Revlon Group Inc.

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Revlon Group Inc.

21 East 63rd Street
New York, New York 10021
U.S.A.
(212) 593-4300
Fax: (212) 527-5000

Private Company
Incorporated: 1933 as Revlon Products Corporation
Employees: 7,000
Sales: $2.60 billion

Revlon Group is a holding company for Revlon, Inc.; Almay, Inc.; Max Factor & Company; and several other manufacturers of beauty products, personal grooming aids, and wigs. All products are sold internationally. The company’s first beauty item was nail enamel. Opaque and long-lasting, it was an improvement over the more transparent, dye-based products of other manufacturers. Revlon’s nail polish owed its superiority to the use of pigments, which also allowed a wider color range than the light red, medium red, and dark red then available.

Initially, the revolutionary “cream enamel” came from the tiny Elka company, in Newark, New Jersey, a polish supplier to beauty salons for whom Charles Revson began to work as a sales representative in 1931. Charles Revson and his older brother, Joseph Revson, distributed Elka nail polish as Revson Brothers. Within a year, however, Charles Revson decided to open his own nail polish company, going into partnership with Joseph Revson and a nail polish supplier named Charles R. Lachman, who contributed the “1” to the Revlon name. Revlon was formed on March 1, 1932.

Revson had a keen fashion instinct, honed by seven earlier years of sales experience at the Pickwick Dress Company in New York. Coupling this with his experience at Elka, he noted that the permanent wave boom was making beauty salons more popular, and that demand for manicures was rising in tandem. He therefore targeted beauty salons as a market niche—a fortunate choice whose importance would grow.

Within its first nine months, the company boasted sales of $4,055. In 1933 there was a sharp rise to $11,246. Also in 1933, the company incorporated as Revlon Products Corporation. At the end of 1934, the company grossed $68,000. By 1937, sales had multiplied more than 40 times.

In 1937 Revson decided to enlarge his market by retailing his nail polish through department stores and selected drugstores. This gave him access to more affluent customers as well as those with a moderate amount of money to spend on beauty products. Formulating a maxim he followed for the rest of his life, Revson steered clear of cut-rate stores, selling his product only at premium prices.

Advertising helped Revson stick to this rule. Its use was a fateful step for the industry; never again would major cosmetics companies attempt to sell beauty items without it. Revson began by labeling his nail enamels with evocative names like Fatal Apple and Kissing Pink, that were descriptive while offering the promise of novelty. The company’s first commercial advertisement appeared in The New Yorker in 1935. Aimed carefully at the upper-income clientele Revson was trying to attract, the advertisement came with a price tag of $335, constituting Revlon’s entire advertising budget for the year.

By 1940 Revlon had a whole line of manicure products. Lipstick, Revlon’s next major item, appeared in 1940. A perfectionist by nature, Revson made sure that its quality was the best he could produce. Its introduction was marked by a full-color advertising campaign stressing the importance of cosmetics as a fashion accessory, and featuring the novel idea of “matching lips and fingertips.” The campaign’s success showed in the 1940 sales figures; reaching $2.8 million, they more than doubled those of 1939.

World War II brought shortages of glass bottles and metal lipstick cases. Paper had to be substituted. Also in short supply were aromatic oils, fixatives, and packaging materials, which had previously been imported from Italy, Ethiopia, and France. Since the shortages affected the entire industry, secrecy was replaced by mutual cooperation; new synthetics and domestic sources of supply were shared, and a new U.S. aromatics industry was born.

During wartime, patriotic activities replaced expansion. In addition to cosmetics, Revlon turned out first-aid kits, dye markers for the navy, and hand grenades for the army. Characteristically, Revson’s military products were the best his company could produce. His attention to detail was rewarded in 1944 with an army-navy production award for excellence.

By the end of the war, Revlon listed itself as one of America’s top five cosmetic houses. Expanding its capabilities, the company bought Graef & Schmidt, a cutlery manufacturer seized by the government in 1943 because of German business ties. Costing $301,125, this acquisition made it possible for Revlon to produce its own manicure and pedicure instruments, instead of buying them from outside supply sources.

