CASE STUDY >
Organic corporate growth
Written by: Klára Smolová
Photo by: Petr Poliak

	Eva Štěpánková

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 lower prices.

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.

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.

Breaking point
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."