HISTORY OF COSMETIC

INDUSTRY

History Of Cosmetic
Industry

Brief introduction

Market capitalization

Size of the industry

Domestic and Export

Share

Top leading
Companies

Latest developments

HISTORY OF COSMETIC INDUSTRY

1.1 HISTORY OF COSMETIC INDUSTRY

Bearing a long glowing heritage of

cosmetic and beauty, aesthetic
makeup products is being used
since olden days and nowadays it
appear like a booming economy in
India which would be the largest
cosmetic consuming country in a
next

few

decades.

While

the

demand of beautifying substances

are growing day by day, a large
number

of

international

local

as

well

as

manufacturers

gradually extend their ranges and

products in different provinces of
India.

Since 1991 with the liberalization along with the crowning of many Indian
women at international beauty pageants, the cosmetic industry has come into
the limelight in a bigger way. Subsequently their has been a change in the
cosmetic consumption and this trend is fueling growth in the cosmetic sector.
Indian cosmetic Industry had rapid growth in the last couple of years, growing
at a CAGR of around 7.5% between 2006 and 2008. While this is due to the
improving purchasing power and increasing fashion consciousness, the
industry is expected to maintain the growth momentum during the period
2

2009-2012. In the Indian Cosmetic Industry both electronic as well as print

media are playing an important role in spreading awareness about the
cosmetic products and developing fashion consciousness among the Indian
consumers.
Due to the development of satellite television and a number of television
channels as well as the Internet in the modern day, the Indian consumers are
constantly being updated about new cosmetic products, translating into the
desire to purchase them. Additionally, the flourishing Indian fashion/film
industry is fueling growth into the Cosmetic industry in India by making
Indians to realize the importance of having good looks and appearances.
Today most of the cosmetics manufacturers in India cater to the domestic
market but they are gradually establishing their footholds in overseas markets.
In recent years, cosmetic manufactures in India have received orders from
overseas markets; for example - Indian herbal cosmetic products have a
tremendous demand in the international market

1.2 BRIEF INTRODUCTION

The Indian Cosmetics Industry is

defined as skin care, hair care,
color cosmetics, fragrances and
oral care segments which stood
at an estimated $2.5 billion in
2008 and is expected to grow at
7%, according to an analysis of
the

sector.

cosmetics

Today

industry

is

herbal
driving

growth in the beauty business in

India and is expected to grow at
a rate of 7% as more people
shun chemical products in favour
of organic ones.

The emphasis of the herbal cosmetic has been on the spectacular growth of
the herbal and ayurvedic beauty products business as conveyed by beauty
expert Shahnaz Husain who was the first to introduce the concept of
ayurvedic cosmetics to the world when she launched her products way back
in 1970. Today, the Indian cosmetics industry has a plethora of herbal
cosmetic brands like Forest Essentials, Biotique, Himalaya, Blossom Kochhar,
VLCC, Dabur and Lotus and many more. The Indian cosmetics industry has
emerged as one of the unique industries holding huge potential for further
growth. In 2009, the cosmetics industry registered sales of INR 356.6 Billion
(US$ 7.1 Billion) despite the global economic recession. Indian cosmetics
Industry has mainly been driven by improved purchasing power and rising
fashion consciousness of the Indian population and industry players spending

readily on the promotional activities to increase consumer awareness and

develop their products.
According to a new research report, the Indian Cosmetics Industry is
expected to witness impressive growth rate in the near future owing to rising
beauty concern of both men and women. Today the industry holds promising
growth prospects for both existing and new players.
The baseline is that there has been a rise in variety of products offered by the
industry players in the country. The companies have started going for rural
expansion and are offering specialized products to generate revenues from all
the corners of the country. Improvement and strengthening of the Indian
economy in the coming years will also pave the way for the Indian cosmetics
market over the forecast period and develop the Cosmetic Industry.
The

Indian

Cosmetic

market

which

traditionally a stronghold of a few major

Indian players like Lakme, and Ponds has
seen a lot of foreign entrants to the market
within the last decade. India is a very price
sensitive market and the cosmetics and
personal care product companies, especially
the new entrants have had to work out new
innovative

strategies

to

suit

Indian

preferences and budgets to establish a hold

on the market and establish a niche market
for them.

1.3 MARKET CAPITALIZATION

According to analysis and figures given by the Confederation of Indian
Industries (CII), the total Indian beauty and cosmetic market size currently
stands at US$950 million and showing growth between 15-20% per annum.
The overall beauty and wellness market that includes beauty services stands
at about US$2,680 million, according to CII estimates.

1.4 SIZE OF THE INDUSTRY

The size of Indian Cosmetics Industry globally is $ 274 billion, while that of the
Indian cosmetic industry is $ 4.6 billion. The current size of the Indian
Cosmetic Industry is approx US$ 600 million. Among these fastest growing
segment is color cosmetics, accounting for around US$ 60 million of the
market. Industry sources estimate a rapid growth rate of 20% per annum
across different segments of the cosmetics industry reflecting with an
increasing demand for all kinds of beauty and personal care product. Growth
in the Indian Cosmetic Industry has come mainly from the low and mediumpriced categories that account for 90 % of the cosmetics market in terms of
volume.

1.5 DOMESTIC AND EXPORT SHARE

Costs for importing other products are much higher than producing it in the
country. India usually allows the entry of imported cosmetics without any
restrictions but the average import tariff on cosmetics products is currently
very high at 39.2%.

1.6 TOP LEADING COMPANIES

Lakm is the Indian brand of cosmetics, owned by Unilever. It
started as a 100% subsidiary of Tata Oil Mills (Tomco), part of the
Tata Group; it is named after the French opera Lakm, which itself
is the French form of Lakshmi, the goddess of wealth who has is
also renowned for her beauty.
Revlon is an American cosmetic for skin care, fragrance, and
Personal Care Company founded in 1932.
Oriflame Cosmetics S.A. (Luxembourg) is a cosmetics group,
founded in 1967 in Sweden by the brothers Jonas AF Jochnick and
Robert AF Jochnick.
The L'Oral Group is the world's largest cosmetics and Beauty
Company. It concentrates on hair colour, skin care, sun protection,
make-up, perfumes and hair care.
Chambor cosmetic line is a blend of the finest traditions in terms of
radiant color, soft texture and skin accentuator.
Maybelline is a makeup brand sold worldwide and owned by
L'Oral.
Avon Products, Inc. is a US cosmetics, perfume and toy seller
with markets in over 140 countries across the world.
Make-up Art Cosmetics or MAC Cosmetics, is a manufacturer of
cosmetics which was founded in Toronto, Canada by Frank Toskan
and Frank Angelo in 1984
ColorBar cosmetics are one of the leading brands of color
cosmetics in India.
Street Wear is a young, funky and hip brand which globally is
positioned at the young and trendy shopper and the range consists
of about 30 SKUs covering categories like nail enamel, lipsticks, lip
gloss, face make-up kits and eye shadows.

1.7 LATEST DEVELOPMENTS

According to Indian Cosmetic Sector Analysis (2009-2012), the Indian

cosmetics industry is expected to witness fast growth rate in the
coming years on the back of an increase in the consumption of beauty
products. Owing to growing disposable income of the middle class
households and changing lifestyle, it is expected that the cosmetics
industry will grow at a CAGR of around 17% during 2010-2013.

A study even shows that affordability and rising consumer base were
the main drivers behind the high cosmetic sales of around INR 356.6
Billion (US$ 7.1 Billion) in 2009. Market players are getting lucrative
and good opportunities as people have become more beauty
conscious due to changing lifestyle and spreading consumer
awareness.

According to ASSOCHAM the size of India's cosmetics market will rise

by almost a half to 1.4 billion dollars in the next two-three years as
people get fashion conscious and more brands are launched. With
increased awakening about cosmetics brands, which is evident even in
rural India, the industry size will grow to around 1.4 billion dollars from
current level of 950 million. It is projected to grow at a CAGR of around
7% during the forecast period.

Indian Cosmetics Industry is set for a significant growth depending on

the capability of the manufacturers to market their products. Products
that claim to renew cells, minimize pores, and restore hydration have
created an $83 billion worldwide market.

Due to the optimistic assessment the domestic cosmetic and toiletries

industry show that with increased awakening which is growing even in
rural India, its size will grow in next 2-3 years to around US$ 1400
million from current level of US$ 950 million. Till then India's per capita
consumption of cosmetic and toiletries products could be on par with
that of China which currently is US$ 1.5, says ASSOCHAM analysis.

GROWTH AND EVOLUTION OF

INDUSTRY

GROWTH AND
EVOLUTION OF
INDUSTRY IN INDIA

GROWTH AND EVOLUTION OF INDUSTRY

2.1 GROWTH AND EVOLUTION OF INDUSTRY IN INDIA

Cosmetic history worldwide has gone through a sea of change over the past
few centuries. Today the cosmetic industry is worth over $50 billion, but this
was not always the case. Before we study more about the history of
cosmetics, we need to search the origin of cosmetics. A cosmetic was not a
business during its nascent stage and it was solely used to enhance the look
of the facial skin. It all started during the 4th century BC when cosmetics and
business were words from two different worlds.
If we look into the history of cosmetics then we find that the Egyptians were
the precursors of cosmetic use. Here the women of the upper class used
animal fat, scented oils and eye color to give a real 'facelift' to their faces.
During its initial years, cosmetics were restricted to the confines of a room
where they were prepared from natural ingredients. Cosmetics had not yet
found any commercial use though it was exchanged among women.
The western world also embraced it (though a little late) much to the
dissatisfaction of the Church and Queen Victoria. The use of cosmetics here
was more among the lower class women and this is what slowly gave rise to
cosmetics being manufactured for sale among the common masses. The
French were the first to manufacture cosmetics on a large scale with the use
of new and improved methods. They replaced the dangerous ingredients like
copper and lead with Zinc oxide and other harmless chemicals. This soon
resulted in wide sales of cosmetics and women from the elite as well as lower
classes started to use it for their facial beautification.
The history of cosmetics changed with the end of World War II and the
industrial growth during the 1940's, when cosmetics found acceptance among
women from all corners of the world. With the advent of the electronic media
10

like Television and Radio, things looked really sunny for the cosmetic industry
as actresses wore cosmetic makeup that attracted the general masses - a
huge boost to the sales figures. Soon more and more women turned it into a
habit to wear cosmetic makeup for almost all occasions.
People, mostly associated with the cosmetic industry, wanted to manufacture
healthier and better products because they did not treat this as a business but
something that even had use in their homes. Technological advancements
made it easier for the companies to try out different ingredients for their
cosmetics and this has also provided a plethora of options in front of modern
consumers. Cosmetic history worldwide is all about providing the right kinds of
cosmetics to satiate the obsession to look beautiful and remain young.
Nowadays, the cosmetic industry is not only concentrating on cosmetics for
women, but even providing the metro-sexual males a chance to improve their
facial looks. Today, the world's cosmetic industry faces a huge demand and a
real challenge in producing good quality cosmetic products. It is still a highly
lucrative business for new entrants, but the challenge now comes from clinical
studies that show the existence of toxic ingredients that are currently used in
the manufacture of cosmetic products. These ingredients, used over long
periods of time, are now being considered harmful to one's health. Therefore,
the history of cosmetics today wills evolve into where the industry will go in
the future with this new information that indicates the continuous use of these
toxic ingredients could be harmful to one's health.
Little did the Egyptians know then, when they were short of options and they
sat in front of the mirror to use their cosmetics, what challenges would exist
today. Though modern make-up has been used mainly by women
traditionally, gradually an increasing number of males are using cosmetics
usually associated to women to enhance or cover their own facial features.
Concealer is commonly used by cosmetic-conscious men. Cosmetics brands
are releasing cosmetic products especially tailored for men, and men are
using such products increasable more commonly. There is some controversy
over this, however, as many feel that men who wear make-up are neglecting
traditional gender roles, and do not view men wearing cosmetics in a positive
11

light. Others, however, view this as a sign of ongoing gender equality and feel
that men also have rights to enhance their facial features with cosmetics if
women could. While highly subjective, some feel the most attractive beauty is
natural beauty without make up.
The personal care market in India is currently estimated at over Rs 300 billion
and growing at a rate of about 12% annually. The major contributor to the size
of the market is the soaps and synthetic detergents market of close to Rs 190
billion. Besides, skin care market at Rs 20 billion (including fairness creams at
Rs 9 billion); hair care (including hair dyes, hair oils and shampoos) at Rs 26
billion; male grooming (and female hygiene) market at Rs 11 billion; colour
cosmetics at Rs 5 billion; oral hygiene (tooth pastes, tooth powder and
brushes) add another Rs 26 billion to the overall market. Other important
components include perfumes and fragrances, estimated at over Rs 5 billion.
Cosmetics, Perfumery Compounds, Flavours & Essential Oils, Essential
Perfume Oil, Cosmetics Fragrances, Perfumes & Fragrances, Aromatic Oils,
Chemicals, Attar, Essences, Toiletries, Nail Polish, Hair Care, Personal Care,
Skin Care, Makeup, Beauty Products
The Indian cosmetic market, which comprises of skin care, hair care, color
cosmetics, fragrances and oral care categories, has outperformed worlds
leading cosmetic markets in terms of growth in the recent past. The Indian
cosmetic market has started witnessing rampant growth driven by improved
spending power and rising consumer awareness about cosmetic products
amid growing beauty consciousness.
The market for perfumes and fragrances, as perceived in western parlance, is
of a recent origin. The perfumes and fragrances market had remained
confined to small quantities of scents, deodorants and after shave lotions.
Presently there are some 500 companies in the fragrance industry, for the
small volumes, a little too many. The small scale sector is dominating the
market. The unorganized market could be four times the size of the organized
market.

12

The growth in demand for perfumes and fragrances over the last 15 years has
been phenomenal. From a very small demand of 950 tonnes in 1990-91, it
grew to 12,500 tonnes in 2000-01. The market for the product is estimated to
have expanded by over 50% in three years to 18,300 tonnes in 2003-04. It is
further expected to grow to 26,650 tonnes in 2006-07 and to 36,400 tonnes in
2009-10.
The organized sector is dominated mainly by the multinationals. The
unorganized sector, with hundreds of units producing a large number of
domestic concoctions, caters to the high upper-middle tier of the market for
low price-end of products. The share of the small and informal sector is
estimated at about one-third of the total market.
The perfumes market is becoming highly competitive with the presence of an
increasing number of new players. The consumer is getting used to the
imported fragrances. As the process matures, the market will need to be
diversified and more Indian. Companies are importing alcohols and oils to
overcome the need for the right mix and process technology which does not
exist in India. The consumer preferences and product variety are so wide that
technology import is unavoidable at this stage. The market is growing. It is
catching up with the rich life style. A long-term high growth trend can be seen
provided the consumer finds the product within the reach of his pocket.
Some leading brands include Exclamation, Masumi, Longing, Emeraude,
Vanilla Fields, Jill Sanders, David Off, Adidas, Jovan Musk, Joop (All Cotys
Premium brand) Wild Orchid, Ivana, Shie (Lakme), Fire, Ice, Charlie, Red and
White (Revlon) Denim, Yardleys gold, Park Avenue, Premium, old spice (HLL)
etc.
Some of the lead players include Coty India, Lakme Lever, Revlon, Yardly,
Palmolive, Helene Curtis, Baccarose Hindustan Lever, Oriflame etc. With a
population of more than one billion and a growing taste for Western
sophistication, India has become one of the fastest growing markets for
cosmetics, perfumes and toiletries. There is a tremendous potential in this
budding market.
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Cosmetics are substances used to enhance the appearance or odor of the

human body. Cosmetics include skin-care creams, lotions, powders,
perfumes,

lipsticks,

fingernail

and

toe

nail

polish,

eye

and

facial

makeup,permanent waves, colored contact lenses, hair colors, hair sprays

and gels, deodorants, hand sanitizer, baby products, bath oils, bubble baths,
bath salts, butters and many other types of products. A subset of cosmetics is
called "make-up," which refers primarily to colored products intended to alter
the users appearance. Many manufacturers distinguish between decorative
cosmetics and care cosmetics. The word cosmetics derives from the Greek
(kosmetik tekhn), meaning "technique of dress and ornament", from
(kosmtikos), "skilled in ordering or arranging" and that from(kosmos),
meaning amongst others "order" and "ornament"

14

The manufacture of cosmetics is currently dominated by a small number of

multinational corporations that originated in the early 20th century, but the
distribution and sale of cosmetics is spread among a wide range of different
businesses. The U.S. Food and Drug Administration (FDA) which regulates
cosmetics in the United States defines cosmetics as: "intended to be applied
to the human body for cleansing, beautifying, promoting attractiveness, or
altering the appearance without affecting the body's structure or functions."
This broad definition includes, as well, any material intended for use as a
component of a cosmetic product. The FDA specifically excludes soap from
this category.

15

PRODUCT PROFILE

Product profile
Price points and brand
positioning
Time-saving and longlasting
The digital beauty
experience
Conscientious beauty
High-tech developments
16

PRODUCT PROFILE

3.1 PRODUCT PROFILE

Most cosmetics are distinguished by the area of the body intended for
application.
Lip gloss, is a sheer form of lipstick that is in a liquid form.
Lipstick, lip-gloss, lip liner, lip plumper, lip balm, lip conditioner, lip
primer, and lip boosters Lip stains have a water or gel base and
may contain alcohol to help the product stay on the lips. The idea
behind lip stains is to temporarily saturate the lips with a dye, rather
than covering them with a colored wax. Usually designed to be
waterproof, the product may come with an applicator brush or be
applied with a finger.
Concealer, makeup used to cover any imperfections of the skin.
Concealer is often used for any extra coverage needed to cover
blemishes, or any other marks. Concealer is often thicker and more
solid than foundation, and provides longer lasting, and more
detailed coverage.
Foundation, used to smooth out the face and cover spots or
uneven skin coloration. Foundation primer can be applied before or
after to get a smoother finish. Some primers come in powder or
liquid form to be applied before foundation as a base, while other
primers come as a spray to be applied after you are finished to help
make-up last longer.
Face powder, used to set the foundation, giving a matte finish, and
also to conceal small flaws or blemishes.
Rouge, blush or blusher, cheek coloring used to bring out the color
in the cheeks and make the cheekbones appear more defined. This
comes in powder, cream, and liquid forms.

17

 Bronzer, used to give skin a bit of color by adding a golden or

bronze glow.
Mascara is used to darken, lengthen, and thicken the eyelashes. It
is available in natural colors such as brown and black, but also
comes in bolder colors such as blue, pink, or purple. There are
many different formulas, including waterproof for those prone to
allergies or sudden tears. Often used after an eyelash curler and
mascara primer.There are now also many mascaras with certain
components to help lashes to grow longer and thicker. There are
specific minerals and proteins that are combined with the mascara
that can benefit, as well as beautify.
Eyelid

glue,

eyelash

extensions,

eye

liner,

eye

shadow,

eyeshimmer, and glittereyepencils as well as different color pencils

used to color and emphasize the eyelids (larger eyes give a more
youthful appearance)
Eyebrow pencils, creams, waxes, gels and powders are used to
color and define the brows.
Nail polish, used to color the fingernails and toenails

18

3.2 PRICE POINTS AND BRAND POSITIONING

Cosmetic companies are generally focusing on the mass market, thanks
primarily to the increasing importance of Latin America, particularly in the area
of fragrance, a category that is dominated by mass brands in the region.
However, mass and masstige portfolios are also being developed in more
mature and traditionally premium-dominated markets, such as Japan. It is
important for skin care professionals to understand that this is a result of the
growing perception among consumers that mass or the upper end of mass
across categories, such as color cosmetics and skin care, may be able to
deliver similar quality as their luxury counterparts. Be aware of this trend and
be prepared to explain to clients and consumers alike what sets professional
skin care products apart from the competition.
Although value growth is being driven by mass beauty, innovation is still most
definitely being led by premium brands, including new mascara packaging
formats in color cosmetics, as well as skin care ingredients. In 2010 and 2011,
there have also been a number of high-profile acquisitions involving premium
and professional lines. Super-premium brands retained their exclusivity and
high pricing, with some putting in a consistently positive performance
throughout the downturn as the spending levels of wealthy consumers
remained largely resilient.

3.3 TIME-SAVING AND LONG-LASTING

From the trend for at-home do-it-yourself beauty during the recession, two
major diverging trends in terms of new product innovation have developed.
Time-saving beauty is a theme in many new products, primarily as a response
to demand from todays time-poor consumers who want to cut the amount of
19

time and money spent on their daily beauty or grooming routine. As a result,
there has been much research and development focus on areas such as fastdrying nail polish and multifunctional products, such as 3-in-1 shower gel,
facial wash and shaving foam for men or hybrid products for the face that
incorporate elements of facial makeup, skin care and sun care.
Super long-lasting beauty is another overriding theme, because such products
are seen as being hassle-free and a good value for money due to the need to
apply them less often than their conventional counterparts. These include
long-lasting lipsticks and nail polishes, and 24-hour moisturizing in skin care.
It is common that clients allow a longer stretch between professional skin care
treatments these days, so it is all the more important to provide home-care
recommendations and options that will help them maintain the results of
professional skin care treatments longer in the most convenient way possible.
Do you have options in your retail area that fit this description, and are you
working with clients to recommend the best home-care options for their
needs?

