ARDEN TRIES A GLOBAL COMEBACK
Byline: Jenny B. Fine
NEW YORK — Now that Elizabeth Arden’s domestic business has embarked on the road to recovery, the company is applying some much-needed first aid to its international activity.
As in the U.S., Arden’s overseas business has been beset by problems.
Once a leader in the travel-retail market, Arden’s early thunder has been stolen by companies like Estee Lauder and Revlon. In the Asia Pacific region, Arden’s weak distribution network jeopardized its brand image, executives said. In Europe, a fragmented market position, particularly in skin care, depressed profitability.
The only bright note on the international front, executives conceded, was Latin America, a region that remained relatively unaffected by Arden’s tumultuous times during 1994 and 1995.
“The business is not as big as it used to be, but it is still big,” said Peter Midwood, the executive vice president and general manager of international, who was brought on board in February of last year to spearhead Arden’s overseas recovery.
“Turning the business around is not a six-month proposition,” he continued, characterizing Arden’s well-documented decline as the company’s “blue period.”
“It took three or four years to reach that degree of difficulty, and to really get out of it will take three to four years.”
Although there has been speculation that Arden’s parent company, the Anglo-Dutch giant Unilever, is interested in unloading the company, Midwood quickly dispelled those rumors. “Unilever knows we need a little time to demonstrate that everything will come around, and in the meantime, they will look for evidence in what we are doing that things are turning around,” he said. “There is no issue with funding, providing Unilever continues to believe in what we are doing.”
Currently, Arden’s international business accounts for about half of its volume, which was reported to be around $850 million globally last year.
Although he declined to comment on the numbers, Midwood said the international side is expected to grow faster than the U.S. business this year, with company executives projecting double-digit increases.
The launch activity that the U.S. benefited from in 1996 will be transferred overseas this year, with products such as Arden’s newest women’s scent, 5th Avenue, and treatment introduction, Skin Illuminating Complex, currently making their foreign debut.
Executives hope the new introductions will help resurrect Arden’s image in key markets such as Europe, which Midwood noted would also provide a much-needed boost to the firm’s travel-retail business.
Arden’s cataclysmic series of restructurings two years ago, prior to the installation of the current management, culminated in the firm’s pullout from the Cannes Tax-Free World Exhibition in 1995.
“The travel-retail business mirrors the domestic business, so if you have a weak domestic business in a particular country, travel-retail follows suit,” Midwood said. “There is a limit to what you can do with special packs. You have to have a strong basic proposition and strong brand at the end of the day.”
But Midwood stressed Arden is back on track with travel-retail, citing the success of the six-bottle sets of fragrance miniatures that Arden introduced last year, as well as the company’s reappearance at the Cannes exhibit.
This year, Midwood continued, Arden plans to introduce about 15 new travel-retail packs of multiple skin care or fragrance products at Cannes.
In addition to big initiatives such as launches, Arden is also working region by region to sort out problems plaguing each area of the world.
While Arden’s fragrance business in Europe “is doing nicely and growing” — led by Cerutti and Karl Lagerfeld scents — the company’s skin care offerings have yet to gain a strong foothold, Midwood said.
“The key issue is to establish ourselves in skin care in the German-speaking markets, which comprise 10 percent of the world market and 30 percent of the European market,” Midwood said, noting that Arden also needs to establish its treatment business in France.
On the fragrance side, Midwood said the Lagerfeld brands — Lagerfeld and Photo colognes for men and Sun Moon Stars for women — are particularly strong in Germany, while Cerutti 1881 “is a brand whose strength continues to grow” across Europe.
However, Chloe Innocence, the company’s most recent launch, has only been “OK.” “It’s been acceptable, but I wouldn’t go any further than that,” Midwood said.
To further solidify its position in the European fragrance market, Arden set up a fragrance-development center in Paris last September, to create scents for its stable of European designers — Cerutti, Lagerfeld, Valentino, Chloe and Jean Louis Scherrer. “We felt that because the designers live in or around Paris, we needed to be close to the European business to get it right,” Midwood said.
But Arden’s biggest headache on the international front remains the Asia Pacific region, said Midwood.
“We had a number of issues there,” he admitted. “We did not have any management with integrity. It was a market where gray activity took place knowingly and on a scale that was unacceptable. They ran the business as a trading entity and not as a brand.”
In an effort to rectify the situation, Arden set up a regional office in Singapore, appointing Mark Scott, a former Christian Dior executive, vice president and general manager of the Asia Pacific region. New general managers were named in Japan, Korea and Australia, and for the travel-retail and distribution sides of the business.
“This will enable us to get the business running as we would like it to be,” Midwood said. “We’ll be moving well by the end of the year.”
Although skin care and cosmetics historically account for a larger percentage of a firm’s sales in Asia, Midwood said Arden’s fragrances are making a strong comeback there.
Fragrances accounted for 33 percent of Arden’s Asian travel-retail business in 1995, while color rang in at 36 percent and skin care 31 percent. Figures for 1996 were not available.
Arden is also reimplementing a regional marketing strategy for the international business — a strategy that had been abandoned, when previous management began eliminating products with limited regional appeal that were not considered cost-effective.
“We are paying more attention to regional needs,” Midwood said. “In our blue period, we were associated with centralization and an insensitive culling of existing ranges. We have to have a more local touch without getting into the excesses of too many stockkeeping units.”
As an example, he cited the removal of Covering Cream, a thick, high-opacity, tinted sunscreen marketed in Australia. Although not a product that would most likely appeal to American or European consumers, Midwood said it was a popular product with Arden customers south of the equator.
“That product may have sold about 15,000 units a year,” he noted, “but when we took it out, the product represented 15,000 loyal customers and 15,000 reasons to come to our counter.”
He added Arden is looking into the possibility of reintroducing the cream by the end of this year.
Likewise Arden’s eye products are being modified to better suit the tastes of the Mideast, where many women favor pronounced looks.
“Women in that region like darker, heavier products, particularly eye liners and mascara,” Midwood said. “That is not what our range is about, and we are currently looking at it.
“Those products are some of the most frequently purchased,” he continued, “and you can bet that if they’re going to Lancome for a mascara, they’re also hearing about Primordiale.”
While noting that its product assortment can use some fine-tuning, Midwood pointed out that it also represents a strength the company hopes to build on in the future.
“One of our strengths and weaknesses is the number of [products] we handle. Before, as effectiveness fell apart, running a complex business contributed to that,” he said. “But we believe that with the chance to take the time and attention, when you get it right, you get it right big.”