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E. Scott Beattie, chairman, president and chief executive officer of Elizabeth Arden, has always championed an unorthodox approach to business, and the results speak for themselves. Sales in fiscal 2012 grew 5 percent overall, including a 10 percent spike in international sales—a focal point for the company. Here, Beattie shares the key building blocks he used when reinventing one of beauty’s most storied brands.
At Elizabeth Arden, we have always had a vision of following the consumer. In the mid-Nineties, we saw that consumers’ habits were changing in terms of how they wanted to interact with prestige fragrance brands. We were the first to become more aggressive at finding new distribution channels, and new ways to merchandise, launch and develop fragrances. Today, our fragrance portfolio is about 60 to 65 percent of our total business and the Arden business is the remainder. We’ve been very successful, particularly in the U.S., in building our fragrance portfolio, by adding new brands, rejuvenating existing brands, broadening distribution and finding innovative new ways to sell to the customer.
Now, we’re looking to take our model and become more global. We are underpenetrated from a market-share point of view in Europe, Asia, Latin America and the Middle East. Bringing our U.S.-based brands into those markets is a tremendous opportunity. We’ve got about 20 percent of the U.S. fragrance market across all channels, but we’ve got less than 2 percent market share in Europe and the rest of the world. Our vision is to take our business model and become more aggressive over the next 10 years at developing market share in the rest of the world.
Arden is a 100-year-old brand that has tremendous loyalty and brand equity. It is beloved by its customer base. It has the DNA and the trust and the loyalty of a brand that has been in the marketplace for a long time, and it has very strong core values. Elizabeth Arden once said that to be beautiful is the birthright of every woman. She was a very strong female entrepreneur when there weren’t any women entrepreneurs. And she brought things like yoga and exercise and cosmetics and spa- based beauty to women, delivering a holistic regime so that a woman could feel more confident and more beautiful.
To us, those core values are even more relevant today than they were 100 years ago. When we looked at the brand, we revisited those elements. We asked, “What’s the size of this opportunity?” We did research around the world. We talked to our existing customers, to our core demographic and to those we want to reach globally. We found that Arden has great brand equity and awareness. I always say the brand equity and awareness is bigger than the business. That’s a tremendous opportunity—when your brand is bigger than the revenues of the business. You don’t have to go out and tell people what you stand for. You just have to consistently execute that message around the world.
We looked at the core markets and we benchmarked what we thought the size of the opportunity was. In our best markets, we’re in the top 10, sometimes higher. But the brand isn’t distributed in three out of the four top beauty markets in the world—France, Germany or Japan—and in China we have a small business that we’re building. There is a lot of white space.
Analyzing the growth of the category over the next 10 years, we saw that if we can consistently rank in the top 10 globally in the markets we’re competing in, we can more than double the size of the business.
That established our strategic vision. It isn’t based on visionary words. It’s based on strong, analytical pillars. It’s based on doing the market research and the customer research. It’s based on doing the benchmarking and the competitive strengths and weaknesses of the brands down to the stockkeeping unit level. It is based on understanding the competitive elements of distribution and retail execution, and on assessing our own strengths and weaknesses organizationally and what we’re capable of and not capable of executing.
When you put that together, you can come up with a strategic plan that has the buy-in of the entire organization, because many people have been involved in the analytical building blocks—the marketing people, the commercial sales organization, the supply chain people, the R&D people, the p.r. people, the finance people. All are part of the cross-functional analytical process. As you build out the plan, you get buy-in because people have confidence in the underlying premise.
People get excited and you can communicate much more substantively than by just having a verbal vision. It’s easy to say we want to be a top-10 brand, but you have to have brought the organization along in every element so that they believe in the opportunity and their ability to attain it.
I don’t believe in a hierarchical organization. I believe in a very flat organization, in collaborative cross-functional involvement. It cross-trains executives in more than their own siloed function, and that is a lot more interesting as a career path for people. It broadens their skills as business people, not just functional experts. It build more collaboration and executional collegiality. People feel like they’re part of driving the solution, as opposed to just one element of the business process.
