1942: Cosmetic Industry

Again in 1942 the cosmetic industry had another one of the best years in its history doing over $500,000,000 worth of business at retail. Increased purchasing power combined with a shortage of durable goods brought this industry a wartime prosperity which even actual restrictions, in the form of material shortages, and a short-lived limitation order, did not seriously affect.

Underneath this front of rising sales, the year in this industry was marked by the research and development work beneath the surface as increasing effort was placed upon finding substitute materials. The list of chemicals and other raw materials whose use by the industry was proscribed due to their limited supply and greater need elsewhere was already long as the year ended. But a more critical situation existed in the field of packaging where it seemed quite likely that many of the containers and closures of all types normally used on cosmetics would be almost unobtainable in 1943. Paper and wood were the chief materials with which the industry experimented in the effort to replace metal in lipstick containers, vanity cases, collapsible tubes, tin cans and metal caps. There were even those who were planning ahead should the day come when glass jars and bottles for cosmetics might be restricted or curtailed.

However, as the year ended, so few substitute products or packages had reached the market that they were comparatively unnoticed as the newly created purchasing power asserted itself in a surge of retail buying. For three months, from July to October, the industry had operated under a limitation order, which established a quota for both products and packages. During this period there was some cessation of sales effort as manufacturers made their plans to do business on this new basis. But with the establishment of a controlled materials policy, WPB discarded limitation for limitation's sake in favor of the more enlightened plan of permitting industry to carry on as best it may under limitations provided by supply shortages, after army, navy, lend-lease, and economic warfare have been given what they need.

That limitations of this kind could be as real as quota restrictions was emphasized at the year's end when the order went out to curtail the use of alcohol in this industry by 50 per cent. It meant find an adequate substitute or sacrifice some of the approximately $50,000,000 worth of perfumes, colognes and toilet waters sold annually, to say nothing of the large volume of hair preparations and other products whose formulas call for alcohol. The problem of this and other substitutes still remained to be solved as the year ended together with the twin shortages of manpower and transportation facing sales forces and shipping departments.

1941: Cosmetic Industry

Sales of cosmetics reached an unprecedentedly high figure during 1941 amounting, in preliminary estimates, to some $517,500,000 at retail. For the first time in over a decade it was a sellers' market and, in common with most other industries, the chief problems of the year were those concerned with supplies of raw materials. As the year ended with this country engaged in total war, it was obvious that the supply problem was only beginning and that products and packages would have to be stripped to their essentials in harmony with a wartime economy and the necessities of an all-out war effort.

On Oct. 1 a new 10 per cent tax on cosmetics sold at retail went into effect and the manufacturer's excise tax on cosmetics was terminated. The tax on the sale to the consumer has as yet had no apparent deterrent effect on such sales, but it has made this industry a fairly important producer of revenue. The former tax on the manufacturer probably amounted to an average of about 3 per cent on his selling cost to the dealer and meant very little in terms of revenue. The shift in the tax brought some agitation for lower prices but in the face of rising labor and material costs and the fact that in a great many cases it was difficult to get anything at any price, the whole trend at the year's end was towards higher and not lower prices.

This industry used to draw its raw materials from many of the far corners of the world. At one time this was part of the glamorous appeal of its products but with a world at war it becomes a problem calling for unending research, resourcefulness and ingenuity. Most of the natural aromatic materials are not grown in this hemisphere and many of the synthetic aromatic materials are dependent upon natural materials for their starting point. Others, which are wholly chemical are dependent upon chemicals which are unavailable for anything but the manufacture of war essentials. Practically all chemicals, oils, fats, waxes, colors, metals and minerals are in short supply and rising in price.

When it comes to packaging materials, metals are almost non-existent, paper and plastics scarce, and glass, while plentiful so far, faces a shortage of shipping space, for the needs of war have first call upon all types of transportation as well as upon labor and materials.

1940: Cosmetic Industry

During 1940 sales of products of the cosmetic industry reached a new, all-time high. Although this is written too early for any absolutely accurate return, the general opinion is that total retail sales for 1940 will be some ten per cent higher than those for the preceding year and amount to about $450,000,000.

