Getting Under The Skin Of Avon And Mary Kay

Last November, Richard W. Heath, chief executive of BeautiControl Cosmetics Inc., was annoyed by the company's first major lawsuit. But with the dispute appearing close to settlement, he can see some flattery in an antitrust complaint by Mary Kay Cosmetics Inc., a rival nine times BeautiControl's size. Says Heath: "The bigger we get, the more bothersome we become."

If so, BeautiControl in Carrollton, Tex., could really irk its competitors. Since Heath and his wife, Jinger, bought the direct-sales company in 1981, BeautiControl has grown at a blistering pace. Sales, which neared $ 53 million last year, have soared at a compound annual rate of 60% over the past decade. "They're small, but they're well-run," says a rival.

TEXAS CHATEAU. Running a small company well is paying off big for the Heaths. The pair owns more than 36% of the stock--valued at $43 million--and just finished building a house styled like a French chateau in one of Dallas' tonier neighborhoods. Richard, 49, runs BeautiControl's daily operations, while Jinger, the 38-year-old chairman, oversees product development and marketing.

The Heaths plan to maintain growth of at least 15% a year by churning out new products and services to add to their lines of cosmetics, fragrances, and skin-care products. BeautiControl's sales force of 30,000 housewives and office workers sells its wares in homes and offices. The company is known for offering free color and image analysis to help women match makeup and clothing to their skin, hair color, body type, and even personality.

BeautiControl has a key advantage over department-store competitors: price. The company says its quality is equal to that of such well-known brands as Clinique and Estee Lauder--for 20% to 50% less. But giants Avon Products Inc. and Mary Kay are taking notice. Avon is now starting to reach customers through direct mail, which BeautiControl uses, too. And Mary Kay's lawsuit against BeautiControl last year arose from a dispute involving its own color-analysis service. The two are now negotiating a settlement, says Heath.

Still, he isn't worried. Avon and Mary Kay both got their start by targeting America's housewives, while BeautiControl focuses on working women. As a result, "their customers are probably a little bit more upscale," says Deepak Raj, a cosmetic industry analyst at Merrill Lynch & Co.

While BeautiControl has room to grow at home, it's also looking overseas. And the Heaths hint that they might even create some new ventures. But the couple isn't likely to neglect the company's core business. After all, they're

living in a house that beauty built.

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