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Scents and Sensibility

The brand?s beauty ventures have triumphed despite scandal and a rotating roster of owners.

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WWD Milestones issue 09/03/2008

The brand’s beauty ventures have triumphed despite scandal and a rotating roster of owners.

 

Calvin Klein built an empire on controversy — and the beauty business that bears his name is no exception.

Whether it’s fragrance — the latest, Secret Obsession, is due this month — a risqué ad visual or a new beauty partner, the company has never wanted for buzz.

Fragrance has proven to be the biggest slice of the brand’s beauty pie. The fragrance license has been held at various times by Minnetonka Brands (which paid $1 million for it in 1980), Unilever (which acquired the license in 1989) and current owner Coty Inc., which bought the license from Unilever in May 2005 for an estimated $800 million.

“Calvin Klein fragrances have remained amongst the most popular for nearly three decades,” said Catherine Walsh, senior vice president of American Fragrances for Coty Prestige. “They also have the distinction of being popular in all areas of the world; our business is split equally between North America, Europe and rest of world.

“Calvin Klein is by far the biggest brand in the Coty portfolio and has experienced healthy growth of over 30 percent over the past two years. Calvin Klein has always been an innovator in the fragrance world — from tapping into the decadent sexuality of the Eighties with Obsession to breaking all the rules with CK One, the biggest fragrance launch ever.”

And that is precisely as Tom Murry, president and chief operating officer of Calvin Klein Inc., likes it.

“From a branding perspective, fragrance is one of our biggest advertisers,” said Murry. “It helps keep the brand strong and is very lucrative from a revenue standpoint.”

Calvin Klein’s fragrance business started with a scent named, simply, Calvin Klein, launched in 1978, followed in 1981 by Calvin; both were produced in-house. In 1983, Robin Burns — who later held key positions at the Estée Lauder Cos. Inc. and Victoria’s Secret Beauty — was appointed president of the money-losing Calvin Klein Cosmetics Co. She brought the company into the black her first year and, in three years, she took the firm from a $6 million net volume, increasing sales eight times — a feat credited mainly to the launch of the Obsession women’s fragrance in 1985.

As in everything else, Klein took pride in making controversial moves in fragrance. His instinct for shaking up the status quo led to two fragrance business models — then considered groundbreaking — that are still in use today: masterbrands and unisex scents. Working with the designer, Burns and her successor, Kim Delsing, helped to forge the practice of masterbranding — marketing separate men’s and women’s fragrances with the same name and a common advertising campaign — when Obsession and Obsession for Men were launched in the mid-Eighties. The Klein fragrance business also brought unisex scents into the mainstream with CK One, introduced in 1994.

By 1994, the Klein fragrance portfolio was reportedly doing about $400 million at wholesale yearly. CK One, which spawned a host of imitations, is said to have generated $50 million to $60 million in sales its first year. Currently, the Klein fragrances are estimated to rack up $1 billion globally at retail each year. “The fragrance business, on average, grows over 10 percent yearly on a huge base, which is not typical,” said Murry.

The winning streak of Calvin Klein fragrances gathered momentum with Obsession for Men, launched in 1986; Eternity in 1988; Eternity for Men in 1989; Escape in 1991; Escape for Men in 1993; Euphoria for women in 2005, and Euphoria for men in 2006, among others. The brand’s newest fragrance, Secret Obsession, has already set tongues wagging with a sexy — some might say salacious — ad featuring an almost nude Eva Mendes. But Walsh isn’t bothered by the recent firestorm around the new ads.

“The Obsession brand resonates in a very provocative place,” said Walsh. “And we wanted to do a provocative ad. But we’re not trying to be raunchy. There’s a lot of skin, but it’s done tastefully.” Evidently not tastefully enough for network censors, who have banned the ad. “Every time we do TV [with the Calvin brand] it comes back with some sort of push-back from the networks — but nothing like this.”

In fact, Walsh said, the Calvin Klein fragrance business will continue to push the envelope. “We expect Secret Obsession to be our biggest fragrance launch since the blockbuster success of Euphoria in 2005.”

For his part, Murry is unapologetic about the brand’s sexy ads. Being provocative, he notes, “is part of the DNA.”

As successful as the Klein fragrance portfolio has been, it has also produced a few duds — most notably Crave, a men’s scent launched by Unilever Prestige in 2002. Aimed at 18- to 24-year-olds and packaged in a gimmicky bottle consumers inadvertently broke when trying to use, it proved to be a rare misstep on the part of the designer’s fragrance business, even with an advertising war chest thought to have topped $45 million. It exited the market soon after launch. And a few years prior, in 1999, Calvin Klein Cosmetics lost a lawsuit it filed against Polo Ralph Lauren over the design of Ralph Lauren’s Romance bottle, which Calvin Klein claimed was a knockoff of its Eternity bottle.

Another category that has come, gone and come again is makeup. Color cosmetics bearing the Klein name have now had three iterations — one launched in-house in Calvin Klein Inc.’s early days, one by Unilever and the latest, by Markwins International.

The Unilever line, designed by Diane Kendal and introduced in 2000, was sold in about 120 doors worldwide. When it was phased out in 2003, its sales were estimated at about $15 million retail. The original collection had been released by Klein in the mid-Seventies and discontinued a few years later.

CKI signed the Markwins deal in September 2005. At the time, Murry said that while it took CKI some time to settle on the right partner, he was confident Markwins had the power to make the cosmetics brand a global powerhouse. “We all learned from the first makeup collection,” Murry said at the time. “The product was very good, but our core competence wasn’t color, and neither was Unilever’s. We both made mistakes, and we’ve both learned from them…we now have a partner who really understands color.”

The newest cosmetics line, with upward of 200 stockkeeping units, is designed to appeal to a multicultural, fashion-forward consumer, said Murry. The line has a full range of shades and textures, along with foundations, eye shadows, lip colors, concealers, mascaras, lip and eye pencils, nail polish and makeup brushes. Price points average $15 to $18 per item in the U.S. and are intended to be consistent with other entry-level prestige brands.

“When you launch a category that doesn’t work, you learn,” said Murry. “For instance, the first time around we probably missed some categories, and the distribution wasn’t quite right. We learned that we needed to go more heavily into perfumeries with the cosmetics. We also fine-tuned price points. And it’s working well. In the second half of 2008, we will expand rapidly — in the U.S., we will go from 18 Sephora doors to 60, for instance. By the end of year, we’ll be in 4,000 points of sale in total.”

The cosmetics are also sold in France, Italy, Germany, the U.K., Japan, Hong Kong, Taiwan and Canada, and Murry said that the brand will enter additional global points of sale in Asia and elsewhere in spring 2009.

The new collection bears the moniker ck Calvin Klein Beauty, while its predecessor used only the Calvin Klein name. “The last makeup line was more of a Collection direction, while the new beauty line is more ck-related,” said Fabien Baron, who designed the packaging. “Like ck, the new beauty brand is a little trendier than Collection, a little bit more fashion-forward and youthful.”

None of the executives would discuss current sales projections for the color cosmetics, although industry sources estimate the Klein color line and upcoming skin care offerings could bring in $80 million at wholesale globally by year three, and more than $200 million by year six.

While he acknowledges that color is an expensive arena in which to play, Murry believes the costs are worth bearing. “Cosmetics, along with fragrances, really further our lifestyle positioning and reinforce our brand message,” he said.

 

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