Andrew Tobias - Demystifying Finance

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FIRE AND ICE
The Story of Charles Revson - the Man Who Built the Revlon Empire.

Chapter 18

Follow the Lauder

I don't think if the competition have got something wonderful, whomever they may be, that there is anything wrong in looking at it, and copying it. You know, great copyists or great experts in copying are those that can create a copy, and for that you have to be smart. On how to create a copy. Does everybody understand? Is that too hard to understand? It means if you copy something, that you copy it so well and so differently that nobody recognizes the fact you copied it. That's creative copy.

-- Charles Revson


It was easy to forget, if you knew Charles Revson, that Revlon was not the world's largest cosmetics company. In 1975, it trailed Avon, L'Oreal and Shiseido. But Avon's sales were exclusively door-to-door and thus not directly competitive. To Charles, Avon barely existed. And neither L'Oreal nor Shiseido was important in the U.S. market. His real competitors through the years were companies and brands such as Blue Bird, Chen-Yu, Contoure, Peggy Sage, Hazel Bishop, Helena Rubinstein, Elizabeth Arden, Max Factor and -- his arch rival in the last decade of his life -- Estee Lauder.

He felt the same inner rage toward competitors an apartment dweller feels toward a burglar. They were encroaching on his space. "If you come into my ball park," he warned Gulf & Western's Charlie Bluhdorn, "I'll kick your ass." He put tremendous pressure on suppliers not to deal with his competitors; on jobbers and retailers not to sell or feature their products; and on magazines never to give their ads a more prominent position than his own. "Of course the other guy has a right to make a living," he liked to say -- "but let him make it in some other business."

He made a point of never mentioning his competitors by name. They did likewise. Arden, a poor Canadian truck driver's daughter made good, called him, simply, "that man." (To tweak her, he brought out a men's line by the same name.) Rubinstein, a Polish immigrant-via-Australia, called him "the nail man." He referred to them, and to Lauder, a social climber whose first rung varies from interview' to interview, only as "competition." Or, if he wanted to become exceedingly specific, he would say, "she." When Love cosmetics were big, he banned the word "love" from all his advertising.

He had a CIA-like intelligence network and -- because he assumed his competitors did, too -- a fetish for closed doors. All his products were assigned code names prior to introduction -- "Park Avenue" (Cerissa), "Cosmos" (Charlie), "Bruckner" (the CHR line). The Ciara fragrance was designated "March," its targeted launch date. It was seven months late. "If we don't get the engravings by July," people were saying, "March won't go out before November." It was enough to confuse the canniest competitor.

Ingredients at the lab were coded. Only a handful of department heads knew what "Ritex," "Bankit," "Neville," "Tylex," and hundreds of others really were. Even Lillian Dunn, a thirty-two-year veteran after whom "Dunnex," a wax, had been coded, didn't know. Suppliers were instructed to label their shipments by code name. As far as the factory knew, they were mixing Dunnex with Neville to make Zarega-or whatever.

From his yacht, Revson was unusually cryptic for fear competitors might be tuned in to his radio frequency. Nail enamel was "n.e.," lipstick, "l.s." -- pronounced fast, like "any" and "else." Projects and companies were referred to by code; people, as "what's his name." "Have what's his name call me about that other matter," he would tell Jay Bennett, fully expecting him to comply. (And because they had such a close working relationship, Bennett usually could.)

But if Estee Lauder did not have a cadre of ham radio operators scanning the Mediterranean for trade secrets, she could still find out a thing or two. When Etherea, Revlon's hypoallergenic line (code name: New Jersey), was being launched to compete with Lauder's Clinique, a memo was circulated to four trusted employees listing the names to be used for each item in the line. Top secret stuff. Lauder ran an ad for Clinique in Women's Wear Daily using every name in the memo as an adjective, and underlining each one lest there be any doubt in Revson's mind that he'd been stuffed. Etherea was to have an item called "B.C.O."-biologically correct oils; Lauder's ad said, "our night cream is biologically correct." And so on.

