With companies from Mary Kay and Sally Beauty to Jack Black, Big D has become one of the nation’s capitals for personal-care products.
By Holly Haber
Published in D CEO September 2015
When the fourteenth season of Project Runway debuted last month, it had a Lone Star accent. Mary Kay and Sally Beauty Supply—based in Dallas and Denton, respectively—were prominently featured as makeup and hair sponsors. It was one more tipoff to the significance of the beauty industry in North Texas.
Although the overall U.S. industry, estimated at more than $56 billion in annual retail sales, is based in New York, Dallas-Fort Worth has its own thriving—if virtually undercover—business in personal-care products. “It’s one of the best-kept secrets, how many beauty companies are here,” says Curran Dandurand, co-founder and chief executive officer of Jack Black lotions and potions for men. “I don’t know who would be No. 2 between L.A. and Dallas. It would be close.”
“It’s like mecca” here, adds treatment entrepreneur Colleen Rothschild.
North Texas is fertile ground for beauty brands thanks to its extensive resources for everything from formulations to production, as well as its position as a central transportation hub.
The grande dame of them all is Mary Kay Inc. Stronger than ever at 52 years, the private company posted a record $4 billion in revenue last year and was ranked the 16th-largest beauty company worldwide by Beauty Inc. magazine.
Dozens of other North Texas brands are also helping people get their glow on. Among the best known are BeautiControl, Bed Head by TIGI, Bodycology, Cetaphil, SkinCeuticals, and Xen-Tan.
“There is so much you can do in Dallas, it’s just unbelievable,” says Niven Morgan, who started his namesake bath and body company here in 2000. “I can get into hair care, skin care, candles, aerosols, room sprays, a spa line, a men’s line. Beauty-wise, absolutely you can start a business here and be successful.”
Their business plan was dashed when Jack Black’s debut at a PGA trade show yielded just five orders.
It’s difficult to track industry revenue with any precision, given the large number of private firms. But the majors alone rack up around $9 billion in annual sales.
Sally Beauty Holdings Inc., a publicly held retailer and distributor focused on hair care and color, recorded $3.8 billion in revenue in fiscal 2014, its 50th year in business. Addison-based direct sales treatment firm Nerium International raked in $403 million, Beauty Inc. reports. Cetaphil, a popular line of cleansers and moisturizers owned by Nestlé, the world’s leading nutrition, health, and wellness company, reportedly does more than $250 million, according to a senior employee.
Then there’s shampoo and style king TIGI, which was generating $350 million in annual sales when it was sold to Unilever in 2009, according to Bruno Mascolo. He signed the deal as CEO of Toni & Guy, and now runs an expanding empire of franchised Toni & Guy beauty schools and salons to the tune of $50 million a year.
Major retailers here are another asset. Neiman Marcus is one of the most important accounts for prestige brands. Its presence motivated Natura Bissé, a luxury treatment firm based in Barcelona, to establish its North American headquarters in Irving.
The Army & Air Force Exchange—a general merchandise giant that’s quietly based in southwest Dallas—sells cosmetics and fragrances to all branches of the military. And, the beauty-buying office for Dillards’ 300 or so department stores is in Arlington, not at the headquarters in Little Rock, Arkansas.
(J.C. Penney is also based here, but its beauty business is managed in San Francisco by Sephora.)
Vendors here don’t even have to leave town to pitch other merchants; they can rent space at the Dallas Market Center during the bustling biannual gift shows that typically attract 40,000 attendees.
Many homegrown brands are developed in dozens of area laboratories that serve all facets of the beauty biz. “Every lab specializes in something different,” says Pat Parsi, owner of Billy Jealousy men’s skin care. “Some do lotions and moisturizers and anti-aging, and others do personal care, mass market. Some are good at scrubs.”
Just don’t ask for any of the labs’ names. The secretive industry is loathe to reveal sources, though online searches turn up some of the heavyweights: Beauty Manufacturing Solutions Corp., CBI Laboratories, Cosmetic Laboratories, Swiss-American Products Inc., and United 1 International Laboratories.
Coast Southwest Inc., a California distributor and formulator of personal care chemicals, opened a 30,000 square-foot facility in Arlington two years ago for R&D, sales, and distribution to support its “rapid growth” in the region.
Botanical extracts supplier Active Organics caught the attention of Warren Buffett’s Berkshire Hathaway Inc., which purchased it in 2012 from Michael and Elysiann Bishop, who retained the Actifirm skin-care line. As Berkshire doubtlessly noticed, beauty boasts high margins. The average retail markup on cosmetics is nearly 80 percent, according to SAP Business Innovation. But the hike on a jar of luxury facial cream from manufacturing cost to retail can be a staggering 2,000 percent, according to one insider.
