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Australia's new beauty exporters

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Everyone has heard the apocryphal stories of people starting up beauty companies from their kitchens. Anita Roddick of the Body Shop and Horst Rechelbacher of Aveda to name but two. Australia has a history of taking advantage of local resources, from Helena Rubenstein’s lanolin-based face creams to the natural antioxidants that have been discovered in our native flora, which are popping up in skincare products. While there have been some big export success stories, Natalie Bloom and Kit Cosmetics to name just a couple, there are other innovative Australian brands started from literally homegrown research and development that are making their mark offshore. Would-be beauty exporters face a raft of complexities but a very strong selling point can go a long way towards meeting the challenges. Inika mineral makeup cofounder and CEO Miranda Bond launched the brand in Australia just as consumer consciousness was turning towards natural organic products, plus the range can be used with problem skin conditions. The British expat took samples with her on a trip to the United Kingdom and called on big name organic retailers in the health industry, rapidly gaining distribution through chain outlets and a celebrity following including vegan designer Stella McCartney. Sasy n Savy’s Samea Maakrun simply bypassed Australia and targeted the Asian market for her botanical skincare products containing Kakadu plum, bearberry leaf, wild rosella flower, grass lily and high quality essential oils, using beauty expos to work her way from Singapore to China and forging relationships with hotels, spas and department stores. Maakrun also picked up Sa Sa, the largest cosmetic retailer in Asia, and the Mirvac hotel chain as private label customers, before turning her sights on the Middle East. Tania Walsh developed her Liquid Sun topical tanning formulation in her kitchen for use training her South Australian beauty college students in spray tanning. Word of mouth spread rapidly in Australia and beyond. Within three months she had a call from a salon in the United States asking about supply. With snowballing demand, Walsh sold the beauty college to develop her non-chemical Vani-T tanning, bodycare, mineral makeup and hair product ranges which now sell in 15 countries. Former film industry makeup artist Linda Lowndes responded to the plight of a girl with a disfiguring condition by dedicating herself to seven years’ research to come up with a flexible, waterproof and long lasting product that would be indiscernable from natural skin. Working with a scientist and colour matching technology, Lowndes approached the Brisbane Royal Children’s Hospital Burns Research Group and gained the support of Professor Roy Kimble to conduct a clinical trial of Microskin with 20 affected children, with the results published in medical journals. In the last year she has been contacted by a dermatologist with a clinic in New York, and hospitals in the United Kingdom and Canada, as well as China, seeking access to Microskin.

How to get started

Where should would-be beauty exporters who believe they have a unique product start? "Small companies need to be very strategic about the markets they approach," says Austrade export advisor Leonie Smith. "The value of your own overseas research visit cannot be underestimated. As well as obtaining firsthand knowledge of the country, it has long been recognised as the best way to develop long term sustainable business relationships. This can be done independently, as part of a trade show or as an addition to a conference."

Maakrun says her first foray into the Asian market was a research visit to find out "who was out there, the names of the retail outlets, who was who and what was what on the market. We started researching competitors and how they were positioning themselves, pricing themselves, doing promotions". She returned to Australia and accessed help from Austrade to establish a network of contacts before selling her products through overseas expos. "Austrade and state government departments offer a range of services to companies seeking business connections overseas, from export planning to business matching services," says Smith. Industry associations and chambers of commerce offer networking opportunities, information seminars and many other levels of support.

Rules and regulations

Australia’s clean green reputation and high manufacturing standards are well known, especially throughout Asia, according to Smith. "At Austrade we are seeing a lot of success building on this image in niche markets, including baby care, men’s care and organic skincare." The content of cosmetic products manufactured in Australia is regulated by the Australian Government’s National Industrial Chemicals Notification and Assessment Scheme and based on the Australian Inventory of Chemical Substances, a register of ingredients that follows naming conventions established by the International Nomenclature of Cosmetic Ingredients. This system for identifying oils, pigments, waxes and other chemicals used in cosmetics is cross-referenced with a numerical Chemical Abstracts Service registry and is critical to meeting regulations governing labeling information. While different countries have variations on the substances they allow in cosmetic products, most follow the standards set by the European Union, to the extent that ingredients banned by the EU are not allowed in Australia. Inherent complexities lie in the percentages, or concentration, and labelling requirements. "Each country is different and requirements are subject to change without notice," Smith warns. "Legal issues such as government regulations and labelling are some of the biggest hurdles faced by Australian cosmetic exporters. Depending on a company’s products and experience I may recommend looking at countries with relatively simple, transparent processes first, such as Hong Kong or Singapore, and progress through more challenging markets such as Taiwan or Korea before facing extremely complex markets like India and China. Outside Asia, the EU Directives and US Federal Drug Administration requirements are transparent but intricate and most companies require the services of a consultant to manoeuvere the complexities of the legislation." Lowndes says preparing Microskin for the US market "has been extremely expensive, a very gruelling process to make sure that everything was labelled correctly and there was a lot of shuffling and reworking. You’ve got to go through all this process which costs a lot of money and takes a lot of time, for each market, which drains a small business". Maakrun faced a different problem with going into China which had recently changed the regulatory body that approves products for consumption from a government department to a new administrative body with no previous experience of dealing with bush ingredients, even though they are registered on the INCI. This has caused delays but she says the key to entering new markets is remaining flexible. "You can’t use certain ingredients or different markets will require different sorts of aromas, different promotions, different competition. It’s not just selling a brand. Half of the business relationship is understanding the customers and how they work, selling your products but also working with them in regards to making your products move, so that’s the promotion, the marketing and the training, so that goes hand in hand to make a successful brand and nurturing that relationship with them. And that’s different for most markets."

