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The Beautiful People
Puerto Rico is a gold mine for beauty retailers
By TAINA ROSA
April 22, 2004
Beauty Means Big Bucks: The beauty industry in Puerto Rico is booming, with cosmetics companies annual sales surpassing $200 million
Puerto Rico is a land of beautiful people. Retailers of beauty products told CARIBBEAN BUSINESS that local consumers have looking good on their list of priorities, making the island a gold mine for them and for the makers of the products they sell, such as LOréal, Estee Lauder, and Coty.
There are other businesses, such as hair salons, raking in the profits from stylish locals. These have been creative about battling in Puerto Ricos fiercely competitive market for consumers loyalty.
But beauty goes beyond makeup, fragrances, and hair & skin treatments. In the past few years, being beautiful has also come to mean being fit and healthy.
A number of spas and wellness centers, which combine healthy dietary regimes with exercise and massage, have sprung up all over the island. Hospitals also have jumped on the bandwagon, opening wellness centers where people (who dont have to be patients) can work out under medical supervision.
Why is Puerto Rico such a beauty bonanza?
It is an understatement to say Puerto Rico is a good market for beauty retailers. It is an outstanding market. According to Sears cosmetics buyer, Michelle Kirschner, cosmetics companies sales in Puerto Rico surpass $200 million annually.
Most people attribute the booming local beauty industry to the Puerto Rican woman, who happens to be the person making about 80% of all purchasing decisions in local households. "The Puerto Rican woman is very sophisticated when it comes to fashion and colors. She takes care of her appearance and is mindful of her well-being," said Carmen Julia Maestre, account manager for Estee Lauder. No wonder Puerto Rico has won the Miss Universe title four times.
James Morgan, real-estate director for Sally Beauty Supply, said his company does well in Puerto Rico because women here pride themselves on their appearance more than those in other markets. The company is doing so well, in fact, that it plans to open four more local stores this year, bringing the total to 28.
Shining beauty retailers
For LOréal, Puerto Rico accounts for 92% of sales in the Caribbean region, said General Manager Luc Olivier Marquet. The companys Guaynabo-based regional headquarters oversees every Caribbean market except the Dominican Republic and Cuba, which are managed from Mexico.
"Consolidated sales from Puerto Rico are higher than from larger markets such as Venezuela, Colombia, and Uruguay," said Marquet. "This [Puerto Rico] market is comparable to Indonesia when it comes to sales, but there are more consumers there. Sales per consumer are higher in Puerto Rico."
LOréals sales in Puerto Rico grew 7% in 2003, even though it had a rough first six months because of the general weakness in the economy. "Things had improved, however, by the end of the year, and our fourth-quarter sales jumped 16% compared with the same period the previous year," said Marquet.
France-based Ebel is also performing well in Puerto Rico. Although the company only began operating locally in late 2000, it expects sales to jump by at least 50% this year, for a total of more than $40 million. Ninety percent of Ebels sales are generated via catalog; the remaining 10% comes from the companys only local retail store, in Bayamons Plaza del Sol. Ebel has a couple more stores in the pipeline.
Coty de Puerto Rico expects sales to increase 18% in 2004. Established in January 2000, the division is in charge of such Latin American and Caribbean markets as Aruba, Bermuda, Bolivia, Colombia, Costa Rica, Curacao, the Dominican Republic, El Salvador, Jamaica, Nicaragua, Panama, Paraguay, and Peru.
U.S.-based Estee Lauder, established in Puerto Rico for over 30 years, sees average double-digit sales gains on the island each year. "Our sales here are exceptional," said Maestre.
Local consumers devotion to beauty can also be seen in malls, where the number of tenants specializing in beauty concepts such as fragrances, hair salons, and cosmetics has risen in the past few years.
"With few exceptions, fragrances and cosmetics were sold only in anchor department stores. Nowadays, you can see many stores and even kiosks or carts devoted solely to beauty products," said Lorraine Vissepo, communications director of Empresas Fonalledas, parent company of Plaza Las Americas and Plaza del Caribe. "There are also more salons today."
Juliana Castillo, marketing manager of Plaza Carolina, told CARIBBEAN BUSINESS that more than 11,000 of the malls 1.1 million square feet of leasable space is devoted to beauty products and services. And this figure, which excludes beauty counters in anchor stores Sears and J.C. Penney, is on the rise.
"This is a very successful category. Five years ago, there was only Preciosa [besides anchor stores] specializing in beauty products, but many new players have arrived recently," said Castillo. "Perfume stores are on the rise, and those dedicated to cosmetics are also growing, albeit to a lesser degree. There are also many beauty salons, but those have been here for a long time."
Vissepo noted department stores in Puerto Rico have expanded their beauty counters and now offer a wider variety of products than in the States. Not only that, the products available locally are more upscale, she said.
There is another difference between the two markets. In the States, many beauty companies dont sell their products in department stores. An example is LOréal. Marquet said J.C. Penney and Sears stores in the States dont even have beauty counters.
