Lean, Mean Beauty Machines

The Top 20 Global Beauty Companies faced a tough year armed with strategies that ranged from cutting personnel and nixing low-performing brands, to raising prices and expanding distribution. Here’s how the competition’s fared and how contenders vying for the world’s beauty business have geared up for the next challenging economic round.

Jamie Matusow, Editor

In striving for optimism, one popular opinion voiced repeatedly this year in terms of sales has been “Flat is the new gain.” That certainly seems to hold true in the beauty industry, where 2008 sales of the Top 20 global beauty companies inched past last year’s by a barely detectable margin. Still, at $138.82 billion, things aren’t all bad, and while many companies listed here managed to follow the same slim curve, others exceeded their projections.

No surprise that global giants P&G, L’Oréal, and Unilever remain the champions, in large part owing to a combination of hiking prices, slashing costs, launching less expensive lines, introducing smaller sizes, increasing advertising expenditures, expanding markets and focusing on supply chains. Noticeably, direct sellers, who also trimmed corporate expenses, actually benefited from the slump in the economy, due to their flexibility to hire. In a time of job losses and decreased household budgets, sales representatives signed on in record numbers, eager to generate a little extra cash. So while individual sales may have been lower, volume was made up with more coverage. Oriflame, in particular, new this year to our list, entered the ring with its best year ever, and boasted a bulked-up work force of 3.4 million consultants. At Alticor, corporate sales surged more than 15% over last year’s; Artistry, Satinique and Body Series are sold through the direct-selling model. Mary Kay, too, reported another record year, and sales also peaked at Avon and Natura. “Out with the old, in with the new” held true not just with updated marketing and production strategies, but with key executives as well. No doubt with the hope that new blood would bring new success, several companies on our list—including our Top Four—made top-tier personnel changes.

Retail shelf space rules these days, too, so “out with the old” also applied to underachieving brands, no matter how popular. P&G sent the Max Factor brand “down for the count” in the U.S., and Estée Lauder, which has struggled perhaps more than most this year, knocked out Prescriptives, after 30 years, sparking a run on the products by loyal fans.

In a beauty world that grows ever more competitive, innovation holds the greatest advantage for staying ahead of the game. Thus R&D departm ents command big budgets and increasingly large staffs.

One area where the R&D bout is heating up is in Men’s Grooming, which seems to be heading for a slugfest between P&G, Unilever and Beiersdorf.

Overall, as trying conditions continue, and our Top 20—as well as all beauty firms—battle to stay in top form, consumers will dictate the punches, and a lean and mean mentality seems destined to reign on both sides . . . at least in this economic round.

Just a note on the compilation of this report: Companies were analyzed according to fiscal 2008 data (except as noted). Beauty sales included only cosmetics, fragrance and personal care items when possible. Figures for companies outside the U.S. were based on the exchange rate for the fiscal year, influenced by a wildly fluctuating currency rate.

Top 20 Global Beauty Companies

Beauty Sales (US Billions)

01 Procter & Gamble $26.3
02 L’Oréal $25.8
03 Unilever $16
04 Avon $7.6
05 Beiersdorf $7.5
06 Estee Lauder $7.3
07 Shiseido $6.9
08 Kao $5.9
09 Johnson & Johnson
10 Henkel $4.4
11 LVMH $3.7
12 Coty $3.5
13 Chanel $3.0
14 Limited Brands
15 Mary Kay
16 Yves Rocher
17 Natura $2.1
18 Alticor $1.9
19 Kose $1.8
20 Oriflame $1.7