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Langer’s Action Plan for P&G Fragrance

NEW YORK — Procter & Gamble is making the first moves today in its long quest to achieve dominance of the global fragrance business.<BR><BR>As long anticipated, P&G Prestige Beauty and Cosmopolitan Cosmetics, which was part of the Wella...

NEW YORK — Procter & Gamble is making the first moves today in its long quest to achieve dominance of the global fragrance business.

As long anticipated, P&G Prestige Beauty and Cosmopolitan Cosmetics, which was part of the Wella acquisition, are officially being fused into a new operating unit, P&G Prestige Products, with the Geneva-based executive Hartwig Langer remaining at the helm as global president. Meanwhile, P&G also has dropped four businesses that don’t fit the master plan: Toni & Tina, Trussardi, Charles Jourdan and Yohji Yamamoto, whose Tokyo-based company said it had ended the license. The design firm said it “has decided to explore strategic alternatives with respect to the distribution and sale of its fragrance brands.” That could mean either licensing out Yohji’s beauty brand manufacturing and distribution again or taking its production in-house.

Today’s moves by P&G were foreshadowed during a recent interview with Langer at the Cosmopolitan offices in Manhattan. Clearly, the editing of the four brands was part of the P&G mantra to look for “brands with big global potential, regional star brands or potential growth engines,” as a spokeswoman said.

P&G identifies its global fine fragrance — purely juice — as approaching $2 billion in worldwide sales, putting it behind market leader L’Oréal. “Our aim and vision and objective is to become the best fine fragrance company in the world,” Langer stated.

P&G executives declined to stipulate how distant the goal is or how long it will take to reach. Considering the hypercompetitive environment of today’s fragrance market, it certainly will be challenging. L’Oreal is not resting on its oars. In the U.S. alone, L’Oreal had a 19 percent share of department store sales in 2004, according to NPD Beauty, compared with 8 percent for P&G. According to sources, L’Oreal aims to cross the 20 percent mark within the next year, pushing sales from $540 million to over $600 million.

Langer’s first boss at P&G was Bernd Beetz, who is now a prime competitor as the head of Coty Inc., another contender for the top spot. When asked recently why he bought Calvin Klein and the rest of the Unilever fragrance business, Beetz retorted, to become “the world fragrance leader.”

When pressed, Langer says P&G now is a “close second” globally, but he refuses to say more. Referring to the acquisition of the Cosmopolitan business and the strength of P&G’s consumer marketing attack, Langer said during the interview, “We have all the rights to be number one globally because I think of the combination of consumer understanding, focus and building brands that P&G brings. And this is why we have always been successful, because it’s in our DNA to build this together with the go-to-market capabilities of Cosmopolitan and the way they run their business with their affiliates, with the training, the consultancy, the expertise they have. There’s a unique, winning model. We have the right people, the right organization, the right portfolio, the right recipe. And I think this will enable us over time to be sustaining long-term.”

This is the first step in the consolidation. The U.S. division, P&G Prestige Products Inc., which continues to be headed by president and chief executive officer Donald J. Loftus, will get up to full strength in January, when P&G regains distribution of its power brands, including Hugo Boss, from Clarins Fragrance Group, which had been doing the selling in the U.S.

P&G sees its driver brands as Boss, Burberry — which it distributes only in the U.S. — Lacoste, Gucci, Escada, Valentino and Max Mara. There also is Giorgio, Jean Patou and Anna Sui. Other brands on P&G’s global stage include Laura Biagiotti, Ghost, Rochas, Mont Blanc, Baldesirini, Mexx, Puma, Yardley of London and Atkinson. Two brands from Inter Parfum that P&G distributes in Europe are Cindy Crawford and Naomi Campbell.

Earlier this year, P&G returned its Ellen Tracy license to parent Liz Claiborne and didn’t renew a Helmut Lang license. However, speculation has been raging for over a year that P&G will take over the Dolce & Gabbana beauty license.

Langer avoided even acknowledging the subject. “We don’t speculate,” he said.

Some executives might find such a forest of brands a burden, but Langer acts as if it’s his strength. “I truly believe that the combination of the total portfolio has a strong advantage,” he said. “There’s one thing that’s very clear and we have to be very choiceful and very clear strategically — what role each brand is going to play. And I think it is clear that not every brand can play exactly the same role,” he continued. “Within this portfolio we can now really start playing and say what are the big global opportunities, what are the big regional opportunities, what are the specialty brands and we can treat them accordingly. And I don’t have to treat everything the same in every region, every country, [for] every customer. We have fantastic opportunities when you think about Hugo Boss and Lacoste and Escada. When you think about regional star brands, like Ghost is very big in the U.K., you have Dunhill very strong in the U.S. and very strong in Asia, you have Mont Blanc being very strong in part of Europe and Latin America. You have Biagiotti being very strong in Germany and Italy. Rochas is extremely strong in France and Spain.

“Without any question Gucci and Valentino are global brands,” he continued. “Escada is definitely a global brand. So I think our position historically obviously is a very strong position in Europe. It is growing and we have clear aspiration to grow quite significantly into becoming a leading company here in the U.S,” he said, stressing the combination of brands and talent.

Langer takes a Duke Ellington attitude in thinking that his instrument of choice is the entire orchestra. He compares his brands to the white and black keys on a piano.

“You could argue that you have too many whites, too many blacks, but you don’t have to play with them all at the same time,” he said. “You have to know how to play with this whole thing.”

As an example, he cited the Lacoste business, which P&G acquired in 2001 along with Jean Patou and Yamamoto. “We felt we needed a French brand,” he recalled. “Lacoste, the crocodile and the icon became hip and cool again. And that was the right time, we jumped it before the crest really started rolling again.”

Similarly, Valentino was acquired in 2003 from Unilever because “we felt there was a need for a high-end prestige female French heritage.”

Another audience that has caught his eye are the fans of Hollywood. “There’s something which is really interesting to see and to watch,” he said. “We need to look at it strategically and say, ‘Is there a consumer group that really aspires to celebrities in a way that maybe other groups aspire to high fashion models and is this is a new form of luxury? Is it a new form of prestige?’ Some of them work very nicely, as we see, and then some of them are not working that nicely. It’s a question of identifying what is the consumer thinking behind it and then strategically to be selecting the right one.”

Langer, who began his career with P&G in 1981 and then joined the fragrance effort in 1992 after P&G inherited Eurocos in the Ellen Betrix acquisition, is always on the lookout for leveraging opportunities with the consumer. “When you look into China there is an advantage, which P&G brings by combining things like [skin care line] SKII and Olay, that gives us some strength. There have been fantastic developments. We already — to a certain extent — play in all of the prestige areas, whether it’s skin, whether it’s cosmetics, whether it’s fragrance. But I think we can combine them.”