Lornamead - Ripe for development

Lornamead has made a tidy profit from picking up so-called orphan brands, rescuing them from under-investment and employing TLC to inject them with new life. Georgina Caldwell reports on the company’s acquisition strategy.

Lornamead’s current strapline takes a Ronseal-type approach to describing the company’s business: it does exactly what it says on the tin. "Adding value to brands" is, in a nutshell, the company’s main reason for being. In an extremely short space of time Lornamead has built up an impressive portfolio of personal care brands through following a specific aquisition strategy – to buy up brands that have been left by the wayside.

However the company is quick to point out that being unwanted by their owners does not equate to unloved by their users – the brands are often market leaders in their field. "I buy under-exploited brands, not failing ones. Often they just need a new perspective and a bit of nurturing," notes Mike Jatania, ceo of Lornamead and brother of its founder, George.

Founded in 1978 as a marketing partner to represent the interests of several renowned brands in Africa, Lornamead spent its first years providing brand management for multinational companies such as Unilever, Gillette and Colgate. However the business was restricted in geographical terms as Lornamead’s services were not needed outside Africa and Jatania decided to produce his own brands to give the company access to the lucrative European and US markets. After a period of consolidation, which saw it shed its pharmaceutical and food arms to focus on the personal care and home sectors, Lornamead began to develop its own brands. Among the more successful results were the fragrance brand Similar and Tura, a skin care line formulated for darker skins.

Jatania soon tired of the high-risk strategy of creating brands from scratch and the late 1990s saw Lornamead change its tack. Realising that there was mileage in established brands, which had passed the critical early stages of development but had since been neglected, the company started to pursue an acquisition strategy that set the course for its position in the market today. Lornamead now owns over 20 brands and five licences and was worth an estimated £550-600m in 2004.

Shopping spree

Between 1998 and 2002 the company snapped up a number of personal care brands, starting with the Harmony styling brand and followed by deodorant brand Amplex, Lypsyl lip balms, the Stergene laundry label, Precision, Once hair care and styling brand and Gold Spot breath fresheners. Initially, Lornamead operated as a brand owner for all its new purchases but outsourced the manufacturing, distribution and marketing to third parties.

However, the company was quick to hit on the limitations of this strategy. "We would be one of a myriad of other brands that they were representing and, while they would do the best job they could for us, we weren’t building our own relationships with retailers," explains Leslie Barber, European managing director at Lornamead. This meant that the company was missing out on hearing first hand what retailers were looking for to grow their business and therefore how it could develop products that would be meaningful for the current consumer. "To develop that kind of intellectual capability you really need to be out there in the market yourself, building relationships with your customers and your users," says Barber.

In early 2003 the company addressed this dilemma with the acquisition of Natural White, a tooth whitening business, that manifests itself in Europe with the Rapid White and Brilliant White brands. "It gave us more mass as an operation, it gave us access to strong brands in a dynamic category, but most importantly it gave us a manufacturing and distribution platform in North America," says Barber. April of the same year saw the acquisition of the Network business in the UK which gave Lornamead a route to market in the UK for its portfolio as well as new names Christy, Te Tao, Keromask, Leichner, Triple Dry and the UK licence for Sally Hansen. This was followed in December 2003 with the acquisition of CD and Brisk from Unilever in Germany. "These two brands were of a scale that allowed us to put a platform down of our own. So we didn’t buy one in this instance we built one up from scratch in Germany to handle those two brands," clarifies Barber.

As if these developments were not enough of a challenge, in 2005 Lornamead was once again hot on the scent of more potential purchases. The company beat off the competition to gain the hair care licences for P&G’s Herbal Essences, Silvrikin, Loving Colour and Loving Care in Ireland, closely followed by the purchase of a number of brands from Wella, including Vosene and Bristows in the UK and the German Handsan, Lanosan and Crisan, as well as Fixonia in Spain. Last but far from least came the announcement that Lornamead had put in a successful bid for Yardley, for an estimated £60m.