Revson had a conniption. But all manner of sleuthing by his FBI-trained security chief failed to reveal the leak. It was then that he instituted mandatory signing in and signing out, and had photo-I.D, cards issued to everyone. A Revlon marketing man ran into Lauder's sons, Leonard and Ronald, at a party sometime later. "You know," he said, "you guys are crazy to spend five thousand dollars just to aggravate us."

"It was worth it," one of the brothers replied, smiling.

 

At any given time in Revlon's history there was some one competitor in particular Revson felt he had to destroy. Blue Bird, the first, was easy: Revlon had a demonstrably better product. It was that simple. Revson was soon able to demand that jobbers drop Blue Bird -- and all their other competitive lines -- if they wanted to carry Revlon. The jobbers didn't like it, or other tough policies that followed, but they had no choice. By the time the Federal Trade Commission ruled some of Revlon's exclusive agreements out of order, the company had acquired a lock on the beauty salon market.

When Contoure learned in the late thirties that Revson might launch a lipstick in competition with their own, they brought out a nail enamel. Revson's friend the jobber with a hernia the size of a baseball sent him a sample as soon as it came in. Revson was beside himself. The product was identical to his own. He was apoplectic when he found out it was being made by his own supplier.

"Why not?" was the supplier's attitude. "We can make nail enamel for anyone we want."

Reason having failed, Revson got hold of the man at the plant who actually compounded the lacquer and, according to an executive then, paid him $100 to slip an extra ingredient into Contoure's brew, with $400 to follow when the mission was accomplished. The extra ingredient, whatever it was, had an unsettling effect on the quality of the product. What's more, it caused a marked deterioration in the relationship between Contoure and the errant supplier, who thenceforth agreed to make Revlon nail enamel only for its biggest customer -- Revlon.

During the war, Chen-Yu was the brand to beat. One quirk of wartime rationing was that glass allocations were issued to companies that made the bottles rather than to the companies, like Revlon or Chen-Yu, that used them. Charles wanted to know what Chen-Yu's Chicago-based bottler might require to steer Chen-Yu's allocation of bottles his way. Jack Price arranged to fly the co-owners of this bottling firm to New York. He says he watched as Charles settled with them for $15,000. Chen-Yu suddenly found itself scrambling for upwards of half a million bottles. After the war, Revlon offered to replace all the substandard inventory it had out, such as those cardboard lipstick cases, with new, quality merchandise. It took money to do that, and Chen-Yu hadn't the resources to match the offer. Then Revson lured away Chen-Yu's all-important merchandise manager, Burr Reibel. It was the coup de grace.

Hazel Bishop -- "stays on you, not on him" -- was another dragon to be slain. This upstart had built a huge lipstick business overnight through the use of television. Merv Griffin, a young singer, started pitching the nonsmear brand on The Kate Smith Show in 1952. "People couldn't understand how with only three salesmen we managed to get such massive distribution," Raymond Spector, who owned the company, says. (Hazel Bishop herself founded the company in 1950, was forced out two years later, and in 1975 was working as a cosmetics analyst with the Wall Street firm of Evans & Company.) "But Revson personally sent a memo around to his salesmen saying, 'Wherever you go, find out how Hazel Bishop is doing and send the information directly to me.' At that time we were still in only a few major markets. People started calling us from all over. They figured that if Revlon was interested, they should be too."

Charles got him in the end, though. The biggest marketing blow was The $64,000 Question. The biggest psychological blow was Spector's discovery that someone -- he states categorically it was Revson -- had been listening in on his most private conversations for more than a year. He first grew suspicious when information that could not possibly have leaked to the trade did. Revlon kept beating him to market with his own ideas, he says. He then tried planting false tidbits to see if they, too, would come back to him and they did. Alarmed, he retained the services of two eavesdropping experts, Charles Gris and Carl Ruh. Ruh was awaiting sentencing on some other wiretapping work he had done. These were the same two men, as it happened, Bill Heller had engaged to tap Revlon phones. In fact, Spector testified, while Ruh was off checking the phones for taps, Gris told him about the Revlon job and offered the same service to him.

Ruh found that several of Spector's phones were indeed tapped, and his office bugged as well. It may even be that Gris and Ruh had themselves done the tapping they were now being paid to detect -- a dicey way of having and eating one's own cake if ever there was one.

