Israel's Sano teams with Amazon to sell goods in US

Israel Materials 7 June 2018 12:39 (UTC +04:00)

Changes in the retail business are forcing even veteran conventional companies to adapt themselves to the dynamic situation by switching to ecommerce, including outside of their domestic market, through international giants such as Amazon. Now taking its first steps in this direction is Sano-Bruno Enterprises Ltd., managed by CEO Yuval Landesberg. Sources inform "Globes" that the company is scheduled to begin selling its product to the US market through Amazon in October.

The measure is part of a pilot that will initially include 10 toiletry and cosmetics products through the Natural Formula and Careline brands, which will be shipped from Sano's logistics center in Israel. It can be assumed that if the pilot is successful, cooperation between the two companies is likely to expand to a wider range of products.

The emphasis in Sano will be on highly distinctive brands classed as premium, rather than basic products for which there is no reason for buying from Israel. The Careline series of products includes makeup and personal care items, such as facial and eye creams, eye pencils, nail polish, mascara, etc. The Natural Formula series of products includes shower gel, shampoo, soap, hair conditioner, and hair care and design products.

At the same time, following the connection created between the two companies, Sano is also preparing for Amazon's entry into the Israeli market and expects to cooperate with it in sales to the local market. Meetings have taken place between the two companies. This, however, is not Sano's first venture into the international market. The Sano group, controlled by the Landesberg family, operates in the US market only in the Jewish haredi (ultra-Orthodox) sector, with no presence at all in the general US market. On the other hand, Sano is active in a number of Eastern European countries, primarily Romania, Ukraine, and Bulgaria, and wants to expand its business there. Sano runs its export business through its Sano International subsidiary.

In addition, an independent production unit has been set up in Romania, which is "focusing continually on development of additional overseas activity, including penetration of new markets in Africa and Western Europe."

As of the end of 2017, the Sano group's exports amounted to NIS 116 million, 8% of its total sales. Most of these exports are to Eastern Europe through subsidiaries and local distributors.

Sano's toiletries and cosmetics activity through its Sano Cosmopharm subsidiary. This subsidiary's business has substantially expanded in recent years, following Sano's acquisition of Careline's activity in March 2010. The company's other brands include Crema, Keff, Neka 7, and Orbitol.

Sano's reports state, "The cosmetics field features relatively high gross profit compared with the company's other activity sectors," but also "personnel, advertising, sales, and marketing costs are very high." Sano says it wants to "increase sales turnover in cosmetics items and continue cutting expenses." In contrast, Sano says that the toiletries sector features "intense competition from local manufacturers and imported products, as well as the large retail chains marketing private brands."

The challenges in these markets are nevertheless mounting. Sano notes that recent years have seen "tough competition from manufacturers in the local market, importers, and multinationals with international brands, whose entry has stepped up competition. The company added that this competition had led, among other things, to "a major increase in advertising and marketing expenses for products and large investments in branding, an increase in the range of products offered, and a significant increase in the level of specializing in niche products."

Despite all of these challenges, Sano is still the market leader. According to its reports, Sano Cosmopharm's market share in toiletries and cosmetics was 18%. The company's main competitors in this areas were Schestowitz - 17%, Unilever Israel - 15%, Procter & Gamble - 8%, Henkel Soad - 6%, Danshar - 4%, and Reckitt Benckiser - 4%.

Where are the products that Amazon will market made? Sano Cosmopharm's toiletries production activity takes place mainly in the company's plant in Hefer Valley, which began operating in late 2011, while its cosmetics manufacturing activity and a limited proportion of toiletries manufacturing takes place both in external plants and through importing finished products.