Diversion Update

Did you know that of the beauty industry's $5 billion yearly product sales, $1 billion is diverted or counterfeit? That’s 20% of total sales. A billion dollars is a boat load of money. You’d think that if someone wanted to find out where it was coming from it wouldn’t be that hard.

The good news is diversion is down. In the third quarter of 2008, total diverted product was $129,473,000 (million) dollars. In the third quarter of 2009, total diverted product was $105,301,000 (million) dollars, a decrease of $24,172,000 (million) dollars and 19%.

The bad news is it’s only a twenty four million dollar decrease on a billion dollar problem. That’s like a flea on an elephants butt! Is it manufactures being more effective with the diversion problem or consumers buying lower cost products at retail outlets because of the economy? It’s our opinion that it’s mostly due to the economy.

Here’s the list of diverted product by Manufacturer for the 3rd quarter of 2009 only. The increase or decrease percent that’s next to each one is compared to the 3rd quarter of 2008. Read it and weep…

Matrix $24,480,000 -7.4%
TIGI $15,460,000 +2.6%
Paul Mitchell $11,033,000 -0.6%
American Crew $10,590,000 -.6%
Sexy Hair $8,641,000 -3.2%
Farouk $8,507,000 -8.7%
Redken $6,270,000 -13.1%
Bumble & Bumble $4,831,000 +2%
Sebastian $4,743,000 -14.2%
Rusk $3,720,000 -2%
Pureology $1,893,000 -10.5%
L’Oreal Kerastase $1,209,000 +9.8%
Joico $1,176,000 -6.7%
Nioxin $492,000 +5.9%
Aveda $404,000 -7.6%
All others $1,847,000 -13.8%
TOTAL $105,301,000 -4.5%

Of Note: Nioxin joined the list in the first quarter of 2009.
Eva Graham founded the privately held Nioxin Research Laboratories in 1987. Is it a coincidence that Proctor & Gamble bought Nioxin in September 2008 and Nioxin makes the list as the 14th most diverted product in the first quarter of 2009? Just asking? You decide. It’s the same thing that happened to Purelogy in 2007 when L’Oreal bought it. Coincidence? You decide.

Aveda is welcomed to the list as the 15th most diverted product..