Under ceo Fabian Garcia, Revlon plans to grow into a $5 billion company in five years.
January 17, 2017
In a bid to regain some of its past stature, Revlon Inc. has dramatically reorganized in hopes of returning to the big leagues.
“It is a sensible thing to do in today’s world,” said Neil Saunders, chief executive officer of retail analysis firm Conlumino. “Whilst channels are very significant, they’re a lot less relevant than they used to be because consumers cross-shop different channels…what’s much more important is the overall view of a brand.”
“Everything should be consumer-centric,” said Jane Hali, ceo of retail research firm Hali & Associates. “The customer makes connections with the brands.”
Wall Street reacted positively to the move, with the company’s stock jumping almost 7.5 percent, to $34.55 Tuesday.
Fabian Garcia, who took the helm April 15, has hammered out a top-to-bottom business structure that puts the brands in the spotlight, instead of the distribution channels, as is usually done. “We are shifting the axis from channels to brands,” Garcia said.
The aim of this strategy is clear. “We want to become a beauty company that plays in the top 10 of beauty companies around the world,” said Gianni Pieraccioni, chief operating officer of markets for Revlon. “This calls for two things — organic growth and also acquisition.”
Garcia quantified Revlon’s newly discovered ambition. He said the company’s goal is to reach a total sales volume of $5 billion in five years. The company’s revenue total now stands at $3 billion.
In a wide-ranging interview in Revlon’s spacious headquarters with sweeping views of New York harbor, Garcia went through the math. “If we grow ahead of the market 50 basis points for the next four years, we’re one small acquisition away from the number,” Garcia said.
With that target in mind, Revlon is reorganizing into four divisions. Revlon and Elizabeth Arden will operate in their own segments, Fragrances will operate as a unit, and the remaining brands such as Almay, American Crew, Sinful Colors, Mitchum and others will operate as the Portfolio division, Garcia explained.
“Along with that, we are creating regions so we can complement our brand-centric organization with a customer development sales organization,” Garcia said. Revlon will have five areas of geographic focus: North America, Europe, the Middle East and Africa, Asia, Pacific and Latin America. John Collier, currently senior vice president of the North American consumer division, will be president of North America; Eric Lauzat will be president of EMEA and Asia with regional vice president Marco Ficarelli; Jaime Vazquez will be regional vice president for LatAm; Tracey Raso will be the regional managing director for the Pacific region, and Enrico Baldassarri will be regional managing director for Africa.
The regions report to the chief operating officer of markets, Pieraccioni, and each brand division is led by its own president — Anne Talley at Revlon, JuE Wong at Arden, George Cleary for Fragrances and Sennen Pamich for the Portfolio segment. Talley is returning to Revlon after more than a decade at L’Oréal, where she was most recently general manager, retail strategies and business development for L’Oréal Luxe. Wong was appointed president of Arden in mid-2015. Before the Revlon-Arden merger, Cleary was named president, global fragrance, for Arden. Pamich has been overseeing Revlon’s professional division for several years and joined the company during the Colomer Group merger in 2013 (that $660 million deal added CND Shellac and American Crew to Revlon).
“The first thing that the brand presidents have to do is define a three-year growth strategy — where and how they’re going to grow their brands, in which segments, in which countries, [with] what kind of brand positioning,” Garcia said. “Then they will produce all the marketing programs…and all innovation that will come to market.”
Below each division president is a group of five: a marketing vice president, creative director, packaging vice president, digital director and finance vice president, Garcia explained. “The idea here is that each brand needs to have a consistent look and feel,” he said. In addition to the VP-level creative directors, the company is in the process of hiring a chief creative officer, who will oversee each group’s creative director, according to Garcia.
In addition, Garcia is focused on building a company culture “that is highly collaborative, where high standards, disruptive creativity and excellent execution coexist; a culture that attracts and retains all generations of executives; where it’s fun and rewarding to come to work, and that we are ultimately capable of reestablishing Revlon and Arden back to the status in the industry they once had, as trendsetters, pioneers and innovators,” he said.
Revlon’s long-standing habit of ceo shuffling is well-documented, and the culture further down the chain of command is something Garcia described as “competitive.” But Arden’s corporate culture has surprised him, he said, calling out the business’ loyal workforce, despite its historical proximity to bankruptcy. Going forward, Garcia said he’s championing teamwork, and the idea is that it’ll trickle down from the top. In late January he’ll kick off a four-week travel schedule, visiting Revlon’s various regions. But after that, he’s headed to Vail, Colo., to ski — something he does in his downtime, when he’s not spending time with his two-week old step grandson, his children, reading about history and geopolitics or hoping to avoid an 8 a.m. meeting so he can squeeze in a workout. The last book he read — and liked — was “Before the Fall” by Noah Hawley. He also liked, “Primates of Park Avenue” by Wednesday Martin.