Although Lornamead will not disclose its sales figures, Barber says that turnover has grown ten times over since 2002 – growth that has been achieved on the back of a dual approach. "Our strategy for growth is based on two things. One is acquisition, another is the organic growth of the brands we own, through providing them with focus, management resource, investment and new product development - that has to be a key driver for this business with every acquisition we make." Such is Lornamead’s confidence in this strategy that the company is said to be aiming for revenues of over £1bn by 2009 and has a number of plans in the pipeline to achieve this goal.

The first of these plans is product development of Lornamead’s existing brands. The whitening business, for example, has been one of Lornamead’s great success stories and, says Barber, has rewarded the company with 25-29% growth in the last 12 months. Barber attributes this growth partly to a rise in demand for whitening products within the oral care sector, but also to ongoing new product development, with this year playing host to the launch of a more convenient format for Rapid White and Brilliant White with the Bright Stick and White Stick.

According to Barber, Sally Hansen cosmetics, the hair care licences in Ireland and CD in Germany are also key to Lornamead’s growth. “We have a new line planned for CD which will extend its penetration of the family and personal wash area in the Germanic markets,” reveals Barber. Last in the star brands line-up is Lypsyl, which enjoys over 60% of the lip balm market in Sweden and a 45% share in Denmark. The range was recently joined by Shine, which takes the caring properties of Lypsyl into the colour cosmetics arena, with further launches planned for the coming year.

"By and large the brands that we own have a very strong equity. Generations of consumers have grown up with these brands and trust and respect them. What we are trying to do is to identify where we can stretch this equity to and provide more up to date thinking and trends to the brand to extend into complementary areas that are commercially viable," explains Barber.

The new additions to Lornamead’s portfolio will no doubt benefit from this treatment in the course of the next year. “With Yardley our first course of action is to get its house in order to make sure that it is being efficiently managed, that our sku count is right and relevant to each of the markets that it is in, that we’ve got a supply chain that is delivering the needs of the business, and that we introduce new lines that fit the Yardley single floral note concept. There has been a history of fragrances that have come and gone in the blink of an eye because they haven’t been relevant.” Top among the possibilities, adds Barber, is a range for men to balance out the portfolio.

The acquisition of Yardley has also created an in-road for the rest of Lornamead’s portfolio geographically. The company hopes to explore potential synergies in markets where Yardley enjoys a strong presence. “Yardley was a fantastic acquisition for us in that it gave us strength in a number of markets that hitherto we’d been rather weak in. So we’ll be pursuing that vigorously over the next 12 months. It’s a strong brand in the Middle East and has allowed us the chance to grow our Gulf representation quite significantly – which forms the basis for spreading our other brands in the Gulf region. It’s also opened doors for us in Singapore, Malaysia, Hong Kong and Indonesia.”

Channel hopping

Lornamead also intends to widen its distribution network. Currently the company’s brands are available in drugstores, groceries and pharmacies, with limited distribution of Yardley in department stores. “We are particularly under-represented in e-commerce and will be looking to make a strategic appointment shortly. Our brands are also poorly represented in professional treatment areas like spas and salons and we would like to address this with brands such as Yardley, where there are clear opportunities for targeted distribution extensions. And then there is the professional sector. There are obvious opportunities for tooth whitening products in dental distribution. We’ve formed a strategic alignment in this area and are looking to be there any day now.”

These three aspects of the company’s planned organic growth will be backed up by a continuation of Lornamead’s acquisitive strategy. “Will we be acquiring additional brands? Absolutely we will. In a perfect world we have our focused categories in which we want to build the business. We are clearly trying to ensure that we have more scale and relevance to our customers in each of those categories so that we can leverage our position for the greater good of the business. So first and foremost if we can build on our brands in fragrance and toiletries, hair care and dental, that would be a real asset to the business,” says Barber.

Rumours abound in the German press that the company is looking at German body care brands in particular. However Barber will not be drawn on which brands the company currently has its eye on. “We have got a number of projects very actively in play at this moment and potentially in the next six months there will be one or two sizeable acquisitions. There are two very firmly in play at the moment and both would fit into our core category businesses.” Watch this space.