1. Baber Mehkeri Gloria Origita Cosmetics: Marketing & Strategic Recommendation CANTIK Consulting 1

2. Agenda Introduction to Gloria Origita & Products Project Research & Objectives Indonesia & North America Market Overview 6 Ps of Marketing : Spa Market Analysis Supply Chain Financial Analysis: Pricing Strategic Recommendation Conclusion 2 3. Introduction of Gloria Origita Gloria Origita is a cosmetic and skin care manufacturer in South East Asia founded in 1993 Location: Jakarta, Indonesia Employees : 500-1000 Revenue: $50 Million in sales annually Distributed throughout Asia (Vietnam to Brunei) Market share: 2.9% Indonesia 3 4. Brands Gloria Origita Brands Purbasari - Aromatherapy body scrubs, regular body scrubs, hand & body lotion Freya - Cosmetics line (lipstick, eye shadow) Kanna - Cracked heel cream 4 5. CANTIK Project Research Conduct analysis of North American market, consumer needs, trends, & products Provide financial analysis Provide regulatory requirements Define a strategy for entry into the North American market 5 Gloria Origita has expressed interest in exploring opportunities to increase company sales by expanding their products into the North American retail markets 6. 6 7. Primary Research Phone consultations with client company Phone consultation with industry professionals (Chair of Skincare Council, Canadian Export Consultant) Phone consultation with Subject Matter Expert (Sephora) 7 8. Secondary Research Research of professional databases (Mintel, Euromonitor,) Web research (cosmetic industry websites, International SPA association, FDA, Canada Trade) Retail store visits ( T&T Asian Store, pharmacy store, The Body Shop) 8 9. 9 10. Indonesian Bath and Shower Market Share 2012 Unilever Group, 39.8, 48% Wings Corp, 18.5, 23% PZ Cussons Plc, 6.2, 8% Bina Karya Prima PT, 4.6, 6% Johnson & Johnson Inc, 4.5, 5% Kao Corp, 3.4, 4% Gloria Origita Cosmetics PT, 2.9, 3% L'Oral Groupe, 2.1, 3% Sales Source: Euromonitor International from official statistics, trade associations, trade press, 10 11. Gloria Origitas Market Challenges 3% market share Rising international & domestic competition Rising material & production costs 11 12. Why North American Expansion? 12 Increase brand awareness and prestige Better opportunities for growth in North America Opportunity to introduce Indonesian heritage & rituals Products unique to North America 13. US Market Attractiveness 13 Competitive rivalry High Threat of new entrants Medium Buyers bargaining power Medium Threat of substitutes High Suppliers bargaining power Medium 14. Marketing Tools = 6 Ps 14 Package 15. 1. PRODUCTS 15 Aromatherapy: 250 g Conventional Body Scrubs: 250 & 135 g 16. Positioning Position as an exotic & relaxing product Provides a more invigorating cleaning routine by opening the pores and removing dead skin cells Perception: provides a relaxing soothing Bali experience The scent is soothing and calms the mind and eases stress 16 17. 2. PACKAGING Using packaging to target specific consumer needs in North America (replace Whitening label to Brightening) Give Gloria Origita the shelf appeal that appeals to North American consumers Packaging for hotel spa market would be more sophisticated to attract hotel guests 17 Current Packaging 18. Labeling 1. Ensure labeling is standard and similar to those products already on the market 2. Volume, number of items in metric and imperial units of measurement 3. Directions 4. Warnings or cautions in English where necessary for safe use of the product 5. Company name 6. Business address 18 19. 3. PROMOTION 19 20. 4. PLACE 20 21. North American Bath & Shower Brand Landscape 2012 by Percentage 15.9 8.5 6.7 5.2 3.2 2.7 2.5 1.9 0.6 0 2 4 6 8 10 12 14 16 18 1 Dove Unilever Group Dial Henkel AG & Co KGaA Bath & Body Works Limited Brands Inc Softsoap Colgate-Palmolive Co Olay Procter & Gamble Co, The Suave Unilever Group Old Spice Procter & Gamble Co, The Lux Unilever Group The Body Shop L'Oral Groupe 21 22. 