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Beauty Inc issue 08/08/2008

Desperate times apparently call for desperate measures. After years of anemic growth in the fragrance category, marketers are responding to the toughest economic conditions in two decades with a bombardment of launches that make the barrage of years past seem like a slow trickle. One launch is mightier than the next: The industry has gone global in its ambitions for the second half of the year, with one fragrance after another sporting gargantuan sales projections and promotional budgets to match. Among the big guns: Gucci by Gucci Pour Homme and Lancôme Magnifique, each of which is expected to ring up $200 million globally; Emporio Armani Diamonds for Men, $185 million; Calvin Klein Secret Obsession, $120 million, and Ralph Lauren Notorious, $100 million. Ready to nip at their heels are Estée Lauder Sensuous with a sales goal of nearly $100 million; Jean Paul Gaultier Ma Dame, $77 million; Hilfiger by Tommy Hilfiger and Inspire by Christina Aguilera, $50 million each; The Essence of Porsche Design, $40 million; Fancy Jessica Simpson, $35 million, and Gwen Stefani Harajuku Lovers, $30 million. (Warning: Launch list may cause readers to experience dizziness and shortness of breath.) That’s not to mention Shiseido’s Zen, Groupe Clarins’ David Yurman, Tom Ford’s White Patchouli and a slew of news from Coty, as well as luxe niche entries from Annick Goutal, Jo Malone, Lalique, Van Cleef and Arpels, Creed, Bond No. 9 and Bulgari.

This story first appeared in the August 8, 2008 issue of WWD.  Subscribe Today.


“They’ve got to do this,” says Wendy Liebmann, co-founder and chief executive of WSL Strategic Retail, of the deluge of scents this season. “If you don’t have something new and fabulous, especially in the fragrance department, it will be easy for [consumers] to say, ‘I already have some of that.’” Of newness at department store fragrance counters, Bob Cankes, president of Coty Prestige, North America, says, “It appears that’s what the consumer wants if she’s buying anything.” To that end, Coty has no fewer than six major launches scheduled for the season, including entries from Calvin Klein, Gwen Stefani, Jennifer Lopez, Vera Wang, Playboy, Tim McGraw, Karl Lagerfeld and David and Victoria Beckham. And that’s not even counting flankers from Coty brands like Davidoff, Kenneth Cole and Sarah Jessica Parker. “Even in tough economic times,” says Cankes, “business has to go on.” The rallying cry comes at a time when sales in the category are more challenged than ever before. Tally up the figures from the top 10 launches and theoretically the industry is looking to add $1 billion in new sales to the category—a far-fetched proposition. In 2007, prestige fragrance sales in the U.S. dipped 1 percent to $2.94 billion. The anemic showing has led many firms to abandon the flanker-led strategies of the recent past for bold new masterbrands. To have a fighting chance this season, companies have amassed sizable war chests, upward of $40 million in some cases—which is also the figure a new women’s scent must reap if it’s to earn a spot in the top 10 in the U.S., according to Karen Grant, global beauty industry analyst at The NPD Group. (New men’s scents have to earn more than $20 million.)


The bar proved too high last year on the women’s side, as no new entries broke the Top 10. This year, the stakes are as big as the budgets. “With all the power behind the category, if we don’t see growth this year I don’t know when we are going to see it,” says Grant, adding that NPD has found that since 2003 there are two million fewer men and women wearing fragrance. “They are simply not engaged in the category,” she says. The shift to megalaunches is more than a clarion call to consumers, however. It also represents a bid to rekindle retailers’ fondness for fragrance, which some manufacturers suggest has dwindled in recent years as sales have stalled. While newness abounds—by last count, there were about 150 fragrances slated for fall—retailers aren’t simply looking for volume. They want blockbusters, a savior in a bottle to prove the worth of the entire category. “The prestige fragrance business hasn’t grown in 15 years,” says Howard Kreitzman, vice president of cosmetics and fragrances at Bloomingdale’s. “In 1990, it was just a tick over $3 billion.” Referring to the shortened new-product life cycle and event-driven nature of fragrance sales, he continues, “It’s become a three-minute business of Mother’s Day and Father’s Day. The business over the past several years has been progressively more difficult to get because fragrance is increasingly competing with all sorts of gift items and accessories, like sunglasses.”


“Fragrance, in a tough economy, is the most discretionary and the most vulnerable [category] in a challenging environment like this,” echoes Lyn Kirby, president and CEO of Ulta. To protect business from eroding during tough times, she says the influx of newness planned for fall is needed. By launching bigger and more head-turning concepts, she adds, “The [category] is spot-on.” Success in the second half of the year is going to require a hands-on approach, says Kreitzman. “The growth we’re going to get is growth that we manage our way to,” he says, specifically referring to the women’s business. With that goal in mind, Bloomingdale’s is increasing its online marketing efforts and event calendar. In early July, for example, Estée Lauder corralled its four Sensuous spokesmodels—Gwyneth Paltrow, Elizabeth Hurley, Carolyn Murphy and Hilary Rhoda—for a personal appearance at the retailer’s 59th Street flagship in Manhattan. Their visit reportedly generated more than $45,000 in retail sales in
one hour.


Still, it’s going to take more than four of the world’s most beautiful women to buoy sales. A number of fragrance firms charge that some retailers have starved fragrance counters by drastically cutting inventory levels to speed inventory turns. Less product hinders in-store presentation, and worse, increases out-of-stocks, say manufacturers. It’s also more challenging to get retailers to take on ancillary items, like lotions and bath gels. Don Loftus, president and CEO of P&G Prestige Products in the U.S., recalls when he entered the business in 1977 about 15 bottles graced the fragrance bar, each with an extensive array of ancillary items. “Some retailers have cut the stock so dramatically it looks like a going-out-of-business sale,” says Loftus, who’s quick to add other stores are beautifully merchandised and fully stocked. Kreitzman, well aware of the pinch of inventory cuts, declares, “We want to make sure we’re properly stocked. You can’t turn your way to success. You have to sell your way to success.”



