Oster-Daum & González on rising makeup prices

Ms. Oster-Daum, Mr. González, your business is all about beauty and presentation. There are no photos of you at the moment. How so?
Easter date: We both agreed that our products should be in the foreground and not us as people. It is also a clear commitment to our privacy and that of our children. I think that’s also contemporary in 2022. In any case, it is not detrimental to our success.

In terms of volume, your company has a market share of almost 40 percent in Germany, well ahead of its international group competitors. How is that possible?
Easter date: Our basic idea, the democratization of beauty, is still valid. We want to offer products at a low price in the best possible quality and be innovative at the same time. When it was founded in 2001, it was a niche in the market. I think we’ve consistently delivered on our promise: We offer brands and products that consumers want.

Gonzalez: From our previous work, we know what makes consumer goods companies tick and what they don’t do well. That’s why we particularly enjoy gaining market share for many years.

Oster-Daum and González met at the cosmetics company Coty. Oster-Daum became self-employed in 2001, conducting job interviews on the couch, boxes piled up around the bed. In 2002 she launched the Essence brand, whose products cost an average of two euros. The market leader at the time was available for seven euros. The drugstore dm was the first retailer to offer Cosnova products and is regarded as the company’s midwife. Since then, the cosmetics manufacturer has been growing, with one exception in the first Corona year, 2020. In 2021, net sales were 467 million euros.

After a long phase of growth in the double-digit percentage range, this had weakened noticeably even before the outbreak of the pandemic. What was the problem?
Easter date: We discussed a lot and took action. We have invested heavily in the digitalization and online sale of our products, entered the Chinese market, expanded our portfolio to include skin care and made our recipes more sustainable.

Gonzalez: We are now reaping the fruits of this labor. Last year we grew by 15 percent, bucking the industry trend. I’m sure: Cosnova has another phase of strong growth ahead of it. As a result of the relaxation of the corona virus, people are buying more cosmetics again. Putting on lipstick is almost a sign of liberation. This year we will exceed 500 million euros in sales.

Many consumer goods companies are much more skeptical and are conceding their profit targets due to rising raw material and energy costs and incomplete supply chains. Don’t you have these problems?
Gonzalez: Yes, the cost pressure is extreme. We haven’t experienced that in 20 years. The supply chain is completely messed up, we are experiencing shortages of various raw materials and packaging materials. That is why there are gaps in retail for individual products.

“A price increase goes against our mission”

Your competitors react to the situation with price increases. They also?
Easter date: We have not increased the prices of existing products for 20 years. We are currently discussing whether we can compensate for the cost increases internally or whether we have to pass at least part of this on to customers. A price increase goes against our mission – the low price is absolutely important for our customers. But the high costs make it difficult. We want to make a decision in the summer.

What can you do at short notice against missing deliveries?
Gonzalez: Nothing in the short term. We don’t have the size to buy our own ships to transport our raw materials and products. We have increased our inventory coverage and revised agreements with suppliers to better ensure availability. But that will help us in half a year at the earliest.

Their products are available in more than 80 countries. Does Russia count?
Gonzalez: No more. We stopped delivery in April.

“After the pictures from Bucha at the latest, it was unacceptable for us to deliver to Russia”

So only some time after the outbreak of the war.
Gonzalez: We have long discussed what the Russian people can do for the war. But at the latest after the pictures from Bucha, it was unacceptable for us to deliver to Russia. We’ll have to see how things continue.

Every year, Cosnova replaces half of its standard range, and there are also regularly limited trend products. According to Cosnova, a product is ready for the market in six to twelve months, twice as fast as is usual in the industry. In doing so, the family business dispenses with classic advertisements – and with its own production facilities. In this way, Cosnova can react more flexibly to new trends. The contract manufacturers include the pen manufacturer Faber-Castell.

They launch 1000 new products every year, on average one stays on sale for two years. What’s the point?
Easter date: Our industry is extremely fast-moving. Consumers are always asking for something new, and we want to constantly improve our products. This is also one of our success factors, as a family business we can react more quickly to trends. We need to know today what customers will like next year.

How do you spot trends?
Easter date: We’re talking to market researchers and looking at what’s coming out of the UK, US and Asia. We also get inspiration from travel and other industries. Our task is to translate social trends such as transparency and sustainability into products. 40 percent of our employees are now responsible for innovation and product development.

“The best marketing tool is the product itself”

And why don’t you advertise? Doesn’t that make the difference in your industry?
Easter date: We prefer to invest in product quality. The best marketing tool is the product itself. If customers think they have a great product every day, it’s the very best advertising you can have.

During the pandemic, many people bought cosmetics online. This trend should become established. What role does e-commerce play for you?
Gonzalez: We are growing very quickly in this area, we now generate about a tenth of our sales digitally.

L’Oréal manages almost 30 percent.
Gonzalez: We started looking at the internet as a revenue channel a few years later. It is also a mountain of work to provide content, images or videos. And the sums that they have to invest in servers, systems and employees with the appropriate know-how are very high.

Is that worth it? Especially with you, the shipping costs are more expensive than the product itself.
Gonzalez: Our million-dollar investments have not yet paid off. But it’s the right thing because we learn a lot about our customers. If someone buys a product on Amazon for two euros and we deliver it within 24 hours, it’s difficult to make money from it. We also run our own web shop: Here, however, the main goal is not profit, we see it as a marketing tool.

Easter date: We are already profitable with online retailers like Douglas or Flaconi because the retailers supply mixed goods baskets. We are important to retailers because we are often the product that the customer puts in their shopping cart first or last – precisely because we are so well known or because the customer still needs to fill their shopping cart with a cheap product.

Cosnova generates a third of its sales in Germany, followed by the USA. Since 2019, Cosnova has been researching new brands and product categories in its own incubator. This is how the idea came about to get into the dietary supplement business. The company has been selling dragees like fruit jelly for a year.

How do supplements go with lipstick and makeup?
Easter date: Our customers are no longer just concerned with external beauty, but also with internal beauty. We assume that this business will boom in the long term. The pandemic has increased health awareness, and people not only want to take care of themselves, but also want to live healthier.

What new products can we expect to see in the coming years?
Easter date: There are still some projects in the incubator. We won’t be able to say more about that until next year.

You are celebrating the 20th anniversary of your Essence brand this year. Where are we headed in the next 20 years?
Easter date: We have the vision to become the world leader in quantity.

“Becoming the world market leader in sales will be the job of the second generation of entrepreneurs”

And what about sales? In this country you are in second place behind L’Oréal.
Easter date: Becoming the world market leader in sales will be the job of the second generation of entrepreneurs.

Have you already thought about your successor?
Gonzalez: We still have enough energy. But we don’t want to get stuck here either. We can imagine that one of our four children will follow. Three are still studying, one is already working. But we don’t want to put any pressure on them. Another option is that they take on a purely shareholder role.

In addition to you, there are five other members of the management board. How do you divide your tasks?
Gonzalez: We actually wanted to withdraw operationally. But then came a dent in growth, Corona and the war. We are mainly active in growth areas, I take care of digitization, my wife takes care of the incubator and the expansion to China.

Easter date: Right from the start, the topics of innovation and marketing were mine, while my husband was more concerned with organization. In other words: I’m the cause of the unrest here, my husband has to clean up.

Thank you for the interview.

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