Estée Lauder's Hair-Care Makeover

In the late 1990s a relative from Central America gave Denis Simioni a baby-food jar filled with a brown gloop that seemed to restore luster to dry hair. Simioni, who owned a Toronto advertising agency focused on beauty products, began tinkering and researching the goo's provenance. He traced it to the Honduran rain forest where the Tawira Miskito Indians, or "people of the beautiful hair," had long harvested the ojon nut for its moisturizing properties. "I didn't know how it worked at the time, but I knew it worked and it was special," he says.

So special, in fact, that cosmetics maker Estée Lauder (EL) in 2007 plunked down $45 million for Simioni's Ojon brand of hair-care products. The acquisition so far hasn't added much extra body to the company's financial tresses: Sanford C. Bernstein (AB) analyst Ali Dibadj estimates that Ojon makes up only about 1 percent of Estée Lauder's $7.8 billion in sales. Last year, Estée Lauder took an $8.8 million charge for Ojon's "reformulation"—a sign the brand "has not performed well and is in need of the relaunch," says Vivienne Rudd, an analyst at Mintel International Group in London.

Still, Estée Lauder is sticking with the crew-cut Canadian entrepreneur and his rain forest recipe as a way to ramp up its expansion into the hair-care business. While Estée Lauder commands up to a quarter of the high-end skin and make-up market in the U.S., its hair products accounted for only a "sliver" of the upscale hair-care business, Dibadj says.

Last month the New York-based company relaunched Ojon with an in-store marketing campaign. Simioni has become a regular pitchman on the QVC shopping channel, regaling viewers with tales of his jungle treks in search of mane-enhancing ingredients. Philippe Warnery, an Estée Lauder vice-president who manages the Ojon brand, says its acquisition gave Estée Lauder not just a premium product but also a popular entrepreneur with a compelling story who can connect directly with customers. With the amiable former adman's QVC appearances, Estée Lauder can also track customer responses with an immediacy not easily found elsewhere, watching sales spike when he mentions key phrases—say, "repairs damage"—on air.

Estée Lauder, which entered the high-end hair market with its 1997 purchase of Aveda and also owns the Bumble and bumble hair-care brand, is focusing on so-called prestige hair-care products, a $7 billion global market. They typically sell for several times the price of mass-market shampoos and generate fatter margins. A two-ounce bottle of Ojon's Color Sustain conditioner, for example, sells for $9 at cosmetics chain Sephora.

Better yet, hair-care sales aren't particularly susceptible to stress in the economy, says Wendy Liebmann, chief executive officer of consulting firm WSL Strategic Retail. "After skin care, hair care is most durable in good times and bad," she says. Over the past decade, "hair became increasingly important as a fashion item and people were willing to spend a premium on it." Prestige hair-care sales grew by 8.8 percent, to $6.9 billion, in the five years through 2010, according to consumer researcher Euromonitor International.

Dibadj says Estée Lauder recently has taken steps to make the Ojon brand more mainstream by focusing on its scientific properties rather than its "folkloric" appeal. Estée Lauder's scientists have documented the effects of ojon oil and other ingredients, giving the marketing team ammunition to hype Ojon's restorative properties. One claim: that hair's condition improved 64 percent after just one application of its damage-reverse line. Store displays rolled out last month feature more ethnically diverse models to demonstrate the products' effectiveness on various hair types.

When he isn't pushing Ojon on TV, Simioni, 43, still travels in search of elixirs used by traditional communities for specific properties—Mexican blue agave for hydration or amaranth for protein—that Estée Lauder scientists can probe further. His next destination? Undecided. "Odds are, knowing us," he says, "it's remote."

The bottom line: Drawn by the economic resilience of hair-product sales, Estée Lauder is overhauling its Ojon brand of rain forest-inspired hair-care products.

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