How Revlon went from cosmetic icon to bankruptcy

On June 16, after decades as one of the most important cosmetics companies in the world, American Revlon filed for bankruptcy protection — a process that in Brazil is known as judicial recovery.

Its executives assured that the debt restructuring process will allow the company to continue to serve the market, without interrupting its operations.

“Today’s statement will enable Revlon to offer its customers the iconic products that it has been providing for decades while providing a clearer path for our future growth,” said Revlon CEO Debra Perelman.

Revlon has announced that, once it receives court approval, it will receive US$575 million (R$3 billion) from its backers to continue its production.

Earlier this year, Revlon had warned that it faced “a lack of liquidity, brought on by continuing global challenges, including supply chain disruption and rising inflation.”

At the end of March, its long-term debt was US$ 3.3 billion (R$ 17 billion). News of its impending bankruptcy caused the company’s stock price to plummet just days before the bankruptcy filing.

Revlon currently sells its products in over 150 countries, but its market position has clearly taken a turn. The company was one of the biggest cosmetics brands in the world, but today it only ranks 22nd.

But what brought Revlon to this situation?

Emergence of new competitors

Revlon’s backlash began in the 1990s, when the company failed to adapt to changing consumer preferences. At that time, the preference for lipsticks of more opaque tones began to increase, in place of bright red.

This mismatch opened up opportunities that competitors were able to take advantage of. Revlon was losing market share to traditional rivals, not to mention the emergence of new brands, driven by famous personalities – such as Fenty Beauty, by singer Rihanna, and Kylie Cosmetics, by Kylie Jenner.

Supply chain issues

Revlon also said that disruptions in the supply chain caused intense competition for ingredients used in cosmetics, which caused suppliers to ask for advance payment for inputs.

This situation caused “shortage of the necessary ingredients for the company’s portfolio”, according to Revlon’s director of restructuring, Robert Caruso, in the request for judicial recovery presented to US courts. “A tube of Revlon lip pencil, for example, consumes 35 to 40 raw materials and components and each one of them is essential to bring the product to market.”

Revlon has also been hampered by a shortage of employees, as has been the case at other companies around the world.

And its sales fell 21% in 2020. Even with the 9.2% recovery seen last year, its revenue is still US$ 2.4 billion (R$ 12.36 billion) below the registered before the Covid-19 pandemic. 19.

an international brand

Revlon was founded in 1932 by Charles Lachman and brothers Charles and Joseph Revson. It started selling nail polish not long after, and by the mid-1950s it had already become an international brand.

In 1970, Revlon broke through racial barriers, becoming the first beauty company in the world to hire a black model —​Saomi Sans.

In the following decade, Revlon moved the beauty market, hiring both recognized models and rising stars for its advertising campaigns. Her role models included Iman, Cindy Crawford and Claudia Schiffer. In 1985, the company was purchased by MacAndrews & Forbes from billionaire entrepreneur Ronald Perelman.

This text was originally published here.