The company now known as Placécol Holdings has its roots in the work of a pharmacist in Ermelo, who in 1980 formulated a range of skin-care products that formed the basis of the extensive range of beauty products the company manufactures and distributes.
WHAT IT MEANS
 Has 52 beauty centres, with 32 of them franchised
Maintains a presence in major retail stores around the country
|
Wessel de Wet, now Placécol CEO, and Charles Moolman, the present chairman and pharmaceutical director, acquired these formulations and set about marketing them. They later formed a private firm called Zelpy 2170, which was incorporated in October 2003. Renamed Placécol Holdings, it became a public company in January last year. It listed on AltX later that year.
The company's divisions include the manufacturing arm CW Pharmaceuticals, which is a well-equipped research and development laboratory. In it, existing formulations are upgraded and new products developed. Placécol Cosmetics does the marketing and distribution of the company's branded skin-care products and provides soft laser skin-care therapy in conjunction with them. The Placécol Beauty Institute, opened in 2005, is one of its divisions.
A wholly owned subsidiary of Placécol Cosmetics, Placecol Franchise, was incorporated in 2006. Salonquip, which supplies Placécol outlets with equipment, began trading in 2006. And last year, Placécol acquired the entire share capital of Dream Nails, renamed Dream Nails & Body, which retails quality nail products and treatments.
The company's vertical integration has led to a degree of self sufficiency, which has enabled it to grow in a competitive environment and it foresees continued expansion. It established its first Placécol Beauty Centre outlet in 2004. It now has 52 - 32 of them franchised and 20 company-owned. Altogether it has more than 300 outlets, which include its self-owned and franchised outlets as well as retail outlets in selected pharmacies, Edgars and Foschini stores.
"We expect a lot of growth from new stores," says De Wet. He says as stores become established, the strong income they generate carries the teething troubles of the new stores until these, too, produce steady incomes, which again carry the newcomers. Eventually the base of secure income becomes so wide that fresh entrants have little effect.
"That is our underlying strength," De Wet says. "Even if the economy should decline, the market will still be there. Each shop will still have its customers and bring in an income, even if it's a reduced one. And even if we have to close some stores, the income is like a wave that you cannot suddenly stop - it's a matter of critical mass."
Charles Moolman and Wessels de Wet
He says the company benefits from exceptionally high barriers to entry. Getting shelf space with retailers is a challenge as they are all aggressively targeted by new product suppliers, who all claim that their product is different. What is important to retailers is distribution, national support, branding, and, particularly, the ability of the supplier to support the product with marketing, including the continuous development of new products to keep up with international trends and developments.
"In Placécol, you have a company that is already well established, not the flavour of the month. We have been competing with international companies for 20 years and more seriously, for the past five years, since establishing ourselves in Edgars stores. We have maintained our presence in the retail market, which is a fairly tough one."
Placécol benefits from making its own products - it does not have to buy them. "This allows us to have a good margin," De Wet says. "We are not dependent on royalties. We have good products, and on top of that, we offer a service. It means we have three sources of income: from our products, the service we offer and royalties. We also make a profit from the equipment we import and the training of beauticians."
On royalties, De Wet says 3% goes towards advertising and marketing and the balance goes towards paying senior operational managers in the field.
"We do not leave the stores to themselves," he says. "We are focused on product sales. We keep tabs on the performance of each store and intervene if that's what is needed. We want throughput. It is necessary for the protection of our brand and we all benefit from that."
Chief financial officer Richard du Toit points out that the company's gross profit percentage to sales is high due to the advantage of making its own products. "Because of this, we are also not exposed to big fluctuations in the exchange rate. We do import raw material and some packaging, but each product contains only a small quantity of the imported ingredients. For us, price is more a strategic matter than being cost driven."
In October last year, the company reported strong interim results for the six months to August. Revenue grew 108% to R63,3m from R30,5m in the previous corresponding period. Headline earnings a share rose to 4,9c from 0,5c and earnings before interest, tax, depreciation and amortisation rose more than 200% to R9,5m. By last year, Placécol had secured 2,45% of the SA skin-care market, says marketing and business development executive Jenny Templemore-Walters. "Placécol's success is testimony to what an SA brand can do in a global trading environment. We are making the big brands nervous.
"We plan to expand to offer full skin-care ranges for our users. Already we have the Platinum series of products for mature users and the Renaissance series for skin of colour. These are entire ranges, which Placécol was the first to launch in SA," says Templemore-Walters."
