Why bankruptcy is hardly the end for Revlon

For much of the 90s, Revlon dominated the airtime of TV commercials as super models strutted their way across screens, glammed up in firehouse red lipsticks. As a staple on the cosmetics counters of the past, the brand has successfully dolled up generations of women. However today, the iconic cosmetics company faces a new set of challenges as it falls under enormous debt and competition from new and rising make up brands led by influencers in an already cluttered field.

Earlier last week, Revlon filed for a Chapter 11 bankruptcy in the US, which will allow the company to strategically reorganise its capital structure and improve its long-term outlook. According to the brand, this comes amidst liquidity constraints brought on by "continued global challenges", including supply chain disruption and rising inflation, as well as obligations to its lenders. If approved, Revlon expects to receive US$575 million in debtor-in-financing from its existing lender base. Coupled with its existing working capital, this will help the business "manage through current macro-economic challenges and in turn enable it to better serve customers".

Debra Perelman, president and CEO, Revlon said that the court filing will allow Revlon to offer its consumers the iconic products it has delivered for decades, and is committed to ensuring the reorganisation is as seamless as possible for its key stakeholders, including its employees, customers and vendors. She added that the consumer demand for Revlon's products remain strong, and Revlon continues to have a healthy market position.

So how did a brand, known for its glitz and glamour fall from such grace? Well Revlon demise didn't happen overnight. With the cosmetics industry seeing a rise in celebrity owned lines, influencer marketing, D2C product lines, and of course big brand competitions, the struggle Revlon faced isn't one isolated to the company, but one many giants of the past face having been impacted by more artisial and indie brands, said industry players MARKETING-INTERACTIVE spoke to.

That said, there’s a possibility that Revlon (and many other traditional make up brands) might have misunderstood the threat it was facing with the generation of new influencer-led brands rising, said Guillaume Pagnoux, head of strategy, at Grey Group.

While many might have seen these new celebrity and influencer-led brands to be marketing initiatives in nature, their true threat is to the traditional business models of the past.

“By this I mean, when any celebrity or influencer launches their own brand, the right business strategy (not marketing strategy) would have been for big companies such as Revlon to help co-create these brands, and make them part of the Revlon portfolio. Then, the right marketing strategy would have been to make these line extensions part of the existing Revlon brand,” said Pagnoux. This would help to not just frame the business problem correctly, but also crack the right business strategy and brand architecture. After which, a right marketing strategy could be built to support this brand architecture and business strategy.

Pagnoux added that thinking of the issues Revlon faced in terms of marketing strategy may be limiting and assuming of dealing with a marketing problem, when the issue is actually a business problem due to a change/disruption in business environment.

Do celebrity endorsements have a place?

In the past, many brands might have been inclined to solve issues such as dwindling awareness or sales by using big name influencers or buying the following or audience. This renders celebrities and influencers a communication channels, rather than full blown marketing channel and business partners, said Pagnoux.

However, this is no longer the case. What traditional, big brands such as Revlon need is to become, is a business partners with influencers rather than just clients buying their reach and influence.

"The personal brand of some of these influencers are already much bigger and way cooler than established brands such as Revlon. Meaning, there’s no doubt that “Rihanna” is a more relevant brand than Revlon for many young consumers. From this perspective, the smartest move would be to minimise head-on competition with Rihanna by becoming her business partner,” he said.

Light at the end of the tunnel

However, filing for bankruptcy should hardly be considered the end for any brand, said Ambrish Chaudhry, Superunion's managing strategy director, Singapore and Asia. "Many well known businesses such as GM and Ford have been bankrupt in the past and have bounced back on the strength of their connection with their customers. What is needed is a strong product line innovation. Revlon enjoy customer familiarly, even trust and has the core tenets to bounce back from this,” said Chaudhry.

He added that as the move unfolds, there might be news emerging of takeover bids and restructuring to streamline operations to help the brand "operate at a lower to mid-tier price range or seek an overhaul in the way LVMH has done with Tiffany.” He added that there is enough of a storied past to explore how the Revlon brand can reconnect with more modern, younger audiences, sharing:

Brand equity is also like a bank balance and Revlon is far from bankrupt there yet.

Echoing similar sentiments, Shufen Goh, co founder and principal at R3 shared that filing for bankruptcy protection can give a brand such as Revlon room to reorganise. While the brand has struggled with a lack of innovation - both in products and marketing - and has been slow to adapt to new market dynamics, Revlon has the advantage of high brand recognition.

“What it needs to do now is update its media mix and invest in becoming relevant," said Goh. On the social front, she added that the trend is now that more and more beauty brands are now taking to Instagram, TikTok, and cult boutiques to drive growth in the beauty category.

"With the pandemic, people are buying cosmetics less frequently, so creating occasions for impulse buying is important,” she shared, adding:

 Models, who have always been the face of Revlon, need to be replaced by more accessible spokespeople.