Matrix Essentials Inc.

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Matrix Essentials Inc.

30601 Carter Street
Solon, Ohio 44139-3513
U.S.A.
Telephone: (440) 248-3700
Toll Free: (800) 282-2822
Fax: (440) 248-3980
Web site: http://www.matrix.com

Wholly Owned Subsidiary of L'Oreal USA
Incorporated: 1980
Employees: 1,000
Sales: $4000 million (2006 est.)
NAIC: 325620 Toilet Preparation Manufacturing

A subsidiary of cosmetics giant L'Oreal and part of that company's L'Oreal USA group, Matrix Essentials Inc. is a leading professional hair care, hair color, and hair texturizing products company that sells its products only through salons. Top hair care and styling products include Biolage, a hair rejuvenator; Curl.life, which helps to control curly hair; the Trix styling line; Amplify, a volumizing system; Color.smart shampoos, conditioners, and other products that help maintain salon-applied color; Sleek.look products used to help control curls and "frizz"; and Vavoom, a line of shampoo and conditioners, styling sprays, foams, and gels.

Hair color and texture products include Colorgraphics, a highlighting system; Color Sync, a demipermanent dye; Logics, a coloring system based on matching the DNA of a customer's hair color; Opti. smooth, a product to facilitate hair straightening; Prizms.PLUS, a semipermanent coloring line; the So-Color line of hair dyes; and V-light, a hair lightener. Although Matrix maintains its headquarters in Solon, Ohio, near Cleveland, its sales, marketing, and education departments, as well as elements of finance and human resources, work out of L'Oreal's New York headquarters. Also in New York, Matrix operates the Matrix Global Academy for training stylists in the use of the company's products.

COMPANY FOUNDED: 1980

Matrix was founded in Cleveland in 1980 by husband and wife Arnold M. and Sydell L. Miller. Born in Cleveland, Arnold Miller became involved in hairdressing only after considering different careers while attending both Western Reserve and Ohio Northern universities. Finally he took classes at the Cleveland Academy of Cosmetology, graduating in 1952, and found his calling. Three years later he opened his first salon in South Euclid, east of Cleveland. Joined by his wife Sydell, he opened more shops in the city's suburbs over the next 15 years. She had been attending Miami University in Ohio, studying to become a home economics teacher, when she met Arnold and dropped out of school to marry him and become a hairdresser as well. As owners, the couple knew firsthand the needs of salons, and by the 1970s they began to pursue a vision of starting a company that could provide salons with the hair care and cosmetics products they needed as well as training to use the products and marketing help to sell them to their customers. The Millers' first venture, Aortal Inc., was launched in 1971 to manufacture and market artificial eyelashes to salons as well as retailers, primarily drugstores. Later the company developed and marketed a hair color product as well.

To realize their dream of being a full-service provider to salons, the Millers established Matrix. It quickly eclipsed the importance of Aortal, which began to have problems with retail sales that were adversely impacted by consolidation among drugstore chains. In 1984 they sold Aortal for $3 million and focused all of their energies on Matrix and the professional hair care market. Selling exclusively to salon customers was a relatively recent development on the market. In the early 1970s Redden Laboratories had exploited salon sales to quickly grow its business, taking advantage of a realization that salons were repackaging its products to sell to their customers. Rather than stop the practice, Redden encouraged it and helped stylists to do a better job at selling the products. Having a customer in a chair for an extended period was an ideal selling situation, and retailing products solely through salons lent an air of exclusivity that resulted in a higher price. It was this approach to marketing that Matrix would also pursue to good effect. Moreover, the Millers, as former salon owners, were comfortable in this channel.

Early on, Matrix sold just one shampoo and a permanent wave product to a limited number of salons. Manufacturing was done by a private-label manufacturer. Because this supplier was unable to meet Matrix's needs on a timely basis, the Millers began to develop their own manufacturing capabilities, eventually bringing as many functions as possible in-house, including laboratory testing, quality control, and research and development. The only major element outside the company's control were bottles and tubes, which were manufactured by outside companies. Salon perms and hair coloring products were added, and in 1981 Matrix began making professional hair care products available to consumers, including shampoos, conditioners, and styling products.

