Scott Vincent Borba admits he's been driving his small staff crazy lately. He has a good reason: On May 6, the 32-year-old will get eight minutes on QVC to convince an audience of millions of women over 35 to pony up for his skin remedies.
Borba has watched loads of QVC to study the best pitchmen and women, and has practiced incessantly for the appearance. He's trying not to be too salesman-like, while still drumming up business for the 15-month-old Woodland Hills-based company that's called Borba LLC after his Portuguese last name that means "to persevere."
It will be his chance to make Borba stand out in a market that's being flooded with products seeking to capitalize on the desire of aging Baby Boomers to refurbish their dermis. Companies are hawking cosmeceuticals hybrids of pharmaceuticals and cosmetics that don't require prescriptions to buy to help mostly women look younger by erasing wrinkles and years of sun damage. Some outside the industry suggest there's a dash of snake oil among the ingredients, too.
Borba, of course, is bullish on its products. The company markets a mix of cosmeceuticals and nutraceuticals or non-prescription ingestible products with medicinal benefits. It has developed water intended to balance users' skin that's sold for $2.50 at make-up outlets like Sephora.
Other examples include Los Angeles-based Dr. Jessica Wu Cosmeceuticals Inc., which combines Asian ingredients and Western science; Beverly Hills-based KaplanMD Inc., whose skincare products target the symptoms of estrogen loss; and L.A.-based Lamas Beauty International, which is creating cosmeceuticals aimed at organic food shoppers at Whole Foods Market Inc. and Wild Oats Markets Inc.
For these relatively young companies, the goal is to stick around and ride the cosmeceutical wave. Borba predicts his company can reach $50 million in sales in a few years and $100 million shortly after that. And Wu, who said her retail sales are on track for $2 million this year, believes she can one day rival Dr. Nicholas Perricone, who built the cosmeceutical powerhouse that is Meriden, Conn.-based NV Perricone Md Ltd.
Richard Gersten, managing director of Greenwich, Conn.-based private equity firm North Castle Partners LLC, said it's typical for companies in the industry to increase sales 15 percent to 20 percent annually, well above the rate in the traditional cosmetics industry. North Castle owns HDS Cosmetics Lab Inc., a Yonkers, N.Y.-based company known for the Doctor's Dermatologic Formula brand, which has seen 40 percent growth in each of the last three years.
As a whole, U.S. sales of cosmeceuticals exceeded $12.4 billion in 2004, a 5.4 percent increase from the prior year, according to Packaged Facts, the publishing division of MarketResearch.com. But there's still plenty of room to boost sales: Packaged Facts forecasts the market will reach $16.5 billion in 2010.
L.A. is a natural place for cosmeceutical companies to pop up. Wu, who is a practicing dermatologist, explained that many of her patients work in front of the camera and come to her to preserve youthful skin. The connection to the show business industry gives Wu and others a hungry consumer base and marketability beyond Southern California.
"There is definitely more competition in the past year in the area of cosmeceuticals," said Wu. "There are more doctors who are trying to get into the market, and not only doctors. Anyone who is remotely connected with beauty is trying to develop their own line."
L.A.'s hip boutiques, stores and spas can be ideal platforms for cutting-edge products. At Fred Segal Beauty, Ahna Landin, a nurse practitioner and director of the medi-spa, said that she's after products that are effective.
"We want products that are going to be result-oriented and give a client the change that they are looking for," she said. "Clients who come who are looking for good anti-aging products have tried the ones over the counter. They're tired the run-of-the-mill and not seeing the results they want."
Once companies prove to an influential outlet like Fred Segal Beauty they can produce, they can set themselves apart from the cosmeceutical pack when trying to secure shelf space elsewhere.
Borba started with three items at Fred Segal Beauty before building up to around 35 products and gaining wider distribution at Sephora USA LLC and Nordstrom Inc. Debuting products at Fred Segal also helped Wu's launch at Nordstrom.
