By and  on March 11, 2005

BOCA RATON, Fla. — The Cosmetic, Toiletry and Fragrance Association’s annual meeting began March 2 with a changing of the guard and ended three days later with a plan to deal with the challenges of the future.

E. Edward Kavanaugh, president of CTFA for the past 33 years, officially retired at the meeting, held at the Boca Raton Resort & Club here. His successor is expected to be been named, but CTFA is keeping a tight lid on information.

Avon’s Andrea Jung, who has served as CTFA’s chair for the past four years, also handed over her title — to Procter & Gamble Beauty’s Marc Pritchard, who vowed to lead the organization into the future by focusing on three key pillars: self-regulation and safety, products and philanthropy.

Self-regulation was the most top-of-mind of those topics for most industry execs, who have been rocked by initiatives such as Europe’s Seventh Amendment, a far-reaching product-labeling mandate. While Pritchard praised Jung for her work in connecting CTFA with international trade associations, he stressed the importance of taking that work to the next level.

“We must build even stronger links, and indeed alliances, with trade associations around the world — particularly COLIPA [European Cosmetic, Toiletry and Perfumery Assoc.] in Europe — to work together on a common set of actions,” said Pritchard, who is president of global retail hair color, cosmetics and personal care for Procter & Gamble’s beauty businesses. “We will all benefit by harmonizing critical regulations in all markets that enable innovation and competition to make the lives of consumers better. 

“Second, we need to boost company leadership in these associations,” Pritchard continued. “Progress requires commitment from experienced company leaders to engage with trade associations, governments, scientific communities and thought leaders — to insure appropriate action across markets. We have a strong model of senior-level leadership participation in CTFA, and I believe this is a model that we should explore in other parts of the world.”

That’s particularly critical in light of regulations that are being forced upon American beauty companies doing business elsewhere in the world, he said. “The U.S. beauty industry is part of a larger global community, with consumers influenced by trends coming from other countries, and more than half the sales outside of our borders,” said Pritchard. “A majority of our member companies conduct operations internationally and are often subject to regulations that are not influenced by what happens here.  With the European Union now larger than the U.S. market, we can no longer assume the world will follow the U.S. on regulatory matters. In fact, we are seeing safety and regulation issues coming from other markets and impacting us — witness the European Seventh Amendment impact on possible California legislation. Some of these influences are certainly welcome, if they can level the playing field across markets and make it easier to foster innovation. But some of these forces could impose standards that are not appropriate for every market, and may even inhibit innovation.”The global playing field was further discussed by T.R. Reid, the Washington Post’s Denver bureau chief, who has also served as bureau chief for the paper’s Tokyo and London outposts. “America-bashing is a great sport in Europe, but I think America is the least insular country,” said Reid, who is also the author of the best-selling “The United States of Europe.” However, he said, the European Union is an increasingly more important entity “which sets a lot of the rules with global commerce.”

Another buzz at Boca was a rehash of the eternal debate: Is the fragrance industry harming the category by constantly launching flankers and new scents? In his keynote address, Arie Kopelman, vice chairman of Chanel Inc., said yes: “We are launching far too many fragrances and we are cheapening the fragrance industry,” Kopelman told the crowd. “We’re all just hoping that some of our new products will stick, but we’ve created an insane pace in stores….We are confusing the consumer.”

There were those, however, who disagreed. “Fragrance has become a specialized commodity,” said Kip Crennan, president of the fragrance division of Mane USA. “In fashion, a woman doesn’t think twice about going back to the store every season to buy clothing. So what’s the matter with a fashion-forward, limited-edition fragrance on a seasonal basis? The days of creating classics are slim to none anymore.”

Kopelman also discussed what he called “Paris Hilton syndrome.”

“We live in a star-crazed world,” said Kopelman. “We think celebrities are a quick hit, but in the long term that doesn’t work. Success is about executing big ideas with staying power. It’s about breakthrough products, not baby steps.”

But flankers aren’t all bad, insisted Art Spiro, president of Liz Claiborne Cosmetics. “Launching a brand is challenging,” he said. “The research, the development process and the overall cost of entry is very expensive. I believe flankers as well as celebrity fragrances offer one advantage in launch strategy: awareness. With a flanker the core brand has been established. The consumer is familiar with the image, the position, and you already have a connection and, quite frankly, an expectation.“Also,” continued Spiro, “celebrity fragrances offer instant recognition. The public persona has been established and the next step is to utilize this awareness in an impactful way.”

For those who choose not to go the flanker route, what can fill the void? “It doesn’t always have to be about a new fine fragrance launch — we can also evolve into offering additional fragrance products, such as more heavily fragranced personal care items,” said Demi Thoman, president, fragrances North America for Quest. Thoman also noted that the fragrance business continues to boom in developing markets such as China, India and Latin America. “There’s still a lot of growth in the world for us,” he said. To that end, noted Paul Austin, vice president and general manager of Quest, the company is spreading its top talent among all of its categories, not just fine fragrances. 

