CANNES — Following a difficult year, travel retail executives are expecting a smoother flight in 2003 — although it could suddenly turn bumpy.Cosmetics executives say the travel retail business has noticeably improved since late summer, and a number of them are hopeful of further improvement — but they quickly point out that there could be a sudden disruption, like a war in Iraq or a major terrorist attack. Erik Juul-Mortensen, president of the Tax Free World Association, opened the organization’s 18th Tax Free World Exhibition Monday with the acknowledgment that $1 billion in duty-free sales — or 5 percent — were lost worldwide in the last year, shrinking the global industry to $19 billion. But he quickly added that the travel industry is set to grow 6.5 percent for the next two decades. According to Generation, the Swedish tracking firm, sales of fragrances and cosmetics are expected to grow by 4.2 percent per year between 2001 and 2004. It predicts that the category’s volume will increase to $6.7 billion in 2010 from $4.5 billion in 2001. Generation executives said that the 5 percent overall drop in travel retail sales during 2001 translated into only a 1.8 percent decline in beauty.Florian Chanet, general director of travel retail for Europe for L’Oréal, said he expects another increase after the 3 to 5 percent increase expected by the time this year ends.However, the sense of uncertainty that pervaded the convention was underscored by Eric Lauzat, general manager of L’Oréal’s PBI division, who said, "It’s a new business. Every day that nothing happens is a good day for us." Like other executives, Lauzat noted that the travel industry is expected to grow dramatically in the coming decade. He pointed out that 12 million Chinese are already traveling compared to a total of 16 million for Japan, one of the hardest-traveling cultures.Despite the vulnerability of the travel business to world events, a number of executives said that the duty-free channel looks more promising than their traditional retail businesses, particularly in the American department stores."Today for us it is a cash cow and show window," said Chanet.He noted that in travel retail one doesn’t have to spend money on advertising, but L’Oréal is investing more and more in marketing for its duty-free business. Its most dramatic investment is a 450-square-foot freestanding store for Lancôme in Terminal Three of Heathrow airport in January 2003. This will be Lancôme’s second airport shop following the opening of a store in a Madrid airport three years ago. But that shop was attached to the World Duty Free perfumery, while the new one in Heathrow will be completely freestanding. L’Oréal also has opened Giorgio Armani shops in Heathrow and Dublin, and the group is thinking about Biotherm and Shu Uemura shops, Chanet said.In terms of product introductions, L’Oréal plans to make a splash in duty free next year with the launch of its LCM skin care and fragrance line for 14- to 22-year-old women as an offshoot of Lancôme. It will also introduce Sensi by Giorgio Armani, Polo Blue by Ralph Lauren and Biotherm’s Skin Loving Colors cosmetics line. Chanet added that new travel retail packaging for Helena Rubenstein products will roll out in North America and Asia. L’Oréal is also working on plans to develop Shu Uemura, which already has a freestanding boutique in Hong Kong and two counters in Taipai and Osaka airports. A Lancôme skin care line for men is also in the works and is expected to bow in September, Chanet said.With the troubles experienced by the liquor and tobacco industries, beauty has been steadily gaining share of the overall duty-free business. Chanet estimates that it now accounts for 35 to 40 percent, up from one-third, and "very soon it will be half of travel retail."One of the most visible changes from last year’s convention, which was held as the global industry was still reeling after the September 11 bombings in the U.S., was seen in terms of attendance. Last year, the Estée Lauder Cos. sent only a skeleton staff of executives out of a show of respect. This year Lauder made a show of force with the appearance of three group presidents — newly named group president of international Cedric Prouvé; Philip Shearer, former head of international and now group president of Clinique, Origins and online business, and Patrick Bousquet-Chavanne, former head of international who is now group president of the Estée Lauder brand and MAC Cosmetics. Fabrice Weber, vice president and general manager, travel retailing worldwide, also was part of the show of Lauder force."Short of another world event, the channel will rebound and get some growth this year," said Lauder’s