Scion gives family cosmetics business a makeover

Barry Vogel's "cheap and desperate" management strategy turned Canderm Pharma into one of Canada's largest anti-aging cosmetics products' marketers

During the mid-1980s Barry Vogel took an extended sabbatical to pursue Talmudic studies. It's a good thing, because years later, when he became president of his family's cosmetics distribution business, he had a lot to pray about.

Six years ago Canderm Pharma had a stale product line, was $7 million in debt and losing money fast. But Vogel was convinced that his parents --Louis and Sylvia Vogel-who had founded the company in 1972, had left him a gem. Canderm's focus on marketing cosmetics for the anti-aging segment was right, it was the execution that needed adjustment.

"Women in their 30s and 40s are not like they were," Vogel said. "You see them in sweat pants and carrying tennis rackets. They are active and healthy. But they want to look as good as they feel."

Canada's beauty care market, which Trendex North America estimates at about $1.7 billion a year, is highly competitive. To stay ahead, companies need to constantly innovate to keep up with the latest trends.

Almost a decade earlier, Vogel's parents had secured the Canadian distribution rights for NeoStrata, a line of exfoliants, which in the U.S. are sold almost exclusively through doctors' offices. But during the ensuing years, the line did not evolve fast enough. Vogel knew that to succeed, he was going to have to do things differently.

But first he had to stop the bleeding. Vogel set in place what he labeled a "cheap and desperate," management philosophy, that consisted of paring unnecessary costs and focusing on two core lines, NeoStrata and Artecoll, --a permanent injectable filler, given by cosmetic surgeons. That meant making painful staff cuts, including two vice-presidents.

"I used to think it was stupid that when general managers take over a hockey team, the first thing they do is fire all the coaches," Vogel said. "Now I know why. You don't get the same loyalty from people if you don't hire them yourself."

Vogel also got tough with his sales staff, telling them: "at the end of the year they were either going to very well paid, or they would no longer be with the company."

But Vogel knew that much of the company's success was going to be contingent on renegotiating the NeoStrata deal. Under the existing arrangement, Canderm was acting solely as a distribution house, netting a small markup that wasn't even enough to keep the company going. Worse, much of the existing line simply wasn't ideally suited for Canadian skins, which face the ravages of fierce winters.

Vogel negotiated a new arrangement with NeoStrata that turned the distributorship into a licensing arrangement. Under the new deal he could now design new formulations --such as peels and self-tanning products - as well as take control of manufacturing.

The deal proved to be a winner. Today, only two of Canderm's NeoStrata existing products use the U.S. formulations. The rest of the line has been developed in Canada, with the manufacturing contracted out to private label producers. Annual sales have more than doubled from $9.3 million in 1998, to an expected $20 million this year and all of the company's debt has been paid off.

Vogel also drew on his religious faith to instill a values-based management code that was distributed to all employees. The code goes beyond purely commercial strategies to include components on caring, respect and mutual support.

The most tangible expression of Canderm's success can be seen at its head office on Thimens blvd. in St-Laurent, where construction is underway on a project to expand the facilities from 32,000 to 47,000 square feet.

But the numbers alone don't tell the whole story because the roof on the new facility will be higher and the design sleeker. As a result, although the building will only be 50 per cent larger, capacity will actually increase by close to 120 per cent.

According to Danielle Rouleau, head cosmetician at Pharmaprix's Côte-des-Neiges and Queen Mary location, --which stocks about 30 NeoStrata SKUs -- Canderm's products do well because of company's focus on quality and it's low price point.

The strategy is evident in its simple and inexpensive packaging, and the high concentrations of key ingredients in its products, Rouleau said.

"They concentrate on what's in the jar, not what's outside the jar," Rouleau said.

But Vogel isn't finished yet. Last month Canderm launched the Alyria Skin Optimizing System. The line has higher concentrations of key ingredients such as retinol and glycolic acid and thus will be marketed directly to doctors in Canada and the U.S., where Vogel's been spending much of his time lately. The company is also quietly developing a line of men's cosmetics.

Like most cosmetics companies, Canderm is also trying to broaden the potential appeal of its anti-aging products to younger users, said Jennifer Preiato, a company manager. Preiato, although she is just 27 years old, uses its anti-aging products nightly, to tackle the occasional dark spots, patches or blackheads.

"You have to take care of your skin and treat it properly," Preiato said. "A little prevention goes a long way."





Sidebar: Vogel's turnaround strategy

o Pare costs and reduce staff, including one management layer.
o Train new managers by promoting from within.
o Introduce incentive plan to boost sales and keep staff
o Re-negotiate NeoStrata distribution deal, so that Canderm could develop new formulations and control manufacturing.
o Launch Alyria line of high potency products to be marketed to doctors in the Canada and the U.S.

Photo caption:

Fact Box:
Company Name: Canderm Pharma
Owner: Vogel family
Founded: 1972
Products: Anti-aging dermatological products
Employees: 45
Sales: $20 million
Phone #: 514-334-3835


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Peter Diekmeyer
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