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Revlon : company profile

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Revlon is one of the world's best-known cosmetics companies, operating primarily in the upper mass-market segment. The company made its name back in the 1930s and 40s after causing a sensation with the first coloured nail varnish, followed by matching lipsticks. It has remained one of America's foremost cosmetics brands ever since, adding Almay to its portfolio in the 1980s. However the company has been under intense competitive pressure for several years from larger multinationals such as L'Oreal and Eatee Lauder. Only its effective ownership by playboy investor Ron Perelman has prevented it from being snapped by a larger company. A change was expected after Perelman announced in 2016 he was considering strategic alternatives for the business. However, when it came, it was not the change analysts expected. Rather than be sold itself, Revlon agreed to acquire smaller rival Elizabeth Arden for $870m.

Advertising

Who handles advertising? Click here for agency account assignments from adbrands.net. Revlon declared advertising expenses of $375m in 2015.

Competitors

Revlon's main competitors are now Coty, L'Oreal and Estee Lauder. See Personal Care Sector index for other companies

Brands & Activities

The Revlon brand is among the most widely known cosmetic products in the world, and especially in the US, but the company is too small to hold its own against the combined assault from larger companies, and has steadily lost share since the 1990s. For several years, though, it has been a pet project for financier Ronald Perelman, who has loyally funded its performance. Ultimately, though, Revlon and Almay might be better off in the hands of a stronger group, and acquisition can only be a matter of time. A merger with Estee Lauder, another privately controlled American icon, might make an attractive proposition, despite the two groups' rivalry. For now, though, the group seems intent on carving out its own position in the global market.

Revlon occupies the market segment between prestige and mass-market, with a range of higher-priced cosmetic products sold through drug stores, supermarkets and other mass merchandisers. Products are sold in more than 100 countries worldwide, but the brand's biggest market by far is the US. There are two principal brands, each with its own family of sub-brands. The main Revlon brand is best-known for its lipsticks and nail polishes (ColorStay, Lipglide, Super Lustrous, Moisturous etc), but also markets a wide range of other face and eye makeup (Revlon Age Defying, Fabulash, New Complexion, Illuminance etc), skincare products (Eterna 27, Vitamin C Absolutes), hair colourants (ColorSilk) and fragrances (including Charlie, Absolutely Fabulous and Fire & Ice).

At the end of 2005, the group introduced an entirely new main brand, Vital Radiance, as the umbrella for range of cosmetics for women aged over 50. This proved extremely unsuccessful, however, and was discontinued mid-year at a cost of more than $60m. In 2010 the group introduced PhotoReady makeup and finisher, which includes photochromatic pigments designed to reflect light and give an airbrushed appearance. The brand is currently marketed under the "Choose Love" banner, an evolution since the beginning of 2016 of the previous "Love Is On" campaign.

Secondary brand Almay is positioned as the company's hypo-allergenic fragrance-free cosmetics line, with a similar range of cosmetics and skincare products. It adopted the tagline "The American Look" in 2015. It is the Revlon group's equivalent to rival Estee Lauder's Clinique. The range of Mitchum antiperspirants for men and women is growing into a strong third brand.

Revlon also controls other brands including Jean Naté fragrances, Cutex nail polish remover, Ultima II and premium-priced Gatineau skincare products, Flex, Aquamarine and High Dimension haircare and colours. Brazilian haircare brand Bozzano was sold in 2008. The group makes a range of Revlon Beauty Tools, including clippers, scissors and so on, and licenses its brand for larger items such as hairdryers to Helen of Troy. The group has also added to its portfolio with a series of small acquisitions. In 2011 it acquired smaller rival Mirage, maker of the Sinful nail colour brand, followed by the Pure Ice and Bon Bons brands in 2012.

