Consolidation Monsters

There are many things to write about, but I awoke a little angry today. I will use that anger constructively by venting about a very frustrating topic for me. When I start any new venture, big or small, I try to learn everything I can within reason.

When we got the master distributor rights for Screen Professional Hair line in the US, I bought a book called “Chemistry of Hair”, I watched a bunch of training videos, and I re-learned the color wheel. But the part I found most interesting was the evolution of the Professional Hair Care Products and Distribution. Big Surprise:  former American Express Executive thinking of the business landscape!

After hearing a few rumors, I rigorously researched the happenings in the distribution of salon professional products. For quite awhile, in the glory days of distributing, there were small regional distributors across the US and Canada; these were serviced by a family, an intimate situation, where the salon felt welcomed and served. Those types of distributors have mostly vanished; some may still exist, and if you know of one, please let me know. I would love to work with them.

Many of the Mom and Pops grew large enough to be bought, and there has been an aggressive string of acquisitions from two large distributors: BSG and SalonCentric.  Over the last 10 years, their quest for coast-to-coast domination has been a strategic buying spree resulting in two very large and very well funded companies.

These two companies determine what products go into the majority of salons. I would like to think that they select brands for their salons based on quality but no, their primary motivation is revenue and control of the pipeline of products.

Let’s look at the two companies more closely:

BSG- a $3 BILLION dollar a year publicly traded company that also owns more than 3,000 stores under the name Sally’s Beauty or CosmoProf. BSG employs 1,000 sales people across the country, and has had 30 acquisitions in 10 years. *this information gained from their 10-K report issued to the SEC

Salon Centric- Finding information on Salon Centric is difficult because they are owned by the “mega brand” L’Oreal.  Their financials are buried deeply in L’Oreal’s financials, based out of France.  Yes, a manufacturer owns them. But their acquisitions speak for themselves.

Many speculate that the two companies will both continue their acquisitions into the coming years.

Take a closer look at the lists of acquisitions:

BSG

Sally Beauty’s

Armstrong McCall (Texas)

Innovations (CA)

Cosmoprof Store

Schoenmen Beauty (PA)

West Coast Beauty (CA)

United Beauty (CT)

Heil’s (KY)

Macon (GA)

To name a few…

SalonCentric

Beauty Alliance (FL)

Columbia’s (SC)

Maly’s (West)

Marshalls (Chicago)

Mid City (Chicago)

Ace (FL)

CB Sullivan (MA)

Golf Coast Beauty (LA)

State Beauty (MO)

Peel’s (IA)

To name a few…

I bet you can imagine what products are most important to SalonCentric  aka L’Oreal, THEIR’S:  L'Oreal Professional (aka Artec) Keratase, Redken, Matrix, Pureology, Shu Uemura, and Mizani. For other products to get placement with SalonCentric, they would need to discount their products enough to make up for the extra margin SalonCentric is also getting as a manufacturer. Ugly and not conducive to growing the options for today’s stylist, I think it is downright un-American to block competition with dominance. Oh yeah, L’Oreal is not an American Company. The company is so big that it is in my spell check.

As for BSG, their loyalties lie with their shareholders, and because of their vast size, they bully their manufactures into dramatically discounting prices (similarly to Walmart). They make the majority of their money from their stores. Most of their stores have only a manager and 3 part-time employees* with very little knowledge of the industry. They cannot and do not have a long term plan for stylist education.

 Rumors have been spreading for years that Proctor and Gamble is going to buy BSG, I have not been able to substantiate this, but it makes sense.  Proctor and Gamble owns the following professional brands:  Wella, Sebastian, Clariol, Nioxen and will exacerbate the war between P&G and L’Oreal. This could cause price decrease in professional brands as they try to win, the never-ending war.

So in short, these consolidations do not benefit the Stylist or the Salon Owner. They reduce choice, customer service and education. The industry has changed a lot and not in a good way.

This is why Screen Hair Care in the US has created its own distribution model; we have offered micro-distributorships to ambitious industry leaders. They can enter the game with one of the world’s most popular independent products; fueled with their energy and expertise. We are bringing the Mom and Pops back, complete with education!

Thanks for listening to my rant, I hope you learned a little about the landscape of our business and what fuels my passion!

Whew, glad I got that off my chest!

* This information gained from their 10-K report issued to the SEC

http://investor.sallybeautyholdings.com/phoenix.zhtml?c=203305&p=irol-reportsOther