PARIS — Michele Scannavini has led Lancaster Group Worldwide, Coty Inc.’s prestige beauty division, for the past two years. During his tenure the business has skyrocketed, posting a phenomenal 58 percent sales uptick.
Scannavini spoke with WWD’s Jennifer Weil about Lancaster’s strategy, its hot Jennifer Lopez brand, two American designer fragrance businesses and a wealth of international and regional names.
WWD: Tell me about the past two years at Lancaster.
M.S.: I think they have been very, very positive. As an organization, we have achieved important targets in terms of economics and ensuring we have set up some healthy basics for future development.
In fiscal 2002 [ended June 30] we made slightly less than $500 million. Last year we hit $605 million. And this year we’re going to hit $755 million. In 2004 we had an increase of 30 percent, and from fiscal 2004 over 2002 the increase was 58 percent in terms of sales.
I think these are very good overall achievements, even more so considering what’s happening in the market. We were hit quite severely by the difficulties Germany [Lancaster’s most important market in Europe] is facing. But nonetheless, we were able to achieve such results.
WWD: How much did the businesses from the Marc Jacobs and Kenneth Cole licenses, acquired last year, contribute to Lancaster’s sales?
M.S.: We made $65 million this year with Kenneth Cole and Marc Jacobs. So our growth without the acquisitions was 19 percent.
WWD: What are you most happy about?
M.S.: First, I think the most relevant achievement came from our business in the U.S. In fiscal 2002 our business there was about $70 million. This year we’re going to end at around $190 million. This is due basically to three factors: First, Jennifer Lopez, which brought not only sales, but most importantly big visibility to Lancaster in the country. [It also gave us] a good reputation for being able to detect the right trend at the right moment, and also for being innovative concept-wise. You know perfectly well the industry was skeptical about the development of Jennifer Lopez. So in a way, everyone has been surprised [by its success], and Jennifer Lopez has initiated the celebrity trend. It has become the politically correct thing for everybody in the industry to have at least one project with some celebrity.
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The second achievement was clearly the acquisition of the Kenneth Cole and Marc Jacobs licenses. Out of the $65 million they generated, around $50 million came from the U.S.
We have to say that so far, we have developed strong plans for Kenneth Cole, [which is doing tremendously well]. We expect 2005 to be the year of Marc Jacobs, with the launch of Marc Jacobs Blush as the first initiative with us.
So far with Marc Jacobs, we have just managed the business we inherited. But we didn’t come up with any major new initiatives while we focused on Kenneth Cole.
The third achievement is the development of our brands in the U.S. After fiscal 2002, we were basically [known for] Cool Water — Cool Water Men and Cool Water Women. I think that due to the success we had with Jennifer Lopez and Kenneth Cole, and because of some of our new projects’ quality, we were able to get excellent results with more traditional houses like Davidoff as well. The launch of Echo in the U.S. has been a great success. At launch, it ranked number four for the first three months.
So the combination of the new licenses, new businesses and the strengthening of the Kenneth Cole house brought our U.S. sales from $70 million to $190 million. With that kind of business, we are among the top five in the industry. With the Lancaster group, we were number 11 in 2001, number nine in 2002 and number six in 2003. Today we’re number five and are aiming to become number four by the end of the year in the U.S.
WWD: Please discuss your North American business further.
M.S.: Our first objective there two years ago was to become relevant in the world’s market, and I think we’re on a good track. The results so far are pretty good. As a matter of fact, in 2002 North America was 15 percent of our business, and today it is 25 percent.
WWD: What other markets are going strong?
M.S.: Travel retail is growing pretty well. This year we’re growing in Europe by 6 or 7 percent, despite its markets being pretty tough. I think we have robust development because our business is so widespread.
WWD: What is the breakdown of your business?