Perhaps the most significant addition to the portfolio in recent years has been the group's Spanish affiliate Colomer Group, which makes a collection of salon professional beauty products. It was acquired in 2013 for $660m, and has expanded the group's position in US professional haircare. Products include men's haircare products under the American Crew and d:fi brands, and CND nailcare cosmetics. In 2015, the group acquired CBBeauty, which develops and distributes licensed fragrances and other cosmetics products for third parties. Clients include Burberry and celebrity licensors such as One Direction and Rihanna.

In June 2016, Revlon announced plans to acquire skincare and fragrance group Elizabeth Arden for $970m. That brand was invented by Canadian-born Florence Graham, who adopted the name Elizabeth Arden in 1910 shortly before she opened her first Red Door beauty salon in New York. By the 1930s, it had become one of the world's most prestigious beauty businesses. After her death in 1966, the company passed through several owners, including Eli Lilly, Faberge and Unilever. Fragrance manufacturer FFI bought the business in 2003 and changed its name to Elizabeth Arden Inc. That company had been attempting for several years to rejuvenate its flagship namesake fragrance and skin care business, while also widening its appeal with a collection of celebrity fragrance licenses.

Following completion of the acquisition, Revlon adopted a new divisional structure in January 2017. The Revlon and Elizabeth Arden brands were established as separate brand businesses in their own right. Arden Inc's collection of fragrances were consolidated as a third division. This has partnerships with various pop stars including Britney Spears, Mariah Carey, Taylor Swift, Justin Bieber and Nicki Minaj. However, sales of those products have been in steep decline recently and none matches the might of Arden's Elizabeth Taylor White Diamonds, the first celebrity fragrance when it launched in 1991, and still a top-seller long after Taylor's own demise. The group also produces licensed fragrances for Juicy Couture, Kate Spade, John Varvatos and other labels. All other brands, including Almay, Mitchum, American Crew and CND were grouped together as a new Portfolio division.

Despite the eye-catching appeal of brand ambassador Cindy Crawford, Revlon struggled during the 1990s in the face of fierce competition in all of its market sectors from larger and more aggressive players such as Procter & Gamble's Cover Girl, L'Oreal's Maybelline and Johnson & Johnson's Neutrogena. Revlon's overall share of the US mass colour cosmetics market fell from 32% in 1998 to 22% in 2002, pushing the company into 3rd place in the US behind its rivals. Cindy Crawford was dropped in favour of new ambassador Halle Barry, and several other models and actresses have been added since 2003 for an aggressive new marketing campaign. Other past and present global ambassadors include supermodel Elle McPherson, and actresses Halle Berry, Jessica Biel, Jessica Alba and Jennifer Connelly. Current ambassadors include Olivia Wilde, Alejandra Espinoza and Emma Stone, while Almay is represented by actress Kate Hudson and singer Carrie Underwood, among others. In 2017, singer Gwen Stefani joined the Revlon ambassador roster for the first time, followed by Wonder Woman star Gal Gadot in 2018.

Performance finally stabilized in 2003, with market share in North America edging up marginally for the first time in years. But a range of new products introduced in 2004 performed poorly. North American sales fell almost 4% that year (although there was an increase in international revenues), and market share fell once more. It has continued to drift steadily lower ever since. In 2009, the company estimated an overall 18% share of the US mass-market cosmetics segment (down from more than 32% in 1998), comprising 12.7% for Revlon and and 5.4% for Almay.

Financials

Following several consecutive years of losses during the first years of the 2000s, Revlon has been generally profitable since 2008. However, revenues have declined from a high of almost $2bn reported in 1998, remaining flat for almost a decade at around $1.3bn and $1.4bn. For 2013, revenues gained 7% to $1.49bn as a result of the Colomer acquisition, but the group slipped back into a small loss as a result of losses on discontinued operations in China and early extinguishment of debt. Net loss was almost $6m, compared to net income of $51m the year before.

The group was back in the black for 2014, with net income of $41m on revenues which jumped 30% to $1.94bn. That figure included a first full-year contribution from Colomer. Consumer revenues rose by a more modest 3% to $1.44bn while professional products quadrupled to $503m.