The Millers also established their own roles in the business. Arnold was in charge of finance, sales, and research and development. By far the more flamboyant of the two, he was the face of the company, but he was also a little undisciplined and often hard to deal with. His wife, when she was not smoothing ruffled feathers, focused on manufacturing, marketing, and purchasing. "Running this company was something that I did," she told the Cleveland Plain Dealer in 1994. "Arnie was on the outside, the personality that everybody knew. But I was the one who made sure we could ship everything he sold." Both of them, however, became tireless promoters of Matrix products, traveling to meet with salon owners, distributors, and stylists at countless trade shows, sometimes together, often apart. Their persistence paid off. According to Crain's Cleveland Business, Matrix enjoyed sales increases of at least 50 percent in five of its first eight years. Despite the Millers' salesmanship, the key to the company's success lay with the products themselves. In a 1997 profile DCI reported, "Matrix rapidly gained the trust of thousands of hairdressers who could count on the consistency of its perms, the performance of its cleaners and conditioners and the reliability of its styling aids." Another element in the company's success was a product development strategy that included what the company called its "hairdresser test." According to DCI, "That means a product must enhance a hairdresser's income; an educational program must improve her skills; an advertisement must drive clients into her salon." A major part of the education effort and customer support was the Matrix Institute of Professional Development, established in 1985 to educate salon owners and stylists about the fundamentals of product usage as well as marketing, advertising, and sales.

COMPANY PERSPECTIVES

Matrix inspires all salon professionals to transform a passion for beauty into personal success.

By the late 1980s, Matrix products were sold to 35 distributors across the United States, as well as to distributors in Canada, the Netherlands, and Iceland. About 10,000 salons made Matrix their primary hair care products line, while another 20,000 carried some of the lines. The Matrix name continued to increase in recognition in the 1990s, although early in the decade some of the notice was hardly desirable. A few weeks after the start of the Gulf War in 1990, following Iraq's invasion of Kuwait, a nearby tool distributor with a similar name, Matrix Churchill Corporation, was raided by U.S. Customs Service officials because the company was accused of supplying weapons parts to Iraq. After CBS's 60 Minutes program publicized the matter and simply referred to the company in question as Matrix, Matrix Essential employees wearing company T-shirts were insulted on the streets and in some cases they were harassed in their homes or reprimanded by their families. Although the company was concerned about having its well-earned reputation tarnished, it still tried to make light of the matter and at least benefit from the attention. "We are not sending guns to Iraq," a company spokesperson told the press. "We're not even sending shampoo."

ARNOLD MILLER DIES: 1992

In 1991 Matrix added salon facial and skin treatment products with the 21-item Matrix Sincere line, which included cleansers, toners, moisturizers, and exfoliate/masques, and special care products such as eye makeup remover. The following year Matrix added cosmetics—blushers, councillors, powders, and foundations—which, according to the company, was the first upscale salon cosmetics line. Although Matrix was generating annual sales of nearly $170 million and beginning a major growth spurt, the Millers had a new burden to bear. Arnold was diagnosed with cancer. He fought it for nearly a year, but in December 1992 he died at the age of 60 at Massachusetts General Hospital in Boston where he was receiving chemotherapy treatments, ultimately succumbing to pneumonia and other complications.

Long relegated to the background where she played a key role in Matrix's success, Sydell Miller took charge of the company, overcoming her fear of public speaking to fill the void left by her husband as she now conducted press interviews, made trade show appearances, and hosted countless meetings with suppliers, distributors, and salon owners. Under her leadership Matrix opened a new distribution center and continued to expand its product lines, and in 1993 sales hit the $200 million level and reached $250 million a year later. A major contributor to the company's growth was its sponsorship of women's tennis. In 1992 Matrix signed a five-year endorsement deal with former champion Chris Evert.

Arnold Miller had always assumed that at some point in its history Matrix would need to team up with a larger company, hopefully a pharmaceutical firm, in order to gain access to the kind of technology that would be needed to drive further product development. In the month before his death, in fact, he began talking to Bristol-Myers Squibb Co. about such a relationship. While there was some speculation in the press that his wife might turn over the reins to a second generation—two daughters and a son-in-law were executives in the company—it was not especially surprising that in August 1994 Sydell agreed to sell Matrix to Bristol-Myers, with a price of 7.4 million shares of stock worth about $400 million. Sydell Miller remained with the company she cofounded, serving as chairman until her retirement in 1996.