M.S.: It is still 80 percent from fragrance and 20 percent from makeup, skin and sun care. Because of the sale of Yue-Sai [to L’Oréal in 2003], next year Lancaster will lose part of its cosmetics business, so [the split] will be more in the area of 15 and 85 percent. But that 15 percent is the Lancaster brand, which is growing and developing the nonfragrance part of its business.
WWD: What made Lancaster sell Yue-Sai, and what did you learn from having the brand?
M.S.: We sold it because we are trying increasingly to focus on brands with global potential. The second reason is we are actively involved in strengthening and enlarging our business even through acquisitions. So we [made some buys], like of Marc Jacobs and Kenneth Cole. Already, these businesses are profitable in their first year. [Getting cash from the sale of a brand that we don’t consider strategic for the long term was another important motivation for selling Yue-Sai.]
Through Yue-Sai, we learned a lot about the Chinese market. I think we have the knowledge today to develop fragrance and to start thinking of how to develop the Lancaster brand in Asia. I think we now have all the elements to begin a new strategy there, both for us and for Coty Beauty.
I think Yue-Sai was a very, very, very positive experience.
WWD: What is the status of your Esprit brand?
M.S.: We are putting the brand more into the masstige area. So we are doing something with it like we did for the Rossellini brand. As you know, this area some call masstige is getting bigger and bigger. Sometimes a method that works really well is to develop and launch a brand in prestige and then to broaden its appeal through a more masstige approach.
We think Esprit is a perfect example of that, because when you think of the fashion house, it is not really very selective. The brand is very easygoing, accessible and young. So we thought we could have more of a business opportunity in broadening that brand into a more masstige area than in keeping it in selective.
We’re going to broaden Esprit starting in September, both in the U.S. and Europe. I’m increasingly investing in masstige.
WWD: What’s new with the Jennifer Lopez brand, which ranks second after Davidoff in your portfolio?
M.S.: It will end this year at around $120 million, so it means about 15 percent [of the total business]. It’s lucrative, and its growth versus last year is around 25 to 30 percent.
Now we’re clearly entering the second phase of the life of the Jennifer Lopez brand. Before, it was about establishing the new concept. Now it’s about how to manage a sustainable long-term business in a category like celebrities, which we know in terms of longevity always raises a question mark.
So on one side we are setting up a plan for which we want to provide our core target — teens — with fun and innovations yearly. This kind of target is very changeable, and people need one innovation after another. So we will focus on providing this and then exploring opportunities in areas other than fragrances.
WWD: Talk about Lancaster, the brand that recently went through a renaissance.
M.S.: Its reputation is very good, but the brand had lost momentum in years when our main competitors became very aggressive.
The results of the renaissance so far are encouraging. I don’t think we can really draw any conclusions before 18 months from now, so I want to suspend any final judgment until then. But at least for the first year, sales came back to growth.
The first market reaction encourages us to keep investing in establishing a full-fledged house for skin care, sun, makeup and fragrance. We have a very full pipeline for the next two, two and a half years, in all four categories.
WWD: What are some recent developments at Jil Sander?
M.S.: Following the rigorous evolution of the fashion house, now that Jil Sander is back, we are following her creative [lead]. We also plan to go broader than fragrance.
This year has been very good for Jil Sander. It’s growing by double digits, thanks to the launch of Pure, which is really the quintessence of Jil Sander’s positioning. We have plans to bring Jil Sander above the $100 million mark in the next couple of years.
Jil Sander is still a multi-local brand, so its geographic balance is strong in the Germanic areas and is developing now in some other countries, like Italy.
We bought back the distribution of Jil Sander in the U.S., so we are managing it now and plan to launch Pure there in a very selective environment of 300 doors. It’s going to be the comeback Jil Sander fragrance in the U.S. and will hopefully accompany the comeback of a very successful Jil Sander fashion business there.
WWD: What is the Chopard beauty business doing now?
