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E. Scott Beattie firmly planted one foot in the beauty industry when he founded FFI Fragrances (formerly French Fragrances) in 1992 through his role as a private equity investor. His background in finance, particularly investment banking, helped Beattie engineer the bold acquisition of the Elizabeth Arden and Elizabeth Taylor brands in January 2001 from Unilever. The acquisition, which would be the first of many, more than doubled the size of the business and elevated the company from a small U.S. fragrance firm to a global beauty company with a new name, Elizabeth Arden Inc. Today, Arden’s sales surpass $1.3 billion, and the firm has 3,000 employees globally overseeing 165 owned and licensed brands.
This story first appeared in the March 11, 2011 issue of WWD. Subscribe Today.
Profits shot up 61 percent in the second quarter. What do you attribute Arden’s stellar performance to?
The performance was really driven by our international business. We’ve also spent the last couple of years focused on reengineering a number of our business processes so that we could become much more of a global business. Much of the improvement in profitability is coming from initiatives to improve our productivity and efficiency. They are not the sexy part of the beauty industry—things like supply chain, demand planning, a new enterprise information system and migrating toward a shared services environment—but they are things that allow us to accelerate our growth going forward and also accelerate our profitability.
How do you see the beauty industry evolving in the next two to five years? What opportunities excite you the most?
There’s tremendous growth in the population of the world that has the disposable income to participate in not just beauty products, but household personal care products. For the last 50 years, we’ve been selling to a fraction of the world’s population. Moving forward, we’ll be able to sell to a much larger percentage. That’s exciting, and that’s the importance of having a very efficient, productive global platform. An interesting statistic is that the top 10 brands represent less than 25 percent of the $160 billion global beauty industry. It’s a very fragmented market and there are a lot of small players. So having a global platform and a global brand portfolio positions us to accelerate growth, particularly internationally. It also puts us in a strong position to acquire smaller brands or local brands.
Also, consumer behavior and how we communicate to consumers is evolving so quickly and almost in a revolutionary way. People want to be educated on our products through digital media—whether it’s through their iPads, their telephones, or traditional Internet searches. That’s quite different than focusing the whole selling process through a retailer. As we go forward, we can educate people on our products, create social networks around our brand portfolio, communicate through innovative new digital mediums and ultimately convert that consumer to purchase through a digital platform. That’s going to be a tremendously interesting way to build brands and build businesses on a global basis.
How has your finance background impacted the way you run the business?
I’m probably more data driven than the average executive in the beauty industry. I embrace performance metrics and financial analysis and I’ve instilled in our organization a financial discipline and an operating discipline, not just in the finance team but also the marketing and supply chain teams and just about everywhere so that they understand the repercussions of spending. I also have a good perspective on value and valuations, and that helps me assess how to deploy our capital efficiently. Fortunately, we have high gross margins and the success of a beauty company is dependant on how you deploy your capital below the gross margin, and how you spend effectively across customers, geographies and brands on a global basis. I understand the value of acquisitions and we’ve done dozens. We know how to value them, how to integrate them and ultimately how to grow them and build value around them.
What does the industry need to pay attention to in the year ahead?
One of the challenges we have is a lack of global regulatory consistency. There needs to be more collaboration around the world in establishing regulatory standards. It’s not about eliminating regulations. Our industry has been proactive in lobbying the regulatory authorities around the world to enforce and, in some cases, improve regulation. You’re seeing a problem in China right now where it’s affecting all of our businesses in terms of the registration issues. It’s to be expected that, as China evolves as an economy, it wants to establish good, strong standards, but we have standards all around the world. They’re just not harmonized properly. That’s a big opportunity for us an industry. It would improve the global efficiency of all companies.
As the retail landscape continues to evolve, what channels and/or concepts do you find most intriguing?
The emerging digital channel, and it’s not just about the purchase of product. It’s an education process. We’re going through a whole redesign of how we train people on our products internally and beauty advisers around the world and ultimately customers. We’re utilizing technology to leverage the training process and to provide the kind of product information and usage information and training advice to the end consumer. If you go around the world, consumers love our products, but they’re not necessarily in love with the shopping process. There are ways for us to make that more exciting and more customized. The beauty of digital is that you can disseminate that information to hundreds of millions of people.
