NEW YORK — In a year where flat business was considered almost a victory by beleaguered fragrance executives, many are hoping for better luck next year.
This story first appeared in the June 13, 2003 issue of WWD. Subscribe Today.
At the FiFi’s Monday night, some executives were slightly upbeat about the industry’s prospects, while others predicted that the gloom surrounding the industry will be ongoing.
“I’m hoping for a better fall,” said Bernd Beetz, chief executive officer of Coty Inc. But while he’s hopeful, he admitted that how things will actually work out remains murky at this point. “I cannot see a [clear] picture of the fall from the market now.” Pointing out that hopes abound in the industry for an improvement as the summer draws to a close, he added, “An upswing has not been realized.” On the other hand, Beetz said, “our launches [such as Celine Dion and JLo] are going pretty well, so the consumer is reacting.”
While Beetz has seen exceptional sales power with celebrity scents, other executives questioned the sustainability of the genre, wondering whether or not they are just “flashes in the pan” or if they have the potential to be long-term successes. “Licenses have been good for some companies [but] celebrity fragrances have had different fortunes,” one executive observed. “It works today, but will it work tomorrow?”
There are opportunities out there, however, believes Hiroshi Maruyama, chairman and chief executive officer of Shiseido. While he acknowledged that the overall fragrance market continues to be tough, he sees opportunities for niche scents and fragranced products. Case in point: Shiseido’s Body Creator, a cellulite product that uses scent as a technology. Shiseido is also the parent company of Beauté Prestige International, which handles such scents as Issey Miyake and the upcoming Narciso Rodriguez fragrance.
“The economy will improve in the second half, but things will continue to be slow and uncertain for a lot of businesses,” said Scott Beattie, chairman and chief executive officer of Elizabeth Arden. “We’re diversified in our distribution, and servicing a number of different types of consumers, which will continue to benefit our business. We’re also seeing that classic fragrances are as popular now as ever.”
Another who believes classics will drive the market is Bernard Potier, president and chief executive officer of Christian Dior’s U.S. operations. “We are expecting rebirth not only with new products, but with the classics. There should be a trading up, not a trading down with [gift] sets and the bargain of the month,” he said.
Others feel that an increase is coming in the near future, but are placing their bets based on the new fragrance launches. Executives at the Estée Lauder Cos. are optimistic. “We’re planning fragrance up 4 to 5 percent, especially with the launch of Beyond Paradise, which is a new direction and concept for us,” noted Janet Cook, president of Estée Lauder North America. Peter Lichtenthal, senior vice president of global marketing for the Lauder division, who also expects an increase for fall, hopes the customer will respond and said “we’re betting on Beyond Paradise.”
William Lauder, chief operating officer of the Estée Lauder Cos., also noted that he expects the company’s fragrance business to be up “very slightly” and cited a number of new initiatives in store, the aforementioned Beyond Paradise, as well as Simply from Clinique and Life from Aramis.
Joe Horowitz, president and chief executive officer of Groupe Clarins, was another that’s upbeat about the category. “We’re excited — we’re seeing an uptick in sales, particularly on the men’s side with Azzaro Chrome,” he said.
Also optimistic is Robin Burns, president and chief executive officer of The Limited’s Intimate Beauty Corp. and its Aura Science and Victoria’s Secret Beauty divisions. “We see the consumer slowly coming back, [which will continue] as long as the world doesn’t have another issue, but she’ll be ready for innovation.” The company will be ready and armed with new fragrances for men and women, as well as giftable items.
Burns noted in tough times, there are two choices — play it safe or “take a big leap” into a new direction that will appeal to the consumer. Clearly, the latter course is more promising but it also is more difficult. “The tendency of the industry is to get comfortable,” she said. “To change is uncomfortable.”
Retailers are also hoping that the new items will lead to increased business. “It will take animation and special events, but I think we’ll see the customer respond,” said Thia Breen, senior vice president of cosmetics for Federated.
Deborah Walters, senior vice president and general merchandise manager for Saks Fifth Avenue, believes that new launches will be a large part of the engine driving growth this fall, adding that she’s especially looking forward to the upcoming Narciso Rodriguez launch.
“I’m optimistic for fall and think it will increase at least three points,” said Laurice Rahme, founder of Bond No. 9 and president of Creed USA, referring to the women’s category. Rahme believes women’s fragrance will be “inspired because women have been deprived and fragrances will be rich and womanly, nothing will be discreet.” She is not as optimistic about the men’s business however, and expects it to be flat.
On the oil house side, the outlook is a bit more cautious. “The environment is very challenging,” said Richard Goldstein, chairman and ceo of International Flavors & Fragrances. “There is not a major economy in the world that is strong.” He noted that it is a struggle to find growth, and he doesn’t expect to see any this year, but has hopes that 2004 will be better.
“I think there are signs now that the business is picking up and I’m hoping that will transfer into a comeback for the fall,” said Patrick Firmenich, chief executive officer of Firmenich SA, who acknowledged he thinks the business can turn around.
His note of hope was supported by executive recruiter Rene Plessner, who said he senses that companies are beginning to hire talent at the higher levels to inject some new blood into an aging management structure. The budget cutters have sliced down to the meat of their organization. “There’s nobody left to blame,” Plessner said. “if the results are not what management expects, then they have to change management.”
“My vision [of fall] is foggy — very short term,” said Michel Mane, president of Mane USA. However, in that short term, there is optimism. “It’s been a lot more positive than what we’ve been experiencing. We have to do what we believe in — and explore territories where brands don’t emotionally connect.” He said one of these areas is connecting with consumers who are driven by inner-directed values such as sustainable development, humanitarianism and environmentally sound practices.