Signature strategy builds foundation for beauty product supplier's rebound
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TNG founder, president and CEO Larry Gaynor launched his company's own spa and hair care products and became the master U.S. distributor for an Italian hair care line to bounce back from years of lost revenue.
Photo: GLENN TRIEST
Beauty supply distributor TNG Worldwide Inc. is slowly recapturing the $25 million in revenue it lost over the past six years as major brands pulled their contracts and began calling directly on beauty salons.
The Farmington Hills-based company has launched its own signature spa and hair care products and become the master U.S. distributor for an Italian hair care line. TNG has taken those products into salons, spas and a new market -- the hotel industry -- over the last couple of years.
TNG founder, president and CEO Larry Gaynor projects the company's revenue will be flat this year at around $61 million but will rise to about $65 million next year, driven by demand for its signature brands and from the hospitality industry.
Originally, TNG served purely as a distributor, dealing in Matrix, Loreal and Tigi products, he said. But the company had to change its model as the name brands began selling their own products -- a trend that hit TNG's bottom line TNG continues to distribute health and beauty products including nail care, tanning, lotion and hair care products, spa equipment, and furniture to salons, spas and resorts. It's moved into distribution of customized items such as shower caps, laundry bags, pens, notepads and other items to resorts and high-end hotels, and it has developed signature hair care products.
"We evolved by manufacturing and being more responsible for our own brands," Gaynor said.
TNG formerly operated as The Nailco Group. Gaynor said focusing on the brands the company manufactures and control over the products has increased sales overall the last two years.
Minnetonka, Minn.-based Beauty Craft Supply Co is not producing its own proprietary products, but TNG, which is well known in the industry, could successfully introduce proprietary brands because the company has a distribution network with its Industry Source stores, said Beauty Craft President and CEO Maximillion Wexler.
Name brands bringing their distribution back in house and consolidating the distributor market through acquisitions are trends that have taken place over the past 15 years, he said.
"Loreal spent close to $1 billion buying up distributors ... (and) Sally's (Inc.) was also doing the same thing," Wexler said.
But the industry consolidation is pretty much complete, said Wexler, also chairman of the Scottsdale, Ariz.-based Professional Beauty Association. And there's now opportunity for small and medium sized distributors.
Those distributors "can move on trends much more quickly because they don't have all the overhead and layers of management," he said. Plus, "salon owners don't know the conglomerates; they know us, Wexler said. "That makes a difference to them."
New corporate HQ
After selling its Farmington Hills building to Mahle Industries Inc., a subsidiary of Germany-based Mahle Group, for an undisclosed amount, TNG in June moved its corporate headquarters to its 175,000-square-foot Lyon Township warehouse. The move followed $1.1 million in renovations to build out its corporate offices designed by Bingham Farms-based Scarcello Associates Inc.
TNG has 210 employees, 165 of them in Michigan. It has about 10 others at its California distribution center and salespeople across the country, Gaynor said.
The company's Farmington Hills flagship store, which supplies only licensed cosmetologists, and its main education center for hairdressers, nail techs and estheticians, will move in early August to a nearby 5,200-square-foot space in a strip center owned by Certified Realty Inc.
The company has signed a 10-year lease there, Gaynor said. It's investing $350,000 on renovations, working with Davis & Davis Interior Design Co. LLC., Farmington Hills.
After the recession
TNG's sales are rebounding after several years of decline.
The company hit an all-time high of $78 million in 2006. But it lost its contracts with Loreal and Matrix in December that year.
To help counter that loss, TNG became the U.S. master distributor for Italian hair care line Kemon early in 2007 and began picking up distribution for smaller brands like Montreal-based Moroccan Oil. Those efforts helped recover about $5 million, Gaynor said.
Sales dropped to about $58 million in 2009, as the recession took hold. But the company has rebounded to about $61 million.
In 2010, TNG began producing shampoo, conditioner and lotion for locker rooms at hotels, resorts, spas and fitness centers under the Ginger Lily Farms spa line.
TNG developed the formulas and fragrances and contracted production to a Michigan company Gaynor declined to identify.
Customers include Motor City Casino Hotel; MGM Grand Detroit; Greektown Casino-Hotel; The Townsend Hotel; Boyne USA Resorts; MGM properties in Las Vegas and Connecticut; and Canyon Ranch in Tucson, Miami Beach and Lenox, Mass.
TNG only sells its signature products to salons, Gaynor said, which helps it compete against the Ulta chain, which carries most major brands and charges less than salons for products.
"For salons to compete, they need to sell products that Ulta doesn't sell," he said.
Gaynor projects the hospitality business will bring TNG $3 million in revenue this year and $5 million in 2013.
Moving into Texas
TNG purchased Salon Source, a Texas-based professional beauty supply distribution distributor for $6 million in 2010, opening a distribution center in Coppell, Texas, and acquiring stores in Austin, Dallas, Fort Worth and Houston. But it wasn't the revenue boost Gaynor initially projected.
TNG since has rebuilt the teams and brands at Salon Source. Last year, those operations brought in just over $1.5 million. Gaynor projects sales in Texas will reach $5 million within three years.
In addition, TNG added another signature hair care line, Black 15in1, last year. The brand is in more than 3,000 U.S. salons, through distributors in other markets and some direct sales through TNG, Gaynor said.
Sherri Welch: (313) 446-1694, email@example.com. Twitter: @sherriwelch