M.S.: It is a very interesting brand that we didn’t make a top priority over the last couple of years. But now we are ready to do so with the launch of a new fragrance. I think Chopard is a good brand for our portfolio, because it represents the tip of the pyramid. So we’re thinking really of executing the marketing strategy for Chopard in a very tailor-made, one-to-one selective way, leveraging as much as we can from our partnership with the Chopard house to give this exclusivity. It’s going to take time. We are not in a hurry to see big volume or big turnover in a really short period.
WWD: What about the Kenneth Cole and Marc Jacobs businesses?
M.S.: In terms of size, Kenneth Cole and Marc Jacobs are becoming more important. If things go in the right direction, we could really shoot to get to a $100 million business within a couple of years.
The results are fantastic. Kenneth Cole Black remained steadily in the top five in its first year. So it makes us confident that it has become a reality in the marketplace. To remain in the top five for the full year is becoming tougher and tougher in each market, particularly in the U.S. There are not so many that have achieved this in the last few years. Kenneth Cole Black, in the last rating, was number four. So I think we have a very strong asset in the male area. Kenneth Cole is more a men’s brand, so it wasn’t a given that its launching a women’s product would have succeeded, because the first attempt was not so successful. But our first results have been very, very good.
The next scent is Reaction, which targets the hip generation and has a more accessible price. So this is the way we have beefed up the house.
As we said, we’re going to launch Marc Jacobs Blush. We have huge expectations for this. The strategy is to be very selective with a slow build. Then we’ll decide. It’ll roll out to no more than 700 doors. I must say, the excitement is enormous in the U.S. But what is even more interesting to me is the excitement in some European countries — the U.K., for instance, where Marc Jacobs is working tremendously well. It’s still the number one fragrance in Harvey Nichols. They go crazy for this brand. So I think with Blush we will really start the brand’s effective rollout in markets outside the U.S. The U.K. will be the first priority. But we will launch Blush in France, as well as in Germany, Belgium and Asia.
WWD: What are the strengths of the Vivienne Westwood brand?
M.S.: It is a very niche brand that gives us an opportunity because of its Englishness. It ascribes to a current trend coming from things U.K.-related. We’re going to launch a new product called Anglomania in the U.K. before Christmas. It will then come out in the rest of Europe.
WWD: Please describe your Nikos brand.
M.S.: It’s a small brand that is very profitable. We are preparing a specific strategy for it in Asia.
Japan is very interesting. Its fragrance market is still very small. But it’s totally targeting young people. That is because the new generation is less affected by tradition. You know, fragrance is very difficult to develop in Japan, because it’s traditionally considered impolite there [to encroach on other people’s personal space]. So if your smell is invasive, it is against Japanese culture. Young people’s mentality in Japan is becoming increasingly Occidental, and we see fragrance sales developing fast for that group. That’s why Jennifer Lopez was so successful there.
WWD: So will some of the new Nikos concept products come out soon?
M.S.: Not so soon. We have to find a way to make this project embraced by some celebrity in Japan, because the impact of a celebrity there is by far the highest in the world.
WWD: Are you looking out for more acquisitions?
M.S.: Absolutely, yes. I think our portfolio is strong enough to ensure us very healthy future growth. If nothing new is happening, it’s fine. We have our goals planned solidly for the next year. But I think our company is also ready to manage some more intense acquisitions, provided they really add value. We’ll keep our eyes wide open.
WWD: Will you consider adding to your celebrity portfolio, in particular?
M.S.: We keep on exploring celebrity possibilities but are ready to go for someone only if [he or she] could bring a totally new approach, a totally new concept to the market.
WWD: Where are you seeing regional growth opportunities?
M.S.: This year we grew 40 percent in Russia. Then we have Asia. Excluding China, where we were impacted by the sale of Yue-Sai, we grew 30 percent. And there’s India, which is developing quite fast — more or less at 30 to 40 percent.
If we exclude the new acquisitions, we are growing by 20 percent overall. So we are keeping the fastest pace of growth in these emerging markets.