Expanding your brand into an international market can be both exciting and challenging. For entrepreneurs and brand managers in the beauty industry, expansion can present a unique set of challenges when developing an export-ready product that adheres to regulatory standards. In this, In Conversation interview with Patty Schmucker of American Made Beauty she reveals how and what brands should do when meeting international exporting opportunities.
SDF: You are an international specialist. Please describe your current role?
PS: In 2012, The Center for International Trade Development (CITD), California’s office of international trade for small and medium size companies, started working with a number of beauty industry companies from Southern California who were seeking services for international expansion. In order to do so, they had to develop a deep understanding of the opportunities and challenges that all US beauty brands need to address in order to increase export sales. CITD engaged my services to help health and beauty manufacturers develop the skills needed to grow their brand through export sales. Through trade missions and an education component we have assembled a team of experts from every discipline affecting the beauty industry in order to provide guidance. Since the program began we have helped over 80 companies resulting in $22M in new export sales.
SDF: Why did you pursue a career in the beauty industry?
PS: I started in the professional beauty industry 40 years ago as a cosmetologist. I specialized in esthetics and nails and was the first to offer acrylic nails in Arizona as well as to provide post-operative skin, hair and makeup services to patients of leading plastic surgeons. I got involved with Horst Rechelbacher, who founded Aveda, when there were only 5 products in the Aveda brand and over the next 15 years became the second largest Aveda distributor in the US. I sold my interest in the Aveda distribution shortly before Aveda was sold to Este Lauder, and I began consulting in my company, Performance Branding Services (PBS). Over the years I have worked with companies like Deepak Chopra, J Beverly Hills, Malie Organics, Sheila Stotts, Extensions Plus, Teadora and many others. Today in addition to providing training with CITD, through my consulting work we are helping American brands get better traction through a new division of PBS called American Made Beauty. Radio AMB launched in March 2015 on HealthyLife.net with a 1-hour weekly radio program providing entertaining and educational content for consumers to engage with American made beauty brands. In May 2015 an e-commerce website, AmericanMadeBeauty.com, will launch establishing a standard for brands made in America while helping these brands turn this attribute into an asset that is recognized and prized around the world.
I started in the industry as a way to earn a living but I also discovered a passion. After being involved in the industry at every level, from standing behind the chair to serving on a number of industry boards including the Independent Cosmetic Manufactures and Distribution (ICMAD) for over 8 years, and watching first-hand the struggle that brands all over the US experience building and selling their products, I get excited every day about the work I am doing. It’s my hope to fill what I see as a tremendous gap in the industry.
SDF: Creating and preparing a product for market is critical for establishing a solid presence. How does American Made Beauty help clients in achieving their goals?
PS: Around the world American brands are in high demand because of the perception of quality. In many places, the American lifestyle is aspirational. In order for a brand to develop equity the unique attributes of the brand (be it American made or an ingredient or technology story) need to be easy to understand and transportable by people beyond the brand owner and their domestic staff. When a brand can be distinguishable anywhere in the world while being relevant to the local market, brand equity increases. We study the biggest and most successful brands since package goods move from commodities to branded goods and demystify the best practices. We unpack and teach what is a complicated but not insurmountable process for building brands from the start that can be shipped anywhere in the world. We provide a formula for our customers made of one part their unique DNA, one part tried, true and proven best practices of business, and one part critical thinking to allow for disruptive technologies that encourage brands to break through the noise in a crowded market.
SDF: Why is building a brand that is export-ready important for emerging brands?
Regulation for beauty companies has become more standardized from INCI (International Nomenclature of Cosmetic Ingredients) terms, testing and labeling. While there are still major differences, if a product is built from the start to adhere to the standards that will allow a company to market beyond the US borders, they will decrease the cost of going international. Forward thinking allows brand owners to formulate using only those ingredients that meet requirements in larger segments of the world. The gathering of all the data needed to meet registration compliance is one third of the cost if done at the time the product is in development as compared to going back years later. Pricing is critical and without an understanding of the cost of running a business that is export ready, the true COG can be understated leading to establishing prices too low for sustainability and often lower than is competitive.
When the US dollar became weaker around the world, the quality and lifestyle aspiration of brands “Made in the US” took on a new value by motivating more international buyers to reach out to American brand owners. Even as the dollar is regaining its strength, a larger number of American brands are experiencing inquiries from all over the world. Together with technology and the internet, inquiries from around the world are much easier to receive and develop into a relationship. If a brand owner does not have an understanding of the cost of doing business outside of the US they can find themselves chasing down the proverbial rabbit hole after opportunities that seldom materialize or when they do, are not profitable.
SDF: What do brands need to know about meeting international exporting requirements? How do the current trade policy negotiations impact how brands manage their companies?
PS: First, if you want to ship your product outside of the US, the product must meet registration requirements. Often brands allow distributors to “handle” these issues and are unwilling to get into the details and are just happy for the short term sales. This can be quite costly for brands in the long run. The intellectual property of your brand including the formulas, trademarks or other protectable assets can be compromised if the companies don’t understand the details. If registration is not completed and the foreign government finds the brand has entered the market the brand can be barred from doing business in the market temporarily or permanently.
Second, there are two sets of standards that I recommend companies access, understand and apply. US FDA cosmetic regulations and EU cosmetic regulations. These two sets of regulations can be accessed free of charge through government websites. When brands build to these two sets of standards from the start in the development of the packaging, the claims they make about the brand and the type of documentation and testing they complete, a brand is set up for the broadest range of options to move on international opportunities.
Keeping informed on the changing landscape outside of the US and current trade policy negotiations allows brand owners to develop a working knowledge of the business climates and factors that will make one country or region within a country a good option for expansion. Every new country is like starting a new line of business within an organization. For emerging brands when human, intellectual and capital resources are restricted, choosing what markets to pursue and which to avoid is critical.
SDF: You facilitate a 5 day educational training program through the Center for International Trade in California. What key piece of advice do you give attendees that brands should keep front of mind?
PS: Brand equity is the objective of the game. For most brands there are only three assets that allow you to build equity: the brand, the intellectual property and sales. Develop a tight, well developed and unique selling proposition and brand story that can be consistently communicated, and legally protect your intellectual assets like trademarks and patents. Mark Cuban of Shark Tank says “sales solves all problems.” Building sales demonstrates market acceptance.
Size and price matter. Understand the market you are going into relative to the cost and size of comparative goods and compare this against your COG. You may make goods that work in the US but price or size doesn’t work in other markets.
Brands aren’t born all grown up. Just because your brand has 30+ products in the US doesn’t mean you need to launch internationally with all 30 SKUs.
Just because someone likes you, doesn’t mean you have to like them back. It is as important what a brands says yes to as what they say no to. International success requires the knowledge to make strategic decisions about addressing inquiries that come from any region of the world. Proactively select your export markets. Establish the right product mix at the right price to make it a profitable venture. Develop a working budget to cover all the requirements for registrations. Both knowledge and passion, are required to create long term relationships.