Mass is also lucrative: Global industry leader L’Oréal posted a robust 17.3 percent operating margin in fiscal 2014, as net profit hit $5.59 billion.
“It’s easy to make a profit,” claims Parsi, who launched Billy Jealousy upscale men’s skincare, hair care, body care, and shaving lotions in 2004. “But if you really want to grow and be like ‘the next [big] thing,’ you have to pump money into it.”
Sales of Billy Jealousy have doubled in 2015 and should crack $10 million within a year or two, Parsi says.
The brand rode the coattails of category pioneer Jack Black, which Dandurand started in 2000 with her husband, Jeff, and one of their colleagues, Emily Dalton. Dandurand was inspired in no small part by her 17-year career in marketing at Mary Kay. Iconic founder Mary Kay Ash was “an amazing entrepreneur,” Dandurand says, adding, “I saw how fulfilled people were by being their own boss.”
Spotting a hole in the market for upscale skin and hair products for men, Dandurand and partners crafted Jack Black in 2000 as a playful, quality brand targeting golfers. Their business plan was dashed, however, when Jack Black’s debut at a PGA trade show yielded just five orders.
“The three of us went out to Chili’s and said, ‘What are we going to do?’ ” Dandurand recalls. “We had quit our jobs and put our life savings into it. So, we said, ‘Let’s approach stores.’ ”
Luxury fashion emporium Stanley Korshak was first to say yes, and the high-profile account lent credibility to the fledgling brand. Once In Style magazine published Matthew McConaughey’s photo alongside his favorite Jack Black products, things snowballed.
“We are one of the largest prestige men’s brands in the market,” Dandurand says, keeping mum on exact sales figures. “In the past five years we’ve had a compound growth rate of 28 percent; in the early years it was even faster. We are still driving very robust growth and starting to expand internationally to 21 countries, so we’re truly global now.”
Mary Kay, meanwhile, is on a roll. With 3.5 million salespeople peddling its creams and cosmetics in 35 countries, sales last year lofted a robust 11 percent over 2013, which was its 50th anniversary and a record year.
The company presciently entered China 20 years ago and is now the top skincare brand in the world’s largest market, according to Sheryl Adkins-Green, chief marketing officer.
“We see growth opportunities both in existing markets as well as the potential for new countries that we have not yet opened,” she says. “Latin America is one of our growth markets; both Brazil and Mexico are in our top five.”
The direct-sales juggernaut produces all of its 200-plus products here except goods for China, which must be made there by law.
Susan Posnick might not have her own makeup brand if it weren’t for Mary Kay Ash. “Mary Kay was the one who told me I was going to do my own company someday and I told her, ‘You’re nuts,’” recalls Posnick, who was Ash’s personal makeup artist for 17 years. “The business end was not something I wanted to get into, and she said, ‘Something will happen in your life that will make you start a makeup company, and when you do you need to use your name.’”
“It’s a lot of fun running it out of Dallas,” McNelis says, “especially when you have products that are great for big hair.”
That “something” was skin cancer. Because she couldn’t wear chemical sunscreen and had never liked foundation, Posnick decided to create something different. She introduced a mineral foundation powder with sun protection in 2002, and gradually filled out an entire makeup line designed for ease of use. It’s now sold by such upscale venues as Forty Five Ten and Lake Austin Spa Resort.
“I just wanted to save somebody else from skin cancer,” Posnick says. “So for me it was about changing lives, making them better. I got that 110 percent from Mary Kay.”
One of Dallas’ best-known beauty brands has trod a rockier path. BeautiControl rapidly expanded after Tupperware Brands Corp. bought it in 2000 and introduced home spa treatments. But its direct sales force diminished, and sales began plummeting in 2009. The company still faces challenges. Revenue slipped 9 percent in the first quarter of 2015, according to Tupperware CEO Rick Goings. Hoovers estimates that BeautiControl, which has offices, R&D, and manufacturing facilities in Carrollton, pulls in $60 million a year.
If Mary Kay is the local makeup queen, the goddess of hair is Sally Beauty Holdings, which distributes products in more than a dozen countries. In the U.S., the company sells to the public and professional stylists through Sally Beauty Supply, and offers professional salon products through Beauty Systems Group and CosmoProf Stores and sales consultants.
The professional division is doing “extremely well,” says CEO Christian Brickman. Most of Sally Beauty Supply’s 3,000 North American stores are currently getting a facelift, with new graphics, floors, LED lighting, cash wraps, and “studio” departments for nails, hair care, and cosmetics.