That culture will play into Garcia’s plan to focus on organic growth in Revlon’s brands. His openness seems to be willing to cultivate a better relationship with Wall Street, where he specified he will be “more forthcoming” with the company’s strategies. It’s something the business, which is majority-owned by chairman Ronald Perelman’s MacAndrews & Forbes, hasn’t always done. MacAndrews & Forbes took control of Revlon through a 1985 hostile takeover, and on and off since then Revlon’s debt has been a topic of discussion — a Moody’s analyst said the company would be leveraged seven times at the closing of the Arden deal.
Garcia noted that Revlon’s debt also spiked after the Colomer acquisition, but synergies eventually drove leverage down to a more acceptable level. That’s the plan with the Arden acquisition as well — that synergies will gradually help the company reduce its leverage to the three or three-and-a-half times range, according to Garcia. “By the end of the next three years we should be at the level of leverage which is really normal for us, for beauty companies,” said Pieraccioni.
When the Arden acquisition was initially unveiled, the companies estimated $140 million in synergies — but said in a filing with the U.S. Securities and Exchange Commission earlier in January that it would likely reap more than that number. It also said that as part of the restructuring plan, 350 jobs will be cut globally and that integration-related costs will hover between $65 million to $75 million by 2020.
Perelman remains involved in Revlon’s operations, according to Garcia, as do the company’s other board members. “We work in close partnership,” Garcia said. “Ronald knows the industry well, has an expansive view of trends and beauty given his extensive network of business and personal relationships and has a team in MacAndrews & Forbes that we can go to when we need help for acquisitions and many other aspects of the business. As with any other job of such responsibility, latitude and trust are earned by delivering outstanding business results and as we build greater value to all shareholders, including Ronald.”
Those business results will start on the brand level.
“Our brands need to get vital again, our brands need to get more compelling to their current customer base and appeal to this elusive Millennial consumer who shops everywhere and lives on Instagram,” Garcia said. That social draw is something that has the Revlon brand switching up its brand-ambassador strategy lately, towards celebrities like Gwen Stefani and Ciara, who both have large social media followings.
“Expect us to do specific product innovations for Asian skin care, that’s a way to grow,” Garcia said. “Expect us to have specific color lines for the U.S., which is where the market is right now, expect us to do special things for new channels of distribution where we need to grow. We need to talk to Ulta [Beauty] and say, ‘what do we need to do to grow with you?'”
At the Revlon brand, all Revlon products and strategies will come under Talley’s purview, and the aim is to give the entire operation more consistency. “If you’re talking about hair coloring, you’re talking about color cosmetics or you’re talking about beauty tools, everything’s going to look the same, everything’s going to feel the same and everything is going to be developed with consistently in mind,” Garcia said. “We want to have a megabrand look, we want to have a megabrand positioning.”
Both Garcia and Pieraccioni acknowledged Almay’s struggle to retain its retail shelf space given heightened competition from newcomer brands such as Elf Cosmetics and NYX Cosmetics, and both denied that Revlon was significantly loosing space — Pieraccioni specified that Revlon’s shelf space has declined only 0.1 percent. “I dispute this notion that we’re losing space with Revlon, we lost space with Almay and that lowered the share trajectory of the brand,” Garcia said.
Over at Arden, a packaging revamp is first on the list, slated for spring, Garcia said. “We need to upgrade the packaging, make it look the part,” he said. And while many of the brand’s consumers fall into the 40-plus demographic, recent consumer research has suggested that young Millennials (twentysomethings) didn’t know if it was a heritage brand or an established brand, according to Wong. “They were willing to give the brand a chance,” she added. In China, that chance will be heavily digital. Garcia added, “We want Elizabeth Arden, the brand, to be more premium and to live in that premium distribution.” Asked about the scope of Arden’s distribution, Garcia replied without elaboration, “We have more doors than we should have.”
“Asia is going to be very much an e-commerce platform and a social commerce platform,” Wong said. You’ve got to win online before you can really be material offline.
In regards to Almay’s repositioning, which was discussed in November, Garcia noted that going back to the brand’s roots is key. “It’s an overall shift in the positioning of Almay, inspired in its origins,” Garcia said, declining to go into detail on the project, but adding that the brand will be “more compelling than what it is today, more authentic than it is today and more diverse and inclusive than it is today…be ready to see more than just white females in the advertising.”
At American Crew, previously stuck in the professional channel, the goal is expansion. “[Pamich’s] remit has changed from expanding in professional to building this brand anywhere consumers buy,” Garcia said.
For the fragrances business, the focus is on “clean distribution,” Garcia said. But unlike certain competitors, Revlon’s not looking to make an exit from the mass market fragrance business. “The mass fragrance market is attractive if you have scale and we do,” Garcia said. “The mass market is still very large…it doesn’t matter how financially challenged you are, you want to look good with your gift. And if you can find a branded product, a fragrance, which is usually a safe gift, at a $10-, $15-, $20-, $25-price point, there’s a very big market for that.”
As for the celebrity fragrance business, it’s a matter of the quality of the brand. “We believe there is profit potential in this business and there is growth in this business.”
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