Revson's market timing was uncanny, Spector alleges, at least in part because he had advance knowledge of his competitors' plans. Winston Churchill had the same edge on the Germans. "I think Revson was a prick," he says, simply. Among Revlon competitors, this was not an uncommon view.

 

Madame Rubinstein thought the nail man was "heartless." She was anguished by the way he would copy her products ("only better!"). But he fascinated her. She couldn't help admiring him. She even bought Revlon stock.

They were not so dissimilar, Madame and the nail man. She, too, was an earthy, idiosyncratic, impossible, tyrannical Jewish founder/one-man-show. She hired people, milked them, and fired them. She played one off the other. She burped unabashedly and blew her nose in her bed sheets. She felt surrounded by ingratitude. She complained bitterly about having to close the office after John Kennedy's assassination. Unlike Revson, however, she was not out to prove herself to anyone, she did not live in fear of being embarrassed, and she was thoroughly-ludicrously-cheap. Yet far better liked than Charles, for all his lavish entertaining. Her quirks were seen as amusing rather than gauche or offensive. No one called her ruthless, although she had much the same obsession with her business that Charles did.

For many years it was not he but "the other one" -- Arden -- whose competition most irked Madame Rubinstein, Arden once raided virtually the entire Rubinstein sales staff. Madame retaliated by hiring Arden's ex-husband as her sales manager. At least the nail man and she were in largely separate fields. He had the lipstick and nail enamel markets, yes, but Madame was queen of the treatment creams. It was only in 1962, when Revson launched Eterna 27, the remarkable skin cream, that Madame felt really threatened. A Rubinstein executive walked into her office that day to find the window open wide and Madame leaning out, screaming and shaking her fist. Her third-floor office was directly opposite 666 Fifth Avenue, where Revson ruled the twenty-seventh floor (hence the name -- Eterna 27). This tiny ninety-year-old woman was screaming up at him in a very heavy Polish accent, "What are you doing? You're killing me, you rat! What's the matter with you?" It looked as though she might fall out of the window. "Don't worry about it, Madame," the Rubinstein executive said, pulling her back in and hoping to cheer her up, "it's not going to sell. In fact, I think they're going to change the name to Returna." She looked at him blankly. Like Charles, she had very little sense of humor about her business. "Why would they want to do that?" she said. "It's a good name, Eterna."

Later that year Madame met Revson briefly at a fashion gathering. Her comment afterward: "He has an awful skin."

In 1965, she died. A year and a half later, Arden died as well. That left two: Revson and Lauder. Most of the other companies had been or soon were merged into conglomerates, with results that ranged from fair to poor.

Max Factor, swallowed by Norton Simon in 1973, had done better than most since the death of its founder/namesake decades earlier in 1938. It was Factor that in 1967 challenged Revlon's privileged position in the fashion magazines. Revson had always demanded that his ads precede those of his competitors. (He also would demand -- and receive -- advance proofs of fashion stories that were to run, and sometimes have them changed. But that's another story. ) Chet Firestein, then executive vice president of Factor, lodged a protest. Bill Fine, then in charge of three Hearst magazines, had to agree that the policy was unfair. With much apprehension, he told Revson he was sorry, but Revlon could no longer be first in every issue. "We made our stand," Fine says, "and Charles said, in simple terms: 'Fuck you. I'll pull my advertising out of all Hearst magazines.'" Which meant not only Fine's three, Harper's Bazaar, Town & Country and House Beautiful, but Cosmopolitan and Good Housekeeping as well. Revlon's annual outlay in these books approached seven figures. (Patty's abduction was thus in effect the second extortion attempt on the Hearst family.)

There was a period of two or three weeks' impasse. And as word of the confrontation spread, Fine found himself in a box. He had to win some concession lest other of his major advertisers revolt. It got so that Fine used to have a man come massage his neck and arm each time before he went over to see Revson, because he would start to get a tingle and an ache in his back.

Fine managed to emerge with at least this much: When Revlon had a black and white page, it would run first. When Revlon had a color page, it would be the first color page -- but another cosmetics ad, in black and white, could come first. As Revlon was not running black and white ads at the time, it was what Fine calls "maybe a fifty-one percent victory -- which is pretty good when you're dealing with Revlon."

