Part Two: Jim’s Thoughts on the Aquisition of OPI by Coty

In case you did not read part one, click here to review:  http://www.famousnamesproducts.com/News/Jims-Thoughts-on-the-Aquisition-of-OPI-by-Coty. 

OPI is the largest nail company in the professional salon industry, so its aquisition by Coty is a BIG deal.  Having gone through the process myself when we sold Creative Nail Design to Revlon in 1995, I know there is a big difference between what the press release says and how events unfold from that day forward.  I believe the effects of this aquisition on our industry wiill be significant.  I also want to emphasize that these predictions are my own and based strictly on my past experiences and no “inside” knowledge.  So, lets get into my predictions:

1. The operations of OPI will be fully absorbed by Coty within twelve months.  Coty’s management team will be charged with producting OPI’s products.  With the loss of control, there will be less influence at OPI over what gets made and when.  Backorders will more than likely go up and lead times for everything will lengthen.  In short, there will be less flexibility from OPI to its customers.  Another result will be loss of the ability to shift production on short notice to address a specific customer’s needs…believe when I say there is a big difference between being able to walk down to your production floor and make a change on the spot versus calling the senior exec in charge fo your production in another state (country?).  I am hesitant to mention this next one, but these are my own predictions and no one else’s:  Will the Coty opertions team be tempted to tinker with the product formulas to save money on the cost of goods?  This would never happen with the knowledge of OPI’s management, but you cant control what you dont know about.
2. OPI’s existing management team will undergo alot of change, starting with George, who will be “retired” by the end of 2011…lord knows he certainly deserves it.  While I dont know this to be fact, I’m guessing Miriam has already left.  Susi will continue to make contributions on a more limited basis.  The rest of the senior management team will transition out in 24 months or less.  Based on Coty’s numerous aquistions, it will be interesting to see if there is much of the existing campus in Los Angeles left in five years time.
3. Speaking of management, the team that leads OPI’s brand into the future will have lots and lots of reports to keep them busy to keep the powers to be informed and in control.  There will be endless, lengthy meetings to attend.  And dont forget the legal department…they will be FULL of great ideas to infuse into all facets of the company.  The large time diversion to the corporate mother ship will come at the price of contact with the customer base…sad, but a corporate fact of life.
4. Its a wll known fact that OPI’s distribution currently extends beyond the professional industry.  I know in our area you can find many of the products (including color) at CVS.  There are other retailers that also sell the products.  In addition, there is the Nicole-Sephora and the Minx-OPI-Sephora partnerships.  So my question is how much more available will the products become in the retail channel?  The Essie-L’Oreal union can be helpful here:  It took about nine months for L’Oreal to announce the availability of a large number of Essie colors in their retail channels.  They were quick to point out a number of “professional only” colors would remain in place.  My opinion:  Big deal, retail is retail.  Bottomline is these deals will be paid for and when it comes to companies aquired from out industry, it will be paid for through the retail channels.
5. Coty has been very active in the aquisitions arena…will they do more through OPI in our industry?  I can think of two possibilities.  One is Nail Harmony, the maker of Gelish, which in my view is the (distant) number two gel polish line.  OPI’s attempt at a gel polish, Axxium, fell short of the mark.  Up till recently Nail Harmony had the wind at their back because of product backorders at other companies.  Those have been resolved and I think Nail Harmony’s momentum will slow.  The timing of a buyout may be good for both parties.  The other canidate could be Minx.  They have already started the transition to retail and with the Coty-OPI combo in place it would be a retailers dream come true.  They have also been testing another retail oriented concept in Canada.  Time will tell on both of these, but it is fun to analyze the playing field.

I can go on, but this blog is getting long in the tooth.  As you can see, I think there will be many changes in the cards.  In the third and final part of this series I am going to talk about what exactly the “professional” salon industry is…and its not going to be what you think it is!  Until next time….