H2O Plus, long known for its colorful, fruity-smelling shower gels and lotions, is giving itself a makeover.
The Chicago-based company, led by a new CEO, is aiming to get U.S. consumers to buy its new line of face creams and, in other words, embrace H2O Plus as the go-to supplier of beauty needs from head to toe.
“It was time to take a step back, re-evaluate the brand and refine the H2O Plus image,” said Rick Ruffolo, a former executive at Crabtree & Evelyn and Bath & Body Works who joined the company as chief executive in January.
It’s a daunting maneuver, as Ruffolo, 45, acknowledged in a recent interview at the company’s West Loop offices.
“You almost have to kind of reintroduce yourself to the customer because she thinks of you as cool, pretty-colored shower gels or great lotions … but hasn’t really considered you for facial skin care.”
With the move, H2O Plus will be going up against the likes of beauty giants such as Estee Lauder and L’Oreal and taking a huge risk. Rebranding can be one of the most rewarding or one of the riskiest initiatives, Ruffolo said: “At jeopardy is losing your longtime customers, but if executed correctly, you are able to maintain your biggest fans. …”
The company is stepping into an increasingly crowded market. Sales of facial care products have grown 33 percent in the past five years, to $80.5 billion in 2012 globally, according to Euromonitor International.
“The world is becoming a global battlefield for cosmetics,” said Hana Ben-Shabat, a partner in the retail practice of A.T. Kearney, a global management consulting firm.
“The brands that are doing well in the industry are addressing specific needs, particularly around health and wellness,” she said. So H2O’s foray into specialized facial skin care is likely a smart move, she said.
Ruffolo contends that “health and wellness” were always part of H2O Plus’ mantra. But the company nearly missed out on the therapeutic facial skin care boom among U.S. consumers in recent years because it was busy growing its international business.
“We had some facial skin care … for some time, but it wasn’t necessarily a key focus for the North American customer,” Ruffolo said.
Despite doubling its distribution into Asia, India, Russia, Turkey, Germany and Brazil, H2O Plus “never quite got there” in an increasingly competitive U.S. skin care market, according to Neil Stern, senior partner at McMillanDoolittle LLP, a Chicago-based retail consultancy.
“It needs to get its branding, messaging and distribution right, Stern said. “I think historically it has come close on so many of these elements … but it now must compete against a host of brands that make it challenging.”
The company recently launched an anti-aging face cream called Total Source, which uses H2O Plus’ signature “marine-based” ingredients. At $95 for 1.7 fluid ounces, the creams are pricier than most H2O Plus products and are targeted at frequent Web-shopping, higher-spending consumers.
“It’s our platinum line,” Ruffolo said.
Total Source, launched last fall, represents about 10 percent of H2O Plus’ business, selling mainly online.
But that price point is midway between increasingly popular posh face creams that retail for hundreds of dollars and mass market creams sold at drugstores and discounters that retail for less than $20. That means it will be challenging for H2O Plus to distinguish Total Source from competitors’ products.
To raise awareness of its products, the company recently expanded a 10-year deal with Walt Disney Parks and Resorts to have its bathrooms stocked with H2O Plus products worldwide, and Ruffolo said his company’s Tokyo-based parent, Pola Orbis Group, has a “wealth” of research and development capabilities to help the company build its facial cream business.
A Total Source eye cream is planned for this year.
Pola Orbis, impressed with H2O’s success in Asia, purchased H2O Plus for a reported $91 million in 2011. Pola Orbis, which also owns Jurlique and other primarily Asian cosmetic brands, had revenues of 180 billion yen in 2012, or $1.8 billion.
Under Ruffolo, H2O Plus is planning a sleeker look for its signature stores; a remodeling of its Michigan Avenue store is scheduled for this summer. Its department store makeup counters are also being updated to reflect a more modern, futuristic feel to go with the brand’s new push.
The company also has refreshed its packaging, emphasizing its marine-based roots by using colors that gradually deepen to mirror the look of the sea.
The company also has boosted its social media efforts, apprising customers of the brand’s changes, seeking feedback and courting potential customers as well as beauty bloggers. The company also has provided some H2O Plus loyalists with a sneak peek into it’s planning to make them feel a part of the process.
“Social media is more valuable than advertising,” said Rebecca Fulmer, a senior brand manager.
Added Ruffolo: “You need to continually stay relevant to the customer and bring her news.”
H2O Plus’ timing is right on its moves, say beauty industry watchers. Sales of beauty products aren’t just growing in dollars — as prices go up — but in units, meaning more products are selling — 3 to 4 percent annually, a sign that consumers are spending to take care of their skin.
“Potentially, a brand like H2O Plus would be well-positioned,” said Karen Grant, vice president and global beauty industry analyst at market research firm NPD Group Inc. “Breaking through the clutter and standing apart becomes important wherever you go.”
H2O Plus has weathered similar situations. After a growth spurt in the 1990s, the company found itself up against an increasingly crowded market, with brands touting exotic ingredients, clinically backed skin-fixing powers and celebrity endorsements.
Fickle consumers turned elsewhere for products that offered a “dermatologist in a bottle,” according to Polly Blitzer, a beauty editor and founder of beauty Website BeautyBlitz.com. “The consumer is much more educated (now),” she said. “That’s a result of … sharing online and people becoming more smart and demanding of products.”
Its acquisition in 2008 by Goldman Sachs Urban Investment Group and private equity group Cordova Smart & Williams LLC enabled H2O Plus to switch its distribution focus from its costly U.S. retail stores to promising foreign markets, namely Asia, where the brand had success with its facial skin care, as it did in the U.S. during the ’90s with its shower gels and lotions.
With the new emphasis on growing their skin care business, H2O Plus officials insist they aren’t shucking body care. They plan to introduce a new line of body care potions, called Sea Lotus, that will be ready for the market in July.
Twitter @corilyns