Despite their differences, manufacturers and retailers alike are hoping newness will motivate consumers and plan to announce their entries with a flurry of activity, including motorcycle stunts, lavish galas and celebrity appearances. But will the promotional din be loud enough for shoppers to turn their ears from the steady broadcast of negative news? Fragrance makers say they can offer an olfactory escape in the gloom—one that generally costs two figures, not four or five like many luxury goods. “The consistency of the market is not systematically connected to the economy,” says Philippe Benacin, chairman and CEO of Inter Parfums SA, the maker of Burberry, among others. To break through the gloom, Benacin says the trick is to offer something different. The company gave the stodgy British brand Burberry a young, edgy twist with Burberry The Beat, a women’s scent introduced in March 2008, which is expected to account for 20 percent of Burberry’s fragrance sales. (Overall, the brand had sales of roughly $210 million in 2007.)



Inter Parfums has equally high expectations for the fall launch of The Beat for Men, which it forecasts will lift Burberry’s fragrance sales by 10 percent this year, and account for 20 percent of the brand’s scent business in its first year on counter. Veronique Gabai-Pinsky, president of Aramis and Designer Fragrances, agrees that the stock market and fragrance sales can be mutually exclusive. “Nobody needs another red lipstick or white T-shirt or new fragrance,” she says. “But we’re in the business of want, not in the business of need.” To cement a purchase, she continues, “It has to be the most fabulous red lipstick, the cutest white T-shirt and the most intoxicating fragrance.” How do you make such an impression? “You have to disrupt their routine,” responds Gabai-Pinsky. Gabai-Pinsky and her team plan to rouse the jaded this fall with Tommy Hilfiger’s Hilfi ger. The launch employs motorcycle stunts performed in key cities and in-store appearances by Hilfiger himself and his scent’s brooding, blonde model Tommy Dunn. In the print and TV ad imagery, shot on location in Coyote Lake in Barstow, Calif., Dunn blasts his motorcycle through the dry desert dressed impeccably in a suit and tie. Marketing efforts will direct men to enter a sweepstakes for a chance to win a motorcycle, just one element of the turbopowered advertising and promotions campaign said to be in the $20 million range.




Groupe Clarins, meanwhile, is hoping to tap into a new audience with its David Yurman scent, a collaboration with the upscale jeweler. The gold cap of the bottle (which has been hand-polished three times) is designed to evoke Yurman’s iconic Cable Collection of jewelry, while the neck of the bottle is a replica of David Yurman’s wedding band. The company will also deploy a high-end sampling program, complete with black cord and silver bracelets infused with the scent and miniature pump sprays and jars of the body cream. Jean Paul Gaultier revived an old tradition (rampant when there were fewer than 20 new launches a year) by hosting a lavish gala to usher in its newest, Ma Dame. The designer and his beauty license holder Beauté Prestige International hosted 850 guests at Villa Eugenie, located in Paris’ Marais district. The evening was hosted by Gaultier and model Agyness Deyn, who stars in the fragrance’s ads. While different in the forms they take, Hilfiger’s death-defying motorcycle stunts, David Yurman’s chic sampling vehicles and Ma Dame’s lavish Paris gala are all aimed at awakening a seemingly complacent consumer. Says Coty’s Cankes, creativity and innovation can nab the attention of even the most preoccupied consumer.



Case in point: the steamy ad campaign for Calvin Klein Secret Obsession, which is expected to yield $120 million in worldwide first-year retail sales. In the ads, actress Eva Mendes brazenly shows plenty of skin and talks about having a sexy secret. Industry sources estimate the scent’s advertising and promotional budget to be $50 million globally, with as much as $25 million to be spent in the U.S. There is a historical precedent for the success of luxury fragrances during rough economic times. “Jean Patou created Joy for his couture clients during the Great Depression,” says P&G’s Loftus. “You may not necessarily be buying as many designer dresses, but you can still pamper yourself with a fragrance. Great fragrances from great brands are still growing despite a challenging economy exactly for this reason.” P&G’s lineup for fall includes Jeanne Lanvin, Gucci by Gucci Pour Homme and Inspire by Christina Aguilera, which industry sources forecast could reap $80 million in first-year retail sales worldwide and is based on a young fresh version of tuberose and freesia. Like Coty, Elizabeth Arden is tapping into the power of celebrity to fuel sales with an entry for Jay Z’s Rocawear label called Rocawear 91X. “You have to activate an audience to get them into the store,” says Ron Rolleston, executive vice president of global fragrance marketing. “You have to create awareness before the launch takes place.” He notes fragrance launches are most successful when they zero in on a specific consumer group. To that end, 9IX courts a young, urban consumer. “We work with the brands’ core constituency to create imagery that emotionally connects with those consumers,” says Rolleston. Arden met with Jay Z to develop the fragrance’s concept and name. In addition to ads in hip-hop magazines like Vibe, Giant and XXL, the Rocawear scent will be featured on rocawear.com and play off of the brand’s current “We Will Not Lose” campaign. The idea is to put the scent in consumers hands, whether they walk into a retail store, flip through a magazine or open a new DVD. And in this environment, everyone agrees, consumers need every ounce of encouragement out there.


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