"In Puerto Rico, our product lines can be found at Preciosa, Sears, J.C. Penney, and Macys," said Estee Lauders Maestre. "In the States, however, we dont sell our products at J.C. Penney or Sears, though we do at Macys."
Fragrances and cosmetics have always been sold in another type of retail establishment in Puerto Rico: pharmacies. In fact, local Walgreens stores generally offer a greater variety of beauty products than their stateside counterparts. "Walgreens stores in the States do have fragrances and cosmetics, but we in Puerto Rico have more upscale lines," said Marketing Director Edwin Rodriguez.
Waleska Miranda, director of Walgreens cosmetics department, said the company adds some 15 new cosmetics products in Puerto Rico stores each month. "Cosmetics account for more than 15% of store sales, excluding sales of prescription medicines," she said.
The orphans of the beauty industry
Not all is rosy, however, for independent pharmacies. Farmacias Plaza President Jose Perez said distributors of beauty products give larger chains, megaretailers included, preferential treatment because they buy in higher volumes. Without the purchasing power of larger retailers, he said, smaller pharmacies have had to decrease their shelf space for beauty products and charge a lot more for them.
"Until about five years ago, some distributors had merchandisers who visited independent pharmacies every month to check that we were stocked with merchandise," said Julie Hurtado, president of the Community Pharmacy Association. "Service then was very good, but the companies later decided to get rid of the merchandisers and left us stranded."
Hurtado added that companies distributing cosmetics now require pharmacies to purchase 75 bags of cosmetics at a time (each bag usually contains about 25 products). "If we buy so many products at once, we will be forced to rent or buy warehouse space, and that just isnt feasible," she said.
According to Hurtado, the alternative is for pharmacies to purchase cosmetics and fragrances from an intermediary, who buys products from the distributor and then sells them to independent pharmacies. "This is more expensive, so many of us [independent pharmacies] have opted to purchase cosmetics and fragrances on the Internet or at department stores when they have a sale," she said.
Distributors, meanwhile, said they treat all clients equally, no matter how much merchandise they buy. "Our rate policy is the same for everyone," said LOréals Marquet.
He acknowledged that while LOréal continues to sell directly to department stores and megaretailers, changes were made in March to how it sells to small pharmacy chains and independent pharmacies.
"We now sell to pharmacies through an intermediary because it was difficult for us to give these retailers the service they deserved," said Marquet. "The intermediary, Cesar Castillo Inc., already served pharmacies, so we decided to have that company supply our products as well. This company is able to visit pharmacies more often than we are."
Marquet noted that while larger retailers pay the same price for merchandise as independent pharmacies, the latter obtain a larger profit per product. "For example, a large chain will buy a product from us at $100 and sell it for $120. A small pharmacy, meanwhile, will sell it for $150," he said.
"Two years ago, our company restructured and our pharmacy coverage was affected; we couldnt continue providing service and offered the distribution of cosmetics lines to various wholesalers," said another cosmetics executive who preferred not to be identified. "Only one wholesaler is working for us, and that company distributes merchandise to about 90 pharmacies. We never were able to serve all the pharmacies on the island, which number more than 900."
Beauty is more than skin deep
Being beautiful inside is also important, and consumers in Puerto Rico and around the world have realized that good health translates into beauty.
Wellness venues, including day spas, destination spas, medical spas, and dental spas, have arisen in almost every country. A day spa typically provides beauty, health, and therapeutic treatments in single sessions by the hour or by the day.
Puerto Rico has Condado-based day spas Zen Spa and Olas Spa, owned by the same family. Most upscale resorts on the island also have spas.
When Zen Spa & Health Studio opened in Condado five years ago, most locals probably didnt understand the spa concept. According to Sales & Marketing Director Michelle Arce, it was a challenge to educate people. Once they understood the concept, however, it took off.
"In fact, one of our suppliers considers Zen Spa a platinum account. We stand out from other Caribbean markets, including Miami," said Arce. She noted the companys supplier of gift certificates is amazed by the thousands Zen Spa orders each month.
Another notable local spa is Wyndham El Conquistadors Golden Door Spa in Fajardo. It nabbed Spa Finder Magazines Best Spa in the Caribbean award in 2003.
Local hospitals are also exploring wellness as a profitable business. Ashford Presbyterian opened its Presby Wellness & Fitness Center about a year ago. The center focuses on preventive health and features a gym where people can work out while being supervised by exercise professionals and physicians. It also offers yoga lessons.
Such has been the demand for this type of facility that in less than a year, membership has shot up to 360. Needless to say, the relatively small but well-organized center needs to expand.
Auxilio Mutuo Hospital is also hip to the trend. It inaugurated its Physical Wellness Center a little over two years ago and is constantly adding services. According to Manager Loyda Padilla, the center started by treating patients who had been hurt while exercising incorrectly at commercial gyms.
"Many times, patients who have been advised to exercise sign up at a gym without properly prepared trainers and get hurt. Then they come here," said Padilla.