For all of the major oil houses, offering a point of difference — whether it is proprietary technology leading to a new ingredient or the ability to match up celebrity or designer initiatives and marketers, for instance — was a key theme.

“As a fragrance house, our job is to service our clients — whether that’s matching a celebrity to a company or coming up with the juice,” said Daniel Rachmanis, president of fine fragrance Americas for Firmenich. His firm has recently hired a director of business development to facilitate the development of these types of partnerships, he said.

Michel Mane, president of Mane, noted that his perfumers are working on state-of-the-art computers that allow perfumers to “create on the fly.” As well, he said, Mane is working with several fashion designers to create fragrances that they hope to match with companies later this year.

And, perhaps most importantly, companies have to be willing to step out on a limb to launch a fragrance — rather than launching a me-too version of something existing. “If you look at the fragrances in the top 10, you’ll notice that most of them tested badly in the U.S.,” said Quest’s Austin, whose firm developed Angel for Thierry Mugler. “You can’t be afraid to do a polarizing fragrance.”And it appears to be happening. While he wouldn’t offer specifics on the companies involved, Nicolas Mirzayantz, senior vice president, fine fragrance and beauty care for International Flavors and Fragrances, noted that the projects his firm is working on for this fall have one thing in common — an element of risk and a strong point of view. IFF logged a strong 2004 with a 13 percent gain in fine fragrance sales, which Mirzayantz attributed, in part, to a culmination of a four-year campaign of fostering team-building and creativity within IFF. One aspect of this was the establishment of a more meaningful and effective way of defining and providing a sense of newness.

Cosimo Policastro, executive vice president for Givaudan’s fragrance division, pointed out that Givaudan has been able to continue growing its fragrance business by mining new regional markets — like Russia, China and India — and tapping nontraditional end uses, like an increase in fragrance ancillaries. He noted that traditional prestige-priced fine fragrance, as defined in the department store sense, is becoming a smaller part of the pie in North America and Europe.

Kathy Cullin, president, fine fragrance worldwide of Symrise, added that the celebrity phenomenon isn’t a bad thing, “if the fragrance has a point of difference and a realness to it.”

While no new celebrity deals were announced at CTFA — although Madonna and Sharon Stone rumors halfheartedly circulated, and Isaac Mizrahi is said to be working on a fragrance for Target — a few more details were revealed on those already out there.

Coty said that its Baby Phat by Kimora Lee Simmons, coming in September, will be sold through its Lancaster Group U.S. division. It will be targeted at 16- to 24-year-olds and will be in a “J.Lo-type” distribution, about 2,000 department store doors, said Eric Thoreux, president of Coty Beauty Americas. The scent will have other parallels to Lopez, as VH1 is planning to do a reality show with Simmons — on the order of MTV’s recent J.Lo special — when the scent is launched this fall.

“The [Kimora] scent will have an urban-glam mind-set,” said Thoreux, adding that the brand will use the Baby Phat and cat logos used on the apparel line. “The concept is street chic, ghetto-fab, hip-hop haute. Kimora is beautiful, articulate and unapologetic, and this brand is a mix of celebrity, fashion and lifestyle. We’re expecting great things from it.” A formal launch event will be held at Simmons’ home in May, and Simmons will also do personal appearances for the brand at launch.John Galantic, president of Coty Beauty U.S., noted that the Simmons license “leverages new areas” for the company and “builds upon the explosion of the hip-hop world.” A men’s counterpart is said to be on the drawing board.

Sarah Jessica Parker, another recent Coty hire, was characterized “as the next global success masterbrand,” said Thoreux. “She’s both glamorous and the girl next door,” he said. While he didn’t reveal much about the scent itself, Thoreux did note that the Simmons and Parker scents will both launch in September. As well, he noted, a fourth Jennifer Lopez fragrance is expected this fall.

There will also be a few new designer fragrances hitting counters this fall. Riviera Concepts will be launching Cynthia Rowley’s first fragrance in specialty store distribution, as well as new juices from Lulu Guinness and Alfred Sung, noted Marg Spasuk, vice president of marketing and sales for Riviera Concepts. And they’re not done yet: “There’s definitely room for more designers at Riviera Concepts,” said Adrian Ellis, president of Riviera Concepts, who added that his company will also launch H2, a follow-up to its popular Hummer fragrance, this fall.

On the mass side, Coty will place a major emphasis on Rimmel this fall, expanding the brand into 10,000 North American drugstores, Thoreux said. “We’re aiming to make it the MAC of mass,” said Galantic.

