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Beauty staples like CoverGirl have lost ground to new online upstarts, high-end rivals

By Sharon Terlep 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 6, 2018).

The biggest and most beleaguered names in beauty are trying to stage a comeback, but first they must shed their reputation as dated drugstore staples.

Brands like CoverGirl, Maybelline and Revlon for decades dominated beauty aisles in drugstores and supermarkets, winning women over with vibrant colors and affordable prices. But they have lost ground to smaller rivals, from online-only brands to higher-end names like MAC and Urban Decay to lines popularized by the rise of specialty retailers like Sephora. Even drugstores have cut back on beauty mainstays in favor of trendier names.

More recently, the big brands have been slow to catch on as social media transformed the way beauty products were discovered, especially by younger shoppers who often hear about new products from YouTube tutorials and Instagram posts by "influencers," or social-media stars. Niche brands have been far quicker to market on social media.

The upheaval has driven losses, prompted the ouster of executives and spurred acquisitions at companies such as Revlon Inc., L'Oréal SA and Coty Inc.

"It's not a matter of big and small. It's a matter of how you connect with the consumer," Coty CEO Camillo Pane said in an interview. "And our brands did not necessarily connect with consumers in the past."

To resuscitate ailing brands, Coty and its rivals are churning out trendier options such as facial highlighter and metallic lip color, recruiting more relatable spokespeople, and speeding how quickly new products get to market.

Coty has been struggling since acquiring the bulk of Procter & Gamble Co.'s beauty business, including CoverGirl, in 2016 for $11.6 billion. The brands, the company said, turned out to be sicker and more difficult to integrate than the company anticipated.

Take CoverGirl, which saw its share of the $16 billion U.S. color cosmetics market fall to 6.9% in 2016, from 9.2% in 2011, according to Euromonitor.

Now the 60-year-old brand is getting dozens of new products and made-over store displays. Instead of using only supermodels -- a mainstay of yesteryear -- its new marketing campaigns feature spokeswomen like a 69-year-old grandmother and a fitness trainer with more than 2 million Instagram followers.

Mr. Pane and other top executives have been lobbying retailers like CVS Health Corp. and Walmart Inc. to give back some of the shelf space CoverGirl lost over the years as its popularity flagged.

That can be a hard sell. While CVS says beauty products are important to sales, its focus isn't necessarily on big-name brands. At an event last year, executives bragged about attracting niche beauty makers and launching their own private-label products in response to demand for nontraditional brands.

The chain is installing new, higher-end beauty sections in stores, stocked with smaller brands and exclusive offerings, in an effort to better compete with beauty retailers like Sephora and Ulta.

"Coty is under a lot of pressure to get this right," said Jefferies analyst Stephanie Wissink. "CoverGirl might become the proxy for the success story for a brand that's under attack. Or they might become the case study for why a makeover in packaging and marketing isn't enough to rebuild."

Shannon Curtin, head of Coty's consumer beauty unit in North America, said CoverGirl's rebirth goes deeper.

Development time for new products is down to as little as six months instead of as much as two years, and one-quarter of the brand's lineup will be entirely new products, Ms. Curtin said.

"We didn't have items people were buying -- primers, brows, corrector kits," she said. "And now we do."

Olivia Cecchi, a recent college graduate who was browsing the cosmetics section of a New Jersey drugstore recently, said she was willing to spend on makeup but only at a store like Sephora, which allows customers to sample the products. "I'd only buy something here if I really needed something and didn't want to spend a lot of money," she said, passing by CoverGirl and Revlon displays to look at Wet n Wild, which offers 99-cent lipsticks.

CoverGirl's biggest rivals are also struggling to woo such shoppers. The five biggest mass-market beauty brands lost a combined 5 percentage points of market share between 2011 and 2016, while higher-end and smaller mass-market brands picked up share, according to Euromonitor.

Slow sales of Maybelline in the U.S. are dogging L'Oréal, whose luxury and professional brands are still growing. In a November call with analysts, L'Oréal CEO Jean-Paul Agon described the mass-beauty segment as "pretty weak" and said the company hopes to bolster sales in part by leveraging the newer NYX brand, which it acquired as a startup in 2014 for $500 million.

Last month, Revlon said its CEO, Fabian Garcia, would leave the New York company, whose shares are down 35% from a year ago amid financial losses, declining market share and concerns from investors that the company can't pay its debt.

"The internet has become the true equalizer," said Tarang Amin, CEO of e.l.f. Beauty Inc. The brand started by selling online in 2004 and now generates most sales from Walmart and other stores.

In addition to the advantages of online marketing and selling, Mr. Amin said the company is benefiting from ultrafast development times and consumers who are more willing to shop across segments. "They are just as likely to have a Chanel item as an e.l.f item."

Write to Sharon Terlep at sharon.terlep@wsj.com

(END) Dow Jones Newswires

February 06, 2018 02:47 ET (07:47 GMT)

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