Bousquet-Chavanne. "There are early signs of traffic coming back, but not to pre-September 11 levels."Bousquet-Chavanne disagreed with some who said that outside of Heathrow, few airports have upgraded their businesses."I think the crisis last year really forced people to focus sharply on merchandising," he said, adding he’d noticed an overall improvement in line editing and inventory, as many have focused on inventory management."I see better quality of retail branding," he said with the addition of lines including Ferragamo, Gucci and Ermenegildo Zegna."I think it will be a strong year," Bousquet-Chavanne said, adding that Lauder will introduce Donna Karan’s Black Cashmere, Estée Lauder’s Intuition for Men and Pleasures Intense into duty free this year. Noting that luxury goods now account for 60 percent of the $19 billion duty-free business, Bousquet-Chavanne remarked, "It’s a big business."Bousquet-Chavanne said the turnout of Lauder brass was a show of support indicating "our firm belief in the future of this industry."That point was also made by Patrick Choël, president of LVMH Moët Hennessy Louis Vuitton’s perfumes and cosmetics division: "Travel retail is a major business," he said. "That’s why we have to be here. We’re making the point that we’re supporting the business."Choël noted that his various brands have been marketing limited edition fragrances specifically for the duty-free market. Givenchy, for instance, marketed a fragrance called Into the Blue last year that was aimed at the Japanese travel retail customer. This year, the division is doing a somewhat more broadly based scent called Only Givenchy. Guerlain is also marketing With Love and Christian Dior did one last year as well, called I Love Dior.Choël had flown in from Paris to lead his brand presidents in hosting a unified LVMH party for duty-free retailers at the Majestic Hotel.Alain Crevet, president and chief executive officer of Parfums Givenchy, outlined Givenchy’s plans for 2003, including the launch of My Couture to supplant Hot Couture in Europe and the Middle East, and a new advertising campaign for Amarige which will be accompanied by the debut of Amarige D’Amour. Global developments are also on many minds. "Being global, we now have to make sure that this channel is part of what we think about when we develop products," said Shearer.Both Shearer and Weber said that they’ve seen an increase in the shopping and entertainment aspect of travel. In fact, Weber referred to it as "traveltainment."One airport operator that appears to understand this principle is BAA and its World Duty Free retail division.Brian Collie, group retail director at BAA and group chairman of its retail division World Duty Free, said that Clarins was its best-selling specialty brand and that the launch of its new Clarins Men skin care line has "taken off like a rocket."The BAA executives have come to think like retailers — they invented merchandising for summer fragrances as a holiday category and are launching more than 60 fragrances this year, just like a traditional store.Mark Riches, managing director of World Duty Free, said that 10 percent of all U.K. perfumery is sold in Heathrow airport. He added that in BAA’s seven U.K. airports, a total of 900 bottles of perfume are sold every hour of business. In November, BAA will put the finishing touches on the expansion of its retail space in Terminal Three, which will double the area to 90,000 square feet. Upscale fashion and beauty shops have not only been added, but they have been organized into streets along merchandised classifications, complete with restaurants matched in the same character.Riches illustrated a trend that other executives have pinpointed. Skin care’s share of the beauty business has jumped to what he estimates as 24 to 25 percent, compared with maybe 10 percent three years ago, while fragrance has become static. Collie also noted that the airline traffic and retail sales have increased this spring. For the first quarter starting April 3, passenger traffic grew 2.5 percent, while trading profit advanced 4 percent.Christian Courtin, president and ceo of Groupe Clarins, said in an interview that Clarins has given male passengers 2,000 treatments in its airport cabines.Courtin said that Clarins has become a big fan of travel retail, as evidenced by the new merchandising unit and assortment of items created for duty-free shops that graced his stand here.He said travelers trapped in airports have time to talk to sales consultants, a plus for skin care sales, and airport retailers are always open to new ideas, since their leases come due every five years and they can lose them. Their quickness extends to out-of-stock situations