We put the plan together over multiple years and brought it down to a manageable level of bite-sized pieces to execute, with interim steps to evaluate performance and see success. That encourages people. As you get more successful, people start believing more, and it becomes self-fulfilling.
Obviously, you hit stumbling blocks. If the plan is in more executable bite-sized pieces, you can course correct. As you learn more and you start operationalizing the plan, things change. The environment changes, the underlying assumption of what you thought worked or didn’t work aren’t correct all the time. You can take best practices and incorporate those back into the plan. And you can take things that aren’t working well and fix them.
We define success in each of these bite-sized pieces. With the Arden execution, we had a project-management process where we had specific deliverables, which started with things like rationalizing the product line, developing the brand architecture, repackaging primary and secondary packaging. With each process, there is a beginning, a middle and an end, and you can define success by accomplishing them on time and on budget and doing things at a high level of executional quality.
The next step was to operationalize the plan. We implemented it in some flagship stores around the world—updating the counter to the new merchandising and visuals, retraining the beauty advisers, improving the communication and the train- ing. We started in September with our best doors and most strategic customers, taking a subset from all of the different geographies—travel retail, perfumeries, de- partment store counters, back walls in places like Boots and Shoppers Drug Mart. We started to see what was working and what elements accelerated the growth of the business. We saw what wasn’t working. We learned a lot and it reinforced the size of the opportunity for us.
When you set a big, bold goal of doubling the size of the business, you have a lot of constituents you have to convince. You have to convince your own organization that it’s possible. You have to convince retailers that the plan is going to work, and you have to entice consumers to re-engage and bring new consumers into the brand as well as maintaining your existing customers. By starting in these flagship stores, you build that buy-in and confidence.
As our business gets bigger, it becomes more difficult to communicate the vision and the excitement to everyone, because I have not only this project, but all of the other brands and initiatives. What I feel most comfortable doing is keeping the organization flat. In a hierarchical organization, the message tends to get garbled from top to bottom. It gets interpreted by people differently.
Having a flat organization, not just between myself and my operational team, but in their teams as well, is important, because the messaging and communication, both formal and informal, has a lot less opportunity for misinterpretation. In the formal ways, we have a communiqué that we send out monthly around the world that reinforces our key strategic initiatives. We’ve incorporated video clips, so that people are hearing it, as well as reading it. That helps, especially when you’re deal- ing with multiple cultures and languages around the world.
The way we communicate with our shareholders and research analysts also reinforces the strategic positioning. A lot of our people are shareholders, so that’s another opportunity to formalize the message that goes out.
We have built our business around an outsource model. We don’t handle our own distribution, with the exception of the U.S. We outsource distribution, our manufacturing processes, our systems platform. We outsource a lot of our p.r. This allows us to scale our business very flexibly. If we want to move into or expand in a market, it makes it easy to do it on a relatively cost-effective basis.
When you have a diverse portfolio of brands and markets around the world, it’s difficult to have all of the skills necessary to promote each one. Each brand has its own DNA, its own competitive positioning and opportunity. Outsourcing some of the brand management and p.r. brings fresh ideas from organizations that have clear strengths in that space. When we look at launching new products, we tend to find people who have a great capability in that space, as opposed to trying to build that capability across all of our brands and our markets.
This system isn’t unique to us, but it allows us to have more specialized executional capability without having to train everyone to be experts in every brand. It’s just not possible in this day and age to have an organization that has all of the expertise in all of these functions that you need to be competitive.
There’s more of a risk in our industry of not aggressively moving forward. The reason the beauty industry is so relevant and is in such a positive place globally is that we’ve always been incredibly innovative. We’ve had very structured levels of innovation from the larger companies and we’ve had tremendous creative entrepreneurial innovation from the small businesses. A lot of other industries are struggling with the current business environment, because it demands tremendous levels of continuous innovation. You’ve got to have a business culture that is comfortable in that. You’ve got to be able to make decisions quickly, both how to reinvest and drive what you think are innovative new products, and you’ve got to be able to make tough calls on things that don’t work. There is an element of risk, but you learn to live with it and manage it, and the ones who do it intelligently thrive. —As told to Jenny B. Fine