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SCOPE OF THE REPORT

Scope

All values expressed in this report are in US dollar terms, using a fixed exchange rate (2011).

2011 figures are based on part-year estimates.

All forecast data are expressed in constant terms; inflationary effects are discounted. Conversely, all historical data are expressed in current terms; inflationary effects are taken into account.

Beauty and

Personal Care

Disclaimer

Much of the information in this briefing is of a statistical nature and, while every attempt has been made to ensure accuracy and reliability, Euromonitor International cannot be held responsible for omissions or errors.

Figures in tables and analyses are calculated from unrounded data and may not sum. Analyses found in the briefings may not totally reflect the companies’ opinions, reader discretion is advised.

Revlon holds a solid position in the world of colour cosmetics, which expects strong growth potential over the forecast period. However the company’s weak financial situation is restricting its potential for growth, in terms of providing sufficient marketing support and resources for product development. Working towards improving its financial health, Revlon will need to step up its business scale in emerging markets to fully exploit the growth potential in the beauty and personal care industry.

Revlon is a US-based company operating in the beauty and personal care industry exclusively through its direct wholly-owned operating subsidiary, Revlon Consumer Products Corporation and its subsidiaries.

Revlon markets its products worldwide and its eponymous brand is one of the most recognised labels around the globe. Building strong brands is one of

Revlon’s core strategies in its business operation.

Other brands include Almay in both colour cosmetics and skin care, Mitchum in deodorants, Charlie and Jean Naté in fragrances, and Ultima II and Gatineau in premium skin care.

Revlon’s business operation is heavily constrained by its high level of debt, which restricts is resources to invest in new products and market growth.

Recession and the uncertain economic development in the US and Western Europe in recent years and the collapse in consumer spending power have only increased the pressure on the company.

However, its mass position has provided some relief as consumers downgraded, and despite the debt, product innovation and international growth are priorities.

STRATEGIC EVALUATION

Financial analysis

Revlon’s net sales grew by 5% to reach almost

US$1.4 billion in 2011, the highest sales figure over the past five years.

Growth was driven by better performance in the core domestic market due to economic recovery, as well as its acquisition of Sinful Colors in early 2011.

Due to the high level of selling, marketing and advertising expenses as well as restructuring costs, Revlon’s net income fell to US$53 million in

2011. This marked a sharp decline of 84% from

2010 when Revlon’s operating income skyrocketed due to a reduction of the company’s deferred tax asset valuation allowance in the US at the end of 2010.

Revlon’s financial gearing is heavy due to its high level of debt, which stood at US$1.1 billion in 2011, compared to its US$1.4 billion net sales for the year. The debt burden restricts the company’s investments in advertising, R&D and capacity expansion. However, Revlon has increased its advertising spend in 2012 in the hope of improving brand and product visibility.

US$ million

US$ million

Revlon Inc: Performance by Sales and Profit 2007-2011

1,500

1,000

500

0

Revlon Inc: Total Indebtedness 2007-2011

1,500

1,450

1,400

1,350

1,300

1,250

1,200

1,150

1,100

STRATEGIC EVALUATION

First half year results 2012

Revlon Inc: Net Sales by Geography 2007-2011

Revlon Inc: Net Sales by Geography

H1 2011-H1 2012

Revlon’s higher sales in 2011 were driven by improved sales in its core US market which accounted for 55% of its total net sales for the year. Revlon’s overreliance on its domestic market has not been significantly reduced over the review period.

Value sales in the US picked up in 2011 as consumers resumed purchasing thanks to a gradually recovered economy. Sales from international markets also increased, but were partially offset by lower sales in Canada.

Revlon’s net sales for the first half of 2012 grew marginally to US$688 million from the same period a year earlier. Unfavourable exchange rate movements discounted the growth by two percentage points. Sales were stronger in the Americas region, but were disappointing in Europe, Middle East and Africa and Asia

Pacific, according to the company’s latest financial report.

Core brand focus

 One of Revlon’s key strategies is building strong brands. Rising competition from industry superpowers and the company’s own debt problem also lie behind the greater concentration on its main Revlon brands as well as the Almay label. Such a move is clearly wise given the market conditions, but the strategy is by no means unique and the pressure on its finances restricts the extent to which it can compete with its larger rivals.

Developing international profile

 International growth is a core strategy at Revlon, which given its current US market focus is a wise move. It is well placed in South Africa, Australia and Canada and it is targeting further growth in these markets. The company would do well to broaden its profile in the emerging world, with a particular emphasis on the BRIC markets. However, its debt problems make such growth harder to achieve.

Investing in product innovation

 Revlon is putting great store in the role of production and packaging innovation in revitalising its market presence. This activity is being centred on its core brands and recent launches have been centred on such ranges as Revlon Age Defying Spa, Revlon ColorStay, Revlon Super Lustrous, Almay Smart Shade, etc. The company is actively integrating cross-category innovations which are seen as a top trend in the beauty and personal care industry in recent years.

Target greater efficiency

 Resolving its debt issues, in so much as reducing its debt levels and improving its profit margins, is a major strategic focus at Revlon. Rationalisation is a central plank of this initiative and the company has overhauled its management structure and made a number of divestments, including those in Latin America. Recent acquisitions tap into the highgrowth categories and broaden its portfolio and coverage, offering opportunities for future growth.

% year-on-year growth

Revlon Inc: Competitive Performance by Value vs Global Beauty and Personal Care Market 2007-2011

-4

A: (2008): Financial crisis breaks out in the US hitting consumers’ spending power, combined with the need to service huge debts forcing Revlon to sell its key Brazilian brands, and leads to further falls in its value sales in 2008, the lowest performance within the review period.

B: (2010): Strong commitment in product innovation stimulates

Revlon’s sales during the year, especially in its emerging markets where sales growth is strong. However weak performance in its core developed markets offsets growth, resulting in the company’s under-performing the market average.

C: (2011): Outperformance in 2011 is driven by improved sales in core US domestic market as well as the company’s acquisition of Sinful Colors, which boosts Revlon’s portfolio in nail polish. The improved sales of Almay colour cosmetics and Revlon ColorSilk hair care partially offset Revlon’s lower sales in colour cosmetics.