and Courtin was happy to point out that travel retail operators hate to be out of stock."Today that is a big plus," he said with a grin.Courtin said that he now does 7 percent of his business in travel retail."I would be happy to do 15 percent," he added.YSL Beauté presented its new men’s fragrance, M7, at a party Monday night during which president Chantal Roos was clearly pleased to announce that her travel retail business was up 12 percent worldwide in the first nine months and a whopping 24 percent in Europe. In a subsequent interview, she said that she and her worldwide travel retail director Caroline Olive-Goument have been busy overhauling counters. About 40 counters have been finished already and by the end of this year she expects 89 or 90 to be rebuilt. She also has created special kits for travel retail, including a case tastefully arranged with a trio of Opium sprays and a pair of Kouros atomizers and a foundation with a lipstick packaged in the box and a double-decker compact.Duty free accounts for roughly 10 to 15 percent of YSL Beauté’s total volume. Roos said that the company was able to do 700 animations in European stores as a result of having created a display department in the last year.She said when she appeared at Cannes last year she was at the beginning of the process."We embarked on a long process of revamping the brand in travel retail," said Roos. "Now we have the evidence. Last year was just talking."Despite the turbulence in the travel retail channel, Bulgari managed to open nine more shop-in-shops in its duty-free network in 2002, bringing the total to 38, plus 1,000 counters. Moreover, Francesco Trapani, chief executive officer of Bulgari SpA, is pressing ahead with product development that is part of his overall brand diversification strategy. There will be new products in jewelry, watches and, above all, what he calls a "new important perfume" next year. In the meantime, Bulgari is introducing Eau Parfumee Au Thé Blanc.Trapani was philosophical about the current bearish climate, stating that after 10 years of growth, now is the time to consolidate gains.As previously reported, Inter Parfums Inc. has teamed up with Diane Von Furstenberg to answer her question to Inter Parfums chief executive officer Jean Madar of "what can we do differently to break the mold."He said that Von Furstenberg would draw upon her fashion expertise and her experience as a designer to launch an unusual fragrance, cosmetics and bath line next September. It will be distributed in only one specialty store per market, both in the U.S. and abroad, and will feature a high degree of personal service.The colors in the line will be edited by Von Furstenberg as her interpretation of what women need at that moment. Madar said there will be one store in Paris and another in London and the business would be based on high productivity. He noted that a highly productive specialty store can generate $1 million per year."This is a business about people behind the counter," he said. "So what if you forget about gift with purchase? You want to give the customer service."Shiseido, a latecomer to travel retail appearing at Cannes for the first time a year ago, returned this year in force, headed by Isao Isejima, corporate officer and director, chief officer of the international operations division. Isejima said he wants to build the brand’s travel retail business into at least 10 percent of local sales.Richard Beardsley, formerly of Beaute Prestige International who is consulting with Shiseido, said that the goal is for the company to rise to fifth position in skin care and makeup in duty free in the next three to four years.Ariel Gentzbourger, travel retail director, is heading the operation based in Paris and she intends to open an office in Miami and another one in Asia. She said she’s looking at Hong Kong or Singapore.Jacques Steffens, senior vice president and general manager of international, and Gretchen Goslin, head of travel retail and global business development at Elizabeth Arden, said the firm is getting behind its Elizabeth Arden and Elizabeth Taylor brands. The firm is also merchandising its more sporadically distributed brands like Halston and Geoffrey Beene’s Grey Flannel on a period promotional basis for budget shoppers.Riviera Concepts will launch its latest Adrienne Vittidini women’s fragrance, called Capri, in March and a first scent for handbag designer Lulu Guinness in Harrods in April and North America in March.Eurocosmesi will launch a women’s Mila Schön fragrance in Italy just before Christmas and overseas in January. Next year the company plans to introduce a men’s version. The company is also pushing its Transvital treatment