Postwar sales strategy, too, was influenced by rises in spending and department store credit sales. Returning interest in dress sparked the company’s twice-yearly nail enamel and lipstick promotions, which were crafted in anticipation of the season’s clothing fashions. Each promotion featured a descriptive color name to tempt the buyer, full-color spreads in fashion magazines, color cards showing the range of colors in the promotion, and display cards reproducing or enlarging consumer ads. Packaging was designed specifically for each line.

The Fire and Ice promotion for fall 1952 was one of the most successful. Its features included the cooperation of Vogue, which planned its November issue around the lipstick and nail enamel; “push” money given to demonstrators in stores without Revlon sales staff to insure full retail coverage; and radio endorsements written into scripts for performers like Bob Hope and Red Skelton. These efforts produced excellent publicity and helped to raise 1952 net sales to almost $25.5 million.

The company received its next boost from its 1955 sole sponsorship of the CBS television show, “The $64,000 Question.” Though initially reluctant to go ahead with this project, Revson was persuaded by the success of rival Hazel Bishop, whose sponsorship of “This is Your Life” was providing serious competition for Revlon’s lipsticks. Attracting a weekly audience of 55 million people, “The $64,000 Question” topped the ratings within four weeks of its debut. RevIon’s advertising budget for the year, $7.5 million, proved Charles Revson’s adage that publicity had to be heavy to sell cosmetics; as a result of the television show, sales of some products increased 500%, and net sales for 1955 grew to $51.6 million, from $33.6 million one year previously.

In November 1955 an allegation of wiretapping was filed against Revlon by Hazel Bishop. In testimony given in a hearing before the New York State Legislative Committee to Study Illegal Interception of Communications, the charge was denied by Revlon controller William Heller, who nevertheless admitted “monitoring” employees’ telephones for training purposes. Underscoring the denial of Hazel Bishop’s charges, a Revlon attorney added a denunciation of wiretapping for industrial espionage, and promised cooperation in efforts to stop it.

Also in November 1955, Revlon reorganized as Revlon, Inc. A month later, in December 1955, the company went public. Initially offered at $12 per share, Revlon stock reached $30 within weeks, and the company was listed on the New York Stock Exchange at the end of 1956.

Meanwhile, the success of “The $64,000 Question” soon spurred a spinoff called “The $64,000 Challenge.” The two shows helped to raise the company’s net sales figures to $95 million in 1958, and to $110 million in 1959. The three-year bonanza came to an end, however, in 1959, amidst charges that both shows had been rigged. At the resulting congressional hearings, the shows’ producers and the Revsons blamed each other. Nevertheless, the committee’s verdict cleared Revlon of any blame in this matter.

As the 1960s began, Charles Revson became aware that his company was in danger of locking itself into a narrow, upper-middle-class image that could restrict sales. To avoid this, he borrowed a technique from General Motors, and segmented his product line into six principal cosmetics houses, each with its own price range, advertising program, and image. Princess Marcella Borghese aimed for international flair; Revlon was the popular-priced house; Etherea was the hypoallergenic line; Natural Wonder served youthful consumers; Moon Drops catered to dry skins; and Ultima II was the most expensive range. Top-priced lines were sold only in department stores, while others were available in other outlets. This strategy allowed the company to cover a wide market area without in-house conflict.

Early attempts to diversify into other fields were unsuccessful. For instance, Knomark, a shoe-polish company bought in 1957, sold its shoe-polish lines in 1969. Other poorly chosen acquisitions, such as Ty-D-Bol, the maker of toiler cleansers, and a 27% interest in the Schick electric shaver company were also soon discarded. Evan Picone, a women’s sportswear manufacturer which came with a price tag of $12 million in 1962, was sold back to one of the original partners four years later for $1 million.

The company’s first successful acquisition came in January 1966, when Revson bought U.S. Vitamin & Pharmaceutical Corporation in exchange for $67 million in Revlon stock. The buy-out brought Revlon a company with annual sales of $20 million, most of them coming from a drug used to treat diabetes. Within a year, U.S. Vitamin proved its worth with its acquisitions of Laboratorios Grossman, a Mexican pharmaceutical company; a comparable concern in Argentina; and another in Chile. In 1971 Revson traded U.S. Vitamin’s diabetes drug and $20 million cash for a group of drugs Ciba-Geigy was required to divest for antitrust reasons. Another U.S. Vitamin acquisition was Nysco Laboratories, and its Nyscap process for timed-release medication. This, in turn, led to the introduction of vasodilation drugs. Fully disposable injectables, introduced in 1968, also came from U.S. Vitamin.

