By  on September 19, 2008

With his background in finance, Elizabeth Arden Inc.’s E. Scott Beattie may claim to approach the beauty business purely by the numbers. But Beattie’s shrewd intellect and intuition have also played a large role in Arden’s success, which has seen sales increase more than 20-fold since Beattie and his partners first acquired the Miami-based distributorship French Fragrances in 1992 and transformed it into the $1.3 billion Elizabeth Arden.

Beattie was the first beauty industry executive to recognize shifting consumer shopping patterns and the blurring between mass and prestige shoppers, as he recounted during the Cosmetic Executive Women’s Newsmaker Forum held on Tuesday evening in Manhattan. “We recognized the opportunity to help develop the prestige fragrance business at mass in the U.S.,” he said, noting that the company is responsible for all of Target’s prestige fragrance business, about 70 percent of Wal-Mart’s and between 50 and 90 percent of other mass retailers such as CVS, Rite Aid and Walgreens. “Wal-Mart has 125 million people in its stores weekly,” he continued. “It has a $16 billion beauty department. It’s a major player, and if you’re in the beauty business, you have to have a Wal-Mart strategy.”

During the event, moderated by Chrysalis chief marketing officer Jill Scalamandre, Beattie expanded on the two-tier distribution strategy that has been so successful for Arden. He used the Britney Spears fragrance franchise as an example. “A Britney customer’s primary point of shopping is in mass,” he said. “There, we try to sell her a smaller size at a more approachable price for impulse purchasing. Typically, prestige retailers are more effective at launching fragrances and creating a more enjoyable shopping experience,” he continued, “so the impulse purchaser might then go to the department store, to buy the larger size of the gift set. Consumers drive our business. We follow her.”

Currently, about 20 percent of Arden’s business is made up of brands it distributes for L’Oréal, the Estée Lauder Cos. Inc., LVMH and Procter & Gamble Co., Beattie said. The remaining 80 percent consists of its own lines, including various celebrity and designer fragrances and the Elizabeth Arden brand, which French Fragrances acquired in 2001 from Unilever and has since become the parent company’s corporate name.

Arden’s celebrity stable of scents includes Elizabeth Taylor, Britney Spears, Mariah Carey and Jay-Z’s Rocawear. Though the category has been challenged of late, Beattie said Arden had come up with a “reasonably scientific formula” to insure success. “Our first [of our] criteria is does the celebrity have beauty appeal,” he said. “Second, is the celebrity committed to the product and to commercializing the project or is it just a revenue stream? Elizabeth Taylor took her beauty business incredibly seriously and was actively involved in building the customer base. The final criteria, is it global in nature? The U.S. is just a small piece of where the opportunity is in fragrance. South America and Eastern Europe have a lot of potential. Over 50 percent of Britney’s business is international — people are always surprised to hear how well she does in the Middle East, Japan, Australia and South Africa.”

Beattie also discussed the Elizabeth Arden brand, whose business has doubled since 2002. Citing its growth potential, he noted that Arden’s brand recognition is much bigger than its business currently. He sees two of the brand’s biggest strengths as being its iconic 8 Hour Cream and its Red Door spa arm. “The spa industry is a $250 billion industry and the beauty business is $500 billion. Red Door is a $100 million business,” he revealed. “There’s a lot of opportunity in the spa channel and the opportunity is phenomenal, particularly in Asia and India.”

Arden is also looking to grow its spa business domestically — easier said than done. “Debbie Murtha, [senior vice president of cosmetics at Macy’s Merchandising Group] is a big proponent of bringing the spa experience to point of sale,” Beattie said. “We still haven’t found the right balance, but it’s a great idea.”

As the company has grown, Beattie revealed that retaining the original entrepreneurial spirit is one of his biggest management challenges. “An entrepreneurial climate is about accountability. It’s about a flat organization — we all have the same offices and work in an open environment. It’s about a cross-functional structure.”

It’s also about financial results. Beattie noted that perhaps one of the biggest differences between Arden and other beauty firms is the financial lenses it focuses on the business. “What we brought to bear was more of a financial analytical perspective. That discipline is healthy across all functions and turns people into business people, not just marketing people,” he said. “All of us have had to learn how to adapt to change. We never had the freedom to not make good decisions or it would have been the end of our business.”

Still, it’s not all work and no play for Beattie, who was called a “golf God” by P&G chief marketing officer Marc Pritchard in a quote read by Scalamandre. “I’m a man in the beauty industry, and in this industry the level of competence on the golf course is very low,” he laughingly replied. “It’s easy to be king of the golf course.”

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