BeautiControl Cosmetics, Inc.

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BeautiControl Cosmetics, Inc.

2121 Midway Road
Carrollton, Texas 75006
U.S.A.
(972) 458-0601
Fax: (972) 490-7359
Web site: http://www.beauticontrol.com

Public Company
Incorporated: 1981
Employees: 286
Sales: $80.11 million (1996)
Stock Exchanges: NASDAQ
SICs: 2844 Perfume, Cosmetics, Toilet Preparations

BeautiControl Cosmetics, Inc. is a leading manufacturer and marketer of a private line of direct sales cosmetics. The company is the third largest direct seller of cosmetics after Avon and Mary Kay, with retail sales totaling $140 million in 1996. In addition to women’s cosmetics, BeautiControl also offers skin care and fragrances for men and women and nutritional supplements for the whole family. All BeautiControl products are fragrance-free and dermatologist, ophthalmologist, sensitivity, and allergy tested. The company also refrains from testing any of its 250 products on animals.

BeautiControl “consultants” buy products from the company and then resell them to customers at a 100 percent markup. The consultants sell products in offices or at home clinics, rather than door to door. Claiming to offer good products sold at affordable prices in a convenient manner, BeautiControl stresses service to its customers. “People don’t get good service today,” linger Heath, BeautiControl’s chairman of the board, told Success magazine. “If you walk into a department store, you can wave a wad of cash in the air and say, ’Excuse me, I’d like to buy something!’ But you can’t find anyone to help you. Our goal is to be the world’s premier skin care and image company. We suggest to our consultants that if the word ’servant’ bothers them, they’re in the wrong business.”

In 1996, BeautiControl was the only direct sales cosmetics company to offer “total image” services. Some of the company’s value-added services included color analysis with personal wardrobe color-organizing books; skin condition analysis with patented skin sensors; image update workshops for companies and organizations; and computer-assisted image/fashion personality analysis.

Company Origins with the Tri-Chem Company

BeautiControl began as a subsidiary of a direct sales company, Tri-Chem. During the 1970s, Richard W. Heath worked at Tri-Chem as a marketing executive. In 1972 Heath’s wife, linger, started selling BeautiControl products. She did well as a BeautiControl consultant but Heath’s position as an executive in the company created some concerns and linger resigned. In the meantime, the BeautiControl subsidiary began losing money for Tri-Chem.

In 1980 Richard quit his job at Tri-Chem and considered purchasing the foundering BeautiControl, using linger as a figurehead for the company. She responded with a firm, “Drop dead!” linger wanted an equal partnership in the business, which surprised her husband. “I made most of the decisions in our relationship—not unusual when someone who’s thirty is married to someone that’s twenty,” Richard Heath explained in Sales & Marketing Management. “This particular incident created an opportunity for linger to draw the line and say, That’s it. From now on our relationship is going to be fifty-fifty.’ That knocked me back a couple of steps.” Nevertheless the couple moved to Dallas and used their life savings—plus a loan—to purchase the, by then defunct, BeautiControl.

A New BeautiControl

By 1981 linger and Richard Heath were in business for themselves. They bought BeautiContrors machinery, inventory, and packaging, retaining the BeautiControl name because it appeared on existing packages. Both worked diligently and tenaciously. linger Heath told Tulsa World: “We mopped the floors. We literally put our hair nets and rubber gloves on and filled the jars. I would show or demonstrate the products and try to encourage women to come into the business.”

In spite of their hard work, in 1983 BeautiControl failed again, forcing the Heaths to sell 50 percent of the company. Within eighteen months, however, assisted by some friends, the couple succeeded in restoring BeautiControl to financial stability, and again purchased the outstanding ownership for $5 million. BeautiControl found its niche through linger, who believed in a customized approach to beauty and wellness. As she told Today’s Dallas Woman, “When a woman knows what makes her look and feel her best, she gains confidence in herself. That confidence has changed thousands of lives.” linger conceived the idea of applying color analysis to cosmetics, offering products that were color-coded by warm or cool skin tones. She thought the company should offer free color analysis to clients so that consultants could sell them the right color products. Beginning in 1983, BeautiControl offered professional color analysis as a complimentary service. Within a year, consultant ranks swelled three times in size, and sales totaled $7.95 million.

Richard Heath assumed control of manufacturing, distribution, and sales for the company. linger Heath concentrated on the product line. Her approach to research and development was from a practical, rather than scientific, point of view. “I’m a consumer,” she explained in New Woman, “so if the pencil sharpener doesn’t work, I say, ’Excuse me, guys. We need to fix this.’ I know—I’m experiencing it.”

In March 1986, the Heaths took BeautiControl public. The stock’s initial public offering sold for $16.00 per share. In a few days, each share was worth $24.75.

Innovative Programs

In 1984 BeautiControl developed a service program, Client Connection, that seasonally mailed catalogs directly to customers, with consultants receiving a percentage of these catalog sales. An innovation in direct sales cosmetics, the idea was copied by other companies and marked BeautiControl as a contender in the industry.

