TTWENTY YEARS There’s Leonard Lauder, heir to the Estée Lauder beauty empire, observed that during economic downturns consumers liked to sweeten the belt with little indulgences. He called it “the lipstick effect” after a simple pick-me-up. Disappointing for the Italian ‘lipstick valley’, part of Lombardy which, according to Cosmetica Italia, an industrial group, produces 55% of the world’s eye shadows, mascaras, face powders and lipsticks, consumers mainly avoided these little luxuries in the midst of the pandemic recession. Whether it’s because makeup less significant on gritty Zoom calls or contoured lips invisible behind face masks, sales of Italian makeup artists fell 13% last year.
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Luckily for Italian beauty companies, shoppers are desperate to show their faces in public again. “When the masks are taken off in June, people will go crazy,” predicts Dario Ferrari, who founded and runs Intercos, the valley’s largest company and the world’s largest makeup subcontractor. Residents of the Lipstick Valley are also expected to benefit from two longer-term trends: the rise of image-conscious Asian shoppers and direct-to-consumer makeup brands that need contractors to bring life to life. to their Instagram feeds.
Lipstick Valley is the latest industrial hub to emerge in northern Italy. Although France manufactures more cosmetics, including skin care and body lotions, Italy has carved out a place for itself in makeup. The surroundings of Crema, a medieval town an hour’s drive east of Milan, particularly attracted such businesses from the late 90s, thanks to the proximity to the creative bubbling of the Milanese fashion scene. as well as the technical expertise of a previous group of chemical companies. Intesa Sanpaolo, a bank, estimates that around 350 cosmetic startups were created between 2012 and 2017, mostly in the lipstick valley.
Today, the region is home to more than 1,000 makeup companies, which generate annual revenues of 12 billion euros ($ 14.5 billion). In the few years leading up to the pandemic, they were enjoying the bright and daring beauty trends that were awarded on social media. The lipstick valley was in expansion mode. Ancorotti Cosmetics, a family-owned business that makes one-fifth of the world’s mascaras, has acquired and redeveloped a factory near Crema that once belonged to Olivetti, a former industrial giant.
Mr Ferrari is convinced that his company will recover quickly from the crisis. Sales in March were already higher than in the same month before the 2019 pandemic, he reports. He is particularly optimistic about the custom of the brands reached. Luca Solca de Bernstein, a broker, says the combination of social media and digital distribution has led to further fragmentation of the beauty industry. Two decades ago, the vast majority of Intercos sales went to traditional beauty companies such as Estée Lauder or L’Oréal. Today, only half do so; direct-to-consumer brands account for about a third (the rest is bought by retailers like Sephora for their own brands). “You can come to us and we can build a brand in six months,” boasts Ferrari.
He is also eyeing Asia. Goldman Sachs, an investment bank, expects cosmetics sales for China alone to double between 2019 and 2025, to $ 145 billion. Last year, Intercos took full control of a joint venture with Shinsegae, a South Korean retailer, which allows Intercos to manufacture Shinsegae’s popular brands and also operate K-the beauty trends, which have conquered the world. She already makes products for Perfect Diary, an Instagrammable Chinese brand whose parent company, Yatsen Holding, was listed in New York City last year.
The other bosses in Mr. Ferrari’s lipstick valley are also looking east. Investors, including those in the East, are watching them in turn. In December CPG, Singapore’s sovereign wealth fund, bought a minority stake in Mr. Ferrari’s family holding company. Giovanni Foresti of Intesa Sanpaolo calculates that the retained earnings of Italian cosmetics manufacturers are higher than those of the average domestic manufacturer and that they spend much more on research and development. Before the pandemic, Mr Ferrari planned to list Intercos on the Milan Stock Exchange. No wonder the bankers are harassing him to revive the idea. ■
This article appeared in the Business section of the print edition under the headline “From the bottom to the top in the valley of lipstick”