To the EstEe Lauder Cos., Donna Karan is a marketing wellspring.
“If you look at the brand and its values, Donna has a very strong point of view on everything,” said Veronique Gabai-Pinsky, senior vice president and general manager of Lauder’s Designer Fragrance Division. “She has a vision of life that will allow the brand to expand way beyond where it is today. The potential is amazing.”
Karan signed a licensing deal with Lauder in 1997 after five years of building her own beauty company, a formative period that was meteoric at first, highly innovative and somewhat controversial.
Lauder is now preparing two fragrance launches under the Donna Karan and DKNY banners, and this is just the beginning. As Gabai-Pinsky explained, the game plan calls for dramatic growth: “We do believe that we can develop the brand very steadily and double our sales within the next three years.”
She added that achieving “critical mass” would give the Karan brand the legitimacy and credibility in the eyes of retailers and consumers alike, which would create a platform and open doors to further product development, emboldened by the designer’s eclectic interests.
Karan launched her beauty company in 1992 with a signature fragrance that featured an unusually artistic bottle that was designed by her husband, vice chairman Stephan Weiss, who was also a sculptor. Weiss, who died in 2001, was the driving business force behind the venture, according to Jane Terker, the beauty company’s president. “He made it happen. It was his passion,” she said.
The initial fragrance and all the rest of the products — the line included 46 principal stockkeeping units by the time it was acquired by Lauder — represented a personal execution by Karan herself. For his part, Weiss “created packaging that looked like custom-made pieces of art. It was a wonderful collaboration between husband and wife,” Terker added.
Judging from reports from retailers, the brand’s packaging looked striking and beautiful to some consumers, but simply confused and perplexed others.
Ironically, what emerged as the champion of the brand, Cashmere Mist, was born out of Karan’s belief that instead of resorting to the industry practice of layering, the products should smell different. Some of the accords from the original fragrances were used as a jumping- off point to create a scent for body products, which in themselves achieved a higher proportion of sales than is the industry norm. That scent was later launched on its own as Cashmere Mist, which remains in the top five in U.S. department stores.
In the short term, Lauder will mark the 10-year anniversary of the Cashmere Mist women’s fragrance with a more intense, more sensual version, called Pure Cashmere Eau de Parfum, which will bow in August with updated advertising. Under the DKNY brand, the company will launch a women’s scent in the fall. An international launch is planned for next spring.
Gabai-Pinsky noted that the business is founded on the two brands. Donna Karan, “the iconic and timeless” brand, forms much of the U.S. business. DKNY, which she described as “in the moment,” is strong overseas. The former represents the soul and passion of the designer’s vision, she added, while the latter is a bit livelier and younger.
By building upon both pillars, Lauder hopes to create mass in terms of image and point-of-sale presence “to develop a cathedral for the brand, so people can feel the essence and spirit of Donna,” Gabai-Pinsky noted.
According to NPD Beauty, a division of the consumer marketing firm NPD, sales of all Donna Karan fragrance and beauty products in American department stores alone amounted to $55 million at retail for 2003. Of that, $46 million, or 84 percent, was generated by Cashmere Mist.
Lauder does not discuss numbers, but industry sources estimate that if Lauder hit its three-year target, the Karan business could grow to as much as $150 million, with U.S. and international volumes combined.
Karan decided to license the beauty company after investors in her publicly held company became restive under the financial burden of the start-up. Industry sources estimated that Karan invested $15 million to $20 million in the beauty company and eventually losses were narrowed to near break-even. One source estimated that the firm was finally losing $1 million or $1.5 million a year on sales of slightly over $40 million.
Terker, who described her tenure there as “an amazing, incredible once-in-a-lifetime experience,” said the beauty unit was challenged by the fact that it was part of an apparel company that then went public, thus depriving it of the necessary funding to do product sampling and make other moves needed to build critical mass. “The whole reason the company did not succeed was a lack of resources,” Terker said. Asked what could have been done differently, she replied, “I would have gone outside for investment.”