2012 US Bath & Shower Retail Distribution Health and Beauty Retailers, 18.7, 22% Beauty Specialist Retailers, 10.4, 12% Parapharmacie s/Drugstores, 8.2, 10% Mixed Retailers (Dept. stores, Walmart, Target), 24.6, 29% Department Stores, 3.3, 4% Mass Merchandisers, 14.0, 16% Warehouse Clubs, 6.2, 7% 22 23. Ethnic Retail Market in North America Rise of large ethnic supermarkets combining modern grocery and international brands and products Modern Asian supermarkets are becoming a shopping destination for ethnic beauty care products Provides high margins for retailers and differentiate from major brands Markets include in-store beauty boutiques featuring Asian products and staffed with multilingual Sales Consultants 23 24. Ethnic Market Challenges Inundated with products Very competitive market!! Niche segment: small pool of buyers Japan and Korea are dominant Asian competitors Shiseido, Amore Pacific, Dr Wu. Japan and Korea are known for better quality cosmetic products 24 25. Multiple Channel Challenges More resources required and coordinating channels will become exponentially difficult Two separate branding strategies required = costly Different positioning options - High end or low end product Channel relationships need to be considered Exclusive distribution agreement with distributor and retailer required 25 26. US Spa Market There are an estimated 19,800 spas throughout the U.S (2013 Spa Industry Association) The Eastern/Asian influence continues to be very strong in the industry and there is a consumer desire for natural ingredient products Female consumers look for: Enhancing their appearance Escape, indulgence, relaxation 4.7 % total spa revenue growth rate (2013 Spa Industry Association) 26 27. Why Do People Use Spa Services? 27 28. Most Booked Spa Treatments in North America in 2011 28 29. Types of Spas Club Spa- primary purpose is fitness club Day Spa spa service on day use basis Destination Spa seven day wellness stay as purpose of visit Medicinal Spa- provides medicinal and wellness care Resort / Spa owned and operated by resort or partner and offers unique spa experience 29 30. Number of Spas by Type 30 31. Hotel Resort Spa in Whistler BC 31 32. Competitor link https://www.youtube.com/watch?v=aMtuHis08fU 32 33. Spa Revenue per Establishment 33 34. 2011 SPA Revenue Composition 34 35. Composition of Retail Revenue 35 36. US Hotel Resort Spa Market Potential 2011 Average Spa Revenue per Store $1,467,000 Spa Retail Revenue % from Products x 10% $147,000 Skin Care Product Retail Revenues x 57% $83,619 Total # of Hotel Spa Resorts 1760 Market Potential $147,169,440 N= # of Exotic hotel Resort Spas Unknown Revenue Sales from Exotic Hotel resort Spas N x $83,619= 36 37. Spa Market Challenges Reduced disposable incomes in a recession will mean that consumers will be more choosy on where their income is spent Medium competition of products in Hotel Resort Spa if multiple brands are already carried 37 38. 5. PRICING International export pricing quotes are considerably more complex than domestic Applicable tariffs and customs duty, insurance, and transportation costs and taxes are added Fixed costs (transportation & marketing) affect pricing Spa retail markup is medium / high 38 39. Cost Plus Pricing Strategy Pricing should include appropriate component of domestic price and includes any export related costs * Depends on the agreed terms of sale Basic approach without consideration of ultimate selling price in the export market A markup is set for each unit, based on the profit the company needs to make 39 40. 40 41. Supply Chain Gloria Origita Wholesaler SPA End Consumers 41 42. The Supply Chain for Retail Goods 42 43. Hotel Resort Spa Proposed Supply Chain Pricing COGS 60% margin Aromatherapy Spa 250 grams 0.90 Conventional Body Scrub 250 grams $0.79 Conventional Body Scrub 135 grams $0.56 Wholesaler margin 80% Aromatherapy Spa $1.48 Conventional Body Scrub $1.32 Conventional Body Scrub $0.94 Retailer Margin @ 100- 300% Aromatherapy Spa $2.65 Conventional Body Scrub $2.37 Conventional Body Scrub $1.68 Final Retail Price Aromatherapy Spa $11.00 Conventional Body Scrub $10. Conventional Body Scrub $7.00 43 44. Indonesian Competitor Products 44 45. Market Entry for Gloria Origita into North America 45 46. The most important factor for a successful product entry into a new market Is to have a clear export strategy 46 47. Gloria Origita Export Objectives Export Objectives Minimize Risk Sell with Economies of Scale Quick Entry to Market Minimize Investments 47 48. Export Market Entry Strategies 48 49. Indirect Export Entry Mode Indirect Exporting Most appropriate for firms with limited international contacts in foreign market 49 50. US Harmonized Tariff Schedule HTS Number: 3304.99.50 Description: Beauty or make-up preparations & preparations for the care of the skin, excl. medicaments but incl. sunscreen or sun tan preparations. MFN Duty Rate: Free 50 51. US Government Regulations US FDA Regulations Imported cosmetics are subject to examination by Customs at the time of entry NOT Required to register product information, ingredient Labeling - Cosmetics distributed in the USA must have correct cosmetic labeling ( direction, cautions, warnings) 51 52. Short Term Strategies (12 - 24 months) Long Term Strategies (36 + months) Medium