Tag: beauty brands

How Beauty Products Are Sold: Part One

Customers don’t know very much about how beauty retailers sell them products. The process by which a lipstick goes from factory to store to you is pretty opaque. Sure, we know conceptually that beauty has high margins and a big markup. But while newer brands like The Ordinary and Beauty Pie have started to offer a bit of transparency into pricing and how brands are ultimately made available to consumers, there is still a lot of mystery baked into the process.

The recent apparent shuttering of an indie beauty brand and its lawsuit against Sephora helps shed some light on how truly complex it is to sell beauty products — and the costs that get passed on to shoppers.

A few weeks ago, the beloved indie makeup brand Obsessive Compulsive Cosmetics (OCC) abruptly shuttered its website, its New York City store, and all its social media accounts. While the brand has not made any official statement and none of its third-party retailers like Nordstrom and Urban Outfitters have confirmed anything, it’s widely assumed that the brand has gone out of business. Founder David Klasfeld seems to have started a new Instagram account under the handle @dkwmakeup, and notes in the bio: “I founded and ran the world’s first 100% Vegan & Cruelty-Free Cosmetics line from 2004-2018.” (Racked has reached out again to OCC and will update if we hear back.)

If this is the case, what happened? The only person who knows for sure at this point is the founder of OCC, but a lawsuit with Sephora dating back to 2015, may provide some clues. It also sheds some light on things like who actually is responsible for building and filling the product testing fixtures you find in stores, what large markdowns mean for a brand, and how store exclusivity works.

There are two legal documents publicly accessible, one from 2015, first published by blogger Zadidoll, and one from 2016. These provide an incomplete record of the full proceedings, and it’s unclear if Sephora and OCC settled this case or what the final outcome was. But what is clear is that retailers hold a lot of the cards and OCC probably lost a lot of money. A representative for Sephora sent the following statement to Racked: “Per company policy, we do not comment on pending litigation.

The terms of a Sephora contract

According to the 2016 order, OCC and Sephora signed a contract in 2012 stating that the retailer would sell the brand’s products and that OCC would be 100 percent responsible for the costs of the fixtures, which is the system of shelving and pigeonholes where testers and products for sale are displayed in the store. They can vary in size from a small box on a shelf to an aisle-long behemoth. Per industry sources, this is a pretty common arrangement. (More on what those fixtures cost in a bit. Hint: a lot.)  OCC then alleged in the suit that it entered into a verbal agreement with Sephora to alter the original contract in two ways: first, that Sephora would become OCC’s exclusive brick-and-mortar retailer with the understanding that it would place enough orders to make up for the ones OCC would have to decline from other retailers. Second, Sephora was supposedly going to help defray the costs of the fixtures by contributing 50 percent, since it supposedly wanted to increase the number of stores selling OCC, which would then necessitate building more fixtures. OCC alleged in the suit that Sephora reneged on these oral agreements by not placing more orders and not helping to pay for fixtures. Sephora argued that it was a moot point because the original contract stipulated that the contract could only be modified in writing and therefore the suit should be thrown out.

However, the judge ruled that OCC could continue pursuing it, because he determined that OCC had acted in such a way (turning down orders from other retailers, for example) that made it seem clear that OCC relied on Sephora’s verbal statements. (He threw out a fraud allegation that OCC made about Sephora, however.) Sephora was given 20 days to serve an answer, but the conclusion or settlement does not appear to have been made public.

But that’s not the full story. An earlier 2015 order details exactly how much money OCC stood to lose in the Sephora deal. Sephora wrote a letter to OCC to terminate the deal in 2015, stating it would sell the products it had until a certain date, while also requesting OCC to fulfill two outstanding purchase orders that OCC hadn’t shipped yet. After the date in the termination letter, Sephora expected OCC to take back leftover product (this is called a return-to-vendor, or RTV, clause) and reimburse Sephora for the unsold product. The bottom line? Sephora said it expected to be reimbursed $832,700 for the unsold products. Otherwise, it allegedly said it would liquidate its remaining stock at fire-sale prices. OCC asked for a preliminary injunction, arguing that “if provisional relief is not granted it will suffer irreparable harm because an immediate mark down of the outstanding inventory would have financially devastating effects and moot any award of damages.” According to the lawsuit, OCC never reimbursed Sephora for remaining stock, and Sephora did end up marking down the remaining products and selling them off quickly, according to Revelist. Ultimately, OCC claimed damages of $521,647.20. This is where the paper trail ends.

PART TWO COMING NEXT WEEK

FDA Investigates Multi State Outbreak (Recall List)

The FDA is advising health professionals and consumers to avoid using products that have been recalled by Shadow Holdings dba Bocchi Laboratories as they might be contaminated with bacteria within the Burkholderia cepacia complex, also commonly called Bcc. The FDA is investigating whether other products manufactured by Shadow Holdings dba Bocchi Laboratories may be contaminated with Bcc and present a risk to consumers. The FDA is currently advising health professionals and consumers to avoid using products that have been recalled by Shadow Holdings dba Bocchi Laboratories, as these products may be contaminated with the bacteria Burkholderia cepacia complex (Bcc). The FDA is particularly concerned about potential contamination in recalled lots of Medline Remedy Essentials No-Rinse Cleansing Foam, since laboratory analysis by the FDA confirmed that samples of this product contained Bcc matches Bcc isolates collected from the Shadow Holdings dba Bocchi Laboratories facility and from ill persons. The matches were detected by pulsed field gel electrophoresis (PFGE), a type of DNA fingerprinting. Shadow Holdings dba Bocchi Laboratories has recalled other products made in the same location.

