SWOT Analysis Report on Revlon Inc.
COMPANY OVERVIEW
Revlon, Inc.
(Revlon or 'the company') is engaged in the manufacturing, marketing and sale
of cosmetics, hair color, beauty tools, anti-perspirants/deodorants,
fragrances, skincare and other beauty care products. The company operates in
North America, Asia Pacific, Europe, Middle East and Africa (EMEA), and Latin
America. It is headquartered in New York City, New York and employed approximately
5,100 people as of December 31, 2012. The company recorded revenues of $1,426.1
million in the financial year ended December 2012 (FY2012), an increase of 3.2%
over FY2011. The operating profit of Revlon was $188.7 million in FY2012, a
decrease of 7.2% compared to FY2011. The net profit was $51.1 million in
FY2012, a decrease of 4.3% compared to FY2011.
SWOT ANALYSIS
Revlon is
engaged in the manufacturing, marketing and sale of cosmetics, hair color,
beauty tools, anti-perspirants/deodorants, fragrances, skincare and other
beauty care products. The company's strong brand image in the cosmetics and
beauty care market helps it in expanding its market share. However, counterfeit
products sold in the market under the Revlon brand name may hurt its brand
image.
Strengths
Strong
brand image facilitates market share expansion and consolidation
Revlon is one of
the leading cosmetics companies in the mass retail channel.The company's
products are sold in more than 100 countries. Revlon was ranked among world’s
top 50 cosmetics brands in 2013 by an industry source specializing in brand
valuation. The company's global brand name, product quality and marketing
experience have enabled it to create one of the strongest consumer brand
franchises in the world. The company's portfolio includes strong brands such as
Revlon, including the Revlon ColorStay, Revlon Super Lustrous and Revlon Age
Defying franchises, as well as the Almay brand, including the Almay Intense
i-Color and Almay Smart Shade franchises in cosmetics; Revlon ColorSilk in hair
color; Revlon in beauty tools; Mitchum anti-perspirants/deodorants; Charlie and
Jean Nate in fragrances; and Ultima II and Gatineau in skincare. The company's
brands received various awards in the recent past. In 2012, Revlon’s Revlon PhotoReady
Perfecting Primer, Almay Oil-Free Makeup Eraser, Almay Oil-Free Eye Makeup
Remover Pads, and Revlon Super Lustrous Lipstick in Black Cherry received Best
of Beauty Awards in the US in the respective categories. In addition, Revlon
Super Lustrous Lipstick in Softsilver Rose received the Readers' Choice Award
in 2012, and Almay Clear Complexion Concealer + Treatment Gel and Revlon
Luxurious Color Diamond Lust Eye Shadow received the Healthy Beauty Awards 2012.
The company also received various awards outside the US in 2012. For instance,
Revlon Age Defying with DNA Advantage Powder received the Australian Beauty
Award (Judge’s Choice); Revlon PhotoReady Makeup and Revlon ColorStay Eyeliner
in Black received the New Zealand Beauty Awards; and Revlon Smooth-On Blush,
Revlon Nail Enamel in Revlon Red and Revlon PhotoReady AirBrush Mousse Makeup
received Beauty Awards in South Africa. Several products of Revlon also
received awards
in the UK and Canada. Strong brand image of the company facilitates customer
recall and allows Revlon to penetrate new markets as well as consolidate its
presence in the existing ones.
Broad
product portfolio encompassing the entire cosmetics range
Revlon is a
globally recognized cosmetics product company manufacturing and marketing a
wide range of cosmetics, hair color, beauty tools, anti-perspirants/deodorants,
fragrances, skincare and other beauty care products. The company manufactures
and markets a broad range of cosmetics under its flagship Revlon brand.
Besides, it also manufactures and markets a full range of fragrance free
cosmetics and skincare products under the Almay brand name.The company sells
face makeup, including foundation, powder, blush and concealers, under the
Revlon brand name. The company also markets different lines of Revlon lip makeup,
including lipstick, lip gloss and lip liner. The company's eye makeup products
include mascaras, eyeliners, eye shadows and brow products, also sold under the
Revlon brand name. Furthermore, the company's nail color and nail care lines
include Revlon branded enamels, nail art, treatments and cuticle preparations.
In the hair care segment, the company markets both hair color and hair care
products. Also, the company manufactures and markets a range of beauty tools,
which include nail, eye and manicure and pedicure grooming tools, such as
clippers, scissors, files, tweezers and eye lash curlers. Furthermore, the
company also sells a selection of moderately priced fragrances; including
perfumes, eau de toilettes, colognes and body sprays, in addition to the
Mitchum branded anti-perspirant products. Additionally, the company sells
skincare products in the US and in global markets under global brand names,
including Revlon and Almay, and under various regional brands, including the company's
premium priced Gatineau brand, as well as Ultima II. A broad product portfolio
enables Revlon to stabilize its earnings and consistently strengthen its market
position through wider customer reach.