3.4 THE DIGITAL BEAUTY EXPERIENCE

Although department stores performed marginally better during the previous

year, Internet retail managed to achieve stronger absolute value growth to
reach total beauty sales of just more than $11 billion in 2010. With e-tailers
expanding their product ranges, including beauty, through acquisitions and
product-specific landing pages, pressure on store- and spa-based retailers will
only intensify.
As consumers continue to rely on the ease of online shopping, skin care
facilities and suppliers alike are looking to hone their Internet strategies to
create a highly competitive non-store beauty market. The key draw of online
beauty shopping for consumers remains price. Typical consumers who buy

20

online already know which products they would like because they are satisfied
with the quality from previous usage or have tried the product off-line and
are purchasing it online due to better prices.
As technology and Internet penetration advance, the beauty industry
continues to adapt new strategies to interact with consumers in a more
experiential way, both virtually and in-spa. This is happening through social
media interaction sites such as Facebook and blog websites, online makeup
tutorials and smartphone applications. Competition with both online retailers
and mass market venues is nothing new to the professional skin care
industry; however, this trend indicates the competition is not dying down or
going away. Make sure that you work to have competitive pricing and offer
other VIP incentives to ensure your clients are spending their money at your
facility and not elsewhere. Also, make shopping with your skin care facility as
easy as possible by considering expanding your website to offer online
shopping if you feel your business would benefit. Approach retail with an open
mind and work to always meet the needs of clients and consumers.

3.5 CONSCIENTIOUS BEAUTY

Naturally positioned, organic and fair-trade beauty products are rapidly
moving from niche to mainstream status. This trend is evident both from the
transition of such products being sold at specialty outlets to more mainstream
stores, such as supermarkets and drugstores, and also from the many beauty
companies addressing the demand for beauty innovations that have both a
minimal effect on the environment and offer results comparable to standard
brands. Changes are also taking place in the regulation of organic beauty in
order to help consumers distinguish between the wealth of products available.
The European-wide Cosmos standard was introduced in February 2011 and
is expected to see a move toward a more harmonized standard in organic
cosmetics.

21

3.6 HIGH-TECH DEVELOPMENTS

Beauty is continuing its quest for scientifically and technologically advanced
formulations, with high-tech innovations being seen throughout the entire
beauty spectrum. This has been particularly the case in skin care, where
innovations based on genomics, involving the study of a particular string of
genes responsible for aging and how those express themselves throughout
time, have been prevalent. There is an increasing focus on providing similar
scientifically advanced innovations in ingredients, both at the upper and lower
end of the price spectrum. Color cosmetics have seen a number of
innovations that increasingly offer high-tech skin care benefits or a
professional-looking finish. Also, the 2009 launch of a prescription treatment
to grow eyelashes has created a completely new category for nonprescription
eyelash growth products. As a result, many major beauty companies have
recently come up with innovations in this area.

22

DEMAND DETERMINATION OF
THE INDUSTRY

PRICE
INCOME OF
TARGETEDCUSTOMER
PENETRATIONLEVEL
AVAILABILITY OF
FINANCE
REPLACEMENT
DEMAND
PROMOTION 23
SCHEMES

DEMAND DETERMINATION OF THE INDUSTRY

4.1 PRICE
There is high maturity and price competition in established mass market
toiletries such as bar Soap and toothpaste. Since the average Indian
household continues to be highly price sensitive, These popular mass-market
products will have the lions share of cosmetics and toiletries sales.

This will offer high growth prospects of the overall market over the coming
years. The cosmetics and toiletries market are also facing competition from
other consumer durables (computers, mobile phones, home theatres and
automobiles) as well as the housing sector.Being value conscious, there is a
limit to the amount that the average consumer will spend on luxury items such
as fragrances.

The mass market for lipsticks (price range between Rs 30 to Rs 100) forms 43
per cent of the total lipsticks market. The price range below Rs 30 forms
roughly 48 per cent of the market. The mass premium segment (price range
Rs 100 plus) is just nine per cent of the total lipsticks market, where Revlon
has a market share of 80 per cent.
Lakmes product range consists of the Elle range (priced at around Rs 30)
and the medium-priced Ultra range (at around Rs 60) to the premium Orchid
range of color cosmetics priced in the range of Rs 120 to Rs 187. French
multinational L'Oreal India prices range from Rs.300 to Rs 1,500. By the end
of 2001, it expects nearly 50 cities to be selling the products.
Maybelline has now introduced an Express Make-up priced at Rs 299.
L'Oreal's product of makeup currently available in the market is priced at the
premium end at Rs 599. The brand is currently available in 4,000 outlets.
Maybelline New York globally has 900 SKUs in color cosmetics.

In
24

competition with L'Oreal's Maybelline range of `transfer-resistant' lipsticks,

Revlon has rolled out `Color Stay' lipsticks priced at Rs 239. The lipsticks are
thus at a high premium to the Maybelline range priced at Rs 185.
The nail enamel market, one of the fastest growing segments in the cosmetic
industry, is segmented into three: the mass premium segment priced above
Rs 75, and dominated by brands such as Chambor, Orchids, and Revlon; the
mass market segment priced between Rs 30 and Rs 75, with brands such as
Lakme and Maybelline; and the lower segment, priced below Rs 30.
Accounting for 75 per cent of the total market, the popular segment consists
of Elle 18, Tips & Toes and other regional brands. The prices of the more
popular products of the key players in the category are enclosed herein.

LAKME
1. LIPSTICKS 85/2. NAIL ENAMEL 48/3. LIQUID LIP COLORS 145/4. LIP LINERS 32/5. COMPACT 155/6. FOUNDATIONS 59/7. REMOVER 30/8. EYELINERS 40/9. MASCARA 95/10. FACE POWDER 22/11. KAJAL 24/12. EYE PENCIL 60/13. BLUSHERS 95/14. EYE SHADOWS 95/-

25

MAYBELLINE
1. MOISTURE WHIP LIPSTICKS 99/109/2. NON-TRANSFER LIPSTICKS 209/219/3. ULTIMATE WEAR NAILENAMEL 59/4. NON-TRANSFER LIP LINERS 179/5. NON-TRANSFER EYE LINERS 179/6. CURL MASCARA 99/7. WONDER CURL MASCARA 159/8.EASY EYE LINING PEN 159/9.EXPRESS MAKE-UP 3 IN 1 STICK 299/10.SHINE-FREE FOUNDATION 169/-

REVLON
1. COLORSTAY LIPSTICKS 219/2. COLORSTAY LIQUID LIPSTICKS 229/3. COLORSTAY CONCEALER 219/4. COLORSTAY FOUNDATION 299/5. COLORSTAY LIQUID EYELINER 259/6. COLORSTAY EYELINER 175/7. COLORSTAY LIPLINER 175/8. MOON DROP LIPSTICKS 195/9. MINI LIPSTICKS 90/10. TOP SPEED NAIL ENAMEL 79/11. MINI NAIL ENAMEL (8 ML) 55/12. NAIL ENAMEL (15 ML) 85,95/13. MOISTURISING FOUNDATION 69/14. MOISTURISING COMPACT POWDER 145/15. BLUSH-ON 200/16. EYE SHADOWS 225/17. NAIL ENAMEL REMOVER 50,60/26

CHAMBOR

1. LIQUID MAKE UP ( FOUNDATION)

Rs.450 /2. SILVER SHADOW (COMPACT) Rs.510 /3. TRIO EYE SHADOW Rs.375 /4. BLUSH ON Rs.395 /5. EYE LINER Rs.250 /6. MASCARA Rs.250 /7. EYE PENCILS Rs.125 /8. LIP STICKS Rs300 /9. LIP PENCILS Rs.150 /10. GLITTER STICK Rs.280 /11. SILVER DUST Rs.375 /12. LIP CRAYON Rs.345 /-

4.2 INCOME OF TARGETED CUSTOMER

India's spending on cosmetics and toiletries is relatively small, with rural and
suburban areas concentrating on basic toiletries and cosmetics. The
purchasing power of Indian consumers is increasing thereby shaping the
aspirations and lifestyles of consumers, who are upgrading to good value
products at affordable prices. The Cosmetic Companies have invested heavily
on promoting product visibility among rural folk, which has increased the
demand for bar soap, talcum powder, lipstick, tooth powder and hair oil in
these areas. This has also increased the demand for essential everyday items
like bath and shower products, hair care, oral hygiene and skin care. Another
strategy followed by companies to promote cosmetics in rural areas was
sachets approach.
While rural India contributed to growth in volume terms, the urban population
contributed 69 %of value sales in 2005 especially for sophisticated products.
27

These high-quality added-value niche products include mascara, toners, body

wash/shower gel, depilatories, sun care and deodorants, amongst others
which are unaware to the rural users. Sales are almost completely generated
from the urban pockets, concentrated within the key metropolitan areas of
New Delhi, Chennai, Mumbai and Calcutta. Due to Western influences, men's
grooming products are used more predominantly in urban population
compared to their counterparts in rural areas income of targeted customers.
Cosmetics and toiletries have witnessed a growing demand from the low and
lower middle-income households. The premium labels are being used in
urban areas, whereas regional and national brands in the rural areas, where
close to 70% of the Indian population resides and price determines
purchasing decisions.

4.3 PENETRATIONLEVEL
Indian cosmetics industry has witnessed strong growth during the past few
years and has emerged as one of the industries holding immense future
growth potential. The cosmetics industry registered impressive sales worth Rs
288.7 Billion (US$ 5.8 Billion) in 2010. The sector has mainly been driven by
improving purchasing power and rising fashion consciousness of the Indian
population. Moreover, the industry players are readily spending on the
promotional activities to increase consumer awareness.
According to research report Indian Cosmetic Sector Analysis (20092012), Indian cosmetics sector is expected to witness noteworthy growth rate
in near future, owing to the rising beauty
concerns of both men and women. The industry holds promising growth
prospects for both existing and new players. To support this evidence, we
have done an extensive analysis of various segments of the cosmetics
industry, keeping in view both the services and products sector.
The baseline for the optimistic future outlook of the Indian cosmetics industry
is that, there has been a rise in variety of products offered by the industry

28

players. Moreover, the companies have started opting for online retailing and
are offering specialized products to generate revenue from all the corners.

4.4 AVAILABILITY OF FINANCE

Cosmetics business in India is flourishing with higher speed among rural and
urban population. Indias per capita consumption of cosmetic and toiletries
products was US$1.5 in the year 2008 which would be expected to grow at
the rate of 15 to 20 percent due to increase in per capita income. Consistent
increase in per capita income witness the prosperity of country, which results
the growing number of middle income population and holding of higher
purchasing power. Swift of larger middle income group ultimately widens the
consumer market in India.
It becomes now the lucrative market for investors in the business of durable
goods, processed food & brewages, real estates, financing, textile and travel
etc. Competition between the companies has given greater choices to
consumers among new style brands products and services in Indian market.
The Indian cosmetic market, which has been traditionally a stronghold of a
few major Indian players like Lakme and Ponds has seen a lot of foreign
entrants to the market within the last decade. The value of output of
cosmetics industry (excluding toiletries) is estimated at Rs 24 billion in the
organized sector. The informal sector produces about one-third by value and
much higher by volume. The overall market is estimated to be of the order of
over Rs 36 billion. It has witnessed a growth rate of 10 to 12% annually.
Despite the downward trend in the demand of a large number of consumer
products, the cosmetic industry continues to grow at a high rate basically
because of the entry of new players (and new products) and globally known
brands.
The up-end market is expected to grow at the rate of 12% and might pick up a
rate of 15% from the present market value level of Rs 24 bn. According to
ASSOCHAM report, 20 percent population believe to use the well known
branded products like Uniliver, proctor & gamble, Godrej, Dabur etc. Rest of

29

80 bilion population spent on low cost cosmetics. Marketing of cosmetic or

any not necessitated products are very price sensitive in India.

4.5 REPLACEMENT DEMAND

The Indian Cosmetics Industry is undergoing rapid evolution and transition
following liberalization. It has matured considerably during the last decade.
Although economic slowdown all over the world had proved a major handicap
for big players but it did not affect the overall growth in the industry which was
estimated to be in the range of 15-20%. With globalization, there have been
changes in many areas viz. upgradation, competition, brand image etc. On
the other hand, cosmeceuticals and naturals emerged favorite segments for
the consumers. Today, the industry is gearing up for a new phase in its
growth, according to market analysts.

For Cosmetics, packaging turned out to be one of the key modes of

differentiation during the year. Companies used packaging both as a means
towards off the fakes in grey market and as a USP to set a brand apart from
the rest. Bubble packs for shampoos, tamper-proff containers for hair-oils
(parachute) were some of the innovations that worked..
Personal hygiene products (including bath and shower products, deodorants
etc.), hair care, skin care, colour cosmetics and fragrances are key segments
of the personal care market. In Asian markets, China and India are the
maximum users of herbal cosmetic products. India the total ayurvedic
products market is estimated to be Rs. 2500 crore per annum out which Rs.
450 crore is the market of natural herbal cosmetics. The other coming market
in Asia is the Malaysian herbal market with an annual turnover of Rs. 4.55
billion per year and is growing at a rate of 20% annually.

30

China is the largest exporters of herbal cosmetics in the world whereas India
stands second in the global market share. Both the countries have a rich
heritage and hence are the biggest exporters of herbal cosmetics. The share
of organic and natural cosmetics in the $270 billion global cosmetic market is
growing at a fast pace
Distinct fragrances used in lotions, shampoos, and other cosmetic products
are because of certain aromatic hydrocarbons that are also derived from
petroleum. Dermatologists and beauty experts have always pitched against
the use of petroleum based materials in cosmetic products.
In recent times organic and natural cosmetics have not only surfaced in the
market, but are also fast increasing their share in the overall global cosmetic
market, which is worth over $270 billion. This article is an attempt to peep into
the world of organic and natural alternatives to petroleum in the beauty care
products, and explore possible business opportunities in the segment.

Ordinary commercial cosmetic products, which include even those that are
manufactured by well-reputed brands, often contain toxic and chemicallypotent substances capable of causing long term adverse impacts on human
skin. Some people, in fact, exhibit immediate health problems upon use of
such products. However, more and more people around the world are growing
aware of the dangers of using chemical cosmetics. This has led to a steady
rise in the demand for certified organic skin care and cosmetics.
Most users of natural and organic cosmetics are not aware of what the terms
natural and organic refer to in the context of cosmetics. To a common person,
natural cosmetics would be those that are not made using any chemical
ingredients and processes. In fact, products are labeled quite often as natural
in many countries, including the US, even if only 70 percent of the ingredients
used in them are from plants and natural sources. The products that are thus
sold can have some chemicals as their ingredientschemicals that are
supposedly not harmful to our skin

31

BEAUTY IN SIMPLICITY
White mineral oil is a safe, effective, time-proven ingredient
A natural substance is derived from a plant, mineral or animal source, without
having undergone a synthetic process.
Organic products are those which use plants and herbs grown organically.
The common person has taken natural and organic products as one, and the
greatest advocates of the use of natural ingredients in cosmetic products have
also not raised much hue and cry about this. They seem satisfied that natural
ingredients are slowly replacing carcinogenic ones. They also know making
organic cosmetic products is possible only with the greater acceptance of
organic ways of farming.
Harmful chemicals and alternatives
Modern research at the Herb Research Foundation has found that human
skin absorbs up to 60 percent of the chemicals in products that it comes into
contact with directly into the bloodstream. This is why the present day
hormone therapy treatments and smoking cessation medications are often
prescribed as patches that one applies directly to the skin. Going by the same
logic, harmful chemicals used in cosmetics would be entering our bloodstream
causing long term adverse impacts. Petrolatum, more commonly called
Vaseline, and mineral oils, which are used in most of the cosmetics products
and even in baby oil and lotions, form an oily film over skin to lock in moisture.
While doing so, these also trap in toxins and wastes and hinder normal skin
respirations.

32

LOVE THE SKIN IN YOU

Propylene glycol, another common ingredient in cosmetic products, is also
obtained from petrochemicals. This is added to numerous skin care creams
and lotions as an emulsifying agent to make the skin look smooth. However, it
speeds up the aging of the skin and can also cause irritation and contact
dermatitis. Artificial fragrances, mostly obtained from petroleum byproducts,
can cause numerous health problems including headaches, lung problems,
skin irritation and dizziness.
Of late, there have been attempts to find alternatives. Multinational companies
have started focusing on organic cosmetics as these are considered not only
safe for health reasons, but are also looked at as something environment
friendly. Many people prepare organic cosmetics at home too. Some of the
natural ingredients used in organic cosmetics are yoghurt, honey, oatmeal,
chamomile, tea oil, etc. Natural extracts like hemp oil, tea oil, coconut oil,
cocoa butter, carrot seed oil and aloe vera can be combined and mixed to
form an effective lotion for the skin, which not only protects it from harmful sun
rays but often softens and moisturizes the skin.
Beauty recipes from China and India using traditional herbs have earned a
special significance the world over. Ayurvedic recipes from India for skin and
hair treatment also serve as cosmetics. Mud, mineral products, milk, milk
cream, and eggs are used in various natural cosmetics. Spices and
condiments like turmeric and saffron figure quite often in the list of ingredients
for natural cosmetics. Lemon is another effective ingredient in natural
cosmetics. Fruits can make up excellent face packs, and cucumbers, peaches
and apricots can be especially mentioned in this regard. The oils obtained
from almond and coconut act as very good massage oils for skin and hair,
controlling wrinkle and crease formation on the surface of the skin. Natural
perfumes can be obtained from essential oils of rare herbs.
The best part about organic cosmetics is that unlike chemical based
cosmetics, these do not interfere with the bodys absorption of vitamin D.
Moreover, these help an individual to have a healthy skin, lustrous hair and
33

glowing complexion in a completely natural way. Naturally-made cosmetics

also help in skin tissues and cell repair. No wonder, more and more people
are realizing the worth of organic cosmetics.

4.6 PROMOTION SCHEMES

Cosmetics are used to enhance the natural beauty of a variety of individuals,
so it's no wonder cosmetic companies have to come up with creative
promotional ideas to entice different types of consumers to try their product
lines. One important aspect of a makeup promotion is that it offers potential
customers an opportunity to experience the brand on their skin through
sampling.
BEAUTY SOCIALS

Direct-selling companies have experienced success through home

parties hosted by their sales representatives. They create an event
tailored to their target market that allows them to meet with a group of
potential customers at one time to demonstrate their cosmetics and
promote company. They give home parties a unique name, such as
"Beauty Socials." During these events, which can be hosted at their
store or at clients' homes, attendees learn about proper makeup
application, sample the product line and bond with other attendees.
After demonstration, take sales orders from interested attendees.

POINT-OF-PURCHASE DISPLAYS

They Partner with local businesses in vicinity that target market

frequents, such as clothing boutiques and hair salons. They work with
the owners of these establishments to see if they can create a point-ofpurchase display in their stores that features their cosmetic products. A
mutually beneficially deal, such as giving the store owner a percentage
of their profits or promoting their products or services to existing
customer base,encourage them to work with them to promote their
product line.

34

GIVEAWAYS

Social networking sites helps to promote the cosmetic line to potential

clients. They Host a product giveaway and promote it on the blog or on
such social networks as Facebook and Twitter. To qualify for entry,
customers write reviews about products, name their favorite makeup
artists or detail their worst makeup experiences. Than they select a
grand-prize winner, a first-place winner, and a runner-up. The grand
prize is generally a basket filled with cosmetic products; the other
winners can pick a product they want to try. They list winners document
with their experiences with products and post their insights to blog,
website and other social networks.

BEAUTY WEEK

Companies host a "Week of Beauty" event and invite potential

customers to visit for a free makeup consultation. Quite often they offer
tips on the best products and colors for their skin. They either visit
customers at home or invite them to companys location. If customer
visits companys location, they are provided with the refreshments.
They give participants product samples to take home and encourage
them to share their samples with friends and family. Distributing
samples help to promote their business to potential clients.Many
women and men across all cultures use makeup, nail polish and other
forms of cosmetics to enhance their appearance. These beauty
products have become a lucrative business venture for entrepreneurs.
Effective promotional ideas for cosmetics can help your venture grow
into a successful business.

DEMONSTRATIONS

Companies Partner with beauty-supply stores and spa retailers to host

demonstrations using cosmetics, including customer makeovers and
product-information sessions that compare their cosmetics with
competing brands. In-store demonstrations help to boost direct-sales
opportunities and build brand awareness, and the retail industry's built35

in customer base allow companies to introduce cosmetics in a nonintrusive manner. Home parties offer a more informal and intimate
atmosphere. Company Partner with five clients who will allow them to
host demonstrations in their homes in exchange for free cosmetics or
referral commissions on product sales.
ONLINE COSMETICS FORUM

Often they build an online message board where members discuss

beauty topics in a public forum and promote it using social-networking
websites and beauty-themed blogs. They moderate the forum to keep
all discussions centered on the topic of products line of cosmetics. Also
they categorize forum sections into departments for each product that
sell to learn which items customers favor the most. They respond to
questions, suggestions and concerns that members post about
products they are using, and post application, cleaning and storage tips
exclusively for members of your online cosmetics forum.

ONLINE TUTORIALS

Tutorials that provide instructional information for specific products and

beauty trends are used as promotional ideas for cosmetics. Companies
build their website that features articles with step-by-step instructions
on how to use cosmetics, and upload photos as visual demonstrations
for each step. They also use feature makeup artists who helps online
visitors achieve specific celebrity-themed looks using cosmetics. Online
video tutorials are another way to extend promotional ideas for
cosmetics. Sometime they hire a model to work as the spokesperson
by wearing cosmetics in all online video tutorials. It includes video
footage that shows the model without makeup prior to applying
cosmetics to the face or nails. They upload video makeovers using
volunteer male and female subjects to demonstrate how cosmetics
look on the average person.

36

PLAYER IN INDUSTRY

NUMBER OF PLAYERS
MARKET SHARE OF
VARIOUSBRANDS

37

PLAYER IN INDUSTRY

5.1 NUMBER OF PLAYERS

PROCTER & GAMBLE
Products/Brands: Pantene, Olay, Head & Shoulders, Cover Girl, Clairol
Herbal Essences, Max Factor, Hugo Boss, Secret, SK-II, Zest, Safeguard,
Rejoice, Vidal Sassoon, Clairol Nice n Easy, Old Spice, Pert, Ivory, Sure,
Camay,Physique,Noxzema.