How would you describe your leadership style and how has it evolved?
I started the company through my role in private equity in 1992—almost 19 years ago. The first year, the business was $30 million in sales and there were three management executives in the company. Now, we have close to 3,000 people and do close to $1.3 billion in revenue. The leadership style as a small entrepreneurial business changes as you get to different levels of size and sophistication. But the common traits would be I’m very collaborative and involved. I’m a big believer that you have to lead by example and should have a clear understanding of the various functions of the company. I’ve worked in a hands-on basis in just about every area of the business. I don’t ever make a decision on my own. I always talk to the people within the organization, because making the decision, in some cases, is the easy part. It’s the implementation and making sure people throughout the organization believe in the decision that’s hard. I’m a big believer in a flat, nonbureaucratic organization. We can assemble a small group of people quickly to make small decisions and big decisions—and we can make them intelligently and in a cross-functional way.
How do you motivate your team to challenge conventional thinking and innovate?
People here know that they are empowered to innovate. Innovation can come from every function, too. It’s not just product. It’s being curious in terms of understanding new business models and what new opportunities exist to drive improvement in productivity and efficiency and embracing it. I hope that I lead by example. I work hard and have high expectations for myself and for the organization. As we execute against that, it becomes contagious. People like being at a high-performance organization that is growing and that is successful. All companies go through ups and downs. You can’t always be performing at the pinnacle of efficiency. But the point is, you’re always striving to improve the capabilities and the performance of your organization. That also attracts high-performance people.
What do you look for when you’re hiring?
People who want to work hard and have strong ambitions for themselves as individuals. They embrace responsibility and accountability. A lot of people don’t want to take on a lot of responsibility and be accountable for the tough, hard problems. When you find people who do, embrace that. Those are the leaders. They also have to be comfortable in the kind of entrepreneurial culture that we have.
When we hire people, they have the chance to meet with a lot of people at different levels of the organization. They get comfortable with the values that we have and how we operate as a business. Sometimes that’s not consistent with their values, or there isn’t a fit. But if there is, and they have strong leadership skills and want to grow and build and work hard, those are the kinds of people we hire.
Do you believe in mentors?
I believe more in long-term business partnerships. The best experiences I’ve had have been relationships that have endured through hard times and good times. The people who have built this business are the people who have endured through the growth and successes, and through the tough times. It’s a marathon. Our business has been growing for about the last 18 years at over 20 percent compounded annually in revenue. That’s because of the consistent dedication of our organization. New people join and build relationships and take it to a different level.
What’s the most difficult business decision you’ve had to make? Would you make the same decision today?
The most challenging decision was when we decided to acquire the Elizabeth Arden business, because it more than doubled the size of our company. We went from being a relatively small, U.S.-based fragrance company to a global beauty company. With that came a lot of complexity. We had to integrate the acquisition and rebuild and invest in business processes throughout the organization. We bought Arden in January 2001, and in September 2001, the world came apart a little bit after 9/11. That was the toughest period, but it was by far the best decision. The strength of the Arden brand and the opportunity to grow it globally, and the opportunity it created for us to become a global business, was fantastic.
You’re an avid golfer. What are the similarities between golf and business?
I don’t love watching sports, but I love doing them. I love tennis, skiing, golf and hockey. I love sports because there aren’t similarities to business. Being active in sports with my friends and family is very mentally relaxing to me. Physically, it takes the stress and anxiety of business out of my system.
E. Scott Beattie, a native of London, Ontario, received both his undergraduate and MBA degrees from the Richard Ivey School of Business at the University of Western Ontario. He began his career with posts at Accenture Consulting and Merrill Lynch, where he served as vice president in the mergers and acquisitions group. In 1989, he co-founded the Toronto-based private equity firm Bedford Capital. Three years later, he founded a fragrance firm that would become Elizabeth Arden Inc. Today, he is chairman, president and chief executive officer of the $1.3 billion beauty firm that operates in more than 100 countries. Its portfolio includes more than 165 owned and licensed brands, including Mariah Carey, Juicy Couture and John Varvatos fragrances and Prevage skin care.