CASE STUDY >
Organic corporate growth
Written by: Klára Smolová
Photo by: Petr Poliak
Czech cosmetic firm Ryor is known
throughout the entire country, and its products can be found on
shelves worldwide. How did owner Eva Štěpánková lead her firm to
such a significant market position?
"RYOR, CZECH DIOR", people sometimes say. Perhaps this
is one way for Czechs to appreciate the fact that the local cosmetics
producer is capable of asserting itself in competitive foreign markets.
Or maybe it is an omen as to how far the firm may eventually go.
Time will tell, but the fact is that during its eleven years of
existence, Ryor has been able to capture a 10% share of the overall
Czech cosmetic market and now finds itself included among such names
as Avon, Oriflame, Palmolive, and Ponds. It is not hard to understand
where the success of Eva Štěpánková, and Ryor, lies. It is based
on three simple factors: timing, constant monitoring of recent trends,
and products of a quality comparable to western goods but at significantly
Right place at the right time
A chemical technology graduate, Štěpánková worked for almost 20
years as manager of cosmetic production at the Institute of Medical
Cosmetics in Prague. Like similar institutions, it started to slowly
collapse after the revolution, yet the number of private cosmetic
salons increased throughout the entire country. "The profession
of cosmetician had only just begun at the time, so professionals
didn't have many products to work with," Štěpánková recalls.
"So my colleagues and I started to prepare products for them
at home." Revenues for its first year of business - CZK 700,000
- proved that the products sold well. In the next year, 1992, production
of retail goods began. "Cosmeticians wanted products for their
customers. After treatment, customers were so satisfied that they
wanted to use the product at home, so cosmeticians tried to accomodate
them." The first four products were born. Since that time,
the firm has recorded continuous development: not only has the range
of products grown each year, but production volume, revenue and
the number of employees have increased as well. Today the Ryor line
includes over hundred products - 40 for cosmetic salons and 87 sold
in retail stores. As time went by, the basic line of creams for
all skin types was expanded with hair care and body care items.
is he best advertising
In the beginning, Ryor had no assets for advertising.
"Promotion was unthinkable. We were just glad
to have money for materials," recalls Eva Štěpánková,
owner of the firm. "Quality was our best advertisement.
Thanks to this, we created customer awareness."
In 1994-95, the firm began purchasing TV spots and
printed ads in magazines. Štěpánková considers consumer
education very important. "Many people believe
in advertisements, I understand this. With such an
excess of products on the market, it's hard to figure
out which one's best for you," she says. Therefore,
Ryor has put a strong emphasis on educational activities
- not only by participating in various media debates
concerning healthy lifestyles, but also in the form
of cooperation with numerous health care organizations.
Today, Ryor's development laboratories work on two
projects. The first one is the development of products
for molding the body, done in cooperation with the
STOB (Stop Obesity) organization. This line of products
is already available, and a marketing campaign is
currently being prepared to be launched in the fall.
The second significant project, supported by the World
Health Organization, concerns the use of amaranth
oils. The ancient Mayans knew about the amaranth plant,
and now scientists are trying to find the best possible
use for it, as it has many beneficial effects on the
human body. Ryor currently makes two products containing
amaranth oil for the highly sensitive skin of people
suffering from cancer. In 2001, a network of specialist
shops covering the entire Czech Republic was established
offering the full Ryor product line, as well as additional
services such as cosmetic consulting. The firm also
engages in sponsoring events for handicapped adults
Back to nature
Since the beginning, the firm's logo and brand name on products
has been accompanied by the slogan "Natural Herbal Cosmetics".
The Ryor line includes products with almond, marigold, and sprout
oils, with aloe vera, beta carotene, panthenol, green tea and sea
algae extracts. Ryor has used the global trend towards natural products
to its advantage. "We visit various exhibitions and seminars
where we learn about the latest trends," explains Štěpánková.
"Today, cosmetics around the world have begun using sphingolipids
(ed. note: a subgroup of ceramides that hold water in the skin and
keep it supple). Our laboratory is now trying to find out what to
do with them. Whoever comes up with a product containing this recently
discovered substance first will capture a large piece of the market."
According to Štěpánková, Ryor's typical customers are women between
the age of 40 and 50, who have more time to take care of themselves
but are unwilling to pay thousands of crowns on cosmetics. If these
customers are able to choose between a cream from L'Oréal for more
than CZK 300 and one from Ryor for CZK 80, most of them will pick
the Czech product.
- Excellent timing for market entry
- Continuous monitoring of the latest research and trends
- Strong emphasis on quality and natural ingredients connected
with efforts to promote healthy lifestyles
- Pricing policy - substantially less expensive products compared
to foreign competitors
The year 1997 was the breaking point in the development of the firm.
At the beginning of that year, production was started at a new plant
in Kyšice, which the firm had built when facilities in Prague 6
proved too small. The modern complex has almost everything: laboratories,
production facilities, warehouses and offices. Construction costs
amounted to CZK 30 million, forcing Štěpánková to take out a loan
for the majority of the investment. "The loan is now paid off,
but it was pretty expensive," she says, noting the unfavorable
interest rates. "Today we finance everything with our own capital."
That same year, large hypermarket chains entered the Czech market
and put huge pressure on pricing policies of suppliers, which resulted
in the collapse of the country's existing wholesale system. Since
Ryor distributed its products through several selected wholesalers
that supplied the entire Czech Republic, the company faced serious
problems. "The two largest wholesalers, Renáta and LK Distribuce,
disintegrated while still owing us a lot of money," says Štěpánková
regretfully, adding: "our sales completely collapsed, so we
had to change our distribution and cash flow management."
These problems also influenced Ryor revenues, which first started
to stagnate and then decline. In 1996, revenue reached a record
CZK 127 million while in 1998, it was only CZK 110 million. It seems
these problems continue to haunt the firm today. In 2000, Ryor was
forced to erase outstanding debts, putting them in the red. Last
year, revenues again reached CZK 125 million, generating a profit
of over CZK 5 million, but the firm's debts still stand at CZK 56
million and equity remains in the red (- CZK 7 million) due to the
losses of past years. However, according to auditor Zdeněk Novotný,
"Based on the most recent results, it is possible to assume
that Ryor will be able to balance the books by 31 December 2002."
1995 Czech made" designation awarded to six products
1997 "Packaging of the Year", for the exclusive
1999 Gold Incheba award for high quality in design (three
products of the Exory line)
1998 Lady Pro '98
2000 Outstanding Czech Business Woman, 1999
2000 Leading Business Woman of the World