“Bringing owls to Athens”—in other words, doing something useless. In 414 B.C.,
when Aristophanes coined this expression in his comedy The Birds, people commonly referred
to Athens’ self-minted silver drachmas as “owls” since they had a picture of the bird on their
reverse side. Athens’ wealth at the time was legendary—and hence it was pointless to bring
any more money to the city-state. Yet, only a few decades later, the situation had changed
dramatically. Expensive wars had wrecked the budget, and 10 out of 13 Athenian
communities eventually defaulted on loans that they had taken out from the temple of Delos,
the first recorded sovereign debt defaults in history.
—“Sovereign Default in the Eurozone: Greece and Beyond,” UBS Research Focus, 29
September 2011, p. 14.
It was January 2012 and Georgios Korres looked out his window—he could literally
see the Acropolis from his office in Athens. Like the Acropolis, the Greek economy was in
dire need of capital. But Mr. Korres’s immediate challenge in this negative economic
environment was not how to fund Greece, only how to fund the growth needs of his own firm,
Korres Natural Products. Before the Greek debt crisis, Korres had faced little trouble securing
funding for Korres’s rapidly expanding global business. But financing was increasingly hard
to find for Greek firms, and Korres needed new capital soon if it was going to be able to put
its business growth opportunities to work.
The Cosmetics Industry
Cosmetics is a $170 billion global industry consisting of five major categories of
products: fragrances and perfumes, decorative cosmetics, skin care, hair care, and toiletries.
Skin care was the largest segment, followed by hair care and decorative cosmetics. Products
are distributed through larger retail stores, specialized and branded retail stores, as well as
pharmacies, salons, and spas.
Recent years had been hard on the industry. Although sales were down in 2008 and
2009, the market had turned upward again in 2010 and 2011. The cosmetics market was one
which rewarded innovation, with continuous reformulation of products and inputs the norm.
Manufacturing costs are generally higher relative to< other industries due to specialized
machinery and chemical compounds. Consumers have shown a growing willingness to try
new products in all subcategories with performance and ingredients being the most important
considerations when making purchasing decisions. And products based on all-natural
ingredients were a true growth category.
With its emphasis on creating natural products from organic sources, Korres was well
positioned to compete in the global market. Consumer consciousness in sustainable products
and a growing backlash against animal testing had helped drive demand. This same
consciousness stimulated new regulations on ingredients, component and product testing, and
manufacturing. Consumers now demanded more information about the source of ingredients
used in the products they purchased. Combined with a renewed emphasis on healthy living,
natural product producers like Korres—were well positioned for the future.
Korres Natural Products
Georgios Korres founded Korres Natural Products in 1996. The company focused on
utilizing pharmaceutical experience in more than 3,000 herbs to create natural products for
use in skin care, hair care, and other cosmetics. Using pharmacies as their main means of
distribution (5,600 in Greece alone), Korres had expanded rapidly from 2003 to 2008, and
now claimed a presence in 30 countries. The company had gone public in 2007 (Athens:
Korres). In 2012, Korres had 28 dedicated stores, five in Greece and 23 throughout Europe,
North America, South America, and Asia. The company now employed more than 300 people
within Greece, and had over 400 natural and certified organic products.
But Korres itself had been changing as illustrated by Exhibit 1. Group sales had
actually peaked in 2008 at €53.7 million, falling the next two years in-step with the Greek
economy, to €50.4 million in 2009 and €44.1 million in 2010. Profits had followed sales
down, with net income falling from €4.0 million (2008) to €3.4 million (2009) and €1.6
million (2010). All things considered, the company’s profitability had remained surprisingly