The changed policy worked to the advantage of Estee Lauder. (Most people, wrongly, credited her with forcing the confrontation in the first place.) Lauder was running black and white ads. Revson soon followed. In fact, whatever Lauder did, Charles soon followed. She offered "gift with purchase"; he offered gift with purchase. She went to using a single model exclusively; he followed with Lauren Hutton for Ultima -- and one-upped her by signing Richard Avedon as her exclusive photographer. She went to sepia ads; he went to sepia. She switched back from sepia; he switched back. She brought out a "stinky" fragrance (Charles's word); he brought out a stinky fragrance. She brought out Aramis; he brought out Braggi. She brought out Clinique; he brought out Etherea. She brought out a fragrance called Estee; he brought out Charlie. To add insult to unoriginality, he would put copied products in one of his less-than-Ultima lines, to cheapen the originals by association.

Charles was reviewing a new eye-shadow compact. Suzanne Grayson had brought along Lauder's version for comparison. In order not to lose the instruction sheet that came with it, she had scotch-taped it to the mirror inside, Charles picks up the Lauder compact and thinks: "Look how smart that ---- is. Why don't we think of things like this? The customer can't miss seeing the instructions, so, in turn, she's going to learn how to use the product and, in turn, she will like it better. Why the ---- can't we think of things like this?!" He got so wound up in his grudging enthusiasm for the way Lauder was taping her instruction sheet inside the compact, even though she wasn't, that there was no interrupting him. The Revlon compact was modified accordingly. It was one of the few times Revson copied Lauder without her knowing it.

Stan Kohlenberg, who no longer has a mole the size of a dime (now it's on Michel Bergerac), runs the Ultima line, Charles's department-store, carriage-trade answer to Estee Lauder. He keeps Lauder's photograph on a dart board in his office and says he sometimes thinks she is just Charles in drag.

When Ultima was first put together (before Kohlenberg's time) it was a flop. One ad showed the most obnoxious-looking, spoiled, chubby kid in shorts and knee socks with his mother, who looked more uncomfortable than sexy, sitting on an overstuffed ottoman in an overdone living room . . . the idea apparently was to reach into Park Avenue's poshest parlor -- and it didn't work. But Charles Revson, we all know by now, was not a man to give up. The products, packaging, and approach were all reworked, the line doggedly promoted, until eight years after its initial introduction it finally turned a profit.

In the meantime (September 1968), Lauder had brought out Clinique, her hypoallergenic line. Kohlenberg provides a fascinating case study of the forces of competition at work.

 

Stan Kohlenberg

Charles came back from his August cruise and had a fit, because he had been talking for a long time in a vague way about bringing out a hypoallergenic line, and now she had beaten him to it. He called me in and he said: "We have to create a line and I've been thinking about it for three years and you have to do it. You can handle Ultima while you do this . . . it's the same kind of line." Charles throws it to you as a challenge.

I started working on it in the beginning of October. He comes back two weeks later, before we even had a name for the line, and he says to me, "I just told Mildred Custin that we're introducing it April 28 in Bonwit Teller." I said, "How could you do that? We don't even have a line!" He says, "I told Mildred we would have it out April 28 and you can't disappoint her." So April 28 is the date.

To put out a full line in seven months -- it is virtually impossible because you are dealing with the packaging, the names, new products and so on. Nobody tries it. But Charles didn't want Clinique to have a long time on the market without a strong competitor. The faster he could get out, the faster he could step on her toes. I made the first presentation to him in the middle of October. It was a concept for a brand-new line, to be manufactured under the same conditions as pharmaceuticals: the white room, everything surgically clean, everybody wearing masks, ultra-violet lights to kill bacteria . . . we had a negative-pressure door, so that when you opened it the air blew out. They still use it. And this was going to be in the ads, how the products were made. Clinique doesn't go through all that trouble. And every item would have a tamper-proof seal to guarantee sterility. There was a profile created by Brauer [the staff dermatologist] so you could determine what skin you were. Originally we wanted all the liquids in vials.