New Products: Olay Quench hand and body lotions, Olay Anti-Aging, Olay
Moistures in-shower body moisturizer, Olay Touch of Sun, Olay Ribbons body
wash, Pantene Color Expressions, Easy Root Touch Up.
Beauty net sales increased 7% to $21.13 billion in 2006. Beauty unit volume
increased 8% in 2006, including nine months of Gillette Personal Care results.
Organic volume increased 6%. Volume growth was broad-based across
categories and was driven by initiative activity including Pantene Color
Expressions, Head & Shoulders brand restage, Olay Regenerist, Olay
Ribbons and a technology improvement on Always.
LORAL
Products/Brands: Hair care, skin care, sun care, color cosmetics, toiletries
and fragrances marketed under such brand names as Artec, Biotherm,
Cacheral, Carson, Helena Rubinstein, Lancme, Lanvin, LOral, LOral
Paris, LOral Professionnel, LOral Perfection, LOral Kids, Giorgio Armani,
Harley Davidson, Matrix, Maybelline, Jade, Gemey Paris, Jean-Louis David,
Ralph Lauren, Redken, Soft Sheen Carson and Vichy. New Products:
Professional-Volume Active, colorants, ColorSmart. Consumer-RevitaLift

38

Double Lifting skin care, Elsve Nutri-Gloss hair care and Volume Shocking
mascara.
Corporate sales rose 6.5% last year and net income surged 37%. Sales in the
rest of the world rose 12.6% to $4.5 billion. The gains were attributed to China
and Indonesia, but the company noted that a distribution problem hurt results
in South Korea.Helped along by an 8.5% gain in the fourth quarter, sales in
the professional products division rose 6.1% to $2.5 billion.Consumer product
division sales rose 4.6% to $9.3 billion. Garnier, LOral Paris and Maybelline
all recorded good gains. Within the luxury products segment, sales rose 2.7%
to $4.4 billion. Lancmes sales were up, Platinum skin care were also up
and LExtrme mascara. Within the fragrance sector, Armani Code provided a
lift. The demand for effective skin care products helped sales of active
cosmetics jump 13.5% to $1.2 billion. First-half sales in Western Europe
reached nearly $9.6 billion.
UNILEVER
Products/Brands: Axe/Lynx, Rexona/Sure and Degree deodorants; Dove,
Caress, Lux and Lever 2000 soaps; Ponds and Vaseline skin care products;
Organics, Salon Selectives, SunSilk, Suave and ThermaSilk hair care
products. New Products: Dove Cool Moisture, Rexona Teens. Unilever
continues to streamline operations. At the close of 2005, nearly 80% of its
turnover was managed through One Unilever organizations. By the end of
2006, the company expects to deliver $871 million in savings and as much as
$1.2 billion in 2007. The reorganization has already helped sales growth, as
corporate sales were up 3% in 2005 after being flat in 2004. Despite
Unilevers determination to cut costs, it will maintain its dual corporate
headquarters.

Within the personal care group, sales rose and the company credited the
Dove Campaign for Real Beauty as a big reason for the sales gain.

At the regional level, sales in developing and emerging markets continue to

grow. The company notes that these countries will account for 90% of the
39

worlds population by 2010. For the first time, sales in developing and
emerging markets exceeded sales in Western Europe. But as important as
D&E markets may be, Unilever hasnt lost focus on Europe and North
America.

In 2005, Unilever managed to grow its U.S. business 3.2% behind gains in
home and personal care sales. As one might expect, gains in deodorant and
personal wash sales helped in a big way as Axe posted double-digit growth,
and

consumer

demand

for

Dove

and

Rexona

remained

strong.

But much work remains to be done in Europe as weakness in the UK led to a

decline in personal and home care sales. In Asia and Africa, sales were up
6.9%, driven by the launch of new Lux and Ponds products.
JOHNSON & JOHNSON
Products/Brands: Aveeno skin care products, Clean & Clear teen skin care
products, Johnsons pH5.5 skin and hair care products, Neutrogena skin and
hair care products, Piz Buin and Sundown sun care products, Shower to
Shower personal care products. New Products: Johnsons Soft and Johnsons
Soothing Naturals, Aveeno Ultra-Calming, Aveeno Essential Moisture lip
conditioner, Aveeno Continuous Protection sunblock lotion. Comments: On
June 26, Johnson & Johnson agreed to purchase Pfizers consumer product
business for $16.6 billion. The acquisition adds more bulk to J&Js fastgrowing consumer products division. Neutrogena became the first J&J skin
care brand to top the $1 billion mark in annual sales. Sales of skin care
products rose 12.2% to $2.4 billion and baby and kid care sales rose 7.9% to
$1.6 billion. Overall, corporate sales rose 6.7% and net income was up
22.4%.

For the first quarter of 2006, corporate sales rose 1% to $13.3 billion.
Worldwide consumer segment sales rose 3.3% to $2.4 billion. The sales gain
was attributed to strong sales of Aveeno, Neutrogena and Johnsons adult
40

skin products. During the quarter, the company announced that it had entered
into an agreement to acquire Groupe Vendome, a privately-held French
marketer of adult and baby skin care products

REVLON
Products/Brands: Cosmetics, skin care, hair care and fragrances sold under
such brand names as Revlon, Colorstay, Age Defying, Almay, Charlie, Ultima
II and African Pride. New Products: Almay-Intense i-Color; Revlon-Fabulash
Mascara, Vital Radiance cosmetics. Net sales rose 3% in 2005 and the
company cut its losses 41%. Revlon is cutting 250 jobs, or 8% of its work
force, and is canceling its recently launched Vital Radiance cosmetics line,
which is estimated to drag down the companys operating results by $110
million this year. The company also said it will postpone the launch of its Flair
fragrance until 2007. Last year, North American sales increased just 0.2% to
$857 million. International sales increased 7.6% to $475.2 million,as sales in
Asia Pacific and Africa increased 7.3% to $242.6 million. In Europe and the
Middle

East,

sales

increased

3.6%

to

$125

million.

COLGATE-PALMOLIVE
Products/Brands: Speed Stick and Lady Speed Stick antiperspirants; Irish
Spring, Palmolive Naturals and Protex soaps.

New Products: Palmolive

Aroma Crme, Speed Stick 24/7 deodorant with micro-absorbers, Irish Spring
MicroClean bar soap, Softsoap Pure Cashmere moisturizing body wash,
Speed Stick deodorant with Irish Spring scents. Colgate markets products in
two major categories: Oral, personal and home care; and pet nutrition. Beauty
sales numbers are only for personal care products, which accounted for 23%
of worldwide sales in 2005 and reached $2.3billion. Corporate sales rose
7.5% and net income improved 2%. Gross margin dropped 70 basis points to
54.4%. Colgate expects to save $325-$400 million by 2008 due to its fouryear, 2004 restructuring program. Last year, sales in the oral, personal and
home care segments rose 8% to nearly $9.9 billion. Volume rose 5.5%. Oral
care accounted for 38% of corporate sales, followed by home care (26%),
41

personal care (23%) and pet nutrition`(13%). Within the oral, personal and
household care businesses, Colgate divides its sales on a regional basis.
Europe accounted for 24% of sales, followed by Latin America (23%), North
America (22%), Asia/Africa (18%) and Australia

5.2 MARKET SHARE OF VARIOUS BRANDS/FIRMS

TOP 10 PLAYERS

(Chart no : 1 Market share )

42

DISTRIBUTION CHENAL IN
THE INDUSTRY

43

DISTRIBUTION CHENAL IN THE INDUSTRY

THERE ARE THREE CATEGORIES OF CHANNELS OF

DISTRIBUTION
PRESTIGE - Department stores, specialty stores and chain department
stores, such as Macy's, Neiman-Marcus and J.C. Penney (internationally) and
Shoppers Stop, VAMA, Westside, Bombay Stores etc (nationally).
BROAD - Drug stores, food stores, cosmetic discounters, warehouse clubs,
and mass merchandisers. Examples are Eckerd, Pathmark, Cosmetic Center,
Sam's Price Club and Wal-Mart (internationally) and Satyam, Haiko, Sahkari
Bhandar etc. (nationally)
ALTERNATIVE - is identified by five different marketing methods:
o Direct Sales
o Direct Mail/TV/Print
o Free Standing Stores
o Health Food Stores
o Salons

44

KEY ISSU OF CURRENT

TREND

PRODUCT QUALITY
CUSTOMER SERVICE
PRICING
MARKETING
STRATEGIES
SEGMENTATION AND
POSITIONING
CURRENT TRENDS
45

KEY ISSU OF CURRENT TREND

7.1 PRODUCT QUALITY

If a product fulfils the customers expectations, the customer will be pleased
and consider that the product is of acceptable or even high quality. If his or
her expectations are not fulfilled, the customer will consider that the product is
of low quality. This means that the quality of a product may be defined as its
ability to fulfil the customers needs and expectations.

Quality needs to be defined firstly in terms of parameters or characteristics,

which vary from product to product. For example, for a mechanical or
electronic product these are performance, reliability, safety and appearance.
For pharmaceutical products, parameters such as physical and chemical
characteristics, medicinal effect, toxicity, taste and shelf life may be important.
For a food product they will include taste, nutritional properties, texture, shelf
life and so on.

It should have precise limits of acceptability so that the production team can
manufacture the product strictly according to specification and drawings. To
achieve the above, those responsible for design, production and quality
should be consulted from the sales negotiation stage onwards. The overall
design of any product is made up of many individual characteristics. For
example these may be:

_ Dimensions, such as length, diameter, thickness or area;

_ Physical properties, such as weight, volume or strength;
_ Electrical properties, such as resistance, voltage or current;
_ Appearance, such as finish, colour or texture;
_ Functional qualities, such as output or kilometre per litre;
_ Effects on service, such as taste, feel or noise level.

46

Manufacturing drawings and specifications are prepared by the designers and

these should indicate to the production team precisely what quality is required
and what raw materials should be used.

7.2 CUSTOMER SERVICE

Based in Washington, D.C., the Personal Care Products Council is the
leading national trade association representing the global cosmetic and
personal care products industry. Founded in 1894, the Council's more than
600 member companies manufacture, distribute, and supply the vast majority
of finished personal care products marketed in the U.S. As the makers of a
diverse range of products millions of consumers rely on everyday, from
sunscreens, toothpaste and shampoo to moisturizer, lipstick and fragrance,
personal care products companies are global leaders committed to product
safety, quality and innovation.

7.3 PRICING
In recent decades, numerous studies have been conducted on pricing from
the perspective of economics, marketing, operational research, decision
making, and consumer behavior. The key rationales behind these studies are
to optimize pricing and to maximize profits. However, investigative work into
pricing a product from the consumers feeling perspective is rare. Hence, this
thesis involves the investigation of the relationship between the consumers
feelings and pricing. To investigate the relationship of the consumers feelings
to pricing, a retail product of a particular retail segment/industry has to be
identified that can illustrate the effect of the consumers feelings in relation to
pricing. The product and its involvement in the consumer market have to be
generally accepted, descriptive and expressive in term of feelings and
representable in the industry/market segment. Most importantly, the pricing
framework developed can be applied to a wider range of products, or even
extended to an industry segment. The cosmetics industry is a lucrative.
47

7.4 COMPANIES SPECIFIC MARKETING STRATEGIES

Hindustan Lever
This is the leading marketing company of India, which believes that someone
somewhere chooses their product about 160 million times a day.14 categories
of 400 brands ranging from personal care, food products and home touches
the lives of many which is done by no other company .The company has
about 174 000 people in 100 countries across the globe and also supports
many suppliers, contractors and distributors.
PROCTOR AND GAMBLE
This is the second largest FMCG Company in India which does not lag much
behind than the topper Unilever. The company has two subsidiaries in IndiaP&G Home Products and P&G Hygiene and Health Care Ltd. The latter is the
fastest growing Fast Moving Consumer Goods Company of India with
turnover of about Rs 500 crores.
GODREJ
Noted among the top Indian marketing companies, Godrej aims at innovation.
It deals in fast moving consumer goods and operates in India and other cities
across the globe. The company provides variety in the brands like cosmetics,
toiletries, hair care, fabric care, baby care, household care and many others.
ITC LIMITED
The ITC is undoubtedly one among the premier marketing companies of India.
The company has a market capitalization of about $19 billion and turnover of
more than $1.5 billion. It is also rated among the world's best big companies.
It specializes in hotels, agri-business, FMCG products, personal care, and
branded apparel. Their business motive is to create multiple drivers from
corporate strategies. They have peerless distribution reach, great supply
chain management, and effective brand building.
48

7.5 SEGMENTATION AND POSITIONING

SEGMENTATION
According to a CII report, US$0.68 per capita is spent for cosmetics, which
might be lower than some other countries, but this indicates a growing
awareness among consumers. There are two major factors that are swaying
the buying decision among women here. First obviously is the television and
media exposure they have today. The other not so obvious one is the
corporate dressing culture, which slowly is evolving in the Indian market. Due
to set dress code in MNCs, a female employee is conscious about picking the
right makeup colors for the office. Today she has the money and the
inclination to spend it on separate sets of products, especially color
cosmetics, said Abdul Rahim, managing director of the Chennai-based
cosmetic distribution company GR Fragrances Pvt Ltd, which markets the
Diana of London range of cosmetics.
According to a source at LOral India, women in the age group of 30 and
above are getting very selective about the type of products they choose. As
older women have more cash and are more conscious of their appearance,
especially skin, they are willing to spend more on separate sets of creams and
lotions that target problem areas. These women also are more open to buying
higher-priced products, he says.
In addition, men as well as the beauty professionals and beauty services
segment are emerging as big buyers of cosmetics and skin care here.
Pradeep Verma, managing director of Derma Color, which sells Kryolan in
India, said The market is ready for professional makeup products since the
Indian professional makeup artists are very well-trained and are aware of the
products and prefer to use international brands. Earlier they were sourcing
their products from international markets such as Dubai or Bangkok or
Singapore.

49

POSITIONING
With increasing awareness among customers, it has become very important
for the cosmetic and skin care companies here to develop the right brand
positioning and create the right product and brand awareness.
Pricing of the product and the nature of product usage are the two criteria that
define brand positioning. For instance products falling under the price range of
Rs 45 to Rs 200 are in the mass-market category. The middle market price
can range from Rs 200 up to Rs 800. In the high-end market, pricing can
range from Rs 800 to about Rs 5000. Finally there is the premium range of
products where the pricing can touch up to Rs 35,000.
Today it is important for big brands like us to define different brand
positioning to retain the right market share. For instance, at LOral we push
Maybelline and Synergie ranges to the younger generation and also in the
lower income group mass market. While LOral range of While LOral range
of cosmetic and skin care products are for the middle and higher-middle class
women and Vichy is for high-end users, explains the source at LOral India.
Brands such as Lakme and Color Bar are being pushed as mass market
products and focus on younger women and women with lower buying power.
Then there is Revlon, Chambor, Diana of London, Bourjois and Pupa that
make the mid-range while Clarins, Shiseido, MAC, Christian Dior, Nina Ricci,
YSL and Lancme make the high end. La Prairie touches the premium end of
the market. cosmetic and skin care products are for the middle and highermiddle class women and Vichy is for high-end users, explains the source at
LOral India. Brands such as Lakme and Color Bar are being pushed as
mass market products and focus on younger women and women with lower
buying power. Then there is Revlon, Chambor, Diana of London, Bourjois and
Pupa that make the mid-range while Clarins, Shiseido, MAC, Christian Dior,
Nina Ricci, YSL and Lancme make the high end. La Prairie touches the
premium end of the market.

50

Besides LOral, Unilever, through its Indian arm Hindustan Lever, Procter &
Gamble, and most premium and high-end brands prefer to come to the
country through distributors such as Baccarose, Euro Traditions, Cosmos
Brands, MKP and GR Fragrance.

7.6 CURRENT TRENDS IN THE INDUSTRY

Cosmetics and toiletries are not just the domain of women any longer and
Indian men too are increasingly taking to the use of more and more body
sprays, perfumes and other cosmetics and toiletries. With rising demand from
men, the Indian market is getting enlarged and many players are coming out
with cosmetic products especially skin care products for men. The market size
of men's personal care segment is estimated at approximately US$
165million, with Gillette having the largest market share. Other major players
in this segment include Godrej, J.L. Morison and HLL. The growing demand
for men's cosmetics have made many direct selling companies such as
Modicare and Amway to launch new products for men. In the last five/six
years, there has been a renewed craze for herbal cosmetic and personal care
products, especially in the skin care segment with the growing belief that
chemical-based cosmetics are harmful. Shehnaz Hussain, Biotique, and Lotus
Herbals are the major players in this segment. Many companies also
expanded their range to include herbal variants. The growing popularity for
natural products also attracted many primarily health-care companies such as
Himalaya Drugs (with its Ayurvedic Concepts range), and Dabur to launch
natural-based cosmetic products.
The urban population in the major cities with increasing purchasing power is
the main force that drives demand for various cosmetic products in India. The
advent of satellite television and awareness of the western beauty and fashion
world, advertisements and promotions, increasing number of women joining
the work force is changing preferences, customs and cultures in India. The
success of contestants from India at various well known international beauty
pageants in the last few years have also contributed towards making the
51

Indian women more conscious about looks, beauty, grooming and aware of
western cosmetic products/brands. All this changed the needs and
consumption pattern of the Indian women, thus leading to increased growth in
the cosmetic sector. More Indian consumers started using cosmetics and a
small segment are also seen willing to pay a little more to look good.
Increasing disposable income and purchasing power have led to a constant
up-gradation from mass to premium products even though mass-market
products still constitute the major portion of the India cosmetics and toiletries
market.

52

PESTEL ANALYSIS

PESTLE ANALYSIS
IMPORT DUTIES ON
COMPONENTS AND
FINISHED GOODS
TAXES AND LEVIES
NON-TARIFF
BARRIERS

53

PESTEL ANALYSIS

8.1 PESTLE ANALYSIS

A pestle analysis is one of the most popular and effective methods of
analyzing the external macroeconomic factors that could impact on a
business within a specific industry. Commonly, a pestle analysis will be used
alongside other analyses that focus on internal factors. The combination of
the pestle analysis with other factors will allow a company to create a strategic
management plan of how to move its business forward in a way that
maximizes the opportunities available to it, externally. A pestle analysis
comprises

of

six

factors,

namely

political,

economic,

socio-cultural,

technological, legal and environmental.

POLITICAL
Political issues as part of the pestle analysis include all sorts of factors that
normally derive from the government in the form of policies or legislation. For
the purposes of the pestle analysis of a cosmetic industry, there is little in the
way of trade restrictions and tariffs to be concerned about. Many employees
within the organization are part time workers. With the government currently
encouraging single parents back to work on a part time basis at least, the
cosmetic industry should see a growing number of workers available. As peak
times within a cosmetic industry are generally evenings and weekends, this
could certainly fall in line with the political drive to encourage mothers back to
work as this would be the times where alternative childcare would be most
readily available.

ECONOMIC
The pestle analysis then goes on to look at the economic impact on the
cosmetic industry. Key areas for the pestle analysis include inflation rates,
54

interest rates and general economic conditions. Cosmetics are usually

considered luxury products; therefore, when there is an economic downturn,
the number of customers is likely to reduce. Where individuals have less
disposable income due to high inflation levels, they will be less inclined to
spend money on luxuries. The current economic climate is relatively weak and
individuals are not feeling sufficiently wealthy to spend large amounts of their
income on cosmetic treatments. As the pestle analysis has indicated, this to
be a particular threat to the cosmetic industry and this should be something
that management looks at mitigating. Typically, this could include reduction in
costs in relation to part time staff or generating additional revenue with
discounts and enhanced services for clients.

SOCIO-CULTURAL
When conducting a pestle analysis on cosmetics, the area of socio-culture
presents a much more positive outlook. This part of the pestle analysis
considers demographics such as age and wealth as well as issues including
career aspirations and general interest in cosmetic issues. In this case, the
cosmetic industry is doing extremely well. With a growing number of young
women carving lucrative careers, there is an increasing demand for cosmetic
facilities. Not only are greater numbers of younger individuals earning good
wages, but the grey pound is also increasing in strength. These changing
demands have led to substantial diversification and new opportunities within
the cosmetic industry.

TECHNOLOGICAL
They measure skin tones or color, with the help of various wavelengths. The
different wavelengths are electromagnetic energy with known length and
known amount of energy. When an object appears in a given color, it is so
due to the emission and/or reflection of light. The object may be absorbing
some other wavelengths but the remaining wavelengths of reflected light rays
that enter our eyes will then allow our perception of color. The perception of
color comes from photoreceptors in our eyes, the L M and S cones sensitive
to the light of long, medium and short wavelengths accurately.
55

A device which is able to detect color is a colorimeter. This device uses

sensors that assign consistent measurement parameter to every color, no
matter what the ambient conditions happen to be. A colorimeter measures the
way an object reflects or transmits lights across the visible spectrum and
records the values which correlate with the way the human eye sees color.
The light reflected off the object will be passed through a red, green and blue
filter.
Another more accurate method of color measurement is to use a
spectrophotometer, which records the amount of energy present at each
wavelength of visible light. And we can take measurements using a
spectrophotometer, an instrument that divides the visible spectrum into
discrete bands and records the amount of energy present in each one. When
we do a color measurement with the spectrophotometer, we obtain its spectral
response curve which shows how much radiant energy the sample transmits
or reflects at each wavelength. The operation of the spectrophotometer is
basically to illuminate the sample with a light source, of a known wavelength
and spectral range, and this will be reflected by the sample at different
wavelength intervals. This is done by passing the reflected light through a
monochromating device that splits the light up into separate wavelength
intervals.