The company had begun to market its products overseas at the end of the 1950s. By 1962, when Revlon debuted in Japan, there were subsidiaries in France, Italy, Argentina, Mexico, and Asia. The Revlon debut in the Japanese market was typical of its international sales strategy. Instead of adapting its ads and using Japanese models, Revlon chose to use its basic U.S. advertising and models. Japanese women loved the American look, and the success of this bold approach was reflected in the 1962 sales figures, which were almost $164 million.

By 1967, expanding worldwide markets produced sales of $281 million, showing a 5.7% increase over the figure of almost $266 for 1966. Planning further expansion, Revlon spent $12.5 million on improvements to existing facilities plus a new cosmetics and fragrance manufacturing plant in Phoenix, Arizona.

During the 1960s the company consisted of four divisions: international, professional products, Princess Marcella Borghese, and U.S.V. Pharmaceutical. In 1968 Revson decided to add two more divisions: the cosmetics and fragrances division, headed by Joseph Anderer, and the Revlon Development Corporation, which was concerned chiefly with long-range planning concepts and strategies for marketing opportunities. Headed by Evan William Mandel, the Revlon Development Corporation brought the total number of divisions to six.

The 1970s began with annual sales of about $314 million. The cosmetics division, its six lines separately aimed, advertised, and marketed, was the industry leader in all franchised retail outlets. Revlon fragrances, such as Norell and Intimate for women and Braggi and Pub for men, had also become familiar to U.S. consumers. Revlon also had a new line of wig-maintenance products called Wig Wonder.

An important 1970 acquisition was the Mitchum Company of Tennessee, makers of antiperspirants and other toiletries. Mitchum joined the Thayer Laboratories subsidiary, formerly Knomark. Mitchum-Thayer division’s widely publicized products required a 1971 advertising budget of $4 million.

In 1973 Revlon introduced Charlie, a fragrance designed for the working woman’s budget. Geared to the under-30 market, Charlie models in Ralph Lauren clothes personified the independent woman of the 1970s. Charlie was an instant success, helping to raise Revlon’s net sales figures to $506 million for 1973, and to almost $606 million the following year.

High profits apart, 1974 was a difficult year. Charles Revson began to suffer from pancreatic cancer. Determined to leave a worthy successor, he picked Michel Bergerac, a president of International Telephone and Telegraph’s European operations. Terms of Bergerac’s contract included a $1.5 million signing bonus, an annual salary of $325,000 for five years, bonuses, and options on 70,000 shares.

Company profitability was Bergerac’s chief interest. Impressed with Revson’s experienced management team, he induced them to stay by introducing the Performance Incentive Profit Sharing Plan, which allotted each executive points based on profit objectives achieved for the years 1974 to 1976. He also cut company spending with tighter inventory controls, and instituted an annual saving of $71.5 million by the elimination of 500 jobs. Bergerac installed a management-information system, requiring that all managers report monthly on problems, sales, and competition.

Bergerac tried to reduce Revlon’s dependence on the increasingly crowded cosmetics market, by acquisition. His first major purchase came in 1975. Coburn Optical Industries was an Oklahoma-based manufacturer of ophthalmic and optical processing equipment and supplies, which cost 833,333 Revlon common shares. Barnes-Hind, the largest U.S. marketer of hard contact lens solutions, was bought in 1976, and strengthened Revlon’s share of the eye-care market. Other acquisitions included the Lewis-Howe Company, makers of Turns antacid, acquired in 1978, and Armour Pharmaceutical Company, makers of thyroid medicines, acquired in 1977. These health-care operations helped sales figures to pass the $1 billion mark in 1977, bringing total sales to $1.7 billion in 1979.

By the late 1970s company pharmaceutical research and development had extended into plasma research and new drugs for the treatment of osteoporosis and hypertension. The markets for soft contact lenses and their rinsing solutions were also growing. Bergerac compounded a successful 1979 by buying Technicon Corporation, a leading maker of diagnostic and laboratory instruments for both domestic and international markets, in 1980.

