmetics jumped to 17% in 2005 from 15% a year earlier.
.
This year, Holt Renfrew devoted 20% of its new cosmetics counter in Vancouver to the alternative brands and Sephora, the fastest growing cosmetic retailer in the United States, reports 80% of its sales are niche brands.
.
“Gone are the days when someone stands behind the counter selling one product line,” says Courtney Baber, Sephora vice-president and divisional merchandising manager for colour. Today’s women want the freedom to play, and they are no longer buying into national advertising campaigns, she adds.
.
The trend can also be attributed to a marketing accident. In 1998, when France’s Sephora opened its first North American store, it could not persuade mainstream luxury brands to sign up, so it scoured the global for alternative brands to fill its shelves, Ms. Baber says. “What started as a hindrance, has become the biggest point of difference [between us and U.S. department stores] and can be attributed to our success today.”
.
And whereas Europe once dominated the sector, increasingly, new products are coming from Canada. In addition to launching Cover FX this month, Sephora’s U.S. outlets are unveiling new line of lip glosses produced by Toronto-based Balmshell, and is featuring a new line from Toronto-based Cargo Cosmetics Corp. — already a popular brand among Sephora’s shoppers. The company’s branches in Canada, and online at Sephora. com also sell Montreal-based B. Kamins, Chemist skincare line. Ms. Baber says Canada’s proximity to the United States means products reach that large market quicker.
.
An early pioneer in niche cosmetics is Toronto-based M.A.C. Cosmetics, a trendy brand designed in the late 1980s for professional artists. The brand sold itself in on pigment and chutzpah making transvestite singer RuPaul its unique cover girl. When the company first manufactured its lipsticks a big run was 100 units. When it sold to a corporate giant in 1997, an average run was 300,000. Today, M.A.C. is the backbone of the Estee Lauder empire selling US$640-million worldwide in 2006, according to Euromonitor International. M.A.C. went mainstream, but it paved the way for other Canadian niche cosmetic lines.
.
When M.A.C. first launched at Holt Renfrew, Hana Zalzal was a young civil engineer and MBA graduate in search of an idea. There was always something new and innovative in fashion, but that wasn’t being translated to cosmetics, she says.
.
Ms. Zalzal approached Eaton’s department store and offered her vision — a pared down approach to make-up. “They gave us three stores with prime real estate,” she says. Her vision: Cool industrial design (makeup in tin cans) and easy application. Cargo hit home runs with its handy lip gloss travel pouches, colour cards, smoky eyeshadow and frost sticks. This year, Cargo introduced packaging made from recyclable paper and a celebrity designed make-up series.
.
“We’ve been around because of constant innovation,” she says. “It’s a highly competitive super-saturated market.”
.
Competition hasn’t stopped other young entrepreneurs from jumping into the fray. Identical twins, Fiona and Jennifer Lees, 29, dreamed of owning their own cosmetics company. When the duo came up with the idea of marrying lip gloss with the Retro floating-art pen concept, they cold-called a Hong Kong manufacturer and a Danish engineer to flush out the logistics for a proto-type. “It was amazing there are people willing to give free information,” Fiona says.
.
Once they had crystallized the concept and lined up the manufacturers, the sisters approached their father for financing. Nigel Lees, a former investment banker and chief executive of Sage Gold, was floored by their industriousness … and their power-point presentation. His first question:”What is lip gloss?”
.
However, Mr. Lees found investors for the company, and he became chairman of the company his daughters named Balmshells. “Now he not only knows what lip gloss is, he knows all the brands and colours,” Fiona adds.
.
In addition to rolling out in Holt Renfrew last year, several of Balmshells glosses were just launched in Sephora outlets across the United States.
.
Another newcomer to hit the luxury market is 33-year-old April Jacobs. A former make-up artist, Ms. Jacobs developed a whimsical line of blendable colours she dubbed Pink Beauty. Her marketing strategy is to evoke another era, using romantic labels such as “Beatrice” and “Elsies” –borrowed from her grandmothers.
.
With the help of her husband, an investment banker, Ms. Jacobs launched Pink Beauty Cosmetics Inc. in the summer of 2006 at Holt Renfrew, and she is now in talks with a U.S. retailer. “We want to grow slowly,” she says.
.
Natalie Penno, vice-president of cosmetics and beauty services at Holt Renfrew, attributes the rise of the Canadian niche brand to the savvy Canadian entertainment industry. The models, the music industry, the film industry, give the products a platform to launch, she says.
.
In addition to Pink Beauty, Ms. Penno is displaying Balmshells, plus two Calgary-based companies: Beaute Cosmetics Inc., a line of luxury brushes and lip gloss, and Teye Minerals, a mineral make-up line launched last year by Oasis Wellness Centre & Spa in Calgary. The spa has been selling a line of skincare products for eight years. But in an example of how the industry has come full circle, Victor Casale, a co-founder of M.A.C. Cosmetics, and his family are angel investors and advisors to Cover FX. All the original brands started in a lab with visionary entrepreneurs, but when they get too global, they loose innovation, Mr. Casale says.
.
He remains a champion of the private brand: “What happens with international cosmetics brands, is like any business, you try to appeal to as many people as you can, so you don’t use a lot of pigment, you make it blah mainstream. [The big brands] don’t do any one thing particularly well, whereas the niche companies don’t have the marketing muscle but they have a competitive advantage because they can focus.”
.