LEGAL
When looking at the cosmetic industry from a pestle point of view, it is not
surprising that safety legislation is both plentiful and restrictive. It is necessary
for all cosmetics to comply with the basic safety regulations, but they should
also pay attention to treatment specific requirements, especially in relation to
surgical type procedures. All practitioners will have to be suitably qualified,
which will have the impact of increasing staff costs.
Insurance will have to be maintained and all necessary employment law
provisions complied with. As the workforce is likely to be largely part time and
possibly even self-employed, attention will have to be paid to ensure that the
correct taxes and paperwork requirements are complied with.
56

ENVIRONMENTAL
The issue of environmental factors has only just been added to the pestle
analysis in a bid to recognize how important this factor can be to the success
of a business. Traditionally, in the pestle analysis, a company would consider
the environmental issues with which it must comply. In the case of a cosmetic
industry, this is largely likely to be in relation to dangerous substances such
as massage oils and cleaning chemicals.
However, a slightly different approach which the pestle analysis reveals is that
the environment could, in fact, bring opportunities to a cosmetic company with
a growing demand for organic and natural products. Many consumers (as
previously analyzed in the pestle analysis) will pay a premium for natural
products and, as such, being seen to be environmentally friendly will not only
ensure regulatory compliance, but may also encourage more customers at a
higher value.

57

8.2 IMPORT DUTIES ON COMPONENTS AND FINISHED

GOODS
Costs for importing products are much higher than producing it in the country.
India allows entry of imported cosmetics without any restrictions but the
average import tariff on cosmetics products is currently very high at 39.2
percent. This makes imported products very expensive for most consumers.
Most foreign cosmetics companies selling premium brands have had a difficult
time developing the low volume premium market in India. Many had to rework price strategies towards the mass segment. Price is not the only reason
responsible for their problems. Poor assessment of the size of the upper
middle and high-income groups, and price sensitivity even within these
groups, had added to their problems.
According to estimates of industry experts and trade publications, India's
annual import of cosmetics and toiletries and intermediate raw materials is
approximately US$ 120 million. Countries like US, Europe, mainly France,
Germany, Italy, Netherlands, and Spain account for the major share; and
Australia, China, and Japan account for rest of the share.
Sophisticated products such as fragrances, non-transfer long-stay lipsticks,
liquid lip color, eye make-ups, anti ageing/anti wrinkle creams, professional
hair-care products, preparations for shaving creams, are some of the major
items of import.

8.3 TAXES AND LEVIES

Sales tax is levied on the sale of a commodity which is produced or imported
and sold for the first time. If the product is sold subsequently without being
processed further, it is exempt from sales tax.
Sales tax can be levied either by the Central or State Government, Central
Sales tax department. Also, 4 per cent tax is generally levied on all inter-State
sales. State sales taxes that apply on sales made within a State have rates
58

that range from 4 to 15 per cent. Sales tax is also charged on works contracts
in most States and the value of contracts subject to tax and the tax rate vary
from State to State. However, exports and services are exempt from sales
tax. Sales tax is levied on the seller who recovers it from the customer at the
time of sale.
Sales Tax in India is that form of tax which is imposed by the government on
sale/purchase of a particular commodity within the country. It is imposed
under Central Government (Central Sales Tax) and the State Government
(Sales Tax) Legislation. Normally, each state has its own sales tax act and
levies the tax at various rates. Apart from sales tax, certain states also impose
extra charges such as works contracts tax, turnover tax & purchaser tax.
Thus, sales tax plays a major role in acting as a major generator of revenue
for the various State Governments.
Under the sales tax which is an indirect form of tax, it is the responsibility of
seller of the commodity to collect or recover the tax from the purchaser.
Generally, the sale of imported items as well as sale by way of export is not
included in the range of commodities that require payment of sales tax.
Moreover, luxury items (such as cosmetics) are levied higher sales tax rates.
The Central Sales Tax (CST) Act that comes under the direction of Central
Government takes into consideration all the interstate sales of commodities.
Hence, we see that sales tax is to be paid by every dealer when he sells any
commodity, during inter-state trade or commerce, irrespective of the fact that
there may be no liability to pay tax on such a sale of goods under the tax laws
of the appropriate state. Sales tax is to be paid to the sales tax authority of the
state from which the movement of the commodities starts or commences.
Central Excise Duty applicable to Cosmetics / Toilet preparation falling
under Chapter 33 are currently attracting 8% Excise Duty on Ad Val basis
+ 2% Education Cess + 1% Secondary Higher Education Cess on Excise
Duty, after considering 30% abatement

59

EXCISE DUTY STRUCTURE FINISHED GOODS

ABATEMENT

BASIC EXCISE

FROM MRP

DUTY

EDU. CESS

HIGHER

TOTAL DUTY

EDUCATION

CESS
30%

10%

2%

1%

10.30%

35%

10%

2%

1%

10.30%

(Table no : 1, Excise duty structure)

Cosmetics (35% Abatement)

8.4 NON-TARIFF BARRIERS

Because countries consider it in the interest of their national economies to
export more than they import, they rely on a number of methods designed to
restrict imports and protect their markets from international competition. In
addition, countries also attempt to increase the amount of money they hold in
their reserves and reduce the amount of their respective national currencies
held by other countries. These concerns have led countries to impose a
variety of trade restrictions such as import quotas, tariffs, and trade barriers,
especially in the first half of the century. But countries have also established
preferential trade agreements with favored nations that granted such nations
reduced tariffs and trade barriers.
In order to limit the flow of goods from elsewhere, countries implement import
quotas, which set maximum limits on the number of various goods a country
will import. When confronted with a trade deficit, countries impose trade
quotas as a quick remedy to prevent the growth of the trade imbalance.
Countries also use import quotas to protect their markets from competition. In
60

addition, countries have resorted to prohibiting of certain imports altogether,

especially during the mercantile period.
Nations also impose tariffs, or taxes, on imported goods to limit the number of
imports that are entering the country. The buyer of imported products pays the
tariffs, making the price higher for the goods in the country that imported
them. The higher price from the tariffs decreases any price advantage these
goods might have over similar domestic products. Governments increase their
revenues through tariffs and tariffs also subsidize domestic producers,
providing them with motivation to produce the goods other countries try to
export. Tariffs take the form of duties calculated as a percentage of the value
of the goods importedusually about 4 percentand as fixed tariffs applied
to a specific quantity of an imported product. But tariffs often benefit one
sector of a domestic economy while harming another. Tariffs on imported
steel, for example, protect the domestic steel industry from international
competition, but they force car manufacturers to pay higher steel prices, and
the car manufacturers in turn pass the higher prices on to consumers.
Countries also restrict imports by using nontariff barriers, that is, by
establishing

voluntary

restraint

agreements. With

these

agreements,

exporters voluntarily limit the quantity of goods they ship to importing

countries. Japanese car manufacturers, for example, reached a voluntary
restraint. States in the early 1980s to restrict the number of automobiles they
export, thereby decreasing U.S. imports of Japanese cars.
Besides these direct methods of limiting imports, various domestic policies
and programs work indirectlyand sometimes unintentionallyto restrict
imports; these policies and programs function therefore as trade barriers.
These trade barriers take the form of health and safety regulations, tax
policies, and product labeling laws. Government support of certain industries,
such as agriculture, also functions as a trade barrier, giving domestic
producers an advantage over outside producers.
Indian cosmetics industry has witnessed strong growth during the past few
years and has emerged as one of the industries holding immense future
61

growth potential. The cosmetics industry registered impressive sales worth Rs

422.3 Billion (US$ 9.3 Billion) in 2010. The sector has mainly been driven by
improving purchasing power and rising fashion consciousness of the Indian
population.

Moreover, the industry players are readily spending on the promotional

activities to increase consumer awareness.
According to this new research report Indian Cosmetic Sector Analysis
(2009-2012), Indian cosmetics sector is expected to witness noteworthy
growth rate in near future, owing to the rising beauty concerns of both men
and women. The industry holds promising growth prospects for both existing
and new players. To support this evidence, we have done an extensive
analysis of various segments of the cosmetics industry, keeping in view both
the services and products sector. The baseline for the optimistic future outlook
of the Indian cosmetics industry is that, there has been a rise in variety of
products offered by the industry players. Moreover, the companies have
started opting for online retailing and are offering specialized products to
generate revenue from all the corners.

This new research report incorporates an extensive research and rational

analysis of the cosmetics industry in India. It provides segment level analysis
of the industry along with the emerging trends that may shape up with the
betterment of economic conditions. The research will help consultants,
industry analysts, and vendors to get in-depth knowledge of the current, past,
and future performance of the industry. The report also provides information
regarding consumer behaviour, particularly men and rural population, with
regard to cosmetic products.

Cosmetic is an industry which is more featured towards feminity, so it

should give equal emphasize on the both gender of society.

Promotion done is sometime illusionary, where result shown in

promotion does not match with actual reality.
62

Manufacturer should make usage of environment friendly inputs.

Artificial chemicals used in preparation of cosmetics need to be replace

by natural and organic inputs.

India is being seen as a strong manufacturing hub and a good source

for natural ingredients, it should form joint venture with multinational
companies to increase profitability and market share

As cosmetic industry presents a big opportunity to brands both national and

international market, government should provide enough support to develop
the industry.

The importance of context in analyzing the cosmetic industry indicates

a need for greater regulation of cosmetics. Beauty culture dramatically
shapes and is shaped by American societal and cultural milieu, and
thus regulation of this powerful force is important in order to protect
consumers and society. This need should be continued to be met by
the industry itself, through, for example, things like tighter, more
transparent, and more uniform industry standards. The unavoidable
reality is that the pragmatic constraints of FDA limited capacities
cannot be ignored, and thus the current system voluntary selfregulation represents the most practical and effective means of utilizing
aligned incentives to ensure consumer safety.

63

Company Study

COMPANY INFORMATION

PART II

HISTORY OF REVLON

GROWTH OF THE
COMPANY

64

HISTORY OF REVLON

9.1 HISTORY OF REVLON

Revlon was founded in the midst of the Great Depression, 1932, by Charles
Revson and his brother Joseph, along with a chemist, Charles Lachman, who
contributed the "L" in the Revlon name. Starting with a single product a new
type of nail enamel the three founders pooled their resources and developed
a unique manufacturing process. Using pigments instead of dyes, Revlon
developed a variety of new shades of opaque nail enamel. In 1937, Revlon
started selling the polishes in department stores and drug stores. In six years,
the company became a multimillion dollar organization. By 1940, Revlon
offered an entire manicure line, and added lipstick to the collection. During
World War II, Revlon created makeup and related products for the U.S. Army,
which was honored in 1944 with the Army-Navy "E" Award for Excellence.
By the end of the war, Revlon was listed as one of America's top five cosmetic
houses. Expanding its capabilities, the company bought Graef & Schmidt, a
cutlery manufacturer seized by the government in 1943 because of German
business ties. This acquisition made it possible for Revlon to produce its own
manicure and pedicure instruments, instead of buying them from outside
supply sources.
In November 1955, Revlon went public. The IPO price was $12 per share, but
it reached $30 per share within 8 weeks.
In the 1960s, Revson segmented Revlon into different divisions, each
focusing on a different market. He borrowed this strategy from General
Motors. Each division had its own target customer:

65

 1932: Brothers Charles and Joseph Revson and Charles R. Lachman

establish Revlon.
1935: The Companys first ad appears in The New Yorker magazine.
1940: Lipstick is added the company's product line.

1955: The Company changes its name to Revlon Inc. and goes public.

In 1957, Revlon acquired Knomark, a shoe-polish company, and sold

its shoe-polish line Esquire Shoe Polish in 1969. Other acquisitions,
such as Ty-D-Bol, the maker of toilet cleansers, and a 27 percent
interest in the Schick electric shaver company were soon discarded.
Evan Picone, a women's sportswear manufacturer which came with a
price tag of $12 million in 1962, was sold back to one of the original
partners four years later for $1 million. However, the 1967 acquisition
of U.S. Vitamin and Pharmaceutical Corporation made Revlon a leader
in diabetes drugs.
1961 sale by Charles Revson of 65,000 shares common stock (par
value $1.00 per share) and 65,000 class B common stock (par value
$1.00 per share) conversion by underwriters of 65,000 shares class B
common stock (par value $1.00 per share) registration and secondary
distribution of 130,000 shares common stock (par value $1.00 per
share)
66

 1962, when Revlon debuted in Japan, there were subsidiaries in

France, Italy, Argentina, Mexico, and Asia. Revlon's entrance into the
Japanese market was typical of its international sales strategy. Instead
of adapting its ads and using Japanese models, Revlon chose to use
its basic U.S. advertising and models. Japanese women loved the
American look, and the sales for 1962 came to almost $164 million
1965 public offering 660,000 shares common stock conversion by
Charles Revson of 465,698 shares class B common stock (par value
$1.00 per share); sale by Charles Revson, Charles R. Lachman, and
Garfield-Broadway Realty Corp. of 660,000 shares common stock (par
value $1.00 per share); registration of 749,868 shares common stock
1966 U.S. Vitamin & Pharmaceutical Corporation is acquired

1968, Revlon introduced Eterna27, the first cosmetic cream with

an estrogen precursor called Progenitin (pregenolone acetate), as well
as

introducing

the

world's

first

American

fashion

designer

fragrance, Norman Norell. Later, Revlon launched Braggi and Pub for
men, and a line of wig maintenance products called Wig Wonder.
1970, Revlon acquired the Mitchum line of deodorants. Mitchum Co. is
purchased.
1972 $50,000,000 4 3/4% convertible subordinated debentures due
1987
1973, Revlon introduced Charlie. Geared to the under-30 market,
Charlie model Shelley Hack in Ralph Lauren clothes, personified the
independent woman of the 1970s. This was the first perfume ad to
feature a woman wearing pants. Charlie raised Revlon's net sales
figures to $506 million for 1973 and almost $606 million the following
year.

67

 1975 registration and public offering of $100,000,000 aggregate

principal amount of 8.45% notes due May 1, 1985, of Revlon, Inc.1975
registration and sale by selling stockholders through underwriters of
650,000 shares of common stock (par value $1 per share) of Revlon.

1979-1980 Revlon lost ground to Este Lauder. Estee Lauder spent

millions of dollars on numerous magazine ads featuring Czech
supermodel Paulina Porizkova, shot by famed Chicago fashion
photographer Victor Skrebneski. Revlon's share dropped from 20
percent to 10 percent of department store cosmetics sales. Sales at the
drugstore also declined as Revlon lost shares to Noxell's Cover
Girl brand. Revlon compensated with more acquisitions; Max Factor,
Ellen Betrix, Charles of the Ritz, Germaine Monteil, Almay, Fermodyl,
Lancaster, Aziza, and Halston. The 1977 acquisition of Carlos
Colomer, a Spanish professional beauty supply distributor, brought
Fermody and Roux and helped introduce Revlon to the world of ethnic
care: Creme of Nature, Realistic, Lovely Color and Milk and Honey.

1983

the

company

attempted

an

unsuccessful hostile

takeover of Gillette. In 1989, Revlon became one of the first companies

to replace animal tests with alternative safety testing methods.
1985, at a price of $58 per share, totaling $2.7 billion, Revlon was sold
to Pantry Pride (later renamed to Revlon Group.), a subsidiary
of Ronald Perelman's MacAndrews & Forbes Holdings. The buyout-engineered with the help of junk bond king Michael P. Milken--saddled
Revlon with a huge $2.9 billion debt load, which became an albatross
around the company's neck for years to come. Pantry Pride Inc. offered
to buy any or all of Revlon's 38.2 million outstanding shares for $47.5 a
share when its street price stood at $45 a share. Initially rejected, he
repeatedly raised his offer until it reached $53 a share while fighting
Revlon's management every step of the way. Forstmann Little &
Company swooped in at $56 a share, a brief public bidding war
ensued, and Perelman triumphed with an offer of $58 a share.
68

Perelman paid $1.8 billion to Revlon's shareholders, but he also paid

$900 million of other costs associated with the purchase. Perelman had
Revlon sell four divisions: two for $1 billion, the vision care division for
$574 million, and the National Health Laboratories division which
became a publicly owned corporation. Revlon is sold to Pantry Pride, a
subsidiary of Ronald Perelman's MacAndrews & Forbes Holdings, and
becomes a private company.
1988. Additional make-up lines were purchased for Revlon. Max
Factor in 1987 and Betrix in 1989, later sold to Procter & Gamble in
1991. Also in 1991, Revlon sold the Clean & Clear brand to Johnson &
Johnson.
1994: Color Stay lipstick is introduced.
1996: Revlon makes an initial public offering of stock.

2000: The Companys professional products line is sold.

2011, Revlon acquired Mirage Cosmetics; makers of Sinful Colors nail

products.
The origins of Revlon Inc. date back to 1931, when Charles Revson and his
older brother, Joseph Revson, distributed Elka nail polish as Revson Brothers.
Within a year, Charles decided to open his own nail polish company, going
into partnership with Joseph and a nail polish supplier named Charles R.
Lachman, who contributed the l to the Revlon name. Revlon was established
in 1932. Charles noticed that the permanent-wave boom was making beauty
salons more popular, and that demand for manicures was rising at the same
time. He therefore targeted beauty salons as a market niche. Within its first
nine months, the company boasted sales of $4,055. In 1933 there was a
sharp rise to $11,246. That same year, the company incorporated as Revlon

69

Products Corporation. The company grossed $68,000 at the end of 1934;

sales had multiplied more than forty times by 1937.

Revlon enlarged its market

that year by retailing his nail
polish through department
stores

and

selected

drugstores. The company

steered clear of cut-rate
stores, selling his product
only

at

premium

prices.

Advertising became key to

maintaining this policy. Its
use was a fateful step for
the industry; never again
would

major

cosmetics

companies attempt to sell

beauty items without it. The
company began to label its
nail enamels with evocative names like Fatal Apple and Kissing Pink. Revlon's
first commercial advertisement appeared in the New Yorker in 1935.
Revlon had a whole line of manicure products by 1940. Lipstick, Revlon's next
major item, appeared in 1940. The company began an advertising campaign
touting "matching lips and fingertips"; the campaign proved to be greatly
successful, with 1940 sales figures reached $2.8 million. World War II brought
shortages of glass bottles and metal lipstick cases; paper was used as a
substitute. Aromatic oils, fixatives, and packaging materials were also in short
supply, as they were previously imported. Since the shortages affected the
entire industry, secrecy was replaced by mutual cooperation; new synthetics
and domestic sources of supply were shared, and a new U.S. aromatics
industry was born. During the war, Revlon produced first-aid kits, dye markers
for the navy, and hand grenades for the army.
70

At the end of the war, Revlon listed itself as one of America's top five cosmetic
houses. The company bought Graef & Schmidt, a cutlery manufacturer, which
made it possible for Revlon to produce its own pedicure and manicure
instruments, instead of buying them from outside supply sources. Revlon's
1952 Fire and Ice campaign was one of its most successful, raising that year's
net sales to almost $25.5 million. In 1955 the company again scored an
advertising success when it became the sole sponsor of the CBS television
show, "The $64,000 Question." Net sales for 1955 grew to $51.6 million, from
$33.6 million the previous year. That year, an allegation of wiretapping was
filed against Revlon by Hazel Bishop. The charge was denied by Revlon
controller William Heller, who nevertheless admitted "monitoring" employee's
telephones for training purposes. Revlon reorganized as Revlon, Inc., in
November of that year. The company went public one month later and was
listed on the New York Stock Exchange a year later. The success of "The
$64,000 Question" led to a spin-off named "The $64,000 Challenge." The two
shows helped to raise the company's net sales figures to $95 million in 1958
and to $110 million in 1959. This success came to an end in 1959 when
charges were levied that both shows had been rigged.
During the early 1960s Charles Revson became aware that his company was
in danger of locking itself into a narrow, upper-middle-class image that could
restrict sales. The company then segmented its product line into six principal
cosmetics houses, each with its own price range, advertising program, and
image. Princess Marcella Borghese aimed for international flair; Revlon was
the popular-priced house; Etherea was the hypoallergenic line; Natural
Wonder served youthful consumers; Moon Drops catered to dry skins; and
Ultima II was the most expensive range. Early attempts to diversify into other
fields were unsuccessful. For instance, Knomark, a shoe-polish company
bought in 1957, sold its shoe-polish lines in 1969. Other poorly chosen
acquisitions, such as Ty-D-Bol, the maker of toilet cleansers, and a 27 percent
interest in the Schick electric shaver company were also soon discarded.
The company's first successful acquisition came in 1966, when it bought U.S.
Vitamin & Pharmaceutical Corporation. The buy-out brought Revlon a
71

company with annual sales of $20 million, most of them coming from a drug
used to treat diabetes. U.S. Vitamin proved its worth within a year with its
acquisitions of Laboratories Grossman, a Mexican pharmaceutical company;
a comparable concern in Argentina; and another in Chile. Another U.S.
Vitamin acquisition was Nysco Laboratories and its Nyscap process for timedrelease medication. This, in turn, led to the introduction of vasodilation drugs.
Fully disposable injectables, introduced in 1968, also came from U.S. Vitamin.
Revlon had begun to market its products overseas at the end of the 1950s.
Worldwide markets produced sales of $281 million by 1967. The 1970s began
with annual sales of about $314 million. The cosmetics division, its six lines
separately aimed, advertised, and marketed, was the industry leader in all
franchised retail outlets. Revlon fragrances, such as Norell and Intimate for
women and Braggi and Pub for men, had also become familiar to U.S.
consumers. Revlon also had a new line of wig-maintenance products called
Wig Wonder. An important 1970 acquisition was the Mitchum Company of
Tennessee, makers of antiperspirants and other toiletries. In 1973 Revlon
introduced Charlie, a fragrance designed for the working woman's budget.
Charlie was an instant success and helped raise the company's net sales to
$506 million in 1973, and to almost $606 million the following year.
The company gained new leadership in 1974; Charles Revson named Michel
Bergerac his successor. Bergerac introduced the Performance Incentive Profit
Sharing Plan, which allotted each executive points based on profit objectives
achieved for the years 1974 to 1976. He also cut company spending with
tighter inventory controls and the elimination of 500 jobs. Also that year,
Bergerac installed a management-information system requiring that all
managers report monthly on problems, sales, and competition. Bergerac's first
major purchase came in 1975 when he acquired Coburn Optical Industries, a
manufacturer of ophthalmic and optical processing equipment and supplies

72

9.2 GROWTH OF THE COMPANY

Revlon reported 3% growth in revenues to $347 million in the third quarter,
inclusive of its acquisition of certain assets of Bari Cosmetics in July 2012.
The

overall

effect

of

the

acquisition,

however,

is

minimal.