During the mid-1970s Bergerac also organized the six cosmetics lines into three groups for easier administration. RevIon, Moon Drops, Natural Wonder, and Charlie now belonged to group one. Group two was comprised of Flex hair-care products and other toiletries, and group three included Princess Marcella Borghese and Ultima II, the prestige cosmetic brands sold in upscale department stores. The domestic cosmetics operations also included the government sales division, carrying almost all the beauty lines through military exchanges and commissaries in the United States and overseas. By the mid-1980s, Revlon’s health-care companies, rather than Revlon’s beauty concerns, were innovating and expanding. Reluctant to initiate beauty-product development or department store promotions, Revlon lost ground to Estée Lauder, a privately held company whose marketing strategy of high prices with accompanying gifts had earned it almost universal center-aisle department store space. This caused Revlon’s share to drop from 20% to 10% of department store cosmetics sales.

Drugstore and supermarket sales were also suffering; Natural Wonder, a low-priced line, lost 24% of its supermarket volume in 1983 alone, and competitor Noxell’s inexpensive Cover Girl line was claiming more drugstore sales. Comparisons of profits from total operations told the story: $358 million in 1980 sank to $337 million in 1981, which fell to $234 million by 1982.

By 1984, industry analysts believed that Revlon would be worth more if it were broken up and sold. Within a year, this opinion was borne out by a takeover bid from the much-smaller Pantry Pride, a subsidiary of Ronald Perelman’s MacAndrews & Forbes Holdings. In defense, Bergerac accepted a $900 million offer for the cosmetics businesses from Adler and Shaykin, a New York investment company. The rest of Revlon was to go to Forstmann Little & Company, a management buyout corporation, for about $1.4 billion. These sales, however, were disallowed by a Delaware judge, who ruled that the deal was not in Revlon’s shareholders’ best interests. On November 5, 1985, at a price of $58 per share, totaling $2.7 billion, Revlon was sold to Pantry Pride, becoming a private company and giving the name of Revlon Group to the former Pantry Pride.

Perelman immediately began to divest the company of the health-care businesses. By the end of 1988, he had recovered $1.5 billion of his borrowed funds, partly by selling the eye-care businesses to the British firm of Pilkington for $574 million.

Divested companies were replaced with others geared to the Perelman objective—restoring the luster to the original beauty business. Costing about $500 million, Max Factor joined the Revlon lineup in 1987, along with its Halston perfume and its Almay toiletries. Other newcomers were Yves Saint Laurent fragrances and cosmetics; and Charles of the Ritz, Germaine Monteil, and Alexandre de Markoff followed soon after.

Other innovations of the 1980s meshed with national trends. The concern of a burgeoning older population with health and fitness led to wider company research on skin-care products as well as on make-up. International concerns for animal rights found a response in Perelman’s Revlon, which abandoned the Draize test in 1989, after closing its animal testing center in 1986.

Revlon’s last public sales figures, issued for 1986, were $1.6 billion. During the late 1980s fears of an approaching recession made bankers generally wary of highly leveraged transactions, and Revlon’s junk bonds began to lose value.

Internal problems stemmed partly from the department store market, where an attempt by Revlon to economize by grouping its Ritz, Monteil, and Borghese prestige brands at one counter failed. Other problems included the introduction of No Sweat, a deodorant which was unable to garner market share and was introduced with a $12 million advertising budget; the reformulation of Flex, a popular shampoo which lost market share when Revlon introduced a new formula and new packaging and raised the price; and a 2% shrinkage in the fragrance market, affecting the entire industry. Nevertheless, by 1990’s end, Revlon held 11% of the mass cosmetics market.

Principal Subsidiaries

Almay, Inc.; Charles of the Ritz Group Ltd.; Germaine Monteil Cosmetiques Corp.; Halston Enterprises, Inc.; Max Factor & Co.; National Health Laboratories Inc.; Norell Perfumes, Inc.; The Princess Marcella Borghese, Inc.; Revlon, Inc.; Revlon-Realistic Professional Products, Inc.; Roux Laboratories, Inc.