BORGHESE TREATS ITSELF TO NEW BUSINESS PLAN, INCLUDING DOWNSIZING

Byline: Alev Aktar

NEW YORK — Borghese, the cosmetics company that markets skin-care products based on curative waters from the Terme di Montecatini spa in Italy, is giving itself a treatment it hopes will cure some long-seated ills.
It is being downsized and restricting itself to marketing and sales.
“We’re downsizing the company and taking it to a different business model,” said Georgette Mosbacher, who was named a member of the board last spring and who has been retained as a consultant. “It’s going to be a marketing and sales operation. Before, we did everything.”
Borghese, said Mosbacher, had its own chemists, lab and creative team.
“The trademark is world class, the quality of the line is fabulous, the positioning is great — it’s just a business model that didn’t work,” she continued. “It was a business model for a large company, not a company this size. We’re changing to a business model that we think is more suitable. We want to be lean and mean and more of a niche brand and really build on our heritage.”
Borghese has been going through a tough year.
In July, its president and chief executive officer, Teresa Townsend, resigned and has since gone back to her native England. This week, it was learned, employees were jolted by layoffs.
Meanwhile, a number of retailers pointed out that the line is underperforming. In addition, it is no longer carried at Saks Fifth Avenue, a key retailer in the beauty business.
Further, rumors are circulating that the company is on the block. In a brief statement this week, Borghese said it “is not for sale.”
In the last two weeks, there have reportedly been more than 20 people laid off in the marketing, creative, product development, quality control and planning departments. According to sources close to the company, there have also been significant layoffs in the field, although at press time it was unclear how many people had lost their jobs.
Sources estimate that the company employed about 135 people in the U.S., including a field sales force, before the shakeup.
A spokeswoman confirmed that there had been layoffs, but declined to reveal numbers or names.
Malcolm Watchorn, who was president of Borghese Ltd. in the Far East and a member of the board, and who became acting president and ceo following Townsend’s departure, declined to discuss the reorganization Thursday.
A spokeswoman, however, said, “We are a small niche brand and we have restructured the company in order to run it more profitably. The size of the staff will be more in proportion to the size of the company. We feel we are better streamlined now to meet those needs.”
As for the speculation that Borghese is for sale, two reported suitors are ICR, a manufacturer based in Lodi, Italy, and CEI, which is headquartered in Holmdel, N.J.
ICR distributes Borghese products in Italy, and CEI manufactures some Borghese products and does warehousing and shipping, according to Mosbacher. Neither was available for comment at press time.
When Townsend was named president and ceo of the troubled company in late 1996, she immediately set about making it over. She shortened the brand name to Borghese from Princess Marcella Borghese, dropped gift-with-purchase and purchase-with-purchase promotions, and developed a new “hospitality program” to improve service in stores.
However, sales this year are reportedly flat, with Borghese’s color business suffering in particular. The U.S. retail volume is said to be close to $50 million, and the company is reportedly losing between $10 million and $15 million annually.
Mosbacher declined to comment on the numbers.
Townsend had inherited a problem child. In a 1997 interview, she admitted that retailers were “feeling pretty low about the company” when she took over. She spent 10 months touring the country and calming buyers who were angry about late shipments, ineffective gwp programs and confusing reversals in strategy following Revlon’s sale of the company, called Halston Borghese at the time, to Arab investors in 1991.
Prior to Townsend’s arrival, the company had almost changed hands and there had been several changes in management. In January 1996, the company announced that a letter of intent had been signed by a group of investors to purchase Borghese. Two months later, negotiations collapsed and the Saudi owners decided to hold onto the brand. They did, however, sell the Nautica and Halston fragrance brands to Paul Sebastian and French Fragrances, respectively.
During the on-again, off-again sale period, Ray Baliatico resigned as president and ceo of Halston Borghese International Ltd. His departure was followed by the resignation in mid-March 1996 of Sherry Baker, former president for North America of Halston Borghese.
Townsend, who had served as London-based president of Halston Borghese for Europe, the Mideast, Africa, Latin America and Canada, arrived in November. She originally joined the company when Revlon sold it in 1992.
One department store executive said the Borghese business is flat and is still underperforming, compared with the department average. It is being evaluated at this time. The merchant complained that the company lacks vision, the marketing and sales teams are weak and there have been too many changes in field personnel.
Another retailer agreed that the company had gone through too many changes.
“Teresa had done a respectable job updating the brand, but it didn’t have enough of a point of difference, and there’s too much competition in the market.”