In particular, the U.S. market that accounts for more than half of Revlons
sales grew by 4%. The results were supported by growth in Latin American
and Canadian markets where sales grew by about 20% and 11%,
respectively.

The prevailing situation in the European market casts its shadow on what was
otherwise a growth story as sales declined by 14% in Europe, the Middle East
and Asia. Color Cosmetics continued to be a major contributor to overall
growth, and it makes up 60% of Revlon's stock value by our estimates.
Revlons business model has proven its resilience, sustainability and validity
for more than 40 years in emerging, as well as mature, markets. The key
drivers, such as being your own boss, setting your own goals, the low barriers
of entry and exit, the lack of discrimination regardless of ones sex, ethnicity,
age, education, physical condition or financial resources, are all in line with a
growing population of entrepreneurs that is less dependent on secure
employments. Although the reasons for joining may vary among the many
sales consultants in the more than 60 countries where Revlons is
represented, most of them agree that Revlons offers attractive nancial
rewards as well as social benets, i.e. the possibility to look great, make
money and have fun. Some join as a way of supporting their family, while
building a business and fullling a career dream. Others see it as a way to
achieve a more exible life or make extra money while studying, being in
between jobs or simply extending ones social life.

73

9.3 Growth & Valuation

Earnings growth (last year)

-3.92%

Earnings growth (this year)

+48.17%

Earnings growth (next 5 years) +5.00%

Revenue growth (last year)

+3.35%

Consultants also join in order to save money through discounted purchases of

cosmetics and personal care, Revlons by enjoying a discount valid for
themselves and their families. The exibility of the system means that
consultants decide for themselves what they want to achieve by joining. An
additional important growth driver for consumers is the growing demand of
cosmetics and toiletries products world-wide.
Revlons offers the leading business opportunity for people who want to start
making money the same day they join and work towards fulfilling their
personal dreams and ambitions through its unique business concept Make
Money Today and Fulfill Your Dreams Tomorrow. A sales force of
approximately 3.2 million independent consultants has seized this opportunity
and is successfully marketing Revlons wide portfolio of Swedish, natural,
innovative beauty products, together creating annual sales exceeding $1.3
billion.

74

PRODUCT PROFILE

SKIN CARE

COLOUR COSMETICS

FRAGRANCE

PERSONAL & HAIR CARE

ACCESSORIES

WELLNESS

75

PRODUCT PROFILE

RODUCT

10.1 PRODUCT PROFILERODUCT PR

Some of their products include: Natural Skin Care Tender Care, Enigma Dare
to Dream Edition Eau de Toilette, Mirage Eau de Parfum, Ecollagen
Energizing Cocktail, Tender Care Lip Balm, Aqua-Rhythm Intense Hydration
Youth Preserve Day Cream and the Anti-bacterial Hand Gel.

Revlons manufactures more than 1,000 products. Each year, they add up to
300 new products to their product line. They have a large R&D Department
that is very committed to developing new, high quality products. All products
are based on natural ingredients and are never tested on animals. Their
product line consists of skin care, cosmetics, fragrances, personal and hair
care, accessories and wellness products.

The product line varies a little bit, depending on which country you live in.
Most products have a shelf-life of 36 months. Revlons product offering is
building on more than 40 years of skincare and cosmetics expertise
combining the wisdom of nature with the best of science.

76

10.1.1 SKIN CARE

Revlons has a wide range of innovative skin care products, developed and
tested by the Skin Care Research Centre in Ireland. Revlons Skin Care offers
proven, effective solutions to everyday skin care needs.

Facial moisturizers
Anti ageing
Hand & Body

10.1.2 COLOUR COSMETICS

Revlons portfolio offers a wide and sophisticated range of products

with

formulations and trendy packaging that enhances every womans natural

beauty.
Lipsticks
Foundations
Powders
Mascaras
Eye shadows
Nail

77

10.1.3 FRAGRANCE
Revlons offers a qualitative fragrance portfolio ranging from exclusive to the
more moderately priced. All fragrances are developed in France to ensure
superior quality, innovation and performance.
Men
Women
Home fragrance

10.1.4 PERSONAL & HAIR CARE

The extensive and high performance hair and body care products offer a
variety of ranges to meet daily needs.
Hair care
Oral Hygience
Bath and Shower
Deodorant
Foot

78

10.1.5 ACCESSORIES

Revlons accessories are non cosmetic products aimed at women, men and
kids.
Hair brushes

Towels

Hand bags

Seasonal gifts

Sunglasses

Toilet bags

Belts

Necklaces

Pedicure sets

Bracelets

79

10.1.6 WELLNESS
Wellness by Revlons has been carefully designed in partnership with
Swedish scientists and nutritional experts to bring innovative, safe and high
quality wellness products that will bring out beauty from within.
Vitamins
Nutritional shakes

80

FUNCTIONAL DEPARTMENT

PRODUCTION
DEPARTMENT

MARKETING
DEPARTMENT

FINANCIAL DEPARTMENT

HUMAN RESOURCE
DEPARTMENT

INFORMATION
TECHNOLOGY
OTHERS
81

FUNCTIONAL DEPARTMENT

11.1 PRODUCTION DEPARTMENT

At the end of 1977, Revlons board of directors decided to build a production
plant, on the outskirts of Dublin, Ireland. The plant was completed two years
later, july 1979 following extensive project work, including transfers of
technology from former subcontractors. The building cover 2800 square
meters for production, research laboratories and quality control. The current
extensions now have been completed and have increased the capacity for
filling from 22 million to approx. 40 million units. The plant is one of Europes
most modern cosmetic manufacturing units and is well equipped with high
technology production equipment.
All Revlon products undergo strict physical, chemical and microbiological
control before reaching the customer. The objective is that the customer
should be able to rely on the product to promote long term quality, regardless
of how it was purchase.
In order to attain this objective, all deliveries of raw materials and packaging
are tested according to strict specification before they enter the production
process. An overriding priority is to offer consumer products that meet the
highest safety and quality standards. The water used is tested daily to
guarantee a high degree of microbiological purity.
11.1.1 RESEARCH & DEVELOPMENT
BEAUTY RESEARCH
Revlons has over 40 years of experience in producing beauty products,
combining the best natural ingredients with the latest scientific research. The
accumulated knowledge and experience has been gathered into one
dedicated Research & Development team that is based in two locations,
Dublin, Ireland and Stockholm, Sweden. All together, the Research &
82

Development function employs over a hundred scientists and technical

experts, covering many scientific disciplines including formulation science,
skin research, clinical testing, process development, packaging technology,
microbiology, toxicology, environmental science, patent support, and global
regulatory affairs.
FROM IDEA TO LAUNCH
The process from idea to launch takes several years, involving valuable time
and resources through the stages of R&D, manufacturing, marketing and
distribution. Thus, being at the forefront of trends and needs is essential to
deliver a strong offering to the market on time. It is the only way to gain new
customers and to make old ones remains loyal to the brand. Revlons
customers come from various parts of the world; have different habits, income
and needs. To create attractive offers for such a heterogenic customer base
requires a wide product range, high launching pace and proactive reaction to
new trends. It is a constant challenge to stay on top of competition and remain
innovative through the constant launches. Ideas originate from various
sources such as international fairs and exhibitions, global trend reports,
research projects and focus groups. A strong team of brand managers
representing all five product categories is continuously monitoring trends,
needs and new launches in order to stay in the loop maintain competitive
strength and gain market shares.

ENSURING THE HIGHEST STANDARD

Revlons core competencies embrace a wide range of technologies and
products, with the accent placed squarely on delivering innovative, high
performance formulations with proven scientific consumer benefits. The
products comply with the most stringent international regulatory requirements,
and are extensively tested to ensure optimum safety, efficiency and quality as
well as ethical and environmental integrity. No Revlons product has ever
been tested on animals. Having an in-house Research and Development
centre provides Revlon greater flexibility over product development in line with
83

the Companys natural Swedish heritage, ensuring delivery of the highest

standard product in the shortest possible time.
11.1.2 MANUFACTURING AND LOGISTICS
Revlons products are manufactured both in-house and by various
subcontractors with expertise in specific product areas. Revlons owns five
manufacturing units based in Poland, Sweden, India, China and Russia.
These factories focus primarily on the production of Skin Care, Fragrances,
Personal and Hair Care and Colour Cosmetics- areas in which there are
sufficient volumes to achieve economies of scale. Revlons is continuously
exploring new sourcing opportunities closer to its main markets. In 2009,
Revlons has successfully ramped up the production at its new Moscow site
and the year before, Revlons initiated bottling and packaging of fragrance
products in Ukraine. Revlon is also continuously striving to increase energy
efficiency. The Swedish facility is now only using clean hydroelectric power
and minimizing energy needs through the use of heat pumps.
11.1.3 QUALITY ASSURANCE
Revlons quality assurance team works both with in-house manufacturing
operations and subcontracted suppliers to achieve consistent adherence to
the high quality, safety and ethical standards set by the Company, no matter
the location of the manufacturing site. Revlons maintains a policy of global
compliance for all its products to ensure conformity with the highest market
standards. Examples include adherence to stringent water quality standards
and a strict control over other raw materials used in production.
11.1.4 CODE OF PRACTICE
During 2009 Revlons integrated the new ISO Cosmetic Good Manufacturing
Practice (GMP) Standard with the Companys Code of Practice. This new ISO
standard gives guidelines for the production, control, storage and shipment of
cosmetic products. All Revlons suppliers are audited on a regular basis to
ensure compliance with the Code of Practice and the Code of Ethics. Revlons
carries out Corporate Social Responsibility (CSR) & Quality Audits on all
accessories suppliers in China, to ensure that they not only meet Quality
84

standards, but that they also comply with the Companys Ethical Policies. This
is an extra layer of audit, in addition to the frequent audits carried out by
Revlons sourcing and procurement partners.
WASTE
Revlons is committed to minimizing the waste produced, having numerous
ongoing initiatives to reduce the amount of waste generated. For example, the
Company has decreased its total effluent waste by introducing site treatment
at two facilities. Revlon is continuing to reduce total waste in the
manufacturing operations and the goal is to achieve an additional 10 percent
reduction in total waste generated per unit production
WATER
With operations in countries like India and China, reducing water use is of
course another key priority for Revlon. During the past five years the
Company has managed to achieve a combined reduction of 35 percent in
water use at the manufacturing operations. From 2010 to 2015, the goal is to
deliver an additional 10 percent reduction (per unit production) in water use at
the manufacturing facilities leading to a total reduction over a decade of at
least 45 percent.

85

11.2 MARKETING DEPARTMENT

The market for cosmetic product is developing positively with recent growth
averaging around 4% per year by volume, although, as with other consumer
industries, growth in 1992-1993 decreased as a consequence of the general
economical recession. The company has experienced steady growth in sales
since the start in 1967 with, in June 1994, sales totaling $230 million for the
group. The current trends are returning to personal service, care and
attention. The global market for cosmetics and toiletries is mature and growth
through the year 2000 is projected to reach the modest rate of 3% annually.
Revlon launched its direct sales method in 1967 when the Company was
founded as a vital part of its innovative business concept. It has proven to
be a successful marketing method in emerging, as well as mature, markets.
Becoming an Revlon consultant can provide a way of supporting the family,
while fulfilling a career dream. However, it is also a way to achieve a more
flexible life or make extra money while studying, being in between jobs or
simply to extend ones social life. As a matter of fact, the increasing number of
sales consultants as a result of the current recession is proof of our attractive
career opportunity. For consumers, the driving force is a more flexible, relaxed
and individual way of shopping, receiving personal advice from someone
familiar.

11.2.1 PRODUCT
Over the years Revlon has launched thousands of products conveying the
Revlons product philosophy combining the wisdom of nature with the best
of science providing a wide portfolio affordable for the many people. Revlon
products are developed using cutting-edge technology and products are
manufactured according to the highest quality standards. Revlon Cosmetics
offers over 900 cosmetic products at any given time, more than a third of
which are newly introduced each year launched its direct sales method in
1967 when the Company was founded as a vital part of its innovative
business concept. It has proven to be a successful marketing method in
emerging, as well as mature, markets. Becoming an Revlon consultant can
86

provide a way of supporting the family, while fulfilling a career dream.

However, it is also a way to achieve a more flexible life or make extra money
while studying, being in between jobs or simply to extend ones social life. As
a matter of fact, the increasing number of sales consultants as a result of the
current recession is proof of our attractive career opportunity. For consumers,
the driving force is a more flexible, relaxed and individual way of shopping,
receiving personal advice from someone familiar.

11.2.2 PACKAGING DEVELOPMENT

Manager, Package Development City New York State NY Part Time No
Temporary No Travel Required 10% Description Responsible for the global
development of new product launches and the on-going maintenance of
regular business packaging for color cosmetic brands. Actively interfaces with
Marketing, R&D and Creative in the "discovery" phase and assumes
responsibility for the successful execution of selected packages in the
"tactical" phase. Investigates new packaging techniques, materials, processes
and developments to provide innovative and cost-effective packaging
concepts and solutions. Plays an active role in determining feasibility of new
projects as they relate to cost, timing, and manufacturability.

11.2.3 DISTRIBUTION
The Companys products are sold in more than 100 countries across six
continents. The Companys worldwide sales forces had approximately
290 people as of December 31, 2008. In addition, the Company utilizes sales
representatives and independent distributors to serve certain markets and
related distribution channels.

UNITED STATES.
Net sales in the U.S. accounted for approximately 58% of the Companys
2008 net sales, a majority of which were made in the mass retail channel. The
Company also sells a broad range of consumer products to U.S. Government
military exchanges and commissaries. The Company licenses its trademarks
87

to select manufacturers for complimentary beauty-related products and

accessories that the Company believes have the potential to extend the
Companys brand names and image. As of December 31, 2008, eleven
licenses were in effect relating to seventeen product categories, which are
marketed principally in the mass-market distribution channel. Pursuant to
such licenses, the Company retains strict control over product design and
development, product quality, advertising and the use of its trademarks.
These licensing arrangements offer opportunities for the Company to
generate revenues and cash flow through royalties and renewal fees, some of
which have been prepaid.
As part of the Companys strategy to increase the retail consumption of
its products, the Companys retail merchandisers stock and maintain the
Companys point-of-sale wall displays intended to ensure that high-selling
SKUs are in stock and to ensure the optimal presentation of the Companys
products in retail outlets.

INTERNATIONAL.
Net sales outside the U.S. accounted for approximately 42% of the
Companys 2008 net sales. The five largest countries in terms of these sales
were Canada, South Africa, Australia, U.K and Venezuela, which together
accounted for approximately 23% of the Companys 2008 consolidated net
sales. The Company distributes its products through drug stores and chemist
shops, hypermarkets, mass volume retailers, general merchandise stores,
department stores and specialty stores such as perfumeries outside the
U.S. At December 31, 2008, the Company actively sold its products through
wholly-owned subsidiaries established in 14 countries outside of the U.S. and
through a large number of distributors and licensees elsewhere around the
world.

88

11.2.4 SEGMENTATION, TARGETING AND POSITIONING

SEGMENTATION
Revlon, Maybelline, and Cover Girl use segmentation strategies in order to
target their predominant consumers: A woman concentrates on Middle Market
Price Segment
TARGETING
Increases the cost-effectiveness of advertising. Most advertising channels
have a cost that is a strong function of the amount of exposure (e.g., the
number of people who see the ad) regardless of whether audience members
are potential customers or not.
POSITIONING
Increases potential ad effectiveness by clarifying the message. This step is all
about defining a space in the mind of the customer something that your
customer thinks of and associates with Revlon product.

11.2.5 OBJECTIVE

Examines and identifies key information and issues about Revlon, Inc. for
business intelligence requirements, Studies and presents the company's
strengths,

weaknesses,

opportunities

(growth

potential)

and

threats

(competition). Strategic and operational business information is objectively

reported.
Provides

analysis

on

financial

ratios

of

the

company;

The profile also contains information on business operations, company

history, major products and services, prospects, key competitors, key
employees, locations and subsidiaries.

89

11.3 FINANCE DEPARTMENT

11.3.1 RATIO ANALYSIS

Ratio analysis is a widely used tool for financial analysis. It is defined as the
systematic use of ratio to interpret the financial statement, so that the strength
and weakness of a firm as well as its historical performance and current
financial condition can be determined. The term ration refers to the numerical
and quantitative relationship between two items/variables. The relationship
can be expressed as:-

1. Percentage
2. Fraction
3 . P rop o rt io n o f n um b e rs

Ratio analysis is a comprehensive tool of analysis in that it seeks to measure

and establish cause and effective relationships between either two items of
balance sheet or both the balance sheet and profit and loss account. A tool
used by individuals to conduct a quantitative analysis of information in a
company's financial statements. Ratios are calculated from current year
numbers and are then compared to previous years, other companies, the
industry, or even the economy to judge the performance of the
company. Ratio analysis is predominately used by proponents of fundamental
analysis.

90

OBJECTIVES OF RATIO:

Ratio analysis is a process of comparison of one figure against another

Interpretation of ratio is helpful to know the strengths and weakness of

the firms operations and its financial position

Ratio analysis helps various interested parties like prospective

investors, creditors, banks, and employees to draw useful conclusions
to serve their purpose.

CLASSIFICATION OF RATIOS

1. LIQUIDITY RATIO
Current Ratio
Liquid Ratio

2. LEVERAGE RATIO OR STRUCTURAL ANALYSIS

Proprietary Ratio
Fixed Capital Fixed Assets Ratio

3. PROFITABILITY RATIO
Gross Profit Ratio
Net Profit Ratio
Operating Ratio
Return on Total Assets
Return on Capital Employed
Return on Shareholders Equity

91

LIQUIDITY RATIO
1. CURRENT RATIO

It is a liquidity ratio that measures a company's ability to pay short-term

obligations. The higher the current ratio, the more capable the company is of
paying

its

obligations.

ratio

under 1

suggests

that

the

company would be unable to pay off its obligations if they came due at that
point. The ideal current ratio is 2:1. The current ratio can give a sense of the
efficiency of a company's operating cycle or its ability to turn its product into
cashs.
TOTAL CURRENT ASSET:
YEAR

2007

2008

2009

2010

2011

DEBTORS

100000

170000

150000

200000

190000

BANK

35000

25000

40000

12000

25000

CASH

20000

15000

10000

21000

50000

INVENTORY

90000

120000

140000

100000

180000

LOAN

96460

84398

99911

182725

122312

CURRENT

341460

341460

341460

515725

567312

ASSETS

CURRENT LIABILITIES:
YEAR

2007

2008

2009

2010

2011

PROVISION

4307

7401

1010

42851

2540

CREDITORS

190000

200000

191000

200000

270000

CU.LIABILITIES

194307

207401

192010

242851

272540

92

CURRENT RATIO = CURRENT ASSETS CURRENT LIABILITIES

YEAR

2007

2008

2009

2010

2011

CU. ASSETS

341460

414398

439911

515725

567312

CU. LIABILITIES

194307

207401

192010

242851

272540

1.76

1.98

2.29

2.12

2.08

CURRENT RATIO

(Table no: 2, Current ratio)

Current Ratio
2.5
2
1.5
Current
Ratio

1
0.5
0
2007

2008

2009

2010

2011

(Chart no : 2, Current Ratio)

INTERPRETATION
This ratio indicates good financial position of the company. It is generally
believe that 2:1 current ratio a comfortable working capital position. By
observing the current ratio of both the years we can say that the ratio of both
the years is more than 2, which indicates good sign for the company.

93

2. LIQUID RATIO

Liquid ratio is a class of financial metrics that is used to determine a

company's ability to pay off its short-terms debts obligations. The higher the
value of the ratio, the larger the margin of safety that the company possesses
to cover short-term debts.

LIQUID RATIO = LIQUID ASSETS LIQUID LIABILITIES

LIQUID ASSETS
YEAR

= CURRENT ASSETS STOCK

2007

2008

2009

2010

2011

CU.ASSETS

341460

414398

439911

515725

567312

STOCK

186085

240982

221309

286350

264556

LIQUID ASSETS

155,375

173,416

218,602

2,29,375

3,02,756

LIQUID LIABILITIES = CURRENT LIABILITY BANK OVERDRAFT

YEAR
CU.LIABILITIES
BANK

2007

2008

2009

2010

2011

194307

207401

192010

242851

272540

194307

207401

242851

272540

OVERDRAFT
LIQUID.

192010

LIABILITIES

94

LIQUID RATIO = LIQUID ASSETS LIQUID LIABILITIES

YEAR

2007

2008

2009

2010

LI. ASSETS

155,375

173,416

218,602

LI. LIABILITIES

194307

207401

LIQUID RATIO

0.8

0.84

192010
1.14

2011

2,29,375 3,02,756
242851

272540

0.94

1.11

(Table no : 3, , Liquid ratio)

Liquid Ratio
1.2
1
0.8
0.6

Liquid
Ratio

0.4
0.2
0
2007

2008

2009

2010

2011

(Chart no : 3, Liquid Ratio)

INTERPRETATION

The standard ratio is considered to be 1:1. In the year 2010 it is below the
standard ratio but in the year 2011 it has gone above the standard ratio which
indicates a good financial position of the company.