We then came up with several names and none of them was acceptable. We didn't want a French name because it was an American line and Charles is very sensitive about our line being uniquely American. He doesn't want the phony chic of a French name. He liked the concept of the line and he agreed to a lot of things, but we had no name. It became a big problem because you couldn't do any packaging. We didn't come up with the name until February.

Charles came in one day and said: "Here's the name to go on'. 'Etherea.' It's a good name because it has kind of a different meaning in it and yet it's not a meaning and you can pronounce it." We all hated it at first, but he said: "That's the name, no argument," and it grew on us.

So now we had the name and ninety days to do everything. We had to cut across every procedure in the company. Forget the paper work, the ordering, the purchasing -- we ordered our own bottles and worked with the lab ourselves and alienated everybody in the company. Alec Faberman threatened to hit me with an ashtray one day. We worked seven days a week, twenty-four hours a day, from February through April. It was things like writing package copy for an entire line, 125 items with shades. We were going to come in with just a narrow treatment line. We'd go to Charles and he'd say: "You've got to have lipstick." So we added twenty shades of lipstick. Next time: "Where's the eye shadow?" I said, "I can't have eye shadow, Charles." He says, "How can you have a line without eye shadow?" Eye shadow goes in. By the time he finished with me I had a full line. It meant going back to the lab and getting more formulas. Meanwhile, the rest of the company had to keep running. We were always late with everything to begin with, and here I am sticking this whole new thing in.

We were sure we wouldn't make it -- the bottles weren't ready, the dates we were getting for delivery were way beyond April 28, everything had to be tested, and we were living day by day on the premise that we were going to fail. Fortunately, we had formulas from other lines to establish a base, but we had to find a product difference for each one. It meant taking a product and putting a twist in it. If we already had a cleanser that tissued off, we had to find one that tissued and washed off, because this was a special line. This was all from October to the week before April 28, in some cases.

We get down to two weeks before the promotion and nothing is in. There are no bottles in the plant to fill, some of the boxes are just coming off the press. I asked them to change the date to September and they said they couldn't. So we set up a press party at Bonwit's to introduce the line and I have no product to show. Nothing is filled. I told Tom Dulick, my assistant.' "Run out to the plant, get every dummy you can, everything that's come in and is unfilled. At least we can set it up; if the people just look and don't touch it will look nice."

The beauty editors of all the magazines and newspapers were invited, and we had it set up so we could do a profile of all the faces, tell them what kind of skin they had. We told them as soon as the line is complete, then we'll send a complete set. Charles walks in and I'm quaking. He's been approving things as we went along but he hasn't seen it in its finished form. He walks over to the alcove and stands there by himself looking at the line. He had seen the cartons in artwork, but he hadn't seen the finished product. We didn't have the time. He stood there quietly for a few minutes and then he looked around. I was watching him out of the corner of my eye and so was everybody else. He went over to Jane Canne of Vogue and started talking about the line. She loved it. He knew the premise of the line, the story behind it, which was his with a few embellishments, so he was able to talk about the line and each of the beauty editors would tell him how nice it was. He was becoming visibly more assured about how well the line was going to do. Finally he got up and made a speech to everybody about how he had been working on this line for three years . . . which he had, he had had the concept for three years . . . and how this was the culmination of what he wanted to do and how pleased he was with it. And everybody applauded.

Charles walks over to me, away from everybody else, and he puts his hand on my cheek and starts giving me a clip as if he's saying "Nice boy." Everybody's watching. As he does this to me he says, "You know what?" I said, "What?" He says, "Schmuck, the cartons are fading."

I said: "I know, Charles, they're only dummies." We are smiling at each other as we are talking. He's having a fit because the cartons are fading under the lights. He's still holding my cheek and he turns to Dulick, who he knew had worked with me on the project, and he says to me, "Does he know the cartons are fading?" I said, "Yes, Charles, he knows. But we fixed it, Charles." And he said, "You know, you guys are ruining my business." And he walks away. Somebody came over to me and asked what he said to me. I said, "He said, 'Schmuck, the cartons are fading.'"

