Revlon kisses China good­bye

China Daily (Canada) - - BUSINESS - By WANG ZHUOQIONG wangzhuo­qiong@ chi­nadaily.com.cn

Cos­met­ics and beauty prod­ucts maker Revlon Inc’s de­ci­sion to exit the Chi­nese mar­ket comes from hav­ing a failed mar­ket­ing strat­egy, sin­gle dis­tri­bu­tion chan­nel and weak prod­ucts that don’t meet lo­cal needs, ex­perts say.

The New-York based com­pany is leav­ing China af­ter 37 years and will shed 1,100 jobs as part of cost-cut­ting mea­sures, the com­pany an­nounced on Tues­day.

Most of the job cuts will be in China, where Revlon’s op­er­a­tions make up only 2 per­cent of the com­pany’s sales, which have been fall­ing. Revlon de­clined to com­ment on Thurs­day.

Global sales dropped 1.3 per­cent to $1.02 bil­lion in the nine months ended last Septem­ber, com­pared with the same pe­riod in 2012.

Rev­enue in Asia de­creased 3.5 per­cent to $166.8 mil­lion dur­ing that time.

The de­par­ture from China will save Revlon $11 mil­lion a year, the com­pany said on Tues­day in a reg­u­la­tory fil­ing with the US Se­cu­ri­ties and Ex­change Com­mis­sion.

Revlon has seen ma­jor turnover in ex­ec­u­tives this year, with CEO Alan En­nis re­sign­ing in Oc­to­ber, re­placed by in­terim CEO David Kennedy and in Novem­ber by Lorenzo Del­pani.

The com­pany also an­nounced a new CFO, Lawrence Al­letto, in July af­ter its for­mer chief fi­nan­cial ex­ec­u­tive, Steve Berns, joined US me­dia com­pany Tri­bune Co.

In China, Revlon holds less than 0.1 per­cent of the skin-care mar­ket and about 1 per­cent of the makeup mar­ket, ac­cord­ing to data from Kan­tar World­panel China.

Ja­son Yu, gen­eral man­ager of Kan­tar World­panel China, said lack of in­vest­ment in brand build­ing in terms of mar­ket­ing and ad­ver­tis­ing has re­sulted in lower ex­po­sure of its brand to con­sumers. Mean­while, com­peti­tors such as Proc­ter & Gam­ble Co, L’Oreal Groupe and Unilever Group have poured money into ad­ver­tis­ing in tra­di­tional and new me­dia.

In ad­di­tion, Revlon’s lim­ited ef­forts to de­velop in­no­va­tions for Chi­nese con­sumers also con­trib­uted to its fail­ure, said Yu. For ex­am­ple, some in­ter­na­tional brands have de­vel­oped BB cream, a hy­brid prod­uct some­where be­tween skin care and makeup, which has proven to be pop­u­lar among Asian con­sumers.

Men’s skin-care prod­ucts also have de­vel­oped faster in China than in Europe and United States.

“Only sell­ing what is avail­able in your home mar­ket in China is not good enough,” said Yu. “You have to un­der­stand lo­cal con­sumers and make prod­ucts here ac­cord­ing to their needs.”

Revlon’s sin­gle dis­tri­bu­tion chan­nel — mostly at makeup coun­ters of large depart­ment stores — also de­prived them of more in­ter­ac­tions with Chi­nese con­sumers, Yu said.

“Dis­tri­bu­tion chan­nels rule the beauty and cos­metic mar­ket in China,” he said. “Revlon is barely vis­i­ble in chan­nels such as su­per­mar­kets and online re­tail­ers.”

Both skin-care and makeup seg­ments in China have grown in the past 12 months, 9.4 per­cent and 8.5 per­cent, re­spec­tively, from a year ago, Kan­tar World­panel China data show.

“Cos­met­ics are still an emerg­ing in­dus­try, and it takes time to cul­ti­vate con­sumers’ habits, as well as mak­ing the ef­fort to go into lower-tier cities and quickly re­spond­ing to lo­cal needs,” Yu said.

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