95

LEVERAGE RATIO
1. PROPRIETARY RATIO
The ratio shows the proportion of proprietors fund to the total assets
employed in the business
PROPRIETARY RATIO = PROPRIETORS FUND TOTAL ASSETS X 100
PROPRIETORS FUND = SHAREHOLDERS FUND
YEAR

2007

2008

2009

2010

2011

PRO. FUND

69678

70367

71018

71225

71301

TOTAL ASSETS

516048

580178

615240

755849

830320

12.13

11.54

9.42

8.59

PRO. RATIO

13.5

(Table no : 4 , Proprietary ratio)

Proprietary Ratio
14
12
10
8
Proprietary
Ratio

6
4
2
0
2007

2008

2009

2010

2011

(Chart no : 4, Proprietary Ratio)

INTERPRETATION
From the above graph we can say that as compare to 2010, the proprietors
have provided larger funds to purchase the asset, but the investment in the
total assets is at larger pace, which leads to decrease in the proprietary ratio.
So there is possibility of firm using retain earning for the increased investment
in the assets.
96

2. FIXED CAPITAL FIXED ASSETS RATIO

Fixed

Capital

to

Fixed

Assets

Ratio

Fixed

Capital

Fixed Assets x 100

YEAR

2007

2008

2009

2010

2011

FC

69678

70367

71018

71225

71301

FA

140,628

138,711

135,934

1,85,259

2,03,030

50.73

52.24

FC TO FA RATIO

49.55

38.45

35.12

(Table no: 5 , Fixed capital Fixed assets ratio)

Fixed capital to fixed assets ratio

60
50
40
30

FIXED CAPITAL TO
FIXED ASSETS
RATIO

20
10
0
2007

2008

2009

2010

2011

(Chart no: 5, Fixed capital Fixed assets ratio)

INTERPRETATION
Fixed capital to fixed assets ratio shows decreasing trend when compare to
past year 2010.Which shows company is increasing investment in fixed
assets only rather than focusing on fixed capital as well.

97

PROFITABILITY RATIO
1. GROSS PROFIT RATIO
Gross Profit Ratio is also known as Gross Margin it expresses the
relationship between Gross Profit earned on Net Sales.

GROSS PROFIT RATIO = GROSS PROFIT SALES X 100

YEAR

2007

2008

2009

2010

2011

GROSS PROFIT

777826

909034

874,782

1002479 1014793

SALES

1109385

1319666

1316595

1513596 1493767

GP RATIO

70.11

68.88

66.44

66.23

67.94

(Table no : 6, Gross Profit Ratio)

Gross profit ratio

72.00
70.00
68.00

GROSS PROFIT
RATIO

66.00
64.00
2007

2008

2009

2010

2011

(Chart no : 6 Gross Profit Ratio)

INTERPRETATION
From the above chart we can see that the GP ratio in 2011 has increased as
compared to 2010. It is a measurement of how much from each dollar of a
company's revenue is available to cover overhead, other expenses and profits.
A high gross profit margin indicates that the company can make a reasonable profit,
as long as it keeps the overhead cost in control. Gross profit margin can be used to
compare company's activity over time.
98

2 NET PROFIT RATIO

Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed
as percentage. NP ratio is used to measure the overall profitability and hence
it is very useful to proprietors. The ratio is very useful as if the net profit is not
sufficient, the firm shall not be able to achieve a satisfactory return on its
investment.
NET PROFIT RATIO = NET PROFIT SALES X 100
YEAR

2007

2008

2009

2010

2011

NET PROFIT

91978

124388

100312

117537

99820

SALES

1109385

1319666

1316595

1513596 1493767

NP RATIO

8.29

9.43

7.62

7.77

6.68

(Table no : 7, Net Profit Ratio)

Net profit ratio

10
8
6
NET
PROFIT

4
2
0
2007

2008

2009

2010

2011

(Chart no : 7 Net Profit Ratio)

INTERPRETATION
Though the gross profit ratio has increased in 2011, but due to increase in
selling and marketing expenses and other administrative expenses, the ratio
of net profit has decreased in the year 2011.

99

3. OPERATING RATIO
This ratio is used to ascertain the efficiency of a company's management by
comparing operating expense to net sales. Operating Expense ratio is the
yardstick of Operating efficiency but it should be used cautiously. Operating
ratio is the ratio of cost of goods sold plus operating expenses to net sales.
OPERATING RATIO = OPERATING EXPENSE + COST OF GOODS SOLD
SALES X 100

YEAR

2007

2008

2009

2010

2011

OPE EXP +COGS 91978

124388

100312

117537

99820

SALES

1109385

1319666 1316595

1513596 1493767

OPE RATIO

85.99

89.26

93.44

92.86

93.21

(Table no : 8, Operating Ratio)

Operating Ratio
94
92
90
88

Operating
Ratio

86
84
82
2007

2008

2009

2010

INTERPRETATION

2011

(Chart no : 8 Operating Ratio)

In the year 2011 the operating expenses are low as compared to the year
2010 due to higher sales in 2010. The smaller the ratio, greater the
organization's

ability

to

generate

profit.

When

using

this

ratio,

however, investors should be aware that it doesn't take debt repayment or

expansion into account.

100

4.RETURN ON CAPITAL EMPLOYED RATIO

The concept of capital employed means the long-term funds employed in

business supplied by the creditors and owners. It enables the management to
show whether the funds entrusted to it have been properly used or not.

RETURN ON CAPITAL EMPLOYED = NET PROFIT BEFORE INTEREST &

TAX / CAPITAL EMPLOYED X 100

CAPITAL EMPLOYED = EQUITY SHARE CAPITAL + RESERVES &

SURPLUS + SECURED LOANS

YEAR

2007

2008

2009

2010

2011

EQ.SH.CAPITAL

60000

100000

100000

100000

100000

R&S

9000

25000

36878

18000

34000

SECURED LOAN

678

954

125

947

796

CAP. EMPLOYED

69,678

125,954

137,003

1,18,947 1,34,796

101

RETURN ON CAPITAL EMPLOYED = NET PROFIT BEFORE INTEREST &

TAX / CAPITAL EMPLOYED X 100

YEAR

2007

2008

2009

2010

2011

NPBIT

105908

141536

117253

135217

121814

CAP. EMPLOYED

69,678

125,954

137,003

1,18,947 1,34,796

ROCE

152

112.37

85.58

113.68

90.37

(Table no : 9, Return on capital employed)

ROCE
200
150
ROCE

100
50
0
2007

2008

2009

2010

2011

(Chart no : 9 Return on capital employed)

INTERPRETATION
The Return on Capital Employed ratio (ROCE) tells us how much profit we
earn from the investments the shareholders have made in their company.
Compare to 2010, earning before tax is showing decreasing trend in current
year, which results into lesser return on capital employed when compare to
past year.

102

5. RETURN ON SHAREHOLDER EQUITY

The amount of net income returned as a percentage of shareholders
equity. Return on equity measures a corporation's profitability by revealing
how much profit a company generates with the money shareholders have
invested.
RETURNS ON SHAREHOLDERS EQUITY = NET PROFIT AFTER TAX
SHAREHOLDERS FUND X 100
YEAR

2007

2008

2009

2010

2011

NPAT

91978

124388

100312

117537

99820

HODERS FUND

69678

70367

71018

71225

71301

132

176.77

141.25

165.02

140.00

ROSE

(Table no : 10, Return on share holders equity)

ROSE
200
150
100

ROSE

50
0
2007

2008

2009

2010

2011

(Chart no : 10 Return on share holders equity)

INTERPRETATION
The ratio of return on shareholders fund shows decreasing trend. As compare
to 2010, profits after tax and shareholders fund are decreasing in current
year. The reason for this decreasing trend is higher tax chargeable in current
year. The ratio of return on shareholder equity indicates low profitability or low
return on shareholder fund
103

11.3.2 DU-PONT ANALYSIS

This method of performance measurement was started by the DuPont
Corporation in the 1920s. With this method, assets are measured at their
gross book value rather than at net book value in order to produce a higher
return on equity (ROE). It is also known as "DuPont identity".

DuPont
-

analysis tells

Operating

us

efficiency,

that

ROE

which

is

affected

is measured

by

by three

things:

profit

margin

- Asset use efficiency, which is measured by total asset turnover

-

Financial

leverage,

which

is measured

by

the

equity

multiplier

If RONW is unsatisfactory, the DuPont analysis helps locate the part of the
business that is underperforming.

11.3.2.1 RETURN ON NET WORTH (RONW)

Return on Net Worth is used in Finance as a measure of a companys
profitability. It reveals how much profit a company generates with the money
that the equity shareholders have invested. Therefore it is also called Return
on Equity. This ratio is useful for comparing the profitability of a company of
current year to that of past year. RONW measures how much return the
company management can generate for its equity shareholders. It is a
function of Net Profit Margin and Net worth Turnover.
RONW = NET PROFIT MARGIN X NET WORTH TURNOVER
NET PROFIT MARGIN= (PATPREFERENCEDIVIDEND) NETSALES X
100
NET WORTH TURNOVER = NET SALES NET WORTH
NET WORTH = EQUITYCAPITAL + RESERVES AND SURPLUS MISC
EXP.
104

YEAR
PAT

2007

2008

2009

91978

124388

100312

PREFERENCE

2010
117537
-

2011
99820
-

DIVIDEND
NET SALES

1109385 1319666

1316595

1513596

1493767

NET WORTH

92821

128912

158121

225383

224036

9.43

7.62

6.68

10.24

8.33

6.715662

6.667531111

96.56

63.47

53.73

44.53910782

NET

PROFIT 8.29

MARGIN
NET

WORTH 11.95

TURNOVER
RONW

99.07

(Table no : 11 Return on net worth)

RETURN ON NET WORTH

100.00
80.00
60.00
Return on Net Worth
40.00
20.00
0.00
2007

2008

2009

2010

2011

(Chart no : 11 Return on net worth)

INTERPRETATION
From the above graph, we can say that the ratio on Return on Net Worth have
a slight decreases in 2011 as compared to the year 2010, due to decrease in
net profit margin and net worth turnover i.e ( net sales in compare to net
worth) the ratio is declining. The term Net-worth means money belonging to
equity share holders and includes reserves net of fictitious assets awaiting
write off.
105

11.3.2.2 RETURN ON TOTAL ASSETS

Return on Total Assets is a ratio which measures a company's earnings
before interest and taxes (EBIT) against its total net assets. The ratio is
considered an indicator of how effectively a company is using its assets to
generate

earnings

before

contractual

obligations

must

be

paid.

The greater a company's earnings in proportion to its assets, the more

effectively

that

company

is

said

to

be

using

its assets.

RETURN ON TOTAL ASSETS = NET PROFIT MARGIN X TOTAL ASSETS

TURNOVER

TOTAL ASSETS TURNOVER =

YEAR
NET SALE
TOTAL ASSET
TOTAL ASSETS

2007

NET SALE TOTAL ASSET

2008

2009

2010

2011

1109503 1317004.
.2
06

1316613.
6

235074

179676

516048

580178

615240

755849

830320

2.15

2.27

2.14

1.80

TURNOVER

RETURN ON TOTAL ASSETS = NET PROFIT MARGIN X TOTAL ASSETS

YEAR

2007

2008

2009

2010

2011

NET PROFITMARGIN 8.29

9.43

7.62

6.68

TOTAL ASS

2.15

2.27

2.14

1.80

17.82

21.41

16.31

16.02

12.02

TURNOVER
ROTA
TURNOVER
(Table no : 12, Return on total assets)

106

RETURN ON TOTAL ASSETS

25.00
20.00
15.00

Return on Total Assets

10.00
5.00
0.00
2007

2008

2009

2010

2011

(Chart no : 12 Return on total assets)

INTERPRETATION
From the above graph, we can say that the ratio of the year 2011 has
decreased in compare t the year 2010. There is a decrease in Profit After Tax
and Sales in the year 2011 and the investment in total assets is increasing.
Due to decrease in Profit Margin and Total Assets Turnover, there is a
decrease in Return on Total Assets. The assets of the company are
comprised of both debt and equity. Both of these types of financing are used
to fund the operations of the company. The ROA figure gives investors an
idea of how effectively the company is converting the money it has to invest
into net income. The higher the ROA number, the better, because the
company is earning more money on less investment. But in this case ROA is
on a decline stage because in comparison with investment, earnings are less

107

11.3.3 RETURN ON INVESTMENT ANALYSIS

Return

on

Investment (ROI)

analysis is

one

of

several

commonly

used financial metrics for evaluating the financial consequences of business

investments, decisions, or actions. ROI analysis compares the magnitude
and timing of investment gains directly with the magnitude and timing of
investment costs. A high ROI means that investment gains compare favorably
to investment costs.
Maximization of Return on Investment is the ultimate objective of the company
management. For, it is the expectation of a high return that motivates equity
share holders to continue with the company and new investors to put in their
money in the companys equity.
Three major ratios are computed and analyzed within this broad group:
Return on Net Worth, Earning per Share and Cash Earnings per Share

11.3.3.1 RETURN ON NET WORTH (RONW)

Return on Net Worth is used in Finance as a measure of a companys
profitability. It reveals how much profit a company generates with the money
that the equity shareholders have invested. Therefore it is also called Return
on Equity. This ratio is useful for comparing the profitability of a company of
current year to that of past year. RONW measures how much return the
company management can generate for its equity shareholders. It is the
measure of overall profitability of a company after discharging cost of
borrowed capital and income tax payable to government. It is a function of Net
Profit Margin and Net Worth Turnover.

RONW = NET PROFIT MARGIN X NET WORTH TURNOVER

108

NET WORTH TURNOVER =

YEAR

2007

NET SALES NET WORTH

2008

2009

2010

2011

1109503 1317004.
.2
06

1316613.
6

235074

179676

NET WORTH

92821

128912

158121

225383

224036

NET WORTH

11.95

10.24

8.33

6.72

6.67

NET SALE

TURNOVER

RONW = NET PROFIT MARGIN X NET WORTH TURNOVER

YEAR
NET PROFIT

2007

2008

2009

2010

2011

8.29

9.43

7.62

6.68

11.95

10.24

8.33

6.72

6.67

99.07

96.56

63.47

53.73

44.54

MARGIN
NET WORTH
TURNOVER
RONW

(Table no : 13, Return on net worth)

109

Return on net worth

100.00
80.00
60.00

Return on Net
Worth

40.00
20.00
0.00
2007

2008

2009

2010

2011

(Chart no : 13 Return on net worth)

INTERPRETATION
From the above graph, we can say that the ratio on Return on Net Worth have
a slight decreases in 2011 as compared to the year 2010, due to decrease in
net profit margin and net worth turnover i.e. (net sales in compare to net
worth) the ratio is declining. The term Net-worth means money belonging to
equity share holders and includes reserves net of fictitious assets awaiting
write off.

110

11.3.3.2 EARNING PER SHARE

The portion of a company's profit allocated to each outstanding share of
common stock. Earnings per share serve as an indicator of a company's
profitability. Earnings per share are generally considered to be the single
most important variable in determining a share's price.
EARNING PER SHARE =

PAT WEIGHTED AVERAGE NO. OF EQUITY

SHARES OUTSTANDING
YEAR

2007

2008

2009

2010

2011

PAT

91978

124388

100312

117537

99820

WAESO

56428.22

56540

56995.45

57,057

EPS

1.63

2.20

1.76

2.06

57,040
1.75

(Table no : 14, Earning per share)

Earning per share

2.50
2.00
Earning Per
Share

1.50
1.00
0.50
2007

2008

2009

2010

2011

(Chart no : 14, Earning per share)

INTERPRETATION
Above shown graph depicts that in current financial year earning after tax has
reduce significantly, which is obviously result of higher chargeable tax. This
scenario affects the shareholder earning. Here earning per share has reduce
by 0.31% when compare to past year 2010.
111

11.3.3.3 CASH EARNING PER SHARE

A measure of financial performance that looks at the cash flow generated by a
company on a per share basis. This differs from basic earnings per share
(EPS), which looks at the net income of the company on a per share basis.
The higher a company's cash EPS, the better it is considered to have
performed over the period.
CASH EARNING PER SHARE = PAT + NON-CASH CHARGES
WEIGHTED AVERAGE NO. OF EQUITY SHARES O/S

YEAR

2007

2008

2009

2010

2011

PAT + NONCASH CHARGES

70,535.28

70,675.00

71,244.32

85,585.19

99,820

WANESO/S

56428.22

56540

56995.45

57,057

57,040

CASH EARNING
PER SHARE

1.25

1.25

1.25

1.5

1.75

(Table no : 15, Cash earning per share)

Cash earning per share

2.00
1.50

cash earning
per share

1.00
0.50
2007

2008

2009

2010

2011

(Chart no : 15 Cash earning per share)

INTERPRETATION
From the above graph we can say cash earnings per share is showing
increasing trend in the current financial year which is positive sign for the
company. This ratio is affected by the non-cash charge

112

11.3.4 LEVERAGE ANALYSIS

Leverage is used to describe the firms ability to use fixed-cost assets or funds
to increase the return to its owners. It is defined as the employment of assets
or funds for which the firms pays a fixed-cost or fixed return. It means the
tendency for profits to change at a faster rate than sales. There are primarily
two types of leverages Operating and Financial. The leverage associated
with investment activities is referred to as operating leverage, while leverage
associated with financing activities is called financial leverage.
OPERATING LEVERAGE
The Operating Leverage is defined as the firms ability to use fixed operating
costs to magnify the effects of changes in sales on its Earning Before Interest
and Taxes. a firm will not have Operating Leverage, if its fixed operating cost
is Zero
OPERATING LEVERAGE = CONTRIBUTION EBIT

YEAR

2007

2008

CONTRIBUTION

339072

EBIT

182297

216621

OPERATING
LEVERAGE

1.86

1.56

337929

2009

2010

286163

265604

304249

168331

184447

182185

1.7

1.44

2011

1.67

(Table no : 16, Operating leverage)

113

Operating leverage
2
1.5

Operating
Leverage

1
0.5
0
2007

2008

2009

2010

2011

(Chart no : 16, Operating leverage)

INTERPRETATION
The higher the degree of operating leverage, the greater the potential danger
from forecasting risk. That is, if a relatively small error is made in forecasting
sales, it can be magnified into large errors in cash flow projections. The
opposite is true for businesses that are less leveraged. A business that sells
millions of products a year, with each contributing slightly to paying for fixed
costs,

is

not

as

dependent

on

each

individual

sale.

FINANCIAL LEVERAGE
Financial leverage results from the presence of fixed financial charges in the
firms income statement. Financial leverage is concerned with the effects of
changes in EBIT on the earnings available to equity shareholders. It is defined
as the ability of a firm to use fixed financial charges to magnify the effects of
changes in EBIT on the Earning Per Share.
Financial leverage may be favorable, if the earnings made by the use of funds
exceed the fixed cost of using the funds.

114

FINANCIAL LEVERAGE = EBIT EBT

YEAR

2007

2008

EBIT

182297

EBT

105908

141536

FINANCIAL
LEVERAGE

1.72

1.53

216621

2009

2010

168331

184447

182185

135217

121814

117253
1.44

1.36

2011

1.5

(Table no : 17, Financial leverage)

Financial leverage
2.00
1.50

Financial
Leverage

1.00
0.50
0.00
2007

2008

2009

2010

2011

(Chart no : 17, Financial leverage)

INTERPRETATION
In the year 2011, there is an increase in the financial leverage as compared to
the year 2010. The financial leverage is favourable if the earnings made by
the use of the funds exceeds the fixed costs of using the funds. The leverage
will be considered favourable if the firms earns ore on assets purchased with
the funds than the fixed costs of their use.

115

Combined leverage
3.50
3.00
2.50

Combined
Leverage

2.00
1.50
1.00
0.50
0.00
2007

2008

2009

2010

2011

(Chart no : 18, Combined leverage)

116

11.3.5 WORKING CAPITAL ANALYSIS

As we know working capital is the life blood and the centre of a business.
Adequate amount of working capital is very much essential for the smooth
running of the business. And the most important part is the efficient
management of working capital in right time. The liquidity position of the firm
is totally effected by the management of working capital. So, a study of
changes in the uses and sources of working capital is necessary to evaluate
the efficiency with which the working capital is employed in a business. This
involves the need of working capital analysis.

Capital required for a business can be classified under two main categories
via,
1) Fixed Capital
2) Working Capital

Every business needs funds for two purposes

For its establishment

To carry out its day- to-day operations.

Long terms funds are required to create production facilities through

purchase of fixed assets such as P&M, land, building, furniture, etc.
Investments in these assets represent that part of firms capital which is
blocked on permanent or fixed basis and is called Fixed Capital

Funds are also needed for short-term purposes for the purchase of raw
material payment of wages and other dayto-day expenses etc. These funds
are known as Working Capital
In simple words, working capital refers to that part of the firms capital which is
required for financing short- term or current assets such as cash, marketable
securities, debtors & inventories. Funds, thus, invested in current assts keep
revolving fast and are being constantly converted in to cash and this cash
117

flows out again in exchange for other current assets. Hence, it is also known
as revolving or circulating capital or short term capital.
There are two concepts of working capital
1. Gross working capital
2. Net working capital

The gross working capital is the capital invested in the total current assets of
the enterprise. Current assets are those Assets which can convert in to cash
within a short period normally one accounting year.

118

1.NET

WORKING

CAPITAL

CURRENT

ASSETS

CURRENT

LIABILITIES

YEAR

2007

2008

CA

341460

CL

194307

207401

NWC

147,153

203,997

2009

2010

439911

515725

567312

192010

242851

272540

247,901

272,874

411398

2011

294,772

(Table no : 18, Net working capital )

Net working capital

300,000
250,000
200,000

Net Working Capital

150,000
100,000
50,000
2007

2008

2009

2010

2011

(Chart no : 19, Net working capital )

INTERPRETATION
From the above graph we can say that the Net Working Capital is increasing
in the year 2011 due to increase in current assets as compare to the year
2010.
Positive working capital means that the company is able to pay off its shortterm liabilities. gives investors an idea of the company's underlying
operational efficiency.

