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Hype and hoopla apart, is there any difference between expensive and popular-priced cosmetics? Yes, there is some. High-priced eye shadow may contain fish scales for extra shine; prestige perfumes have more natural essential oils and fewer synthetic ones than cheaper scents. But Francis Le Cates Jr., a cosmetics analyst at Donaldson, Lufkin & Jenrette, estimates that on average only 80 of the cosmetics sales dollar goes to pay for ingredients. The extra cost of the better ones used in prestige products comes nowhere near accounting for the difference in selling price. The real difference is in fancier packaging, splashier promotion, and the fact that the swankier cosmetics are made in limited quantity for sale through prestige stores, which raises the manufacturing cost per unit.
High price is itself a selling point in cosmetics, a fact about which Bergerac is not the least apologetic. Asked if a $2.50 lipstick and a $6 lipstick are just the same product in a different case, he replies that the formulas are changed, but swiftly shoots back a question of his own. "Suppose they were the same and you knew it? Which would you buy for your wife if you wanted to impress her? If spending more makes you feel better, why not do it? How can you put a price on happiness?"
For investors, happiness is rising sales and profits, and Bergerac has certainly given them that. Sales jumped from $639 million in 1974, Revson's last year, to $1.1 billion in 1977. Profits rose even faster, from $54 million in 1974 to $98 million last year. That includes international operations; Revlon manufactures in 25 countries and sells in more than 100. Bergerac is negotiating with officials of the Soviet Ministry of Food Industry, which has jurisdiction over cosmetics, to work out a deal to sell Revlon products in the U.S.S.R. "The market is clearly enormous," he says. Foreign cosmetics are a big black-market item in the Soviet Union, because the stodgily run government factories do not turn out lipsticks and fragrances in the quantity and variety that women yearn to buy.
About a third of Revlon's sales come from its health-care business: drugs to control high blood pressure, antiacne soaps, diagnostic laboratories. Revson began diversifying into this field; Bergerac has pushed much further, mostly by acquisition. The products are related, he notes, and Revlon's pretax profit margins in health care (25.5%) are even higher than in beauty products (20.6%).
In the cosmetics industry, a gossipy and sometimes backbiting trade, the acquisitions have stirred talk that Bergerac intends to make Revlon another ITT. The president of one competing firm goes so far as to predict that in ten years Revlon will no longer be basically a cosmetics company but a conglomerate. Bergerac laughs off the idea, and his bubbling delight in the cosmetics business does make it seem farfetched. Some rivals and retailers also grumble that Revlon is cheapening its image by toying with the idea of selling in supermarkets. Bergerac replies that it is only testing that approach in Dallas, Denver, Phoenix and Seattle, and merely for products of