LANCASTER GROUP CHIEF: WE'RE NOT FOR SALE

Byline: Pete Born

NEW YORK--Lancaster Group is not for sale.
That message comes from Peter Harf, chief executive officer of Lancaster and its parent, the Benckiser Group of Ludwigshafen, Germany.
He made that statement in response to a number of reports circulating in the market that Benckiser, which is owned by the Reimann family of Germany, has grown tired of the prestige fragrance game and wants to cash in its chips.
"There is absolutely no interest--not by management, not by the board, nor by the owners--in selling Lancaster or Benckiser or any part of it," Harf said. "This clearly has no basis. "We took a hit last year," Harf conceded, referring to the 60.8 percent drop in Benckiser's 1993 profits, partly triggered by a major corporate restructuring.
"The restructuring was put into our normal costs," Harf said, noting that the typical American company would isolate the cost as an extraordinary charge.
Harf said that for this year he expects to surpass the pretax profit level set in 1992 of $109 million (167.9 million marks) at current exchange rates. Sales that year were $2.6 billion (4 billion marks).
Harf said he expects the results to be strong enough for the company to pay down $227 million (350 million marks) to $260 million (400 million marks) in debt.
Harf also spiked speculation that Benckiser is reining in its hard-charging and heavily funded American subsidiary, Lancaster Group USA, which was founded four years ago. Harf said Lancaster is continuing to bankroll the development of the U.S. business and the New York-based subsidiary is on plan to reap a 26.4 percent sales increase for this year, pushing volume to $135 million. For next year, a 25.3 percent increase is anticipated.
"We are on a roll," Harf said. "Our products are being well-accepted in the U.S. market." As for the U.S. operation's bottom line, he said, "We are very close to breaking even."
Richard G. Hartigan, president and chief executive officer of Lancaster Group USA, said he plans on launching at least two fragrances in the U.S. next year. He said the company will continue to orchestrate its introductions with the same "five-figure spending" that propelled the launches of Davidoff's Cool Water and Casmir from the Parfums Chopard division.
He added that the advertising budgets for core fragrance brands will be higher in 1995 than 1994.
Harf had noted that Lancaster this year has "tightened the process" of doing business to get more kick out of working capital. As an example, Lancaster has adopted what Hartigan describes as common industry practice of paying for November and December advertising on Jan. 1. Lancaster previously paid the bill each month.
Profitability is not a problem, however, for Coty Inc., Benckiser's other U.S. beauty subsidiary. Long viewed as the leader of the mass market fragrance business, Coty is making money "hand over fist," Harf said.
On the launch front, Lancaster has encountered some difficulty with Zino Davidoff, the men's fragrance that was introduced here last fall. Harf confirmed reports that the fragrance is performing "under budget."
The Lancaster chief gave no figures, but industry sources say Zino's $16 million wholesale sell-in might have been too aggressive and there are worries about the sell-through.
The news is much more comforting from Casmir, a women's scent launched in March and rolled out in August. "It is doing significantly better than we had expected," Harf said.
Casmir was originally projected at $21 million wholesale for the first year, according to sources, and it now is expected to do $24 million or better.
Many of Harf's headaches, however, are rooted in Lancaster's home market of Germany.
The cosmetics and fragrance market there is static at best, beset by the lingering effects of recession and threatened by a troubling development.
A price-cutting war has erupted with the influx of discount perfumeries stocked with gray market fragrances.
"The price structure is crumbling," Harf said."We are the market leaders, so we are taking the brunt of it."
Other manufacturers in Germany and elsewhere are also grappling with these problems, Harf said, noting, "The whole industry in Europe has been shaken up."

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