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Bare Escentuals (BARE) |
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WIKI ANALYSIS
Bare Escentuals Inc. (NYSE: BARE) is a San Francisco based natural health and beauty company that develop and sells its own line of cosmetics (i.d. bareMinerals, RareMinerals, and Bare Escentuals brands). The company operates over 300 privately owned boutiques and holds retail contracts with department stores and home television networks. The product: bareMinerals generates most of the company's revenue. The company earned $557 million in revenue and $98 million in net income in 2009.[1]
Differentiation and distribution channels are the keys to the company's success. Bare Escentuals produces cosmetics with 100% all natural minerals. In doing so, BARE maintains a brand image that feeds on the mainstream public's desire of having skincare and make up in one product. The company aims to cover all income levels of consumers through displaying different products at different price levels ranging from over a hundred to around twenty dollars.
Instead of going through department stores such as the conventional makeup product, BARE focuses its marketing plan through infomercials in an exclusive contract agreement with QVC-an internationalshopping channel that has evolved into one of the world's leading multimediaretailers with 50 million customers for over 21 years. From that angle, BARE began by selling directly to the customers and thus building a loyal customer base without using the middle retailer. It remains the number 1 cosmetic product sold on QVC.
The majority of demands from QVC is rooted in the lower level consumers who are more susceptible to Part of the reason is due to competiting boutiques and department stores. Secondly QVC mainly channels to the lower economic level consumers who are more susceptible to economic downturns.
Although QVC remains the primary distribution channel for BARE, it also sells its products through various distribution channels consisting of premium wholesale, company-owned boutiques, spas and salons, and online shopping.
Seeing this success, competitors have come forth with similar products, however, Bare Escentuals remain one of the most popular and well known of mineral based make ups. In the past five years, BARE has experienced more aggresive growth than its competitors despite the lapses in the economy.
Company Overview
History[2]
Bare Escentuals Inc. was started in 1976 in Los Gatos, California. Until 2006, it was called STB Beauty before changing it to Bare Escentuals Inc. Starting in the 90s, the company began to sell its products through boutiques in the San Francisco Bay Area. The CEO, Leslie Blodgett advertised her company through QVC television marketing using real women testimonials. Currently, Bare Escentuals are sold in one of the company’ 300 private retail stores and boutiques and make up specialty stores (Sephora). Their most famous brand; bare Minerals has won numerous awards.
Products[3]
Cosmetics Brands (95.8% of net sales)
- bareMinerals: bareMinerals was the first product created by Bare Escentuals Inc. and up to date remains the most popular line among consumers. It is the number 1 product sold on QVC. The company holds exclusively the patent for extracting fine minerals used for BareMinerals, a product proven to cover blemishes allegen free. it has been tested to cover rosasea and acne. BareMinerals make up the majority of profit for Bare Escentuals Inc. For the past five years, it is also the leader in the company's expansion, being responsible for the substancial increases in profit over the past year.
- Buxom: Buxom branded cosmetics and products include a broad assortment of fashionable color cosmetics and accessories including prep-products, lipsticks, lip glosses, lip liners and mascaras.
DSFD
Skin Care Brands (4.2% of net sales)
- RareMinerals: nighttime skincare product (Skin Revival Treatment) using the same patented mineral extraction and formulation. It is the first skincare product to be made from 100% minerals (with newly discovered "Jurassic Soil"). Clinical trials tested skin cells turnover increased 35% after 23 days of use.
- md formulations: provides a complete professional skin care solution addressing the anti-aging market. Products in the retail line include cleansers, corrective treatments, antioxidant moisturizers and sun protectors. The brand also offers a complete line of professional-use-only products for use by aestheticians, such as glycolic peels, to complement the consumer retail line.
Business Growth
FY 2009 (ended January 3, 2010)[1]
- Net sales increased by less than 1% to $557 million.
- Net income increased by 1% to $98 million.
Trends and Forces
- Growth of Asia: To date, BARE products can be found in Japan, Australia, and Europe. Out of these three, Japan and the Asian market have the greatest impact on BARE. Asia is the most populous and the largest of all continents with over 4 billion people (60% of the world population). BARE's expansion to Japan is favored by friendly U.S. relations, which leads to a low tariff, and the Japanese love of Cosmetics. Using BARE's competitors as an example, both L'Oreal and Elizabeth Arden have major headquarters in Japan. There is a culture for beautifying skin and buying expensive cosmetics. Aside from that, China also has a huge pool of consumers interested in foreign cosmetics.
- Preference for Natural products: Although there is assurance from the largest cosmetic companies that their various ingredients are safe to use, there is a growing preference for cosmetics that are without any "synthetic" ingredients, especially those taken from petroleum. Once a niche market, certified organic products are becoming more mainstream. Even though many products in cosmetics are regulated, there are many health concerns that come from harmful chemicals in these products. Some products carry carcinogenic contaminant 1,4- dioxane. Not all organic products are better but they don't carry harmful preservatives that could be harmful. Many cosmetic companies are coming out with "All natural" and "Organic" products.
- Petroleum Prices: Because many cosmetic products include particles from Petroleum, it is a factor that cosmetic companies must adhere to. While cosmetics take up a relatively small percentage of the world's oil supply, it will still be affect when the prices go up. A higher operating cost for the conventional chemical based cosmetic companies will lead to an increase in competition for the natural mineral makeup market.
Competition
Because the key difference between the marketing strategy of BARE and its competitors is the distribution channel, BARE's relative performance can be broken into two segments. Either it is measured against the larger and more established cosmetics company such as the following:
- Avon Products (AVP)
- Neutrogena
- Estee Lauder Companies (EL)
Or it can be measured more specifically against natural mineral makeup industry by itself, where it appears much more competitive:
- L'Oreal (LRLCY): A France based cosmetics company with 19 global brands under 4 different product ranges. Instead of focusing only on developing products as a mean of expansion, L'Oreal is also acquiring other companies in different fields.
- Elizabeth Arden (RDEN): A U.S. beauty company that sells skincare products, color cosmetics and fragrances.
References
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