Distribution channels

"We’ve been strategic in terms of which countries we’ve gone after," says Inika’s Bond. "We’ve learned as we've gone and one of the things we’ve really improved on is how we choose a distributor. What we look for is somebody who has got experience in the natural and organic space and who can do multi-channel distribution." Smith agrees. "I have seen greater success with companies who have a proactive approach with identifying the overseas market first and the partner requirements second," she says, but also stresses that the partnership is critical. "Ask the company for examples of their successes, an overview of their corporate structure (including warehousing and regulatory services) and, most importantly, a business plan showing how your brand would fit within their organisation," she advises, warning that online requests for distributorships and/or large orders "may not be the opportunity they appear and should only be considered in line with your export objectives". Walsh, who responded reactively to requests for Vani-T stock, says: "We did have a lot of issues, especially in the early days when we took on people that didn’t have the capital behind them. Ideally we are looking for people with a database who already sell to salons or mainstream high-end retail distributors and they add our products to their portfolio." Bond says the beauty of distributors is they allow her to control her running costs. "The only way that you really need to expand is to be producing more product so you don’t need to expand your core team in order to service distributors because they have their own team, so your upscale of resources in this wide area distribution model is quite effective," she explains.

Marketing and brand identity

Lowndes, with the help of Microskin’s board of directors, has developed a business model for franchising her product through dermatology clinics and licensing through hospitals. She says she always knew she wanted global distribution, hence the company name, Microskin International. "We’re going to be like Johnson & Johnson, that’s my goal, we are going to be big," she predicts. Her eight-person organisation has already attracted the attention of multinationals such as Smith & Nephew which is interested in the Microskin retail range that includes a just released concealer aimed at the youth market. Having used the internet to access support groups for people with disfiguring conditions, Lowndes is confident about creating international demand for Concealit. "I believe as soon as we put it up on YouTube there will be phone calls. We have never had to seek anyone out, not once, they come to us." Walsh had to resolve a conflict between supplying salons with Liquid Sun spray tan-"which is pretty much our bread and butter"-and selling Vani-T products through retail outlets such as Harrods and Harvey Nichols, which she has now withdrawn from, but has taken onboard that tanning salons don’t promote her brand identity, often hiding the product that gives them a competitive advantage. "We’ve recently launched a retail concept store at Westfield here in SA where people can go and see all of our products and we’re just about to open a dedicated salon which will be the first of many exclusive medispa type destinations that we’ll do around the country. The strategy behind it is to be more accessible to more people and get more marketing and branding out there," she explains. Like Lowndes, she is considering alternative channels for exposure and distribution. "We’re relaunching our website, it’s going to be a lot more interactive. I’d like to do something like Nude by Nature does, where they advertise on TV and then drive people to their website for online sales."

Walsh says she is open to television selling in Australia but turned down a shopping channel approach from the US. "We have been approached by QVC in the US but there are massive stock amounts that we would need for that." Having started her business with just $600, she has funded Vani-T’s expansion entirely through re-investing profits. Bond too is taking a strategic approach to building Inika’s profile, saying she’s leaving the hugely competitive US market till last. "We are making sure that we are in all the big markets and have really proven ourselves and built a very desirable prestige brand, so that by the time we come into the US we can come in at that high level." Maakrun says she networks in the spa industry, the beauty industry, at a government level and on a personal hobby level through organisations like women’s associations, "so we network in three different areas and networking also creates good relationships that we can ride on".

Challenges

All four entrepreneurs agreed that cash flow is the biggest hurdle to growing their export businesses. As Maakrun says, "For one good export you’re servicing about 70 or 80 clients back home and payment is upfront." "Shipping, costing, freighting, once it starts growing we are employing a lot of companies," Lowndes explains. She took advantage of the then-Commercialising Emerging Technologies (COMET) grant and last year was awarded further funding for research and development of Microskin. This year, she used an Export Market Development Grant to help meet the expenses involved with supplying the US market. Maakrun and Bond also received EMDG funding. "Compared to the global market, Australian cosmetic companies tend to be small enterprises and often have limited financial resources. The EMDG scheme is a partial rebate on marketing and promotional export expenses," Smith says, advising companies to investigate their eligibility early to incorporate future rebates into their long-term financial plans. "Rapid growth involves a constant need for cash and the cash flow is always a challenge," Bond says. "The Austrade ENDG grant really enabled us to expand. We’ve also for the last couple of years used Deca Financial Services. They help us with our Australian market and that’s freed up some cash." The four different companies are all committed to the long run, with big ambitions for their products, and all have won awards, including international recognition. In a crowded market dominated by huge multinationals, Australia’s cosmetic exports are carving a hard-earned niche.

Specialist services

An offshoot of the not-for-profit Australia New Zealand Health Care Association, the Aunew Export Group (www.aunew.org) provides comprehensive services for marketing lifestyle products to East Asia, with offices in Sydney, Auckland and Beijing. Staffed by experts, including a former Chinese Ministry of Health official, Aunew provides natural health care product exporters with: Documentation, product registration, trade mark and packaging Regulatory assistance and standards compliance Content assessment and labelling Anti-counterfeiting protection Controlled temperature bonded warehousing Product launches at a dedicated central Beijing concept store.

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