Focus on R&D has facilitated continuous
development of new products
Revlon has a
strong focus on R&D. The company spent approximately $24.2 million, $23.8
million and $24 million in FY2012, FY2011 and FY2010, respectively, on R&D
activities. The company operates an extensive cosmetics R&D facility in
Edison, New Jersey.The Edison facility is responsible for all of the company's
new product R&D worldwide as well as the research for new products, ideas, concepts
and packaging. The R&D group at the Edison facility also performs extensive
safety and quality testing on the company's products, including toxicology,
microbiology and package testing. Furthermore, the company has a
cross-functional product development process intended to optimize the company's
ability to bring to market its new product offerings and to ensure that the company
continuously has products in key categories under its various brands, including
Revlon, Almay and Mitchum. Increased emphasis on R&D enables the company to
develop innovative products, offering a competitive advantage and helping in
improving brand and market shares.
Weaknesses
Lack of scale compared to peers
The company
lacks favorable scale of operations in comparison to its competitors. Many of
its competitors, such as Procter & Gamble (P&G), Unilever, L'Oreal,
Avon Products and The Estee
Lauder Companies
are much larger in size in terms of revenues. In the financial year ended June
2013, P&G
recorded revenues of $84,167 million and The Estee Lauder Companies recorded revenues
of $10,181.7 million, significantly higher than Revlon. Similarly, in the
financial year ended December 2012, Unilever recorded E51,324 million
(approximately $65,992.4 million) in revenues, L'Oreal recorded E22,462.7
million (approximately $28,882.5 million) in revenues and Avon Products recorded
revenues of $10,717.1 million.
Revlon, in
comparison, recorded revenues of $1,426.1 million in FY2012.The company's small
scale of operations may turn out to be a disadvantage in the fiercely
competitive market. Lack of scale also reduces the bargaining power of Revlon.
Concentrated customer base increases vulnerability
to unfavorable terms of trade
Revlon has a
concentrated customer base. The company's principal customers include large mass-volume
retailers and chain drug stores, including retailers such as Wal-Mart Stores,
Walgreens, CVS and Target in the US, Shoppers DrugMart in Canada, A. S.Watson
& Co. retail chains in Asia Pacific and Europe, and Boots in the UK. The
company's largest customer, Wal-Mart Stores and its affiliates, accounted for
approximately 22% of the company's consolidated net sales in FY2012. Due to the
revenue concentration from few retail customers, loss of any of them could have
a material adverse effect on the company's financial position. Moreover, the
increasing consolidation in the retail space and the rising bargaining power of
retailers may lead to the imposition of unfavorable selling terms for Revlon
which depends on these channels majorly for its products display. If these retailers
do not purchase Revlon's products on favorable terms, then the company may not
be able to find suitable alternatives to sell their products. The company,
therefore, is prone to loss in sales and market share.
High
debt burden
Revlon holds a
substantial amount of debt. In FY2012, the company had long-term debt of $1,145.8
million, an increase of 3.5% over FY2011. At the same time, Revlon had
shareholders’ deficit of $649.3 million. In addition, Products Corporation
launched the syndication of the issuance of up to approximately $700 million of
bank term loan debt in August 2013 for the acquisition of The Colomer Group.
Recently, in October 2013, Revlon acquired The Colomer Group (a beauty care
company) for $665 million. Although the acquisition is estimated to add nearly
40% in annual revenues for Revlon, the company’s net debt increased to more
than double. The high level of indebtedness may require the company to dedicate
a substantial portion of its cash flows from operations to the payment of
principal and interest on its debt, thereby reducing the availability of cash
flows to fund capital expenditures and other purposes. It could also limit the
company's ability to obtain funds for its working capital requirements.
Opportunities
Booming
male grooming business
In the recent
times, the business of beauty has expanded from being women-centric to include
grooming
products for men as well. As more and more men are embracing beauty, skin care
and
hair care
products, manufacturers are finding new opportunities in this newly-booming
space. For instance, Gillette, the razor-maker, expanded its product line to
include face washes, scrubs, shower gels and moisturizers for men. At the same
time, Unilever added shampoos, conditioners and hair-styling products
exclusively for men under its Axe brand. Even companies like L'Oreal, which is
a direct competitor to Revlon, has face care, deodorants, hair care and shaving
products for men. In the US, the men's facial skincare market grew by 11% in
dollar sales in 2011 over 2010 according to industry sources. It was also found
in the study that more than 90% of men aged over 18 use grooming products
(includes body and facial skincare products, shaving products and tools, hair care
products and fragrances). Furthermore, only one quarter of men use facial
skincare products such as facial cleansers and moisturizers, lip and eye
products, and anti-aging treatments. A similar trend is noticed in Europe.