119

2.WORKING CAPITAL TURNOVER RATIO = COST OF SALES / NET

WORKING CAPITAL

YEAR

2007

2008

COST OF SALES

331,559

NWC

147,153

203,997

WCTR

2.25

2.01

410,632

2009

2010

2011

441,813

511,117

478,981

247,901

272,874

294,772

1.78

1.87

1.62

(Table no : 19, Working capita turnover )

Working capital turnover

2.50
2.00
1.50
Working Capital
Turnover

1.00
0.50
0.00
2007

2008

2009

2010

2011

(Chart no : 20, Working capita turnover )

INTERPRETATION
Working Capital Turnover Ratio provides some useful information as to how
effectively a company is using its working capital to generate sales. The
working capital turnover ratio is used to analyze the relationship between the
money used to fund operations and the sales generated from these
operations. In a general sense, the higher the working capital turnover, the
better because it means that the company is generating a lot of sales
compared to the money it uses to fund the sales. But in this case, the
expenses against sales are more as compared to sales, so it is bad sign for
the company
120

3.STOCK TURNOVER RATIO

The ratio signifying the efficiency of sales is the stock turnover ratio. It shows
the number of times the average stock is turned over during the year
STOCK TURNOVER RATIO = COST OF GOODS SOLD AVERAGE
INVENTORY
AVERAGE INVENTORY = INVENTORIES 2

YEAR

2007

2008

2009

2010

2011

COGS

331,559

410,632

441,813

511,117

478,981

AVERAGE

93042.5

118991

110654.5

143175

132278

3.56

3.45

INVENTORY
STR

3.99

3.57

3.62

(Table no : 20, Stock turnover ratio )

Stock turnover ratio

4.00
3.80
3.60
Stock Turnover Ratio

3.40
3.20
3.00
2007

2008

2009

2010

2011

(Chart no : 21, Stock turnover ratio )

INTERPRETATION
In case of Stock Turnover Ratio, the company is revealing increasing trend.
With the decrease in COGS, there is an increase in the ratio. A low turnover
implies poor sales and, therefore, excess inventory. A high ratio implies either
strong sales or ineffective buying. High inventory levels are unhealthy
because they represent an investment with a rate of return of zero. It also
opens the company up to trouble should prices begin to fall.
121

4.CURRENT ASSETS TURNOVER

Current Assets Turnover Ratio establishes the relationship between net sales
and Current assets. This ratio indicates how well the Current assets are being
utilized. A higher current assets turnover ratio indicates the capability of the
organization to achieve the maximum sales with maximum investment in
current assets. Higher current assets turnover ratio better will be the situation.
CURRENT ASSETS TURNOVER = NET SALES CURRENT ASSETS

YEAR

2007

2008

2009

NET SALES

1109385

1319666

1316595

CA

341460

411398

CAT

3.25

3.21

439911
2.99

2010

2011

1513596 1493767
515725
2.93

567312
2.63

(Table no : 21, Current assets turnover ratio )

Current assets turnover

4.00
3.00
2.00

Current Assets
Turnover

1.00
0.00
2007

2008

2009

2010

2011

(Chart no : 22, Current assets turnover ratio )

INTERPRETATION
From the above graph, it can be seen that current assets turnover ratio of the
year 2011 is decreasing as compared to the year 2010. Due to the increase in
the current assets and decrease in sales, it shows that company has ideal
assets as a buffer; sales are less as compared to the investment in assets.
This shows an ineffective utilization of assets.
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5.FIXED ASSETS TURNOVER

Fixed Assets Turnover Ratio establishes the relationship between net sales
and net fixed assets. This ratio indicates how well the fixed assets are being
utilized.
FIXED ASSETS TURNOVER = NET SALES NET FIXED ASSETS
YEAR

2007

2008

2009

NET SALES

1109385

1319666

1316595

NFA

140,628

138,711

FAT

7.89

9.51

2010

2011

1513596 1493767

135,934

185,259

9.69

8.17

203,030
7.36

(Table no : 22, Fixed assets turnover ratio )

Fixed assets turnover ratio

10.00
8.00
6.00
Fixed Assets
Turnover Ratio

4.00
2.00
0.00
2007

2008

2009

2010

2011

(Chart no : 23, Fixed assets turnover ratio )

INTERPRETATION
Fixed assets turnover ratio shows a decreasing trend. If the fixed asset
turnover ratio is low as compared to the past years of data for the firm, it
means that sales are low or the investment in plant and equipment is too
much. This may not be a serious problem if the company has just made an
investment in fixed asset to modernize
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6.TOTAL ASSETS TURNOVER:

Total Assets Turnover Ratio (TATR) is used to measure the firm's ability to
utilize its assets to generate sales. It is an indication to the firm's operation
efficiency. A lower ratio means inefficient utilization of assets.
TOTAL ASSETS TURNOVER = NET SALES TOTAL ASSETS

YEAR

2007

2008

2009

2010

2011

NET SALES

1109385

1319666

1316595

513596

1493767

TOTAL ASSETS

516048

580178

755849

830320

TAT

2.15

2.27

615240
2.14

2.00

1.80

(Table no : 23, Total assets turnover )

Total assets turnover ratio

2.50
2.00
1.50
Total Assets
Turnover Ratio

1.00
0.50
0.00
2007

2008

2009

2010

2011

(Chart no : 24, Total assets turnover )

INTERPRETATION
As compared to 2010, the Total Assets Turnover Ratio is decreasing in the
year 2011. The lower the total asset turnover ratio, as compared to historical
data for the firm and industry data, the more sluggish the firm's sales. This
may indicate a problem with one or more of the asset categories composing
total assets - inventory, receivables, or fixed assets. The firm should analyze
the various asset classes to determine in which current or fixed asset the
problem lies.
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11.4 HUMAN RESOURCE DEPARTMENT

11.4.1 CORE VALUES
Togetherness people who work together and share the same goals achieve
greater results. They motivate each other and know that pulling together is
more rewarding than doing it alone.
Spirit people with a can-do spirit have a winning attitude and never give up.
They are prepared and committed to do what it takes to succeed.
Passion passionate people have the power to change the world. They love
what they do, they believe in it. They know deep down that they can make a
difference.

11.4.2 CULTURE: THE ORIFLAME WAY

REVLON is a fast growing company, with ambitions to constantly attract new
people and add new markets to its world. The people behind Revlon are the
reason for the Companys success. But how does one run a company with
more than three million consultants all over the world who speak different
languages and hold different values, religious beliefs and political convictions?
The key is the corporate culture. A common culture is an invisible bond. It has
the power to unite, enthuse and lead people over borders and boundaries that
might otherwise separate them. Revlon culture is based on entrepreneurship
as well as respect for and belief in peoples capability.
Revlons corporate culture was created in the early years of the Company and
formed in conditions of strong competition and financial challenges. The
culture is a direct result of the approach that proved most stimulating and
effective. It is built on values such as mutual trust and respect, entrepreneurial
spirit, customer focus and quality demands and it is reflected in all parts of the
organization, as well as in the approach to social responsibility.
Revlons corporate culture can be summarized in three key values;
togetherness, spirit and passion. All employees are required to be familiar

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with the Companys values, history and driving forces, called The Revlon
Way, as these are the keys to Revlos continued success.
Protecting the corporate culture has been one of the greatest and most
important challenges to the Company during its strong growth.
The Revlon Way
Revlon wants to ensure that all employees understand the core values and
operating principles of the Revlon culture. The Revlon Way is a one-day
seminar presented by senior manager trained for this purpose. The seminar is
given in English, Russian and Spanish to fully reach its target audience. To
date, 1,380 employees have attended the Revlon Way and the CEO and
President Magnus Brnnstrm has personally conducted 50 of these training
sessions, as it is a highly prioritized matter in the Company.

11.4.3 SUPPORT TOOLS

Sales consultants are offered a number of tools to help them succeed,
coordinated in SARPIO Sales and Recruitment Processes in Revlon.
SARPIO is the global platform for processes, training and communication. It
has been developed in order to offer consultants support in developing and
managing themselves and their businesses, while ensuring that they convey
the Revlon brand in a consistent way. In 2009, Oriflame launched a new
management tool for the sales force in most markets. This tool helps sales
consultants to track performance of their network and identify action areas
that can improve business effectiveness. It also improves communication with
the sales force.
During the past years the online activity among the Revlon sales consultants
has increased dramatically. Around 50 percent of the sales force uses the
online services and more than half of all orders are placed through the online
ordering. Moreover, online social networks are becoming significant grounds
for sales and recruitment activities. As time spent online increases, the sales
force is provided with new tools that allow them to continue their business
activity in this environment. During the year Revlon conducted a pilot rollout of

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an e-learning concept to coach and support the sales force in their selling and
recruiting activities. The response has been very positive and the intention is
to continue the e-learning initiative globally going forward.

11.4.4 A CREATIVE CAREER OPPORTUNITY

A creative career at Revlon means a unique possibility to be involved in the
production of one of the worlds largest beauty publications. The core team
consists of art directors, layout artists, layout editors and copywriters.
Production involves project management, image retouching and prepress,
print production coordination, technical layout and text editing. The catalogue
planners, creative directors, project managers, creative category managers,
print production coordinators, photography coordinators, model bookers,
stylists, image retouches and text functions support every step of the creation
and production process.

11.4.5 STRIVING TO BECOME NUMBER ONE WORKPLACE

Striving to become the number one beauty company selling direct, Revlon
needs to become the number one workplace. Revlon presents a stimulating,
creative and dynamic working environment that empowers people to grow as
people and professionals, whether they are employees or independent sales
consultants. The greatest challenge is to preserve core values and a genuine
sense of entrepreneurship, as Revlon grows and requires more structure.
Attract, develop and retain Revlon has 3.2 million independent sales
consultants in 62 countries. In addition to this the Company has over 8,000
employees located in offices all over the world. To retain these people and to
be able to attract outstanding professionals, Revlon must offer motivation and
potential for development. The Company presents a stimulating and
entrepreneurial working environment that empowers people to grow as people
and professionals, whether they are employees or independent sales
consultants .Revlon consultants get the chance to run their own company
setting their own targets, planning income and working hours and sometimes
even changing their lives. Revlons employees develop both in their day-today work and in Revlon Academy, a unique training program created to
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support and strengthen Revlons culture. Revlon has also implemented a new
strategy for compensation and benefits. In order to find the right person for
each position, a performance management and an internal succession
planning system have been adopted.

11.4.6 DIVERSITY
Embracing and actively working to sustain diversity, Revlon aspires to be a
company that reflects the globally diverse audience that it serves. In addition
to hiring the best talent, Revlon believes that diversity of gender, nationalities
and cultures leads to the creation of better perspectives, ideas and products.
The diversity of employees and partners serves as the foundation of better
service for customers and stakeholders all over the world. Revlon takes pride
in offering the people who join the Company an opportunity to work abroad in
one of the many countries where they have a presence. Revlon has offices in
more than 60 countries, each of which is a venue for diversity and common
experience, not least the Stockholm office where people from more than 30
countries work together towards the same goals a truly unique working
environment. Revlon hosts three major international conferences every year
in various, carefully chosen locations. The conferences provide an opportunity
for leaders to exchange experience and ideas with top management and
colleagues from all over the world. Last years Gold Conference in Rome
hosted a record number of 4,800 attendees from 58 markets.

11.4.7 GENDER EQUALITY

Revlon always strives for an even distribution of gender and ethnical
background within all categories of employees at all levels. All employees
should be evaluated based on the same basic principles; performance,
experience and potential. Their ambition is that the work environment at
Revlon shall be suitable for all employees, men as well as women, who
should find it possible to combine work with the responsibility of having and
raising children. When recruiting, Revlon always wants to review both female
and male candidates. According to statistics for the global top 200, the
Company is close to a gender distribution of 60/40 in favour of men. Looking
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forward, this gives the Company a very good base for recruiting women into
top management. Revlon always strives to secure equal pay for equal work
and performance benchmarked against external market data. A salary
mapping comparing wages has been conducted between men and women at
the Stockholm office and it shows the Company is compliant with both law
and policy for equal opportunities when it comes to differentiating between
women and men based on gender.
In 2009, a global policy for equal opportunities was published together with
two target actions for gender equality A mentoring program was
implemented for top women in the Company and a program aimed at women
with leadership potential was initiated and will be introduced as a topic at
Revlon Academy.

11.4.8 THE RIGHT PEOPLE ON THE BUS

In order to grow and reach the corporate vision, they have to drive and focus
on Talent Management processes in the Company. The concept Having the
right people on the bus was launched in 2009. The concept consists of two
parts. The first part involves presentation and training in the crucial processes
for attracting, recruiting, developing and retaining key people. The second part
focuses on forming cost-efficient and effective strategies, actions and
responsibilities for People and Culture together with management. The
purpose of the concept is to establish a structured framework, an explicit
ownership and a sharp agenda in each Region/Market/Department in Revlon.

11.4.9 THE ORIFLAME ACADEMY

Revlons most important training programmers for managers are found in
Revlon Academy, implemented in 2006. The internal three-step development
programmer for managers has been created to support and strengthen
Revlons culture, increasing integration, strategic understanding as well as
leadership and management skills.

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11.4.10 GLOBAL INDUCTION PROGRAM

In 2009, a new global introduction process was implemented as a way of
welcoming new hires to Revlon. The process begins before a new employee
arrives and lasts up to a year or longer after the employee is in place. The
purpose of the process is to ensure that all new hires get up to full speed as
quickly and smoothly as possible, feeling that they made the right choice
when they decided to join Revlon.
The introduction focuses on introducing the new hire to his/her role, explaining
how it relates to Revlons overall functions, activities and vision. The process
also involves setting performance targets, as well as enrolling the new hire in
the Revlon and Revlon Academy training.

11.4.11 ENCOURAGEMENT AND MOTIVATION

Revlon has a well-developed system for encouraging sales consultants. An
important part of this is the Success Plan, according to which sales
consultants are rewarded for their own sales, as well as those of any
consultant within their network. This provides sales consultants with an
incentive to maximize network sales and to enlist new consultants to grow the
scope of their network. Apart from the financial rewards, successful sales
consultants and network builders are also rewarded with Senior Manager and
Director Titles depending on their achievements. Increasingly important
means of encouragement are the cost-free training programmers and
seminars that Revlon offers. Every year, Revlon hosts three major
international conferences in exotic locations. The conferences are an integral
part of the overall Success Plan where a title has to be met in combination
with reaching a certain qualification each year. At the conferences, the
Company has an opportunity to launch key initiatives for the leaders and have
product experts presenting the science behind the products. An equally
important aspect is the venue that the conferences provide for leaders to
exchange ideas with top management and between themselves. Last years
Gold Conference in Rome hosted a record number of 4,800 attendees from

130

58 countries. Revlon has been awarded several times for these extraordinary
events.
11.4.12 REVLON COMPENSATION PLAN
The first way to make money is by selling products to retail customers. One
can do this by doing group presentations, one-on-one sales presentations or
by sharing catalogs with friends and family members. When one do this, one
keep the wholesale retail difference. In most cases, this is somewhere
between 20% and 40% of the selling price. Sometimes its more and
sometimes its less. It varies by product and whether or not one gives his
customers any type of discount. Every product has a suggested retail price.
The amount one charges customers is up to him.
The next way to make money in the Revlon business is to sponsor new
distributors. When you sponsor people into the Revlon business, you can earn
money off their sales too. When they sell products to customers and sponsor
new distributors, you earn a small commission off each sale. As their sales
increase and their down line grows, your commissions grow and you make
more money. Therefore, its in your best interest to help your new Revlon
distributors succeed.
The final way to make money in the Revlon business is with leadership
rewards and incentives. When you build a large down line and generate lots
of sales volume, Revlon will reward you with cash incentives, gifts, travel
opportunities and more. The amount of money you can earn is unlimited. Its
all based off your sales volume and your groups sales volume. The more
volume your total business does the more money you make.

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11.5 INFORMATION TECHNOLOGY

The experience and expertise at Revlon is so progressive with more than 40
years experience, over 100 scientists and state of the art R&D facilities. They
are constantly searching for better solutions and technologies in order to
create innovative products that are consistently on-trend and meeting
Consumer needs.
The research process starts with identifying consumer insights, meaning
they need to gain a deep understanding of their target consumers attitudes
and beliefs in order to create products that can change behavior. Therefore,
they are constantly analyzing the latest beauty and cosmetic trends and
communicating directly with consumers through our advanced market
research techniques. An Revlon products life begins at its Skin Research
Institute, where sophisticated science is used to create unique and sometimes
patented technologies that give them the leading edge on their competitors.
These new technologies are then passed on to the scientists in its Product
Development Centre in Dublin, whose role it is to create a cosmetic formula
that fits within an existing Revlon brand or has the potential to start a new
one, bring it to manufacture and enable its sales. Most importantly though
their role is to create a product that customer will love and enjoy using.
At Oriderm, its in house testing facility, high tech equipment is used to
measure the performance of the products directly on the skin of volunteers.
This allows it to see real results on real skin and provides customers with the
confidence what the claims they read in the catalogue really are true. Using
the best of science is obviously extremely important to the creation of its
products, but it also strives to apply the highest quality and ethical standards
to everything it does thats our Swedish nature for you!

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11.6 OTHERS
CORPORATE SOCIAL RESPONSIBILITY
Revlon, believe that companies have the same moral responsibilities as
individuals. This belief has guided its operations for over 40 years, and
continues to shape the Companys social and environmental responsibility. It
is about fulfilling dreams in a natural, progressive and ethical way and it is
particularly important for an international company like Revlon, which
operates in many different countries and cultures.
Revlons view of Corporate Social Responsibility (CSR) encompasses
applying a responsible business model, which empowers people and provides
them with tools to enrich their lives. Becoming a sales consultant for Revlon
provides financial opportunities from the first day but never any risk. Apart
from contributing to the communities in which the Company operates by
providing employment and business opportunities, Revlon also supports
charities on a local, regional and global level. In addition, the Company
continuously strives to minimize negative impact on the environment in all
areas of its operations.revlon is committed to the ten principles of the United
Nations Global Compact. These apply to the areas of human rights, labour
standards, the environment and anti-corruption. The Company worked during
the year to integrate these principles into the Code of Conduct and to ensure
that they permeate all aspects of the business. Revlon strives to make sure
that its suppliers are committed to operating in line with policies and
requirements regarding wages, working hours, child labor, etc. Revlon
manufactures 46 percent of all products in-house, five internal factories
produce skincare creams and liquids, foundations, mascaras, lipsticks,
personal care and hair care products as well as fragrances. The remaining
part of the product range, which includes cosmetics, accessories and food
supplements is produced by external suppliers in Europe, the United States
and Asia, both for finished products and accessories.

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11.6.1 CHARITY INITIATIVES

Revlon is a grass roots company, which means that it is provided with a
unique insight into the lives, conditions and needs of people around the world.
Revlon has a long tradition of supporting projects aimed at improving living
conditions for the underprivileged in the countries where the Company
operates. The purpose of these initiatives is primarily to defend the rights of
children.
The various charity activities in which Revlon is involved include funding,
product donations and the time and energy of employees spent in numerous
social causes. One of these is the World Childhood Foundation under the
patronage of HM Queen Silvia of Sweden, which Revlon co-founded in 1999.
Another is the Af Jochnick Foundation that continues to provide grants to local
charities. Their objective is to assist 100,000 children with education over a
period of ten years to ensure their survival, security and progress. Meanwhile,
each day in communities around the globe, many of Revlons employees and
consultants are committing their time to support charitable initiatives.

11.6.2 REVLON FOUNDATION

Revlon is proud of all good work, but realize that as the business continues to
grow and the Revlon brand becomes more recognized around the world,
there is a need to better coordinate, support, and ultimately increase the
charitable work undertaken across our markets. The decision was therefore
taken during 2009 to set in motion a process designed to enhance and
expand Revlons charitable giving program, under the global framework of the
Revlon Foundation. Revlon Foundations mission is providing help to children
and young women through a wide range of educational initiatives so that they
can have the opportunity to change their lives for the better and are
empowered to turn their dreams into reality. By offering a selection of charity
products and accessories, the aim is to raise one million Euros during the
Foundations first year, and to double this amount during the following two
years. In order to create greater impact and focus for the charitable efforts in a
more determined and sustainable way, Revlon will partner with a global NGO
134

that supports focus and can assist the Company in establishing charity
initiatives in all markets around the world.
When formulating new products, Revlon makes a point of striving to use
natural ingredients that are in line with the Companys Environmental Policies
and are not harmful to the environment. All primary surfactants and
preservatives have a good biodegradability profile. Scientific reports on
environmental issues are continuously being monitored to ensure that action
can be taken to replace suspect ingredients or packaging materials. Revlon
was one of the first companies to utilize plant extracts in skin care products
and has always tried to optimize the use of ingredients from renewable plant
sources. Revlon has strong animal welfare policies. No Revlon products
contain ingredients which cause suffering to animals. Revlon products have
never been tested on animals. Consumer safety has always been considered
a top priority for Revlon and the Company has very strict policies for
ingredient selection, formulation and safety testing. All Revlon cosmetic
products are fully compliant with the latest European and other international
regulations. All cosmetic products are manufactured in line with the
international guidelines on Good Manufacturing Practices for cosmetics.
At present, Revlon owns and operates five cosmetic manufacturing plants in
Poland, Sweden, India, China and Russia. Energy conservation, greenhouse
gas reduction, waste reduction and water use are key considerations in the
design of these plants and the production equipment used Revlon there. Work
continuously to monitor environmental data at our factories to identify
opportunities for improvement. Moreover, as regulatory requirements vary in
different parts of the world, Revlon adapts its policies to comply with the ever
changing and increasingly demanding environmental legislation at local and
international levels.

