Local beauty product firms get global faces

Two husband-and-wife teams reap success with international expansion

Skoah co-founder Andrea Scott

Two Lower Mainland grooming product manufacturers, both headed by husband-and-wife teams, are expanding rapidly by targeting international markets.

Skoah and AG Hair make and contract the production of beauty and grooming products – a sector with global retail sales estimated to be more than $220 billion in 2012 and growing at about 3.4% annually, according to Lucintel. The market research firm says the expansion is “highly influenced by increasing demand in Asia Pacific and Europe due to increase in GDP and improving living standards” and that “increased awareness” has resulted in higher demand for luxury products.

Five of Skoah’s eight retail stores are in Metro Vancouver – but it is the U.S. where principals Andrea Scott and husband Chris Scott plan their expansion.

The Scotts, through partner Cam Nelson, plan to open their second Boston location on that city’s Newbury Street in May and then a third Boston location by the end of the year. The Scotts also plan to open two Seattle locations by the end of August.

“We want to be at 50 stores within the next five years,” Andrea Scott said. “Future growth will all be corporately owned stores and not a licence agreement like we have in Boston.”

AG Hair principals John Davis and Lotte Davis do not have stores because they want to focus on manufacturing and distribution.

They have already expanded sales of hair-care products, which they manufacture in Burnaby, to more than $20 million annually via distributors to 14,000 salons across Canada, the U.S. and Taiwan. Five years ago, they generated almost $17 million from sales to 10,000 salons.

The Davises plan to launch sales in Australia in the next couple months thanks to long-time customer Red Deer-based Chatters Canada Ltd. buying the 120- location Australian hair salon franchisor Price Attack.

Both 85-employee AG Hair and 80-employee Skoah operate under the radar and are part of a small subset of B.C.’s manufacturing sector. The biggest difference between them is that AG Hair does no direct sales to customers. It prefers to sell through distributors who resell products to salons.

Skoah, in contrast, focuses heavily on the retail side.

The company employs a chemist and has its own proprietary recipes for its various skin creams and cleansers. But it outsources the manufacturing to different Vancouver labs.

Andrea Scott told Business in Vancouver that part of the reason she recently hired a CFO is because the company is starting to crunch numbers on bringing its production in-house.

All of her company’s employees are expected to work part time in the company’s stores – a situation that was inspired by Lululemon Athletica Inc. founder Chip Wilson’s advice that it is more important to be in the store than in the office, she said.

“Being in the store is the best way we can think of to make sure everyone understands how important the customers are.”

She attributes the company’s rise to nearly $10 million in annual sales to direct engagement with customers and genuinely listening to what products they want.

Interaction is heightened because Skoah customers can also get facials, which promotes employee-customer conversations.

The service sets the chain apart from retailers such as the Body Shop or Kiehl’s, which sell similar products. It also boosts revenue.

“We teach customers why products are important. We don’t just rattle off a list of ingredients,” Scott said. “It’s unusual for someone to have a facial and not go home with products.”

John Davis values feedback but prefers to get that from distributors because it means he can focus his investment on making shampoos, gels and other products.