Current Recalls

Shadow Holdings DBA Bocchi Labs recalls Eufora BEAUTIFYING ELIXIR BODIFYING CONDITIONER, 1.7 oz. due to potential contamination with Burkholderia cepacia complex (Bcc.). FDA has confirmed the presence of the bacteria in some lots of foaming cleanser.

Shadow Holdings DBA Bocchi Labs recalls Eufora BEAUTIFYING ELIXIR BODIFYING CONDITIONER, 1.7 oz. due to potential contamination with Burkholderia cepacia complex (Bcc.). FDA has confirmed the presence of the bacteria in some lots of foaming cleanser.

Shadow Holdings DBA Bocchi Labs recalls Eufora NOURISH HYDRATING SHAMPOO, 8.45 oz. due to potential contamination with Burkholderia cepacia complex (Bcc.). FDA has confirmed the presence of the bacteria in some lots of foaming cleanser.

Shadow Holdings DBA Bocchi Labs recalls John Paul Mitchell NEURO REPAIR HEAT CONTROL BLOWOUT PRIMER, 0.85 oz. and 4.7 oz. due to potential contamination with Burkholderia cepacia complex (Bcc.). FDA has confirmed the presence of the bacteria in some lots of foaming cleanser.

Shadow Holdings DBA Bocchi Labs recalls John Paul Mitchell INVISIBLEWEAR MEMORY SHAPER, 8.5 oz. due to potential contamination with Burkholderia cepacia complex (Bcc.). FDA has confirmed the presence of the bacteria in some lots of foaming cleanser.

Shadow Holdings DBA Bocchi Labs recalls John Paul Mitchell SUPER SCULPT GLAZE, 8.5 oz. due to potential contamination with Burkholderia cepacia complex (Bcc.). FDA has confirmed the presence of the bacteria in some lots of foaming cleanser.

Shadow Holdings DBA Bocchi Labs recalls John Paul Mitchell NEURO LATHER HEAT CONTROL SHAMPOO, 9.2 oz. due to potential contamination with Burkholderia cepacia complex (Bcc.). FDA has confirmed the presence of the bacteria in some lots of foaming cleanser.

Shadow Holdings DBA Bocchi Labs recalls John Paul Mitchell NEURO LATHER HEAT CONTROL CONDITIONER, 9.2 oz. due to potential contamination with Burkholderia cepacia complex (Bcc.). FDA has confirmed the presence of the bacteria in some lots of foaming cleanser.

Shadow Holdings DBA Bocchi Labs recalls Medline Remedy Essentials No Rinse Foaming Cleanser: No Rinse Foam; CHG Compatible, pH balanced, Fragrance Free – for all ages 4oz (MSC092FBC04): 24 bottles/case; 8oz bottles (MSC092FBC08): 12 bottles/case; Ingredient: Water, TEA-Lauryl Sulfate, Aloe Barbadenis, Propylene Glycol, Sodium Lauryl Lacitylate, Iodopropronyl, Butylcarbamate, DMDM Hydanton Triethanolamine, Citric Acid. Manufactured for Medline Industries, Inc. Northfield, IL www.Medline.com; Item number MSC092FBC04; lots M06691, M07247 ; Item number MSC092FBC08; lots M05703 and M06691, due to  potential contamination with Burkholderia cepacia.

Avlon Industries, Inc recalls KeraCare Hydrating Detangling Shampoo—Sulfate-free, 8 oz., and gallons; 8 oz.-12 bottles/case; gallons-4 per case; UPC 9670838012, Item #53227; UPC: 9670833053, Item #53943 (Lot 16G1503 and Lot 16K3I03) due to the presence of Enterobacter cloacae.

The resources listed below are related to recalls of cosmetics and other products regulated by FDA, as well as other safety alerts related to cosmetics. To learn about FDA’s role in recalls of cosmetics, see FDA Recall Policy for Cosmetics.

 

Coty Will Acquire Procter & Gamble’s Beauty Brands

The Real Hair Truth

Coty Will Acquire Procter & Gamble’s Beauty Brands

Procter & Gamble has been looking to streamline its massive portfolio of brands, looking to sell, spin off, or shut down the majority of them. Last night, the unofficial news came out that many of the company’s beauty brands sold to competitor Coty, which means that Cover Girl and Clairol will be run by another drugstore cosmetics veteran.

Coty may not be a name that you recognize, but the cosmetics conglomerate owns a wide variety of brands: they sell branded fragrances for everyone from Beyoncé to Playboy to Vespa (yes, the scooter company). Their best-known brand is probably nail care products sold under the name Sally Hansen (who was not a real person) but they also own higher-prestige brands like OPI (nail care) and Philosophy (skin care).

Coty isn’t in the hair care business, so acquiring hair color brands like Clairol and Wella would introduce them to a new market. They are, however, already selling products to salons: OPI sells nail polishes and supplies to pros as well as directly to consumers.

The Cleveland Plain Dealer estimates that the acquisition would double Coty’s annual sales. The brands included in the deal are Cover Girl, Max Factor (which remains popular in Europe, but is no longer sold here) and the two hair color brands, Clairol and Wella. P&G would hold on to its brands that revolve around soap and shampoo, like Aussie, Old Spice, and Pantene.

There are other bidders in the mix, including private-equity firms and other soap companies, so this deal isn’t finalized yet. Some sources are also reporting that Coty won the bid for Procter & Gamble’s fragrance brands.