According to a survey by an industry source, about 65% of European men give
first importance to their appearance and almost half of the European men prefer
to be attractive and well groomed. With an increasing interest in male
cosmetics globally, manufacturers are coming up with a variety of men's
grooming products with masculine names and are packaged in designs that attract
the typical male consumer. While competitors like L'Oreal, Unilever and P&G
are chasing the booming male grooming and personal care market, Revlon could
also make an entry into this fast growing market by leveraging its technical
expertise and research in the cosmetics and personal care business.
Increasing demand for natural ingredients
The surge in consumer interest in natural
personal care products around the globe has driven outstanding growth in this
segment even as the overall cosmetics industry has posted lukewarm results.
According to industry estimates, the global market for natural and organic
beauty products was over $7.5 billion in 2012. It is estimated to grow at a
compound annual growth rate of 10% during 2012–18. The prime reason for the
surge in the popularity of natural cosmetics products has been the increasing
consumer awareness about cosmetic product formulations and ingredients.
Additionally, availability of these products through mass retail channels is
also aiding in the growth of this segment. Encouraged by this opportunity,
large cosmetic companies are entering the natural/ organic beauty products
space through various ways including investing on new product launches or
through acquisition of existing manufacturers. Recent newcomers, such as
Garnier, Henkel and Amore Pacific, launched certified organic products in the
beauty care segment. With appropriate investments in the natural and organics
space, beauty products companies like Revlon can explore and drive their value
share in the global beauty care and cosmetics markets.
New
opportunities in the fast growing Cosmeceuticals market
Demand for
cosmetics that combine common cosmetic preparations with nutraceuticals and
claim therapeutic benefits on hair, skin and nails is on the rise. Beauty care
products with ingredients that promise anti-ageing effect are in special demand
in the recent times due to an increasing aging population in most of the
developed markets like the US and Europe. Consumers often view cosmeceuticals
as less expensive alternatives to the more painful and expensive methods (Botox
and plastic surgery) of dealing with common skin conditions like ageing. At the
same time, consumers find it much easier to use beauty care products with
therapeutic benefits than following lifestyle regimes suggested by medical
practitioners. Anti-aging facial care market is one of the fastest growing
segments in the cosmetics industry. According to MarketLine, anti-ageing
products segment accounted for 25.5% share of the $51.7
billion global
facial care market in 2012. Revlon, through its patented Botafirm ingredients
and Revlon Age Defying franchises and product lines, caters to this market. The
company's quality assurance associated with its brand name makes it a
formidable force in the anti-aging market. With continued innovative launches,
Revlon is strongly positioned to penetrate and capture the cosmeceuticals and anti-aging
products market globally.
Threats
Increase in counterfeit products may hurt the
company's brand image
The consumer goods
sector, especially the beauty and pharmaceuticals markets, have long been
a prey to
counterfeit products. When a product is popular and expensive, it will mostly
likely be
counterfeited
and sold through alternate retail channels or through direct selling. In the
recent times, beauty and make up products such as mascara, eye shadow palettes
and eye-liners are being copied and placed on the market. Additionally, during
economic downturns, consumers will become more price conscious and may be
tempted to choose products based on just the price and not the brand name.
According to a consumer survey conducted in 2012, nearly 23% of body care
consumers globally are not brand loyal and usually buy products that are on
sale. This attitude of consumers, in turn, spurs the growth of fake and
counterfeit products in the market. Additionally, the counterfeit products
market has also been driven by the internet counterfeit market in the recent
times. According to the Intellectual Property Rights (IPR) Seizure Statistics
by Customs and Border Protection (CBP) Office of International Trade, the
number of IPR seizures in 2012 reached 22,848. The counterfeit trade in
pharmaceuticals/personal care products accounted for 7% of the total manufacturer's
suggested retail price of the seizures in 2012. The abundance of counterfeit
goods and accessories will adversely affect the sales of branded products. At
the same time, low quality counterfeits reduce consumer confidence in branded
products like Revlon. Counterfeits not only deprive revenues for the company
but also dilute its brand image.
Competition in the cosmetics and beauty care
products business
The cosmetics and
beauty care products business is highly competitive. Brand recognition,
quality, performance and price are factors on the basis of which the companies
in the industry compete. Other factors such as advertising, promotion,
merchandising support, the pace and timing of new product introductions, and
line extensions also impact consumer buying decisions. Revlon competes in
selected product categories against a number of multi-national
manufacturers.The company faces competition from products sold in mass retail
channel and demonstrator-assisted channels, prestige and department stores,
television shopping, door-to-door, specialty stores, the internet, perfumeries and
other distribution outlets. The competitors of Revlon include L’Oreal, P&G,
Avon Products, The Estee Lauder Companies, Elizabeth Arden, Unilever, Coty and
Shiseido Company. Some of these companies are larger and have substantially
greater resources than the company, resulting in an ability to spend more on
advertising, promotions and marketing, as well as flexibility to respond to changing
business and economic conditions. Therefore, intense competition could lead to
pricing pressure and, in turn, reduce Revlon's margins.
If you want SWOT Analysis Reports on Revlon, contact Mahasagar Publications.
