Exclusive: P&G pledges to make over $4B makeup world

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Procter & Gamble Co. is ambitiously vowing to refurbish not only its own cosmetics brands-Cover Girl and Max Factor-but the entire $4 billion mass business marred by two ugly years of volume and sales declines.

Jack Stahl, CEO of rival Revlon, promised similar steps to analysts in a conference call last week, including working with in-store beauty advisers to hand out samples and advice at mass-market outlets.

P&G told retail executives that by refreshing its advertising, package design and product lineup, along with the broader retail shopping experience, it can bring 5% annual growth to the category within 24 months.

That may not sound like much, but it's actually a tall order. For the 12 weeks ended June 12, sales of lipstick and nail products declined 9.6% and 6.9%, respectively, in food, drug and mass outlets, including Wal-Mart, according to figures from VNU's ACNielsen reported by Banc of America Securities.

It's also big talk for a company that-while it has the leading brand in Cover Girl-is a distant No. 2 to the combined share of L'Oreal's Maybelline and L'Oreal brands.

The problem isn't cosmetics, according to analysts, but the mass-retail cosmetics business. Strong results in recent quarters from Avon and Estee Lauder show women are still buying, but prestige and specialty outlets are grabbing a bigger piece of the market.

Even P&G is seeing better results globally from its ultra-prestige SK-II brand. A trial of SK-II in seven U.S. Saks Fifth Avenue stores launched earlier this year is 50% ahead of plan, according to one executive familiar with the results.

added pressure

Estee Lauder's move to bring a mid-range offering to Kohls and Coty Beauty's U.S. rollout of Rimmel from Wal-Mart Stores to full distribution adds pressure for mass brands.

While P&G and Revlon talk a similar talk, their tactics diverge in new products. Revlon, with advertising handled by Interpublic Group of Cos.' Deutsch, New York, cut its number of new products in an effort to better support what it does launch, though it told analysts last week it plans to step up new-product activity in 2005. Chief Marketing Officer Stephanie Klein Peponis said some "breakthrough" products will be unveiled in the next few weeks. P&G also has told retailers it plans to step up new products.

Revlon will also repair marketing. With two agencies and five taglines over a six-year period, Ms. Klein Peponis said Revlon's advertising "was always a moving target, so the consumer didn't get the full impact."

P&G's initial focus will be Max Factor, which is getting a broad packaging and product overhaul for early 2005. It will shift ad focus slightly from its heritage as the "makeup of makeup artists" to the stars those artists make up. Publicis Groupe's Leo Burnett, London, handles Max Factor. Grey Global Group handles Cover Girl.

contributing: stephanie thompson

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