Direct marketers of beauty care poised for future growth

Related tags Cosmetics

Vorwerk & Co - a German direct selling business - has announced
it is to acquire beauty care company Jafra Cosmetics. The
acquisition represents the expansion of Vorwerk into the cosmetic,
fragrance and skin care market, the largest and fastest growing
direct sales segment worldwide.

"Our core competency is direct sales. With Jafra Cosmetics, we are expanding our portfolio to include a company with an excellent brand name, high profitability with strong growth prospects, and very competent management,"​ said managing partner of Vorwerk Jorg Mittelsten Scheid.

Jafra Cosmetics is a direct seller of premium skin care, colour cosmetics, fragrance and body care products in the Americas and Europe. The company, which is partly owned by the global private equity company Clayton, Dubilier & Rice (CD&R), reported annual revenues of $400 million in 2003.

Jafra is not the only direct-selling beauty company to have posted positive results in 2003 however. With what appears to be a revival of the direct-selling approach, Avon - the largest direct-selling cosmetics company in the world - continues to preform as it embarks on Asia.

As the Chinese government considers lifting a ban on direct sales, the direct selling market of beauty products looks set to continue growth world-wide.

Vorwerk's​ core business is the direct sales of household appliances, as well as industrial and financial services and carpets, the group achieved an annual turnover of €1.6 billion in 2003. With the addition of Jafra, Vorwerk's turnover will increase to €2 billion.

"The many growth initiatives and operational enhancements implemented by Jafra's outstanding leadership team drove a 400 per cent increase in the company's profits since 1998 and significant cash flow generation. The company is well positioned for continued success under Vorwerk's ownership,"​ said CD&R financial partner David Novak.

CD&R acquired Jafra from The Gillette Company in 1998. Since then the company doubled its global consultant base to over 400,000, increasing its presence in its primary US and Mexican markets.

"The company's corporate culture and its advisory- oriented sales approach using trained consultants to market Jafra's brand-name products all fit perfectly into Vorwerk's corporate strategy. Jafra's management team will continue to lead the company as a separate entity within the Vorwerk group,"​ said Vorwerk managing partner Achim Schwanitz.

The transaction is subject to customary regulatory approvals and is expected to close in the second quarter of 2004.

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