But the distribution network in the cosmeceutical industry is changing as the products become more popular. Gersten explained that department stores remain important, but less so. Sephora and specialty stores have become more important on the retail end. But spas, skin clinics and doctor's offices are among the most critical places, because that's where health advice is spread by patients to their friends.
Dermatologists' brands benefit when practitioners instruct patients about their products. Even outside the doctor's office, these brands gain traction because dermatologists' training lends instant credibility to their assertions about what their products will achieve.
"The claims made at the local department store counter are incredible in scope and nature. This type of over-promotion leads to disappointment," said Joel Schlessinger, president of LovelySkin.com and president elect of the American Society of Cosmetic Dermatology and Aesthetic Surgery. "Instead of saying a cream will improve skin in 24 hours and make them wrinkle free, we are trying to hold to a higher standard, saying this product will have a benefit. The benefit isn't immediate and isn't permanent."
But doctor's words aren't the only ones that carry weight a friend's opinion can be invaluable. Women are keen on telling their friends if they find a product that works, and women will often trust their friends more than advertisements or the prodding of a sales clerk.
As they get older, Janice Breen, a 53-year-old substitute teacher who lives in Branchburg, N.J., said her friends buy more skincare products and discuss them more. Based on a present from a friend, she began using Borba's facial cleanser as part of her daily skincare regimen.
"We all exercise, we all work out and we all eat healthy. We will spend more on products if they work well," Breen said of her friends. "I am just looking for anti-aging. I found a few products that I like."
For consumers like Breen, the crowded cosmeceutical landscape breeds confusion. The vast array of products makes walking into a department store dizzying even for dermatologist Wu. "I am bombarded by people who try to put something on my face and spray me," she said. "I am bewildered."
The dense market makes it all the more essential for small companies to do something radically different. They can penetrate the noisy cosmeceutical market if they appeal to needs the consumer doesn't feel are addressed with other products or in a manner that is tailored to specific problems.
Wendy Lewis, a beauty consultant with Wendy Lewis & Co. Ltd., said that one way companies are starting to distinguish themselves is by customizing their products down to the DNA of their consumers. Ingredients in the products will be matched with a consumers' DNA to provide the best possible skin solution, she explained.
"The challenge is figuring out who your customer is, what the customer really wants and servicing those needs," she said. "There is so much overwhelming and conflicting advice."
The challenge for small companies is not going to get easier. After waiting to determine if cosmeceuticals were a lasting phenomenon, large cosmetic companies such as the Estee Lauder Companies Inc. and L'Oreal SA are beefing up their cosmeceutical presence. Estee Lauder and Irvine-based specialty pharmaceutical company Allergan Inc. recently teamed up to market Prevage MD, a topical antioxidant.
Like Allergan, pharmaceutical players are also infiltrating the cosmeceutical world. Belinda Tsao-Nivaggioli, chief executive of Palo Alto-based Avicena Group Inc., said the shorter development time for cosmeceuticals makes them attractive to pharmaceutical companies. Avicena's upcoming cosmeceutical line, called Nurigene, took only about a year to create, while the company has been working on a drug for the disease ALS for almost a decade.
With all the newcomers, established cosmeceutical companies are gearing up to keep their edge.
"The consumer is more educated and they want something that works. Everybody wants to look better. Everybody wants the next newest thing," said Howard Murad, founder and chief executive of El Segundo-based Murad Inc. Like some others, Murad has been evolving to address the internal role in skin problems as well as the external and sells supplements for that reason.
Murad is scientifically adept: he touts studies that have been done in peer-reviewed journals backing up his products' results. Overall, the industry is moving in that direction investing more in studies to validate claims. These studies can be a selling point to retailers looking for ways to get products off the shelf and shoppers who are knowledgeable about ingredients.
But even well designed studies are no guarantee that a small company will survive. Gersten said that it's inevitable that many of these companies will fade away, while some of the successful remaining companies will eventually get swallowed up into the conglomerations.
"There are no barriers to entry into this market," he said. "New entrants will come and go. That is the nature of the business."
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