The new “Project Runway” campaign is also intended to freshen Sally’s somewhat-dated image. “We’re in the process of rejuvenating the brand,” Brickman explains. “Sally was declining a couple of years ago, but now it’s up a few points. It’s slow, but it is growing.”
The company is opening stores in Brazil and, in the longer term, China, Brickman says. It has many proprietary brands accounting for more than 40 percent of Sally Beauty Supply’s annual sales. They are “800 to 1,000 basis points” more profitable than other labels, Brickman says.
“It’s a big part of our strategy to build our own brands, plus we think it differentiates us,” he explains. “We have a team here in Denton that wanders the world looking for what’s hot and cool. We develop all of [the products] locally, but they are made all over the world.”
One of Sally’s niche suppliers is Curls, which makes hair care products for women and girls with naturally curly, wavy, or kinky hair. The company relocated to Plano from northern California in late 2013, says owner and founder Mahisha Dellinger. “The main driver was to be in a climate that is conducive to the growth of my business, and California wasn’t it, from the standpoint of taxation, regulation, and also the location,” she says. “I can get to any of my main suppliers or business partners easily out of Dallas. Sally Beauty is here, and Walmart is a 45-minute flight. There are many pluses.”
Curls has grown consistently since its introduction in 2010 and is currently sold in every Target store and select units of CVS, Rite Aid, Duane Reade, and Walmart, Dellinger says.
Lynne McNelis, co-founder of Xile Beauty Group, says Lone Star roots are an advantage. Xile’s signature Fave 4 Texture Takeover was one of the first texturizing hair sprays on the market. “It’s a lot of fun running it out of Dallas, especially when you have products that are great for big hair,” McNelis says. “You have a lot of credibility coming from Texas.”
McNelis leveraged her 11-year career in product development and marketing at TIGI to start Xile in 2012 with fellow TIGI alum Alex Andrews. She says she learned a lot from Bruno Mascolo and his wife, Kyara. Formulated here, Xile’s Fave 4 and Omni brands are sold through professional hair salons in the U.S. and Mexico. Canada is in the works.
Another niche hair company is Macadamia Beauty LLC. Founded in Plano in 2009, it produces Macadamia Professional hair products that are sold in more than 80 countries.
After 15 years at one of Dallas’ major labs, Colleen Rothschild went solo to create two botanically based skin-care lines: c.Booth and Eclos. She sold them to mass marketer Freeman Beauty in 2012, then successfully launched Colleen Rothschild Beauty prestige skincare treatments.
Candles are due in the fourth quarter and makeup is scheduled for next spring, she says. “I love having a business here because it’s centrally located,” Rothschild adds. “When you’re in distribution, getting a truck from New York to L.A. is expensive.”
It was quite a different scene when Christi Harris Speer created her skincare products back in 1972. “It was much harder back then,” Harris Speer says. “There are labs now, but there weren’t then.”
Intrigued by skin research she did for the John Robert Powers Modeling School, Harris Speer worked with a chemist in her neighborhood to concoct cleansers and creams. Unable to find someone to develop an almond scrub, she crushed the nuts in a coffee grinder and formulated it herself.
The former model initially packaged her treatments in Tupperware and sold them to Powers’ students. By 1976, and while living in Dallas, she had established a finishing school in Abilene and introduced color cosmetics. (She eventually got tired of the commute and opened a 10,000-square-foot training center on Belt Line Road in 1983.) The beauty guru currently offers makeup socials and image workshops at her latest location, Christi Harris Beauty Center in Addison.
Another model, Jamie O’Banion, is hitting the big time via home shopping networks as the face and co-founder of Beauty Biosciences’ anti-aging treatments. Television is a great vehicle, because the message is so clear, O’Banion says. “It takes the same effort to fly to [the Home Shopping Network] and sell 40,000 [units] in a day as going to a department store and doing 500, if you’re lucky.”
The 4-year-old brand will branch into QVC UK, Selfridges, and Harrods in the fourth quarter, she says. Next year could bring a windfall when O’Banion stars in Beauty Bioscience infomercials produced by marketing firm Guthy Renker, a new equity partner.
Other local brands include Cantu hair products for naturally curly hair, Kale Naturals chemical-free hair and body products, NailaCareMD skin treatments, and SmartShield Sunscreens.
“Dallas is definitely a launch point for a lot of beauty companies,” sums up Leesa Smith, who sells her treatment lines, Agera and Clinical Aesthetics, to physicians. “There are so many opportunities for brands both large and small.”
Proving that, in North Texas, beauty is a lot more than just skin deep.