By  on December 16, 1994

SANTA MONICA, Calif. -- It's a brave new world at Giorgio Beverly Hills.

The upscale fragrance manufacturer, which was acquired by soap and detergent giant Procter & Gamble Co. in July, is ready to prove to the industry -- and to itself -- that it can become an even larger player in the prestige market.

P&G has made several moves since the acquisition to show it is serious about a market it hardly knows. The company:
Merged its Eurocos division into Giorgio in the U.S., giving Giorgio control over the Eurocos brands Hugo Boss, Boss Elements, Laura Biagiotti Venezia and Laura Biagiotti Roma. In Europe, where Eurocos is strongest, the Giorgio brands will be distributed by Eurocos.

Boosted the U.S. Giorgio sales force by 15 to 54.

Developed initiatives to control diversion of Giorgio brands, including a door-by-door analysis to insure the firm is growing its business in an appropriate manner.

Identified stocks of counterfeit Giorgio products and investigated the sources of bogus merchandise.

Kept Giorgio's California staff intact instead of moving in P&G executives, which it has done in other cosmetics and fragrance acquisitions.

Named Giorgio president and chief executive officer Linda LoRe an officer of P&G; she is one of only 11 female officers in the company.

These moves are a relief to Giorgio observers, some of whom joked the firm would become Giorgio Cincinnati, named after the location of P&G's corporate headquarters.

LoRe said earlier this week that P&G has ushered in a new era with new opportunities for the firm, which was owned by Avon Products Inc. for the past five years.

"P&G does not believe in going half way in anything they do," LoRe said in her first interview since the acquisition. "They always believe in being a leader, both with resources and brands."

Giorgio did a reported $165 million in wholesale volume worldwide in 1993. Eurocos posted a worldwide wholesale volume of $165 million during P&G's last fiscal year, which ended June 30. Acquiring Giorgio will boost P&G's prestige and mass market fragrance volume to $500 million, the company has said.While LoRe declined to give specific dollar amounts, she said P&G is willing to invest the money needed to make Giorgio an even bigger player in the prestige market.

During the past few years, Avon did not consider Giorgio a key product category and did not support the brand -- especially in advertising, LoRe said.

She described Giorgio as "rejuvenated" under P&G and claimed the firm is positioning itself for future growth. Plans for a fourth women's scent are on the board, with a launch slated for early 1996.

Industry sources have estimated Giorgio's most recent launch, the August introduction of Wings for Men, will do $25 million to $30 million at retail its first year, about half the volume of the women's version.

Giorgio is also developing a Salvatore Ferragamo fragrance, its first designer name.

And while the launch of Giorgio's fourth fragrance is expected to be a big-budget blockbuster on the scale of Giorgio, Red and Wings, the firm is not ruling out smaller, niche fragrances.

The moves are necessary for Giorgio to keep its share of what has become a more competitive and fragmented market. Still, some observers wonder if Giorgio is only competing with itself, replacing one brand with another in a string of megalaunches.

LoRe bristled at this argument and said the retail performance of different Giorgio brands shows each has its own customer.

"We still do a phenomenal amount of business with Giorgio," LoRe said. "Red is still in the top five, and Wings has a formidable position in the top 10. We are not going to turn our back on brands that are successful."

But LoRe said Giorgio would not be afraid to drop a fragrance if it became unprofitable in a glutted market.

"If something doesn't fit in your brand portfolio for whatever reason, whether its strategic, financial or whatever, then that's a decision that has to be made. We're not at that point.

"It's like saying, 'Do you want to kick out [Calvin Klein's] Obsession, Eternity or Escape?' They're all big brands that do a lot of business," she continued, "and it's the same thing for us."While skeptics wondered if P&G were willing to let Giorgio run its own show, the integration of Eurocos into Giorgio in the U.S. appears to be a vote of confidence for Giorgio.

Bud Hamilton, who for less than a year was general manager at Eurocos USA Inc., based in Hunt Valley, Md., will be reassigned within P&G after the merger into Giorgio is completed in the next few months, according to a Giorgio spokeswoman. Reached in Hunt Valley, Hamilton said, "I am totally supportive of the move. It's absolutely the right thing for the business."

The Eurocos brands are sold in the U.S. by a sales force provided under contract from Khepra Beauty Group. Hamilton added that the association with Khepra will end March 1. He noted that the other Eurocos staff members in Hunt Valley, fewer than 20, will be reassigned within P&G.

Walter Farnsteiner will continue to head Eurocos in Europe, adding Giorgio, Red and Wings to his stable. Farnsteiner's title remains vice president for fine fragrances in Germany and Eurocos marketing worldwide.

The marriage of P&G and Giorgio may at first seem unlikely, LoRe said, but it already has helped boost the Giorgio brand. Giorgio is using P&G's research and development team, which LoRe described as one of the best in the world.

P&G's research team has been especially helpful to Giorgio in identifying diversion and counterfeiting, two problems that continue to plague the prestige industry. These efforts, in addition to those made by Giorgio in the past few years, are paying off, LoRe said.

LoRe pointed out that in addition to new launches, Giorgio would pour additional money and resources into keeping market share for its established fragrances. For the Giorgio brand, the firm is developing a "revitalization program" that is expected to include a new advertising campaign, a boost in the Giorgio ad budget and changes in product packaging.

"For those of us who can put some firepower behind the brands that really are formidable classics, more power to us, because that's really what's going to make the industry more stable and healthy," LoRe said."Yes, we have to have new initiatives on the board all the time," she continued. "But if we just do launch them and leave them, launch them and leave them, launch them and leave them, we will go the way of some other major companies that really ended up hurting themselves because of that attitude."

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