In the meantime the stores had sent out their mailers, we had hired all the girls -- but we had no merchandise. Components had just come into the plant. By Thursday we are hysterical because there is no product and we are supposed to break Monday at Bonwit's-Manhattan, Manhasset, Short Hills, Scarsdale, and Philadelphia. If it doesn't happen by Monday, we're all dead . . . the mailers are out, the women are coming into the store. I said to Tom: "I think we better go to the factory and see what's happening.'' They were just starting to set up all the lines. It was a disaster. They wanted to run all the powder, then all lipstick -- which is efficient, but we couldn't do it that way and still make the order. We had to tailor-make Bonwit's order with tiny runs of each item.

By Saturday I'm starting to get emergency calls from Paul [Woolard]. "What the hell is happening?" Mildred Custin called me: "There's no merchandise in my stores." By Saturday afternoon we began to get representative portions of every part of the line. We got three station wagons. I had one kid make a run to Manhasset; Tom made a run to Short Hills. We sent a messenger truck to Philly. I live in Scarsdale, so Saturday night I put about sixty cartons in the wagon, driving blind.

Sunday at seven A.M. we drove back out to Edison and started loading trucks again. We finished all of the branches by Sunday afternoon. Not a piece had gone to the downtown store.

I called Mildred at home and said, "Don't worry, at seven o'clock Monday morning we will be at your receiving entrance with your whole order." I had eighty cartons in my wagon, Tom had seventy-five in his. Seven o'clock Monday morning, in suits and ties, we drive up. We had our own consultants waiting at the counters to set up. And we run the wagons through the store and as I go through the store the guard says: "You can't go through the store without the order being checked." I said: "Get out of my way or I'll put wheel marks on you." I was so frantic at that point, he let us in. We set it up, and at nine-thirty, when the store opened, we put the last piece of goods on the counter.

It was done. And tremendously successful. So much so that we had to call the police at one point because the crowd was so big. We were giving away a gift free without any purchase. All you had to do was to have your profile done. Every woman will do that for nothing to get the gift.

Three years later I did the whole thing all over again with Ciara. The station wagons and the whole bit.

 

Thus does the nation's most successful cosmetics giant (Avon aside) develop and introduce a major new product line. Normally, there would have been vastly more interference from Charles and interminably greater delays. But the enemy had stormed the barricade and was already in the department stores. If it had been another competitor, he might not have put on quite the same pressure. But it was Estee Lauder.

Of all the women in his life, although he never spoke more than two words to her, it was probably she who had the greatest impact. She was the one competitor he set out to beat but couldn't. It had taken her a full fourteen years, from 1946 to 1960, to reach $1 million in sales -- but a mere fourteen more to reach $100 million. Revlon was still much larger, but she had captured exactly the segment of the market that mattered to him most. As Revlon owned sex and fashion in the fifties and Arden owned pink, so Estee Lauder by the late sixties owned class. Suddenly she was beating him in all the best department stores, she had the houses in Palm Beach and the South of France, she was dining with the Duke and Duchess of Windsor (who had long since learned to live well by allowing a bit of royalty to rub off on eager commoners). The Park Avenue socialite he had always had his eye on had found a counter at Bloomingdale's she liked better than his. Never mind what a small segment of the market she represented. As a result, Mandel says, "his priorities came all out of whack. The whole corporation was working on one percent of its business ninety percent of the time to satisfy this ego of his: Ultima, Borghese, and Braggi. He left a hole wide open in the marketplace for Factor to make a comeback and for others to get into the business as well."

Revson argued that the quality image of his top lines would enhance the image of basic Revlon. But pride, not profit, was his fundamental motivation in taking the course he did.

And so it was Lauder, not Lyn, who led Charles to be more "social." Lauder, not Lyn, who lured him to the black-tie affairs Ancky had always longed to go to. It was to combat Lauder, not to amuse Lyn, that he landed on the Breakers Hotel golf course in a helicopter, photographers and reporters lined up on the fairway, where he was to judge a very hotsy-totsy, uppercrust (read: Gentile) Palm Beach beauty contest. That Lyn was young, beautiful, vivacious, and extraordinary in bed were sources of genuine pleasure and great allure. That she helped him project the glamorous image and generate the Women's Wear coverage he wanted to combat Lauder was perhaps even more important to him. And why not? Lyn's motive for marrying this notoriously difficult fifty-seven-year-old must have included an element of practicality, also.

 

***

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