The company launched another service, Personal Image Profile, in 1987. This computer-assisted image makeover moved the company’s services beyond skin, makeup, and color analysis to total image analysis. The first service of its kind, Personal Image Profile identified the body and fashion personality types of each client, offering advice on clothing styles and wardrobe ideas to help each client look and feel her best.

In 1990, BeautiControl introduced the Instant Image Makeover video. Personalized by color seasons, these videos presented more than one hundred image and confidence builders for BeautiControl’s clients. BeautiControl also made available skin condition analysis using patented skin sensors in 1992. This service analyzed a client’s skin in five minutes so that a BeautiControl consultant could develop an individualized skin care program for the client.

Innovative Products

Initially, linger felt BeautiControl products were “antiquated”—heavy makeup for dry skin with a limited assortment of colors and unsuitable for various types of skin. Tight financial resources precluded changing the line altogether, but the Heaths gradually changed and added products over time. One of the first products introduced was Lip Apeel, a cream that smoothed lips and improved the coverage and wearability of lipstick. Through their development of new products, the Heaths set standards emulated by other cosmetic companies. According to Richard Heath in Success, “We became product innovators…. The industry copies us.”

BeautiControl developed what was heralded as one of the most effective alpha hydroxy acid products in the industry in 1993. Regeneration Alpha Hydroxy Complex dramatically improved the appearance of skin and formed the foundation of the skin care product line. A three-month supply sold out in three weeks. Regeneration’s great popularity prompted the company to re-market the product to men by changing packaging to a masculine design and color. “We decided to do a men’s version because of the enormous success of the women’s,” explained director of product marketing Ed Huckfeldt in WWD, “and we’ve had our consultants telling us there are a lot of husbands of customers using the women’s.” BeautiControl expected about $1 million in sales of Regeneration for Men.

After the impressive success of Regeneration Alpha Hydroxy Complex, BeautiControl added more products to the Regeneration line including a blemish-control formula, high concentration formula, and a formula for extremely dry or damaged skin. In 1995, the Regeneration line accounted for 13 percent of total sales, or $77 million, an increase of 10 percent from 1994.

Through the 1990s BeautiControl continued expanding its product line with more items for men including Skin Strategies for Men, a line of four products with clean, soapy scents. “We’ve been in men’s treatment very lightly until now,” Richard Heath explained to WWD at the time. “We think the protective and healing properties of Skin Strategies will make us a front runner in the category.”

Company Perspectives:

Beauty is an attitude—a state of being that reaches beneath the surface of life. Our belief in this simple truth underlies why we’ve come to be known as the World’s Premier Skin Care and Image Company. Our product reflects the health, beauty, and diversity of those who use it. Our opportunity enables the pursuit of beauty as it relates to the comforts of life, work, home, and family. And our vision guides us toward a beautiful future, inspired by the successes of our first fifteen years. True to our reputation as innovators, we ’ve created a proprietary new kind of success—the kind that’s more than skin deep. The kind of success you can count on.

In June of 1994, BeautiControl also launched one of its more popular, if unusual, products. linger Heath requested that researchers develop a substance that would keep clothing—such as socks or bra straps—from slipping out of place. The result was Body Glue. When Body Glue debuted on the QVC Home Shopping Network, customers placed 15,000 orders in twelve minutes, translating to $299,250 in sales.

BeautiControl began offering weight management and nutritional products in 1994. Sculptique Body Contouring Creme to reduce inches and smooth cellulite was the first such product. Then in 1995 the company launched nutritional supplements for men, women, and children. These supplements, the biggest product introduction for the company, were projected to generate $8 million in their first year. BeautiControl added PMS Support Complex to Within Beauty nutritional supplements and a weight management program in 1996.

BeautiControl entered the hair care arena in 1996 with “What a Pear!” Scented Hair Care products. Made with alpha hydroxy acids, Hair Wash Shampoo, Moisture Lock Conditioner, Hair Spray, and Hair Shine were projected to add $585,000 to the company’s wholesale business in their first year. Bang It!, a gel with a brush-on applicator for controlling bangs and other difficult hair, was also introduced with great expectations—$250,000 in wholesale business in its first year.

Going Global

In 1993, BeautiControl began a program of international expansion. “It’s a worldwide market,” Jinger Heath told WWD, “and we want a piece of that pie. With our image services and products at our price points, we can compete on a worldwide basis.” The company negotiated the manufacture and sale of cosmetics in China, as well as direct and retail sales in Mexico. By 1995, the company’s Puerto Rico branch, started by BeautiControl consultant Faye Powell, grew to a 2,500-person organization. BeautiControl controlled 80 percent of a company-owned subsidiary in the United Kingdom, BeautiControl International, Ltd. The United Kingdom business moved from a subsidiary to distributorship in 1996, and administrative offices and a distribution facility opened in Canada. Seven international sales distributorships were in place by the end of 1996.