Term Strategies (24 - 36 months) Market Entry Strategy 52 Short Term Strategies (0 - 12 months) Long Term Strategies (24 + months) Research & Development Explore & Develop distributor relationships in target markets Develop sales plan Develop marketing activities Short Term Strategies (0 - 12 months) Plan Entry & Development Ship products to shelves Execute marketing activities (promotional activities) Analyze sales Medium Term Strategies (12 - 24 months) Entry External Growth Explore and develop new wholesaler and joint-venture relationships Explore complementary products Long Term Strategies (24 + months) Sustain 53. Budget & sales forecast- establish sales benchmarks Strategic planning (advertising, promotions) Having all export documentations & agreements in place (see appendix) Develop a target list of SPA distributors T Market Entry Strategy: Planning Phase 53 Research & Development Explore & Develop SPA distributor relationships in target markets Develop sales plan Develop marketing activities Short Term Strategies (0 - 12 months) Plan 54. Short Term Strategies (12 - 24 months) Long Term Strategies (36 + months) Medium Term Strategies (12 - 24 months) Grow Entry & Development Phase 54 Entry & Development Ship product to spas Execute marketing activities (promotional activities) Analyze sales Medium Term Strategies (12 - 24 months) Entry Ship products to spa with custom brokers Create awareness with marketing activities (loyalty programs) Conduct social media & promotion activities Analyze sales figures 55. External Growth Explore and develop wholesaler and joint- venture relationships Explore complementary products Leverage production technology for efficiencies and expansion Long Term Strategies (24 + months) Sustain Long Term Strategies (36 + months) Sustaining Growth Phase 55 Utilize the supply chain expertise of potential partners Create demand for a new market Further develop and secure additional partnerships by leveraging reputation and success of retailers Revise or explore alternative distribution strategies if targets are not met (subcontracting, joint distribution, licensing) 56. Conclusions 6 Ps of Marketing: Product Exotic Body Scrub product (natural & aromatherapy Position Exotic & Natural: Let Bali Come To You! , Experience Bali In Your Home Place Focus on spa market as Asian stores are too small and competitive Promotion Social media, loyalty cards, free samples Packaging Appealing and packaging to meet standard labeling requirements Pricing Competitive value pricing 56 57. Conclusions Continued Financial Analysis of spa market Strategic Recommendations: Implement 3 phase plan over 5 years: Plan, Entry, Sustain 57 58. Questions? 58 59. Appendices 59 60. Submitting a fully completed Cosmetic Notification Form (CNF) to Health Canada within the first 10 days a cosmetic is available for sale. Provides specific product information, address and contact of the company purpose of the cosmetic form of the cosmetic (e.g. gel, solid, liquid, etc.) ingredients of the cosmetic concentrations of the ingredients (ranges specified in the Cosmetic Regulations) 60 61. Sales Mix Break-Even Point Calculation (Units) 61 Product Conventional Body Scrub 250 g Conventional Body Scrub 135 g Aromatherapy Spa Body Scrub Sales Price per Unit 1.32 0.94 1.48 Variable Cost per Unit 0.53 0.37 0.58 Contribution Margin per Unit 0.79 0.57 0.9 Sales Mix Percentage 40% 10% 50% 0.4 0.1 0.5 0.316 0.057 0.45 SUM weighted-average contribution margin per unit 0.823 Total Fixed Cost* $20,500 Weighted Average CM per Unit 0.823 Break-even Point in Units of Sales Mix 25000 units 62. Canadian Hotlists What is a Hotlist? A list of substances which are prohibited or restricted in cosmetics Steps to avoid being on the Hotlist: Reduce the concentration of the ingredient to an acceptable level Remove the substance from the formulation Consider marketing the product as a drug or natural health Product (requires application for a new Drug Identification Number (DIN) or Natural Product Number (NPN)) Provide evidence that the product is safe for its intended use Confirm that the product is labeled as required Confirm that the product is sold in a child-resistant package Consequences of non compliance Remove the product from sale http://www.hc-sc.gc.ca/cps-spc/cosmet-person/indust/hot-list-critique/hotlist-liste-eng.php 62 63. Target North American Market SPA vacationers - Spa -cationer The Price to Value ratio has become more meaningful. The consumer is seeking a "value added" experience or product. Women buy or influence the purchase of 80% of consumer goods. Word of mouth Online product reviews 63