135

SWOT ANALYSIS

STRENGTH
WEAKNESSES
OPPORTUNITIES
THREATS
136

SWOT ANALYSIS
12.1SWOT ANALYSIS
Revlon, SWOT Analysis company profile is the essential source for top-level
company data and information. Revlon, SWOT Analysis examines the
companys key business structure and operations, history and products, and
provides summary analysis of its key revenue lines and strategy.

Revlon ('the company') is engaged in the production, marketing and selling of

an array of cosmetics, hair color, beauty tools, anti per spirants deodorants,
fragrances, skincare and other beauty care products. The company operates
in North America, Asia-Pacific, Europe, Africa, and Latin America. It is
headquartered in New York City, New York and employs 4,900 people. The
company recorded revenues of $1,321.4 million during the financial year
ended December 2010 (FY2010), an increase of 2% over FY2009. The
operating profit of the company was $199.8 million in FY2010, an increase of
17% over FY2009. The net profit was $327.3 million in FY2010, as compared
to

net

profit

of

$48.8

million

in

FY2009

at

Revlon

products.

SWOT analysis is a strategic planning method used to evaluate the Strengths,

Weaknesses, Opportunities,

and Threats

involved

in

project or

in

a business venture. It involves specifying the objective of the business

venture or project and identifying the internal and external factors that are
favorable and unfavorable to achieve that objective.
Setting the objective should be done after the SWOT analysis has been
performed. This would allow achievable goals or objectives to be set for the
organization.
The aim of any SWOT analysis is to identify the key internal and external
factors that are important to achieving the objective. These come from within
the company's unique value chain. SWOT analysis groups key pieces of
information into two main categories:
137

Internal factors The strengths and weaknesses internal to the

organization.

External factors The opportunities and threats presented by the

external environment to the organization.

The internal factors may be viewed as strengths or weaknesses depending

upon their impact on the organization's objectives. What may represent
strengths with respect to one objective may be weaknesses for another
objective. The factors may include all of the 4Ps; as well as personnel,
finance, manufacturing capabilities, and so on.
The external factors may include macroeconomic matters, technological
change, legislation, and socio-cultural changes, as well as changes in the
marketplace or competitive position. The results are often presented in the
form of a matrix.

STRENGTHS: characteristics of the business, or project team

that give it an advantage over others

WEAKNESSES (or Limitations): are characteristics that place

the team at a disadvantage relative to others

OPPORTUNITIES: external chances to improve performance

(e.g. make greater profits) in the environment

THREATS: external elements in the environment that could

cause trouble for the business or project

Identification of SWOTs is essential because subsequent steps in the process

of planning for achievement of the selected objective may be derived from the
SWOTs.
First, the decision makers have to determine whether the objective is
attainable, given the SWOTs. If the objective is NOT attainable a different
objective must be selected and the process repeated.
138

Users of SWOT analysis need to ask and answer questions that generate
meaningful

information

for

each

category

(strengths,

opportunities,

weaknesses, and threats) in order to maximize the benefits of this evaluation

and find their competitive advantage
SWOT analysis is just one method of categorization and has its own
weaknesses. For example, it may tend to persuade companies to compile lists
rather than think about what is actually important in achieving objectives. It
also presents the resulting lists uncritically and without clear prioritization so
that, for example, weak opportunities may appear to balance strong threats.
It is prudent not to eliminate too quickly any candidate SWOT entry. The
importance of individual SWOTs will be revealed by the value of the strategies
it generates. A SWOT item that produces valuable strategies is important. A
SWOT item that generates no strategies is not important.
The cosmetics industry plays a significant part in the economy. In this sense,
the industry study proves to be useful since it provide findings as to the past
and current situation of the industry. This study can be classified according to
the famous (SWOT) Strength, Weaknesses, Opportunities, and Threats
format.

STRENGTH

Revlon is the major player in cosmetics, skin care, and fragrance and
Personal care products. It has long history of 75 years.

Famous brand especially among the womens.

Despite of heavy debt and net losses from last few years. Product
Development is the main focus area for Revlon.
Strong research and development.
Revlon products are sold in more than 100 countries.
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 Revlon 43 percent sales are from United States market.

It has been supporting several health programs for Women.
Advertising is one of the key areas for Revlon.
Revlon aims to provide quality products.

Distribution channels are well managed that the reason Revlon products are
Used in more than 100 countries of the world.

During the three decades, from 1970 to 1990, the cosmetics industry gained
momentum in its extensive development through per capita consumption.
Even some segments may vary; the cosmetic industry is near maturity. The
current annual retail sales of the industry totaled up to $14.5 billion.
The first quarter of this current year has seen a demand beginning to revive
and trend is expected to continue well into the following year.
Over the years Revlon has launched thousands of products conveying the
Revlon product philosophy combining the wisdom of nature with the best of
science providing a wide portfolio affordable for the many people. Revlons
products are developed using cutting-edge technology and products are
manufactured according to the highest quality standards. Revlons Cosmetics
offers over 900 cosmetic products at any given time, more than a third of
which are newly introduced each year.
At the first sign of an economic slowdown in 2008, Revlon started adapting
the catalogue offers promoting more value for-money products. This had a
beneficial impact on overall sales in 2009 and led to a positive product mix for
different target groups and people with varying incomes. At this time, the
Company created products that were on trend for 2009. At the same time,
Revlon increased prices by approximately 5 percent on average.
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WEAKNESSES

Weak financial position due to net losses and heavy debts.

Cutting down number of jobs reduce employee trust on the Company.

Continuous changes in the Organizational Structure may impact the

performance for employees.

Besides advertising other marketing areas are the weak.

Opportunities

Accounting to the past developments, the cosmetics industry has never been
always in such a case. The industry is no longer recession-proof and is now
bound for depressions and declinations. Actually, the sales in the past year
are slow moving because of downed consumer spending. Consumers that
time then tend to settle for the less expensive lines.
Another setback of the industry is the demand-price ratio. Within the past five
years, the prices were invariable and steady but promotion budgets were
growing and getting greater than ever.

OPPORTUNITIES

Revlon is currently facing financial problems so joint ventures or

partnership with other players in the industry may open the doors of
new opportunities.

Utilize all marketing methods to promote its products; it will help to

boost the sales of the company.

Develop products for male segment

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In keeping away from a potential head-on competition, a strategy of focusing

on special niches proved to be effective especially in the struggle with the
industry leaders. This has been a great line of attack adopted by smaller
companies in their contest with the market leaders. They survive and exist
through specializing in niches, differentiating the product lines, and focusing
on market segment. A potential huge market has been spotted on men as
they account for 50% of adult population that consume one-fifth of cosmetic
sales. The failure of the market leaders in such opportunity provides hint to
smaller companies as to what would be the proper and better approach to the
market. Furthermore, the senior citizen population is a large growing market
segment which should be given focus as the populations needs were not
being met.

The Revlon Business Opportunity Concept is built on four Strategic

Cornerstones; Brands & Products, Network Marketing, World Class Service
and People & Culture. The Revlon supply chain organization is one of the
main pillars of the strategic cornerstone; World Class Service. It is the
ultimate objective of the supply chain organization to deliver an industry
leading service to the sales organization, to the consultants and to the end
customers.

In recent years, Revlon has implemented a new operating

platform, locating Revlon marketing, catalogue and supply functions to

Stockholm, Sweden and expanding central and regional logistic hubs in
Warsaw, Poland and Moscow, Russia. In 2009 the integration of the Baltic
markets into the Warsaw Group Distribution Centre was finalized. During the
year a new supply chain management system was implemented, providing
higher transparency and better responsiveness throughout the planning cycle.
The roll-out to Revlon markets will continue as planned during 2010. A new
Group Distribution Centre will be established in Budapest serving neighboring
countries. By consolidating the inventory closer to the consultants and by
eliminating intermediate warehouses in the various markets, the lead times
will be shortened, product availability will be improved and the inventory will
be better controlled and managed

142

THREATS

Intense competition with major players of the industry including Procter

& Gamble, Unilever, LOreal,

Rapid changes in fashion may require heavy budgets for product

development & marketing. Revlon has to find some financial assistance
to support its operation to sustain its position in the industry.

Revlon selling its products through websites but it havent made efforts
to develop relations with the customers through online channels.

Government instability and variation in exchange rate in few countries

Focused towards woman segment

Notwithstanding the apparent growth of the cosmetic industry during the past
four decades, there are currently more than 700 growing cosmetic companies
competing in the market. Additionally, there are also market leaders that
dominate the cosmetic industry. Consequently, it creates stiff and intensifying
competition especially to those smaller companies as market leaders are
putting pressure on these smaller cosmetic companies. Competitors being a
cosmetics company selling direct means that Revlon compete both with major
cosmetics manufacturers for end customers as well as with other direct sellers
for consultants.

Some of the largest competitors to revlon in Eastern Europe are the global
manufacturers Procter & Gamble, LOreal, Beiersdorf and Unilever, while the
Russian company Kalina has been very successful in key markets such as
Russia, Ukraine and Kazakhstan. The two largest cosmetics companies
selling direct in Eastern Europe, are by a wide margin Revlon and Avon, but
there are many other direct sellers that compete for consultants. Russian
Faberlic and the American direct sellers Mary Kay and Amway are some of
143

the companies that have built a large sales force of consultants during recent
years. Direct sales as a channel is estimated to have more than 20 percent of
the total C&T market in Eastern Europe.

This is higher than the global

average of approximately 11 percent. In Latin America, Revlon is still a small

player in the cosmetics market. Avon has been very successful in this region
as well as many local companies, such as Natura, Esika, Yanbal and Jafra.
Direct sales are very popular in this region and depending on country, it is
estimated that this channel has taken about 30 percent of the total C&T
market. According to Euromonitor, the largest cosmetics manufacturers in
Revlons Asian markets are Unilever, Procter & Gamble and LOreal. Direct
sales has a significant share of the market in China, with Amway, Avon and
Mary Kay being the largest direct sellers, while Amway and Revlons have the
largest market share among direct sellers in Indonesia and India.

144

SWOT ANALYSIS
1. Effective communication

Strength

2. High R&D
3. Innovation
4. Loyal customers
5. Market share leadership
6. Strong brand equity

7. Uniqueproduct

Weakness

1.

Over leveraged financial position

2. Not diversified
3. Poor supply chain
4. Weak management team
5.

Opportunity

Week product related service

1. Financial markets (raise money through debt, etc)

2. Emerging markets and expansion abroad
3. Innovation
4. Online
5. Product and services expansion
6. Takeovers

Threats

1. Competition
2. Economic slowdown
3. External changes (government, politics, taxes, etc)
4. Exchange rate fluctuations
5. Lower cost competitors or imports
6. Maturing categories, products, or services
7. Price wars

145

INDUSTRY ANALYSES

Scope of Revlon
Reasons To Purchase
Competition level
Competitive force
Porters five force
analysis

146

INDUSTRY ANALYSES
An industry is a group of firms producing products that are close substitutes.
In the course of competition, these firms influence one another. Typically,
industries include a mixture of competitive strategies that companies use in
pursuing above-average returns.
The Indian cosmetics industry, which witnessed a strong growth in the recent
years, has emerged as one of the markets holding immense growth potential.
With the rising beauty concerns among both men and women, the Indian
cosmetics sector would continue to expand remarkably in near future. New
product launches catering to consumers' growing requirements would fuel
growth in the industry, for which the future outlook seems exceptionally bright.

SCOPE OF REVLON

Examines and identifies key information and issues about Revlon, Inc.
for business intelligence requirements;

Studies

and

presents

the

company's

strengths,

weaknesses,

opportunities (growth potential) and threats (competition). Strategic and

operational business information is objectively reported;

Provides analysis on financial ratios of the company;

The profile also contains information on business operations, company

history, major products and services, prospects, key competitors, key
employees, locations and subsidiaries.

Provides all the crucial information on Revlon, Inc. required for

business and competitor intelligence needs

Contains a study of the major internal and external factors affecting

Revlon, Inc. in the form of a SWOT analysis as well as a breakdown
and examination of leading product revenue streams of Revlon, Inc.

Data is supplemented with details on Revlon, Inc. history, key

executives, business description, locations and subsidiaries as well as
a list of products and services and the latest available statement from
Revlon.
147

REASONS TO PURCHASE
Quickly enhance your understanding of Revlon,
Gain insight into the marketplace and a better understanding of
internal and external factors which could impact the industry;
Increase

business/sales

activities

by

understanding

your

competitors' businesses better;

Recognize potential partnerships and suppliers;
Obtain yearly profitability figures
Support

sales

activities

by

understanding

your

customers

businesses better
Understand prospective partners and suppliers
Keep fully up to date on your competitors business structure,
strategy and prospects
Obtain the most up to date company information available

148

COMPETITION LEVELS
Businesses compete on several levels and it is important for them to analyze
these levels so that they can understand the demand. Competition is
identified on four levels:
Consumer needs: level of competition that refers to the needs and
desires of consumers. A business should ask: What are the desires of
the consumers?
General competition: The kind of consumer demand. For example: do
consumers prefer shaving with electric razor or a razor blade?
Brand: This level refers to brand competition. Which brands are
preferable to a consumer?
Product: This level refers to the type of demand. Thus what types of
products do consumers prefer?

Another important aspect of a competition analysis is to increase the

consumer insight. For example: [Ducati] has, by interviewing a lot of
their customers, concluded that their main competitor is not another bicycle,
but sport-carslike [Porsche] or [GM]. This will of course influence the
competition level within this business.

149

COMPETITIVE FORCES
These are forces that determine the level of competition within a particular
market. There are six forces that have to be taken into consideration, power of
the competition, threat of new entrants, bargaining power of buyers and
suppliers, threat of substitute products and the importance of complementary
products. This analysis is described in Porter 5 forces analysis.

PORTER'S FIVE FORCES ANALYSIS

Porter's five forces is a framework for the industry analysis and business
strategy development developed by Michael E.Porter of Harvard Business
School in1979. It draws upon Industrial Organization (IO) economics to derive
five

forces

that

determine

the

competitive

intensity

and

therefore

attractiveness of a market.
Attractiveness in this context refers to the overall industry profitability. An
"unattractive" industry is one in which the combination of these five forces
acts to drive down overall profitability. A very unattractive industry would be
one approaching "pure competition", in which available profits for all firms are
driven to normal profit.

The five force model of competition expands the arena for competitive
analysis. When studying the competitive environment, firms concentrated on
companies with which they competed directly.
Porter's five forces include three forces from 'horizontal' competition: threat
of substitute products, the threat of established rivals, and the threat of new
entrants; and two forces from 'vertical' competition: the bargaining power
of suppliers and the bargaining power of customers.

150

THE THREAT OF THE ENTRY OF NEW COMPETITORS

Identifying the new entrants is important because they can threaten the
market share of existing competitors.
Profitable markets that yield high returns will attract new firms. This results in
many new entrants, which eventually will decrease profitability for all firms in
the industry. Unless the entry of new firms can be blocked by incumbents, the
profit rate will fall towards zero (perfect competition).

The existence of barriers to entry (patents, rights, etc.) The most

attractive segment is one in which entry barriers are high and exit
barriers are low. Few new firms can enter and non-performing firms
can exit easily.

Economies of product differences

Brand equity

Switching costs or sunk costs

Capital requirements

Access to distribution

Customer loyalty to established brands

Absolute cost advantages

Learning curve advantages

Expected retaliation by incumbents

Government policies

Industry profitability; the more profitable the industry, the more

attractive it will be to new competitors

151

THE INTENSITY OF COMPETITIVE RIVALRY

For most industries, the intensity of competitive rivalry is the major

determinant of the competitiveness of the industry.

Sustainable competitive advantage through innovation

Competition between online and offline companies; click-and-mortar -vslags on a bridge

Level of advertising expense

Powerful competitive strategy

The visibilities of proprietary items on the Web used by a company

which can intensify competitive pressures on their rivals.

How will competition react to a certain behavior by another firm?

Competitive rivalry is likely to be based on dimensions such as price,
quality, and innovation. Technological advances protect companies from
competition. This applies to products and services. Companies that are
successful with introducing new technology are able to charge higher
prices and achieve higher profits, until competitors imitate them. Examples
of recent technology advantage in have been mp3 players and mobile
telephones. Vertical integration is a strategy to reduce a business' own
cost and thereby intensify pressure on its rival.

152

THE THREAT OF SUBSTITUTE PRODUCTS OR SERVICES

Substitute products are goods or services from outside a given industry that
perform similar or same functions as a product that the industry produces. Eg.
Revlon Optimals White Foaming cleanser and cleanser/face wash for
oily/combination skin, Revlon Tea Tree Purifying Wash & Tone Gel and
Garnier Light Fairness Face Wash.
The existence of products outside of the realm of the common product
boundaries increases the propensity of customers to switch to alternatives:

Buyer propensity to substitute

Relative price performance of substitute

Buyer switching costs

Perceived level of product differentiation

Number of substitute products available in the market

Ease of substitution. Information-based products are more prone to

substitution, as online product can easily replace material product.

Substandard product

Quality depreciation

153

THE BARGAINING POWER OF CUSTOMERS (BUYERS)

The bargaining power of customers is also described as the market of
outputs: the ability of customers to put the firm under pressure, which also
affects the customer's sensitivity to price changes.

Buyer concentration to firm concentration ratio

Degree of dependency upon existing channels of distribution

Bargaining leverage, particularly in industries with high fixed costs

Buyer volume

Buyer switching costs relative to firm switching costs

Buyer information availability

Ability to backward integrate

Availability of existing substitute products

Buyer price sensitivity

Differential advantage (uniqueness) of industry products

RFM ( recency, frequency, monetary value) Analysis

154

THE BARGAINING POWER OF SUPPLIERS

The bargaining power of suppliers is also described as the market of inputs.
Suppliers of raw materials, components, labor, and services (such as
expertise) to the firm can be a source of power over the firm, when there are
few substitutes. Suppliers may refuse to work with the firm, or, e.g., charge
excessively high prices for unique resources.

Supplier switching costs relative to firm switching costs

Degree of differentiation of inputs

Impact of inputs on cost or differentiation

Presence of substitute inputs

Strength of distribution channel

Supplier concentration to firm concentration ratio

Supplier competition - ability to forward vertically integrate and cut out

the buyer

155

CONCLUSION

CONCLUSION

156

CONCLUSION
It is concluded that the Revlon siness is a viable business opportunity for the
following reasons. First and foremost, they offer exceptional products at
reasonable prices. And all products come with a 100% money back
guarantee. Next, they have a good reputation, a strong financial backing and
exceptional leadership. Additionally, they offer a good compensation plan and
great distributor support. Simply put, they have everything thats required in a
good direct selling company.
The Company is providing a wide assortment of distinct product brands at
affordable prices:
Assured product performance at value for money
High purity ingredients and strict manufacturing standards
High ethical standards and stringent environmental policies
Your key to success is to find a good sponsor, build a large retail customer
base, and continuously sponsor new distributors into your Revlon business. If
you can do that, you will make money and build a profitable Revlon business.
Please know that Revlon is not a get rich quick business opportunity. It takes
time and effort to succeed, just like any other viable business model.
On a side note, if you have a good experience with the company, why not
share your story? On the bottom of this page, you can fill out the web form to
share your Revlon experience with others. You can give a product testimonial
or share your business experiences with others. Be sure to check it out!

157

ANNEXURE

158

Profit & Loss Account

DR
P&L A/C

2008

2009

2010

2011

Operating
11408
Exp
Cost
of 80570
goods sold
NPBIT
105908

100000

9322

100037

90020

24388

90990

17500

9800

141536

117253

135217

121814

ROCE
Profit
tax
EBIT

152
after 91978

112.37
124388

85.58
100312

113.68
117537

90.37
99820

182297

216621

168331

184447

182185

105908

141536

117253

135217

121814

Net sales

1109503.2

1317004.06

1316613.6

235074

179676

Net profit

91978

124388

100312

117537

99820

1109385

1319666

1316595

1513596

1493767

777826

909034

874,782

1002479

1014793

EBT

2007

Miss.exp

CR
Sales
EPS

Gross profit
Total

159

Balance sheet of REVLON as on 31ST March

LIABILITIES

2007

2008

2009

2010

2011

Fixed capital

69678

70367

71018

71225

71301

Equity
share 60000
capital
R&S
9000
Secured Loan
678
Unsecured
Loan

100000

100000

100000

100000

25000
954

36878
125

18000
947

34000
796

Holders fund
69678
Equity shares 56428.22
outstanding

70367
56540

71018
56995.45

71225
57,057

71301
57,040

Equity
par 1.63
share
Pref. Dividend
-

2.20

1.76

2.06

1.75

Pro. Fund

69678

70367

71018

71225

71301

Creditor
Provision

190000
4307

200000
7401

191000
1010

200000
42851

270000
2540

Li. Liabilities

194307

207401

192010

242851

272540

BANK O/D

Net Worth

92821

128912

158121

225383

224036

ASSETS

2007

2008

2009

2010

2011

Fixed asset

140,628

138,711

135,934

1,85,259

2,03,030

Stock
Debtors
Bank
Cash
Inventory
Loan

186085
100000
35000
20000
90000
96460

240982
170000
25000
15000
120000
84398

221309
150000
400000
10000
140000
99911

286350
200000
12000
21000
100000
182725

264556
190000
25000
50000
180000
122312
160

Net
worth
turnover
profit margin

8.29

9.43

7.62

6.68

Total assets

516048

580178

615240

755849

830320

161

BIBLIOGRAPHY

BIBLIOGRAPHY

162

BIBLIOGRAPHY
Web site: - www.revlon.com
Reference:- Financial Accounting For Management - Ambrish Gupta

163