The U.S. hair, skin, and cosmetics industry is large (over $55B) and projected to grow at nearly 4% through 2020, providing a stable tailwind (p. 7, para. 2).
The U.S. lipstick industry, a core category for Revlon, is expected to grow at an annualized rate of nearly 6% through 2020 (p. 6, External Issues).
The industry is "much more resistant to economic downturns than many other industries," as consumers continue to purchase beauty products at high rates even during recessions (p. 7, para. 1, 2).
Estee Lauder's CEO suggests that "men's skin care products may outpace companywide growth," indicating a significant and underserved market segment (p. 8, para. 1).
The case notes that "customer spending has increased substantially," providing an opportunity to increase sales volume and introduce new products (p. 5, para. 2).
Rival Avon has been "plagued" by issues, including a declining revenue trend and a bribery scandal, and rumors suggest it is a potential acquisition target (p. 6, Avon Products).
There is "increased demand for products that are marketed as chemical free," creating an opportunity for new product lines in the natural/organic space (p. 8, para. 1).
The high cost of marketing and R&D, which comprises 25% of industry revenue, makes it difficult for new, small players to enter and compete effectively (p. 7, para. 1).
The professional salon channel is a key area for product innovation and customer acquisition, which Revlon can leverage through its Professional division (p. 2, Strategy).
While the case focuses on the U.S., the global nature of competitors like L'Oreal (only 25% of sales from North America) indicates significant opportunity for expansion outside the U.S. (p. 6, L'Oreal SA).
The beauty industry has "over 3,000 different competitors," including resource-rich giants like Procter & Gamble, Unilever, L'Oreal, and Estee Lauder (p. 3, Competitors).
A "notable trend in the industry is less customer loyalty and increased commoditization," with many customers willing to switch brands based on attributes other than name (p. 5, para. 2).
Firms are forced to increase spending on R&D and marketing to attract buyers, which "negatively impacted profits" across the industry (p. 7, para. 2).
There is "increased sensitivity to possibly harsh metals, chemicals, or animal byproducts" in cosmetics, which can lead to costly reformulations and negative PR (p. 7, para. 1).
A growing online trend of celebrities and influencers promoting a natural look with hashtags like "#nomakeup" could dampen long-term demand for color cosmetics (p. 8, No Makeup Trends).
Rivals like L'Oreal are gaining a reputational advantage by being included in the "Global 100 list of the 100 most sustainable companies," a factor increasingly important to consumers (p. 6, L'Oreal SA).
Rivals like Avon and Mary Kay use a direct-to-consumer sales model that bypasses traditional retail, creating a different and highly personal competitive threat (p. 5, para. 2).
The "stronger dollar in recent years" has "plagued" competitors like Avon that have a large international sales base, indicating a risk for any global expansion strategy (p. 6, Avon Products).
The case notes that wholesalers "are expected to increase their share moving forward as they have better bargaining power," which could squeeze manufacturer margins (p. 7, para. 1).
There are "rumors that Perelman may want to sell Revlon," putting pressure on the CEO to deliver a clear strategic plan to maximize acquisition price (p. 8, Future).