Small Business VMV Hypoallergenics Is Sensitive to Consumers’ Needs

13 Mar


“I remember the day the woman called up crying because she hadn’t been able to wash her hair in a few years,” said CC Verallo-Rowell, the North American operations manager of the hypoallergenic company, VMV Hypoallergenics. With the purchase of the brand’s shampoo, the woman finally found relief from years of a painful scalp condition.

“We really help people,” Verallo-Rowell said. “I don’t think it is very often you can say you make a difference in someone’s life, particularly in the beauty industry.”

This story is one of many from devoted customers of VMV Hypoallergenics, a 30-year old Asian-based skincare company that recently increased their U.S. presence with the opening of a flagship store in New York City.

As VMV Hypoallergenics believes the U.S. economy is primed with a sophisticated, educated demographic, they are confident the brand will appeal to customers who not only suffer from allergens or sensitive skin but also plan on targeting people who are looking for safe alternatives to harsh products.

“Niche brands require a developed market with cosmetic-savvy consumers who may be more skeptical of traditional cosmetics and looking for something new and for more clinical validity to claims. The USA is certainly this market,” said Kristen Owen, the marketing manager at VMV Hypoallergenics.

Still, VMV Hypoallergenics will face challenges as a niche, independent skincare business going against mega companies like L’Oreal, Estee Lauder, and Revlon.

“There is a lot of competition with the skin care category, both domestically and across the world. Companies like Estee Lauder and L’Oreal have a strong global presence and spend a lot of money on advertising and marketing,” said Sofya Tsinis, an analyst at JP Morgan.

Even so, the company’s 30-year successful run in the Asian market provides a platform to compete against the Goliaths of the skin care industry.

Founded in 1979 by Dr. Vermin M. Verallo-Rowell, a dermatologist and dermatopathologis in the Phillippines, the line came about after a chance encounter with a patient suffering from adult acne. Dr. Verallo-Rowell tinkered with various ingredients until she created a toner with phenomenal results. After much persistence, the patient not only convinced Dr. Verallo-Rowell to launch a skincare line but also wed him.

VMV Hypoallergenics now includes 400 products, including 92 shades of lipstick, available in eight different countries through brick and mortar shops and globally online.

The company boasts as being the only validated hypoallergenic company. Everything from the $105 Illuminants moisturizer cream to the $10 cleansing soap, is rigorously tested and rated on its VH-Rating system, one that measures allergy omissions and provides validation for their products.

“There isn’t a standard for hypoallergenic. We came up with the rating system specifically to distinguish ourselves as being validated hypoallergenic, because we are proved to be,” Owen said.

With the opening of its flagship store, the company hopes to capture more U.S. market share and bolster its 30% growth plan for 2012. Last year the company’s revenue amounted to about $8 million globally with $1 million generated from the U.S. This year the business is aggressively aiming for $10.4 million worldwide with $2.6 million coming from the U.S.

Hitting the U.S. market in 2010, the flagship store located on Broadway near Union Square is one of pristine clean lines, while offering a homey feel to its shoppers. The 1,700 square foot store is comprised of a store along with a VMVvenue for events and a treatment room for full-on facials or massages.

The ambience is welcoming as sales associate, or specialists, float around the shop, politely asking shoppers if they can be of assistance without appearing pushy but instead with a look of genuine concern. Flanked with words like heaven, bliss, and skin love, the walls of VMV Hypollergenics encompass all 400 products but done so in a simplistic manner, organized by categories based on needs and demographic.

Displayed neatly on the shelves are some of VMV Hypoallergenics’ best sellers, which include Know-It-All, a $40 virgin coconut cold-pressed oil, an $80 bottle of Re-Everything Eye Serum, a product known to help with antioxidant repair, and a $22 Superskin Toner, a gentle exfoliator that firms and brightens. The products are packaged in a glue-free box with an attached brochure ensuring all information is provided and concerns are answered.

The shoppers looking to find the magical cure for their aliments are allowed to test all products and a porcelain sink is center stage for the full trial experience.

The brand isn’t only concerned with skincare but has gradually expanded into the lifestyle arena by offering products like a specially formulated toothpaste free of fluoride, dyes, and flavor for people who suffer from perioral dermatitis, a rash around the mouth.

The shop on Broadway is only the beginning for VMV Hypoallergenics’ U.S. plans. It hopes to open five to ten stores in the next few years while growing in Europe and continually expanding in the Asian market.

As VMV Hypoallergenics is beginning to grab on to the coat tails of success, the independent company still faces challenges with stiff competition coming from brands like Kiehls and Origins, both sitting comfortably under the umbrella of multibillion-dollar groups Estee Lauder and L’Oreal.

A major obstacle independent skincare lines face like VMV Hypoallergenics, is the lack of exposure due to limited distribution channels and slim marketing budgets.

Joyce Greenberg, a partner covering health and beauty at the investment bank Coburn Greenberg Partners, recognies the difficult plight independent skin care lines are up against and believes finding new distribution channels is one reason 2012 looks to be another big year for mergers and acquisitions.

“Owners make acquisitions to gain additional, new distribution channels. Look at Shiseido. The only reason Shiseido bought Bare Escentuals was to gain access to direct retail selling. Before the acquisition, Shiseido had no meaningful presence on QVC or hadn’t been involved in infomercials,” Greenberg said.

Even though Verallo-Rowell acknowledges the desire to be bought by a larger company, she realizes VMV Hypoallergenics is not quite ready to embark on that route.

“One of the issues is that we are such a small brand. Not enough people know about us yet, so we kind of build it up by working with doctors and spas. It is actually a way to work from the bottom and build up,” Verallo-Rowell said.

Besides targeting a more specialized demographic for business-to-business channels, VMV will continue to focus on customers’ experience in the stand-alone stores.

“Having our own store not only provides a chance to bring customers into our environment and tell our story but also is the opportunity to make available all these products.” Owens said.

A second issue facing VMV Hypoallergenics is in order to have over a 100% increase in U.S sales in 2012, the company must convince loyal consumer to make the switch to its brand. Not only must the company get consumers to breakaway from their tried and true regimen but must do so on a minimal marketing budget.

“Right now we can’t compete against the companies with the big budgets that advertise in Vogue. We are looking for a more organic approach. Working with a hundred doctors is nothing compared to one ad in Elle,” Verallo-Rowell said.

Knowing they can’t go head-to-head with the big names, the company plans on focusing their strategy on local marketing initiatives along with digital advertising and social media. It will also continue to educate consumers both online and

in-person through detailed brochures, providing custom regimes, and releasing quarterly publications.

Besides exterior challenges, VMV Hypoallergenics has to battle a monster it created—the VH-Rating system. Because VMV Hypoallergenics bases its system on published lists of allergens, a list that changes every few years, the company must continually reformulate its products to adhere to its own standards.

“We are constantly reformulating as the new list [provided by North America and Europe] is published. We want to make sure we are as hypoallergenic as possible, and it’s not as simple as taking out an ingredient and putting another one in,” Owen said.

With 400 SKUs, the brand is already eliminating some products and clearancing out others.

It remains to be seen if VMV Hypoallergenics can convert from a niche brand to a household name in a competitive industry, but Verallo-Rowell remains optimistic.

“We are not a fad. We don’t use gold dust or bright pink. We aren’t trendy. We’ve been around the Asian market for thirty years, and we are in this for the long-haul.”

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