line, building up distribution starting with Henri Bendel as an exclusive in New York, with plans to subsequently open "a couple of other department or specialty stores," according to Enrico Scabini, general manager of the firm. Distribution is also being built in the Middle and Far East. The company is also looking at spas and beauty salons. Eurocosmesi plans to launch its first Muriel Burani men’s fragrance around the world next year.In addition, the company will launch Blurock, the second scent for men in its Rockford brand, in duty free; it has already been introduced in Italy in 200 perfumeries.Puig has completely overhauled its color cosmetics and skin care line and called it Prêt á Porter de Peau. It has been launched in the U.K., Spain, Italy and France and made its travel retail debut at DFS in Hawaii. The company also is getting ready to launch its women’s fragrance called Carolina that is aimed at younger women aged 25 to 35. The bottle was inspired by the flacon used for the original 1985 Herrera signature scent. The new version will be launched in the U.S. in September with an initial distribution of only 800 doors, according to Kathy Cullin, general manager of beauty for Puig North America and president of Puig USA. She explained that the new fragrance is more feminine and not as trendy as the more cutting-edge 212. Cullin described the formula as "an edible floral." Industry sources estimate the line could do $10 million at retail in its first year. Distribution is expected to ultimately swell to a 1,200 door maximum.Manuel Puig, president of prestige fragrances worldwide, said he expects the next two years to be rocky for the industry. "We have to learn how to live under these circumstances," he said.But in general, he seemed confident about the growth prospects of the travel retail industry, which represents about 20 percent of Puig’s turnover. Citing figures predicting that the number of passengers traveling will double over the next 10 years, he expressed concerns for proposals by the World Health Organization to ban the sale of tobacco in duty free."I think it will affect traffic," he said, but he added that more Chinese are traveling and that ultimately Europeans will try leaving home more often.At the end of June, Juan Pedro Abenacar Trolez became president of Parfums Loewe and president of LVMH cosmetics in Spain. "We want to be a big contender in the fragrance market worldwide," he said.His three-year plan for Loewe calls for a ranking in the top 20 in every major market. Perhaps as a first step, the company is now launching Esencia Femme, a women’s fragrance.Pupa will launch a youth oriented fragrance called J which is a novelty with a novel denim-covered package. The company touts it as the first fragrance packaged in a soft aluminum bag inserted in a denim jeans pocket. The company will also issue a makeup kit in the shape of a clear sphere and a set of makeup shaped like ice-cream treats.Dr. Paolo Bevegni, director of Pupa’s international division, said the company continues to pursue its overseas evolution by opening a Spanish subsidiary in September and getting new distributors in Canada and Australia. It’s also building up a presence in the U.K. by entering the House of Fraser and Jenner’s while negotiating with other department stores and chains.Balmain is launching Balmya, a new fragrance. Jean-Claude Le Rouzic, chairman of Balmain Perfumes, and Gerard Pichon-Varin, director general, have mapped out a plan to build upon Balmain’s trio of classic fragrances and add three or four new ones in the next five years.The Tax Free convention would lose its character without the constant presentations and parties, starting Sunday night with a Confinluxe soiree for the launch of a men’s and women’s masterbrand fragrance called Morgan de Toi. The party, hosted by Jean-Pierre Grivory, president of Confinluxe, featured a Latin band and dancers. On subsequent days, Versace had a reception to launch its Couture Jeans fragrances and Diana Di Silva hosted a party. Escada had an impromptu fashion show to introduce its new fashion fragrance Ibiza Hippie. Maurer + Wirtz unveiled its fragrance masterbrand Blind Date and Parfums Gres turned the dining room of the Majestic hotel into a real life cabaret Wednesday night to announce its women’s fragrance of the same name. Odeon Parfums and International Selective Perfumes held a bash onboard a yacht for the launch of the latest fragrances for the Rodier and Ventilo brands. Lauder also threw a party for the launch of Donna Karan’s Black Cashmere. Also, the Lancaster Group showed a new 20-shade lipstick line to customers.

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