Bristol-Myers' performance with Matrix was spotty. It installed some seasoned executives, but they knew the retail business and were not familiar with the peculiarities of the salon channel. Nevertheless, sales increased to more than $340 million by the end of the decade, making Matrix the largest professional hair care firm in total sales. As Arnold Miller anticipated, innovation was a key element in the company's ongoing success, and Matrix was able to draw on Bristol-Myers' research capabilities to develop the kind of products demanded by hairdressers and their clients. Bristol-Myers also invested in upgrading Matrix's facilities, agreeing to a $53.8 million expansion in 1999, and helped to expand Matrix internationally, spreading the brand throughout Europe and Asia, albeit with limited success.

Popularity brought new challenges, however. Because a major part of the company's success was limiting sales to salons, it had to become increasingly diligent about combating "diverters," people who purchased products from hairdressers and others and then distributed them to nonchain drugstores, grocery stores, beauty supply stores, and swap meets. With Matrix products being shipped around the world, the opportunities for diverters increased, prompting Matrix to take a more aggressive approach to protecting its position. A former Drug Enforcement Agency special agent was hired as the "shampoo cop" and the asset protection budget doubled, as Matrix kept closer tabs on salons to make sure hairdressers did not sell Matrix products to diverters. Not only could salons lose their right to sell Matrix products, but if a seller used the telephone or the U.S. mail to make or distribute illegal sales, the company would press federal wire fraud and mail fraud charges.

Because maintaining product exclusivity was a key component of the Matrix business model, it was understandable that the company also elected not to sell its products online when it launched its first web site in 1999, maintaining that interested buyers should go to their hairdressers, who could recommend the right products for their particular needs. Instead, the site was purely informational in nature.

KEY DATES

1980:: Arnold and Sydell Miller found Matrix.
1992:: Arnold Miller dies.
1994:: Company is sold to Bristol-Myers Squibb.
1996:: Sydell Miller retires as chairman.
2000:: L'Oreal USA acquires the company.

MATRIX SOLD: 2000

Although Matrix enjoyed faster growth than its rivals, in early 2000 Bristol-Myers announced that it was putting Matrix up for sale to exit the salon business and focus on its global Chloral Professional retail and professional beauty care unit. A buyer was found in L'Oreal's Cosmair Professional subsidiary four months later. Cosmair was already deeply entrenched in the salon market, owning Redden and L'Oreal Professional, which had both carved out their own niches. According to SalonNews, Redden had a reputation "as a fashion-forward haircolor and styling brand, while L'Oreal Professional is well known for its upscale haircolor and its salon technologies. Matrix, on the other hand, is often noted for its moderately priced wet-line products." Moreover, Matrix was "known for its breadth of distribution; it is the most widely distributed salon line in the U.S."

Under L'Oreal's ownership, Matrix continued to operate as a stand-alone business. The company was allowed to maintain its longtime home in Solon, Ohio, although about 70 of the company's employees involved in sales, marketing, education, and human resources were transferred to L'Oreal's New York headquarters. As a reflection of L'Oreal's commitment to Solon, in 2001 the company launched a $60 million expansion program, updating the plan initiated by Bristol-Myers before the sale. The new parent also lost little time in installing a new management team which began to invigorate a brand that many in the industry regarded as a sleeping giant. The company's education efforts and research and development programs were expanded, and a number of new products were introduced.

Matrix enjoyed strong growth in the early 2000s, fortifying its leadership position in the three key salon categories: color, hair care, and textures. To maintain that momentum, Matrix opened its first training academy, the Matrix Global Academy, which opened its doors in the fall of 2004 in Manhattan's Greenwich Village neighborhood. Matrix also tweaked its advertising strategy, focusing on fewer magazines and turning more to entertainment magazines like Us Weekly. In the meantime, Matrix continued to unveil new products on a regular basis, including a new Vavoom volumizing collection in 2005, Matrix for Men shampoos and styling products in 2006, and Prizms.Plus in 2007.

Ed Dinger