There was another improvement in 2015, with full year sales of $1.91bn, down slightly on currencies, but net income up by another 37% to $56.1m. Excluding pension settlements, impairments, restructuring and certain other one-off charges, adjusted net income was up more than 70%. The consumer division contributed revenues of $1.41bn and professional $471m. The US accounted for 55% of revenues. The biggest international markets are Spain, Canada and Australia. Revlon's single biggest customer worldwide is Walmart, which accounted for 18% of worldwide sales in 2015.

The group's single biggest outlay is interest payments on its substantial indebtedness to its controlling shareholder. Revlon is controlled by investment group MacAndrews & Forbes Holdings, which is in turn wholly owned by chairman Ron Perelman. He controls around 78% of voting stock, as well as most of Revlon's substantial debt of over $1.8bn at the end of 2015. In return receives a handsome interest payment, which amounted to $83m in 2015.

Management

Ron Perelman remains Revlon's chairman, with Scott Beattie as vice chairman. Alan Ennis, president & CEO since 2009, left the company abruptly in Oct 2013. Chris Elshaw, formerly EVP & COO, also left the business at the same time along with group chief marketing officer Julia Goldin. Ennis was eventually replaced by Colomer Group's Lorenzo Delpani, who led a turnaround of the business until he too stepped down in Feb 2016 (though he remains a director). His successor was named as Colgate-Palmolive executive Fabian Garcia. He too stepped down just under two years later. He was eventually succedded in May by Debra Perelman, Ron Perelman's daughter.

Background

The company was founded in 1932 by Charles Revson in partnership with his brother Joseph and chemist Charles Lachman, who contributed the "L" in the company name. Originally a salesman for Elka nail varnish, Revson is generally credited as the man who first began selling nail polish in fashion colours. Previously all nail enamel had been transparent. In 1940 he introduced matching lipsticks to go with his nail polish, and after the war began introducing new colours twice-yearly to coincide with seasonal couture collections. The Fire & Ice range introduced in 1952 was a massive success, and Revlon later sponsored popular TV quiz show The $64,000 Question, causing sales to rocket. The company went public in 1955.

Revson acquired Mitchum deodorants in 1970 and launched Charlie perfume three years later, which had become the world's best-selling mass fragrance by the time the founder died in 1975. Meanwhile the group moved successfully into healthcare, acquiring a variety of pharmaceutical units around the world. In 1986 Revlon was acquired by retail entrepreneur Ron Perelman. He merged Revlon's retail operations with his own Cosmetic Centers chain and sold them off, along with the highly profitable healthcare business. However by now, Revlon's leading position in the US had come under significant pressure from other companies. Perelman sought to restore its lead through acquisitions. He bought Almay in 1987, followed by Max Factor (sold again in 1991 to Procter & Gamble to reduce debt). Perelman floated part of the business again in 1996, but he kept a controlling equity stake, as well as almost all of the voting shares.

The pressure on Revlon heightened during the late 1990s. The group continued cutting back on its non-core divisions, closing more than half of its worldwide manufacturing operations and selling the Colorama brand in Brazil (to L'Oreal) and Plusbelle range in Argentina (to Dial), as well as a worldwide professional products division. The group concentrated all its marketing at the Deutsch agency in 2003, and that appeared to pay results when the relentless slide in sales and market share was halted. But it was, it seems, only a temporary fix. Performance slumped once again in 2004, and Deutsch was dropped. The group has instituted a number of restructuring and product development initiatives since 2002, but profitability still looks to be some way off.

Jack Stahl, recruited from Coca-Cola in 2002, resigned abruptly in 2006 as president & CEO following the disastrous launch of the Vital Radiance cosmetics range. He was replaced by David Kennedy, previously CFO and one-time president of the group's international division. Several other senior officers also left the company. Kennedy was in turn replaced in 2008 by Alan Ennis, another former CFO.

Last full revision 10th June 2016

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