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Beauty Companies Tout Restructuring, Fresh Product

Beauty firms were out in force at a host of financial conferences this week, charging ahead with down-to-earth plans to appeal to the consumer's new frugality.

Beauty firms were out in force at a host of financial conferences this week, charging ahead with down-to-earth plans designed to appeal to the consumer’s new allegiance to frugality and Wall Street’s call to cut costs.

But despite it being “a very challenging year,” a number of beauty firms — the Estée Lauder Cos. Inc., Procter & Gamble Co., Elizabeth Arden Inc. to name a few — are embarking on restructuring plans and introducing new products while reducing layers of management and eliminating slowly turning items.

For instance, at the Piper Jaffray 29th Annual Consumer Conference on Wednesday, Inter Parfums Inc. chairman and chief executive officer Jean Madar unveiled plans to introduce a Burberry color cosmetics line next year. Inter Parfums acquired the Burberry license in 1993, and its fragrance launches over the last five years have fueled a 19 percent compound annual growth rate to $248.4 million in net sales, said Madar.

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Echoing the sentiment of his peers, Cedric Prouvé, Lauder’s group president, International, told investors Tuesday at the Deutsche Bank Global Consumer & Food Retail Conference in Paris, “The past nine months have been extremely challenging for the consumer.” He continued, “Our consumer needs to feel it’s OK to spend. We need to convey the value of the proposition, not just the aspiration of the product.” Prouvé said that a number of Clinique counters in the U.S. have begun to display prices. “We’re offering the consumer a chance to see how affordable the products are without having to ask,” he said, adding Clinique also has reframed its marketing message with the ad, “Great skin for less than the cost of a bottle of water a day.”

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Earlier this year, the Lauder firm outlined a multipronged, four-year restructuring effort that is expected to wring out $450 million to $550 million in costs. Prouvé said part of Lauder’s strategy includes “focusing our resources on the biggest opportunities.”

“We plan to develop high-growth segments, such as wellness and antiaging,” he said, noting that in North America sales of natural and organic personal care products are roughly $5 billion.

P&G also is in the midst of a restructuring effort to create a “simpler, flatter, more agile organization,” in the words of newly named ceo Robert McDonald (see related story, p. 8).

What P&G is not streamlining is its product offering. At the Deutsche Bank conference Tuesday, P&G’s senior vice president and treasurer, Teri List said of the firm’s R&D investment, “We spend nearly two times our closest competitor…the pipeline is very full.” Still, P&G is looking to fill out consumers’ beauty and grooming regimens, with a new emphasis on men. That means going “wider and deeper” into product categories, and offering goods at more price points.

Speaking at the Piper Jaffray conference Wednesday, Arden detailed its “efficiency reengineering initiative,” which calls for, among other things, consolidating its business functions and vendor network. Chairman, president and ceo, E. Scott Beattie, also declared the beauty firm’s intention to grow its $600 million Elizabeth Arden brand into a $1 billion business, by modernizing its image, executing consistently across the globe and focusing on skin care.