“You Should Sell for BeautiControl”

By 1996, BeautiControl products were sold through a network of 55,000 independent skin care and image consultants in North America, Europe, the Pacific Rim, and Russia. That year more than 95 percent of the consultants were women. One longstanding corporate objective for BeautiControl was increasing the number of consultants at a 15 to 20 percent compound annual growth rate. At first, BeautiControl achieved its goal, but during the early 1990s growth slowed. The company’s entry fee of $500 was considerably higher than those of Avon or Mary Kay, so BeautiControl began offering special spring sign-ups with lower and lower entry fees. “We had locked ourselves into a frequent flyer type of situation,” linger Heath explained in WWD. “People were actually waiting until the spring to sign up. We would do a great business in the spring and then recruits would fall off during the rest of the year.”

In 1992 BeautiControl initiated a recruiting drive to acquire 10,000 new consultants. Only 6,700 signed up—just a 3 percent growth rate. The company cut its entry fee in half to $250, paid in three installments, in 1993 and increased commissions for consultants. “We had the highest entry fee in direct sales,” linger Heath told WWD at the time, “Now we have something more attractive to the job hunter.” The company also introduced a thirty-minute infomercial to recruit consultants that year. Formerly recruiting mostly through its sales force and ads, BeautiControl spent $1 million on the infomercial with a two-year life span. By September, 35,000 consultants were on board, a 10 percent increase.

In addition, BeautiControl created a middle-management level consultant called Unit Managers in 1993. Consultants who sold $1,200 worth of products each month and recruited twelve other consultants who sold about $2,500 monthly received a company car or a $250 bonus each month, and their minimum commissions increased from 25 to 40 percent. Initially BeautiControl promoted 104 consultants to the new position—a larger number than expected. Consultants able to recruit three new sellers earned a four percent commission on the sales of recruits. Those able to recruit 30 new BeautiControl consultants with sales in excess of $10,000 each month became directors.

Training and Turnover

BeautiControl traditionally had one of the lowest turnover rates in the direct sales industry. Consultants credited their extensive training for the low rate. “One of the major things that distinguishes our company from other direct sales companies,” revealed BeautiControl consultant Faye Powell in Sales & Marketing Management, “is our education. The other day I was sitting in a group of businessmen, who were in marketing, and I felt like I was an equal.”

Newly recruited consultants as well as seasoned veterans enjoyed a variety of training opportunities, from Getting Started sessions with director-level personnel to a comprehensive leadership development program. Most importantly, BeautiControl sponsored biannual national meetings for training, inspiration, support, and recognition.

Rewards and Recognition

Recognition became one of BeautiControl’s hallmarks. With “recognizing and rewarding” as a philosophy, the company gave bonuses, diamonds, trips, and awards to its consultants. According to Michele Marchetti of Sales & Marketing Management, “[linger] Heath inspires her salespeople by stressing a close-knit clan of sisterhood. She calls each of the 500 sales directors on their birthdays, offers emotional and financial support when a consultant is sick, and invites salespeople into her home. Plus, she offers a compensation plan fat with recognition and incentives.”

By 1996 part-time sales consultants for BeautiControl earned about $25,000 a year. Average full-time earnings of consultants were about $50,000, director-level BeautiControl consultants made about $35,000 and national executive directors earned approximately $200,000. According to the company, several consultants became millionaires selling BeautiControl.

Women Helping Others

In 1993, linger Heath founded the Women Helping Others (WHO) Foundation, a nonprofit organization for improving the lives of women and children and for encouraging community service. From 1993 to 1996, the foundation raised more than $500,000 in grants addressing women’s and children’s health and education-related concerns. Funded through BeautiControl consultants, company employees, and individual contributors who volunteered their time and organized fund-raising activities for local groups, Women Helping Others fostered local community service, supported organizations for women and children, and educated individuals. Each year the foundation bestowed WHO Awards to outstanding community volunteers. Women Helping Others also made donations to charities such as Ronald McDonald House; Nativity House, serving the homeless in Tacoma, Washington; and Operation Smile, which provides reconstructive surgery for children with deformities in Tennessee and Kentucky.

Everything’s Just Jinger

BeautiControl’s philosophies of helping and rewarding reflected Jinger Heath’s personal ideology. Jinger Heath functioned successfully as a wife, mother, speaker, author, marathon runner, kickboxer, and board member for professional, education, and nonprofit groups, in addition to acting as chair of BeautiControl Cosmetics and BeautiControl Research Institute. Glamour, Working Woman, Mirabella, WE—Women’s Enterprise, as well as numerous civic and business organizations, named Jinger Heath an outstanding entrepreneurial business leader, a Woman of the Year, and an exemplary provider of community service. According to Richard Heath in Dallas/Fort Worth’s Life Style, Jinger “is the image of our company and stands for what women want to be. Everything we are is what she is.”

Into the Future

Like its chairman, BeautiControl earned recognition from the business community. Inc., Business Week, Forbes, OTC Review, Dallas Business Journal, The Business Press, WE—Women’s Enterprise, and Dallas Morning News all cited Beauti-Control as one of the best, fastest growing small or publically held companies. “We’ve achieved our outstanding growth by reaching only a very small portion of the beauty market,” Richard Heath wrote in the company’s 1996 annual report. “Our advantage in the marketplace is undeniable. Our company’s record of growth can be attributed to our understanding of women’s needs. And we’re meeting those needs better and faster than our competition…. We are poised for continued success.”