This sales figure was attained despite the fact that some of the larger perfume companies did not go 'all out' in their sales efforts for the Christmas season while others were forced to curtail sales because of failing stocks. For even in perfumes the war made its far-reaching influence felt. So much so that in this field, as in so many others, the important question became one of production and not of sales. With imports from France completely cut off without much previous warning, stocks of finished French perfumes in this country were dangerously low in a great many cases. What was even more important, both from the number of manufacturers involved as well as from the point of view of dollar volume, supplies of raw materials in the form of essential perfume oils from France were also cut off. As the year ends the supply of raw materials has been temporarily eased somewhat, but 1941 promises a struggle for survival by some and a struggle for supremacy by others who were either more fortunate or more far-sighted in securing stocks or materials or both. Naturally, such perfume products as are wholly manufactured from products available outside the British blockade will also be in a strong position competitively while American perfumes have been presented with an unusual opportunity. The American position on synthetic aromatic chemicals, already good, will be further improved while a domestic or perhaps hemispheric flower-growing and essential oil distilling industry may easily result from a continuing scarcity of natural perfume materials.

In the face of these developments other factors which affect manufacturing and marketing in this industry did not loom particularly large. By this time labeling and manufacturing under the regulations of the Food, Drug and Cosmetic Act are proceeding smoothly in routine fashion. Thanks to cooperative efforts taken by and within the industry, the Federal Trade Commission has had little or nothing to complain of from reputable companies in the way of exaggerated claims in advertising. On the other hand, this Commission's cases against several of the larger companies marketing 'treatment lines' through demonstrators still drag along after more than four years so that there is still no final decision as to the legality of this type of cosmetic merchandising.

With respect to price maintenance under the Fair Trade Acts, the so-called Bathasweet decision handed down by a New Jersey Court on September 30, poses a problem to manufacturers operating under these acts. Briefly it held that 'when a producer, operating under the Fair Trade Act, combines two trademarked articles at a price less than the aggregate price of these articles if sold separately and independent of the combination, he has abandoned his price structure under the statute as to those items which have been combined.' As it is generally believed that this opinion would be upheld, this means that the fairly widespread merchandising device of using combinations of this type for stimulating or bolstering sales may only be engaged in with special, and not standard, packages.

1939: Cosmetic Industry

An approximate sales volume of $200,000,000 at wholesale for the cosmetic industry in 1939 indicates an increase of approximately 20 per cent over the wholesale figure of $182,107,000 for 1938. Furthermore, it means a definite topping of the 1937 business which totaled $192,045,000 at wholesale and an approach to, if not an actual increase over, the hitherto unbeaten high of some $201,689,154 wholesale, established in 1929. This shows that 1939's cosmetic business approached the all-time high established by this industry in 1929.

It may also be of interest to note that so far as can be determined, the war has had no perceptible effect, one way or another, so far as volume of sales is concerned. Wholesale sales through August were some ten per cent ahead of the same period of 1938 and since, from 30 to 50 per cent of this industry's business, particularly in the high-priced lines, is represented by Christmas trade, it is evident the year's total represents continued good business through the closing months of the year.

From a regulatory point of view the most important event of the year was the beginning of the enforcement of the Food, Drug and Cosmetic Act in June. Although an extension of time was granted on the labeling provisions of the Act, this was merely to give manufacturers in this industry until Jan. 1, 1940, to handle the fairly large task of relabeling the millions of products involved. In other words there is no conflict between the industry and the government concerning the nature, spirit and purpose of the Act which was welcomed by all of the reputable manufacturers. This is not to say that there have not been and will not continue to be differences concerning the Act's enforcement but once the period of transition and adjustment is over, the cosmetic marketing picture will remain relatively unchanged.

The same cannot be said of the Robinson-Patman Amendment to the Clayton Act which continues to be a potential threat to the marketing of cosmetics through demonstrators as practiced by many of the larger companies with so-called 'treatment lines.' The threat is potential because complaints entered against these companies more than three years ago by the enforcement agency, the Federal Trade Commission, have still not been brought to any conclusion. In the meantime, the Commission has been very active with respect to advertising claims and revisions in the advertising approach, both voluntary and stipulated, have been constant.

Any review of the cosmetic industry's year would be incomplete without reference to the 10 per cent excise tax on cosmetics. This tax was made part of the government's revenue in 1934 and since that time the industry has made strenuous efforts to have this burden lifted or partially removed. Although the tax remains at 10 per cent in the current revenue act, two amendments were added which, it is believed, set a more equitable base for the tax, thus resulting in a considerable saving for many of the manufacturers in this field. However, the wording of these amendments is somewhat vague so that rulings by the Treasury Department and perhaps review by the courts will be necessary before their effect becomes entirely clear.