Korres: A Greek pioneer in natural cosmetics
The phones at Korres SA’s headquarters in the northern Athens suburb of Metamorphosi often ring with requests from foreign hedge funds seeking an appointment. Some of those funds are looking into the possibility of a direct investment.
With a presence in 30 countries, growth in the double digits and a gross profit margin close to 65 percent, the Greek firm that produces and distributes natural cosmetics is regarded as holding great promise worldwide. This is especially so now, when sales in North America are expected to accelerate thanks to a restructuring of the distribution network and the collaboration with Avon in Brazil. The opinion that the company has completed a successful restructuring and is poised to show sustainable robust growth is starting to prevail in the market.
The company’s main shareholder, Giorgos Korres, who owns 43.95 percent of the company’s shares, does not appear at all inclined to give up any more of the company he built from the ground up 20 years ago, however. Neither do the other shareholders who joined the company later: Alexia David (13.25 pct), Dimitris Daskalopoulos’s Damma Holdings (5.01 pct) and former Johnson & Johnson head Pericles Stamatiadis (6.25 pct). Even smaller shareholders such as Generali Investments Europe SpA and several stockbrokerages holding the remaining Korres shares on the Athens Exchange are not selling.
The result is that Giorgos Korres finds himself in the fortunate position of seeing the stock of his listed company being among a handful on the Greek bourse trading at record highs for the last five years. Yet this is not where the attention of either he himself or the company’s managing director, Dimitris Vidakis, is focused.
Their attention is firmly on research and development for new innovative products based on natural ingredients, advanced packaging design and further expansion abroad. This is, after all, the successful mix that has allowed Korres SA, despite the crisis, to reduce borrowing, improve inflows and profit margins, rationalize its financial figures and attract fresh talent, leading to a burst in exports from 15-20 percent a few years ago to 45 percent today, along with an increase in turnover from 39 million euros in 2013 to 54.5 million euros in 2016. In the first half of this year, turnover exceeded 30 million euros. Borrowing is at 34.8 million euros and after the cash availability is deducted, net borrowing amounts to 24.4 million euros.
These results arise from a slight uptick in sales in Greece in H1 but mainly from a much more significant rise in strategic foreign markets. Sales in Greece rose 1 percent, but in Germany, Norway, the UK and France, they shot up 32 percent.
In the US, meanwhile, the main distribution channels – like Sephora, Sephora Inside JCPenney and korresusa.com – also saw sales grow. Why then did group US sales come to 30.1 million euros in H1 this year compared to 31 million euros in the same period of 2016? This is explained by changes at the Home Shopping Network, one of the channels distributing Korres products, but the Greek company’s management tells Kathimerini that HSN has already completed its own restructuring plan and the Korres team has already speeded up sales, with positive results expected to start showing more clearly after the second half of this year.
Sales are also doing well in Canada, where Korres has started working with a new independent distributor, and in South America, where it works with Avon.
Major global market
The global cosmetics market is estimated to generate annual sales of around 396 billion euros, according to Cosmetics Europe, with an average growth rate of 4.2 percent in the past decade. Natural and organic cosmetics, however, are growing at an annual rate of 5.7 percent thanks to a global trend toward healthier and more natural lifestyle choices.
In some markets, demand is growing at as much as 20 percent per year, according to DK Consultants, which specializes in this field. The biggest markets of natural and organic cosmetics, meanwhile, are North America – representing two-thirds of global sales – and Europe, Germany in particular, as it represents 45-50 percent of total sales on the continent, followed by France at 29 percent.
However, while the value of the overall cosmetics retail market in Europe comes to 77 billion euros, the continent produces only 70 percent of the cosmetics it consumes and imports the remainder, figures from Cosmetics Europe show, mainly from the US, China and Japan. According to Eurostat, the value of cosmetics transactions between European Union member-states comes to around 25 billion euros. Germany, France, Italy, the UK and Spain are the bloc’s production leaders and exporters, in that order.
Investor interest
The value of retail sales in the Greek market comes to 862 million euros, according to Cosmetics Europe, and there are a total of 68 firms in the country involved with production and sales, Euromonitor International says.
The value of natural personal care products that are sold only in pharmacies, meanwhile, comes to 60 million euros, with an annual growth rate of 15-20 percent, DK Consultants estimates. The sector, however, has not been impervious to the crisis, prompting Greek companies to increase exports. This outward-looking mind-set has been spearheaded by market leaders, Korres and Apivita in particular, with new firms following their lead and aiming abroad from the get-go.
The establishment of some particularly dynamic Greek export groups, in combination with the recognizability of Greek natural ingredients, have attracted the attention of giants in the sector and investment funds that see significant promise in their activities.
The existence of highly skilled scientists and researchers in the sector, as well as the significant expenditure made by leading Greek companies in research and development for new products and innovation across the board, including packaging, provide the Greek natural cosmetics industry with yet another competitive advantage, experts say.
This optimism is confirmed by the acquisition earlier this year of a majority stake in Apivita by Spain’s Puig, a company with a global presence in fashion, perfumes and cosmetics, as well as by the discussions that Apivita and other Greek companies are said to be in with French giant L’Oreal.
Interest is, of course, focused on export prospects as the Greek market represents roughly 1.5 percent of the European market. Per capita expenditure on cosmetics in Greece is estimated at 74 euros per year, well below the European average of 124 euros/year.
Switzerland, Norway, Sweden and the UK have the highest per capita spending on cosmetics.