She added that Auxilio Mutuo aims to attract members who arent patients. "We want to focus on the preventive aspect of physical training," she said.
Besides a gym, the center provides massages and, in about two weeks, will begin offering aerobics and Pilates classes. Later, it will add yoga classes.
According to Presby Wellness Medical Director Carlos Jimenez, there were 52 medical wellness centers on the U.S. mainland in 2002. Today, there are around 550. Puerto Rico is only starting to delve into wellness services, but it is sure to become a major market, as it has become for cosmetics and fragrances.
Men join the club
Who said beauty products are only for women? In Puerto Rico, more and more men are purchasing moisturizers, getting pedicures, and luxuriating in posh spas.
"Five years ago, there was a boom in men purchasing cosmetics. Then, it stabilized and now is picking up again," said Estee Lauder Account Manager Carmen Julia Maestre.
She noted that many men are secretly using their wifes lotions. "Men are the beauty industrys secret clients. Some of the products men are using are eye creams and skin moisturizers," she said.
Of course, they continue using products traditionally associated with men, including aftershave, cologne, and deodorant. The product offerings in these categories have grown along with sales.
Coty recently added many new product extensions to its Adidas line, and mens apparel retailer Clubman is adding aftershave and lotions to its private-label fragrance. Estee Lauder, said Maestre, has seen double-digit sales gains of its products and will launch more in the future.
Some men, however, make no secret about enjoying beauty products. "The taboos are being broken," said Ambar Gay, Macys newly appointed general manager. "Men are more concerned today about their appearance, from head to toe, and are more likely to pamper themselves. Now, you can even see men getting pedicures. Thats something new."
This trend can be seen at local day spas. "When we opened in Condado in 1998, we served only women," said Michelle Arce, sales & marketing manager of Zen Spa & Health Studio. "In response to demand, we began allowing men to join us on Tuesdays. Later, we extended the invitation to Tuesdays and Thursdays. Today, men are welcome in our spa every day except Saturday."
Arce added that Zen Spas new facility, in Guaynabos San Patricio Towne Center, will welcome men and women. Among the services most requested by men are massages and pedicures, she said.
Beauty salons focus on service to retain customers
Beauty salons in Puerto Rico are implementing strategies to turn every first-time visitor into a loyal client. Two examples are Amado Salon in Guaynabos San Patricio Plaza and Esteban Montes Alta Peluqueria in Condado.
Esteban Montes Alta Peluqueria is known for pampering its clientele. In the afternoon, clients are served wine or champagne and appetizers. "In the morningwe open at 8:00 a.m.we serve coffee, cappuccino, or hot chocolate, as well as fruit juices and cookies," said owner Esteban Montes. He noted that the beverages are always served in glasses, not plastic cups, and on trays.
Customer service also reigns supreme at Amado Salon. "We place a lot of importance on availability. All clients who walk into our salon are taken care of immediately; they dont have to wait for a hairdresser to become available," said owner Amado Navarro. Amado Salon is open Monday through Saturday from 8:00 a.m. to 9:00 p.m. and Sunday from 11:00 a.m. to 5:00 p.m.
Men are increasingly patronizing beauty salons. "Men already make up about 25% of our clientele," said Navarro. "They like to put highlights in their hair; they get their eyebrows done; and they even dye their chest hair. And you will always see men getting manicures and pedicures."
More men going under the knife
Although women still make up the majority of patients undergoing cosmetic surgery, men are increasingly choosing surgery to correct imperfections. According to the American Society of Plastic Surgeons (ASPS), more than one million men had undergone plastic surgery on the U.S. mainland as of 2001.
In 2003, almost nine million people had plastic surgery for cosmetic reasonsup a whopping 32% from the previous year. The ASPS estimates that 15% of all cosmetic-surgery patients are men.
According to the organization, the most popular cosmetic-surgery procedures among men in the States last year were rhinoplasties (reshaping of the nose), eyelid surgeries, liposuctions, hair transplants, breast reductions, face-lifts, ear surgeries, chin augmentations, dermabrasions, and forehead lifts.
The trend is similar in Puerto Rico. Claudio Corral, a plastic surgeon and founder of Eden Esthetics, said that 22% of all his patients are men, a higher percentage than in the States.
He said men are more likely to go under the knife today because recovery time is much faster. "You can have a procedure done on Friday and be back at work on Monday," said Corral.
The most sought-after procedures for men on the island are liposculptures, rhinoplasties (especially popular among younger men), eyelid surgeries, and face-lifts. Men are also going for nonsurgical procedures, including Botox and Restylane injections to smooth out wrinkles, and other skin treatments.
Corral warned that there are many physicians who arent plastic surgeons performing cosmetic surgery. "Patients wanting the best results should seek a physician certified in plastic surgery," he said.
He noted that there are some 200 certified plastic surgeons in the U.S. (including Puerto Rico) and Canada. "The same number of plastic surgeons retires each year," said Corral.
This Caribbean Business article appears courtesy of Casiano Communications.