Why Ad Agency Sid Lee Went Into the Beauty Business

Q&A: President J.F. Bouchard on Opening Upscale Functionalab in Henri Bendel in a Down Economy

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NEW YORK (Ad Age.com) -- Montreal-based Sid Lee was a quiet force for some time, but in the past year the U.S. market has really taken notice. The shop, which has done breakthrough work for brands such as Red Bull, Cirque du Soleil and the MGM Grand in Las Vegas, was the envy of agencies when it scooped up the plum Adidas Originals account last summer. It announced plans to open in Amsterdam and Paris and launched an architecture arm. Now it's putting its stamp on the Big Apple flagship of Henri Bendel with the launch of a beauty store within a store.

The idea behind Functionalab is to take the guesswork out of choosing the right nutritional supplements.
The idea behind Functionalab is to take the guesswork out of choosing the right nutritional supplements.
Functionalab offers nearly 100 wellness and beauty products such as drinkable tonics, skin, hair and nail supplements, as well as a consultation service, with beauty/health professionals trained to design one-of-a-kind programs for patrons. The idea, the company says, is to take the guesswork out of choosing the right nutritional supplements.

Sid Lee's president, J.F. Bouchard, told Ad Age why his agency decided to venture into a new industry -- and why he's not worried about doing it in a recession.

Ad Age: A lot of agencies today are creating more than ads and striking interesting equity deals with businesses. What's different or better about your model?

Mr. Bouchard: We have said that the ultimate creative challenge is to create a company, and it's something we've been preparing for a long time. In this case it's a start-up company called Functionalab we've helped bring to life by providing multidisciplinary expertise. We sat down with a company and provided them the full range of what we call "commercial creativity": architecture, packaging, industrial design, interactive marketing.

When other agencies talk about business ventures, it's mostly about being paid in a different way, and I don't think it amounts to innovation. Building a true innovation offering implies that you can help clients create new products and new services. It's a different subject. There are agencies are venturing into that, and some are doing it in very interesting ways. What sets us apart is how we have built one comprehensive team that can help companies at every simple consumer contact point. Functionalab was incubated in our offices. It's a very logical extension for us, as we've been working as an innovation machine for many years now. I don't think other agencies have gone as far as us in exploiting multidisciplinary thinking.

Ad Age: Can you tell me a bit about the consumer trends are you exploiting as part of this venture?

Mr. Bouchard: The nutricosmetic industry is an emerging category, but it's fast-growing. Some multinationals are playing in this field, but they are doing one or two products. The fundamental belief is that people are coming to realize that beauty is not something that should be driven by covering up but should be driven by a healthier lifestyle in general, and nutrition is a big part of that. Functionalab is a new way of looking at cosmetics and nutritional supplements, which are very hard for consumers to decipher. When you walk into GNC, it is a very confusing experience. Our approach is a system that helps consumers identify solutions. ... It goes to the extent where you can personalize, using software, a program that works for you.

Ad Age: Anyone who has been to Bendel's knows that it's a far cry from Walmart -- not a place that caters to recession-smacked shoppers. Why did you want it as your retail partner even in this environment?

Mr. Bouchard: It's a premium brand that we're launching. We wanted to launch it at the very best location possible in the world. And in the cosmetics category, that is Henri Bendel. If we could control the economic context we would, but we think of this as a long-term endeavor, so even if the short-term context is not ideal, I'm sure we'll be OK.

Ad Age: You're an ad agency, but you're devoting time to founding other businesses. Why?

Mr. Bouchard: From our perspective, the main driver for doing this is not about compensation. We want to take the notion of partnerships that agencies have been talking about forever when talking about their clients and take this to a whole new level, where we become an innovation partner for clients, and where they can benefit in us getting involved early on. So often the marketing potency of products could be enhanced by looking at it from a communications and branding perspective earlier on. We believe it's possible to embed products and services with more marketing potency, by making sure they have richer narratives, more storytelling power right from the get-go. We need to get closer to clients and move from a supplier role to a true partnership. That's what this endeavor is about. It's not about how we get compensated. We're making a good living. We believe that partnering this way with our clients will help them grow, and in turn help us grow as well.

Ad Age: What's the most valuable lesson you've learned from the Functionalab venture that other would-be entrepreneurs might value?

Mr. Bouchard: We aren't at a postmortem stage yet, but if there's one thing that I know at this point in time, it's that if it works as much as we hope it will, it will prove that we have a role to play in helping clients innovate. But even if it fails -- and failure is part of innovation -- we met amazing individuals. The lesson is that innovation is a long, painful, bumpy journey, but when you do it, do it with people you love and who are brilliant. Don't partner with people out of just opportunistic thinking; it has to be people that fit your culture, that you are ready to jump off a bridge for, because it is demanding and it's risky.

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