A delegation from Shiseido — led by Toshio Negami, chairman and chief executive officer of Shiseido Cosmetics (America) Ltd.and Heidi Manheimer, president of U.S. operations — discussed plans for upcoming launches, including Lifting Foundation, Future Solution Lip and Eye and White Lucent.

At the conference, Bonne Bell announced that it has named James Ward, formerly head of the company’s Australian business, to the post of chief marketing officer. Bonne Bell also unveiled several new product initiatives, including eye shadow palettes, a mascara and new lip glosses and lip balms, all priced under $5. The company promoted its popular Lip Smackers line, which turns over about 20 percent a year, said Laurianne Murphy, a spokeswoman for the brand.

Revlon, which reported its first positive numbers in six years earlier this week, plans to continue to build on that growth going forward, noted Jack Stahl, president and chief executive officer of Revlon. He said that “2004 was a significant year for Revlon. We’ve put the company into a place where we can support the brands and have enhanced new product development.” Successful advertising campaigns featuring Susan Sarandon, Halle Berry and Julianne Moore haven’t hurt, either, he said. In the second half, the company will have a number of new products to offer, including Color Beam Sheer, a “light-infused,” eight-stockkeeping-unit nail polish lineThe company’s Almay division is also making significant strides, said Stephanie Peponis, chief marketing officer of Revlon. Peponis said Almay will launch several new products, including a new mascara, and will continue to use Elaine Irwin Mellencamp as the brand’s spokeswoman. “We track our brands on a weekly basis and Almay has made great strides.”

Speaking of opportunities, several executives suggested — particularly in the wake of the recent Federated-May merger — that the beauty industry reexamine its distribution strategies. “Distribution channels are blurring,” said Thoreux. “The perception of a brand as ‘prestige’ is no longer driven by where it is sold, but by the brand itself.”

That’s a point that E. Scott Beattie, chairman and ceo of Elizabeth Arden, enthusiastically picked up. Although the brand’s best-selling Britney Spears fragrance, launched last fall, rolled out in department stores, it was marketed non-traditionally. “When we launched Britney Spears [last fall] we made a conscious decision to go where the customers were,” said Beattie, noting that the company employed interactive Web site banners, e-mail blasts, text messages and voice-mail messages from Spears, among other initiatives. A second Spears fragrance is said to be on tap.

“The prestige department store market is stagnating,” added Firmenich’s Rachmanis. “Mass, specialty stores and direct sellers are growing. We have to be open to where the market is going.”

In light of these changes, said Eric Horowitz, president of the Clarins brand division of Clarins Groupe USA, “It’s more important than ever to build strong relationships and make sure you’ve got the best possible assortment at counter. The world is rapidly changing, but if you build the right relationships with your consumers, she’ll find you — no matter where you are.”

That comment dovetailed with a new initiative recently showcased by NPD Beauty. Timra Carlson, president, was at the meeting, talking about a new series of Internet consumer surveys, called Topicals. The third study, which taps the opinions of 6,000 consumers, is now being conducted on the topic of alternative distribution — the Internet, direct sellers and TV shopping.

When executives weren’t gossiping about the latest celebrity fragrance rumors, talk turned to the conference and to CTFA as an organization and how both should evolve going forward.“Generally, the direction of CTFA’s agenda is the right one,” said Michael McNamara, global president of Neutrogena, who noted that increasing regulatory issues are among the most important of those on the organization’s agenda. “It’s not just happening in California — all over the world groups are coming together, and as an industry we have to be prepared to deal with that. CTFA is helping us to pull together as an industry.”

“CTFA plays an extra important role in regulatory issues,” said Richard Goldstein, chairman and chief executive officer of IFF. “They’ve done an exemplary job in defending our industry against things like Proposition 65 [a stringent product-labeling initiative] in California, and I believe they will continue to have that type of leadership role going forward.”

Dan Brestle, chief operating officer of the Estée Lauder Cos., added that if the industry is to move forward as a cohesive unit, focusing on these regulatory issues must be a key priority for CTFA. While Kavanaugh and Jung have made a good start, “We need to continue to forge strong relationships with our counterparts in other countries — COLIPA, CCTFA [Canadian Cosmetic, Toiletry and Fragrance Assoc.] and others,” Brestle said. “We can no longer assume that what happens in the U.S. will fly around the world.”

Maggie Ciafardini, ceo and managing director, YSL Beauté Inc., said, “I think it would be very timely to see a proactive new positive p.r. campaign for the cosmetics and fragrance industry. We are hearing about the ‘negatives’ regarding cosmetics and really, there are multiple benefits that need to be communicated.  A strong positive campaign communicated throughout the U.S., and eventually worldwide, would counteract the negativity.” 

 Former New York City Mayor Rudy Giuliani also delivered a rousing keynote address on how to lead during a crisis and on how to be an effective leader in general. The qualities necessary, he said,  include having the courage to be an effective leader, being an optimist, learning from others and “relentlessly preparing.”

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