GERMAN FIRMS ON FAST TRACK
Byline: Melissa Drier
BERLIN — Germany may be feeling the effects of a sluggish economy and high unemployment, but there’s no shortage of movement in the country’s beauty business.
Fragrance vendors are launching new products with an eye on local success as well as a strong presence abroad; Wella has been generating strong-enough scent sales to create a new subsidiary. Meanwhile, Douglas — the largest German beauty retailer — has opened its largest store to date, and more like it are in the works.
Wella’s Cosmopolitan Approach
Now that Wella has split its business in two, the company is focusing on developing a fragrance presence to match its traditional power in hair care.
“Our first goal is to be the best known and most competent hair care supplier worldwide, and this can be accomplished when [the company is] focused on hair,” said Jorg von Craushaar, chairman of the Wella Group, based in Darmstadt. “But then in our second core area, fragrances and cosmetics, we also aim to belong to the top five suppliers worldwide. We had to separate the businesses.”
The result was the consolidation this month of Wella’s fragrance and cosmetics brands under a new holding company, Cosmopolitan Cosmetics, based in Cologne. This side of Wella’s business has “been so strong, it needed a home of its own,” von Craushaar asserted.
In 1991, four years after gaining a foothold in the scent sector with the acquisition of Rochas, fragrances and cosmetics generated 181 million marks in Wella sales. The figure jumped to $376 million (662 million marks) by 1996 and this year, Wella is projecting $426 million (750 million marks).
Total group beauty sales for 1996 reached $2.262 billion (3.529 billion marks), and Wella expects to end this year with a sales rise of about 7 percent.
The new subsidiary brings together the prestige brands Gucci, Rochas and Charles Jourdan, along with mid-market and mass market lines that had come under the Muelhens umbrella, such as Priscilla Presley, Gabriela Sabatini, Puma, Galileo, Tosca and 4711.
As previously noted, Heiner Gurtler, a member of the management board of Wella AG, has been named chief executive of Cosmopolitan Cosmetics. The new holding company not only will help tailor the cost structure of Wella’s perfume and cosmetic activities, but will help “establish a new profile and unified commercial culture” for these areas, he said.
Cosmopolitan Cosmetics has production sites in Cologne and Poissy, France; five regional distribution centers, in Miami, Singapore, Dubai, Paris and Cologne, and employs 1750 workers worldwide.
Two marketing divisions will be maintained — one in Paris for prestige brands and another in Cologne for mass offerings. For the time being, Intercosmetics, the American operation, is unaffected by the new centralized structure.
Both Rochas and Muelhens traditionally have generated 80 percent of their annual sales in Western Europe. Cosmopolitan now plans to establish daughter companies in emerging markets.
“I believe Latin America and Asia are the markets leading to growth. By the end of the year, we’ll be in Mexico, and Brazil, China, Korea, India and Indonesia are planned,” said Gurtler.
Gurtler sees variety as Cosmopolitan’s strength: “Gucci is a cosmopolitan brand. It has different success in different countries, but it’s global, as is Rochas, though clearly French and one that will do well where French brands do well.
“We will build 4711 into a global brand,” he continued, noting that while 4711 is “globally known, sales outside of Germany haven’t been significant.” Cosmopolitan’s recent licensing agreement with designer Anna Sui also reflects global objectives, with Asia — Japan in particular — in the forefront.
“In our multicultural portfolio, a piece was missing in Asia,” said Werner Hofmann, regional vice president for North America, Asia, the Far East, Africa, Northern Europe (including the U.K. and Ireland) and European duty-free. The first Anna Sui fragrance is expected to be launched worldwide in 1999.
In the American fragrance market, Wella is a fairly new player, having emerged only two years ago. Market sources project the company’s U.S. sales will be about $40 million at wholesale this year, and $60 million is in sight for 1998.
Gucci Envy leads Cosmopolitan’s U.S. prestige business and a men’s follow-up is planned for April. “The expectations are already high in the trade and we will meet the volume we did with Envy this year, even though men’s is usually smaller,” Hofmann predicted.
“Gucci Envy is a good example for a worldwide successful launch,” added von Craushaar. “It came on the counters worldwide in March ’96, and by the end of August, sales reached $39.7 million (70 million marks). [This year] sales will reach more than $57 million (100 million), which puts us not just at break-even, but already at payback.”
Douglas, Germany’s giant of beauty retailing, just keeps getting bigger. On Tuesday, the chain opened what it claims is Europe’s largest perfumery, a four-floor behemoth in Nuremberg with about 20,000 square feet of selling space and a sales staff of 90.
Douglas had announced the day before that sales in the first nine months in its 587 units rose 9.7 percent (6.5 percent on a same-store basis) to $668 million (1.17 billion marks).
Douglas said it expects its recent pact with LVMH — LVMH acquired a 30 percent stake in Douglas International, while Douglas took a 30 percent stake in Sephora, France’s biggest perfumery chain — to accelerate growth outside Germany.
Inside Germany, large-scale expansion is planned, starting with the Nuremberg unit, which is expected to generate annual sales of $11.4 million (20 million marks), according to Claus Mingers, the Douglas Group board member responsible for the Douglas Parfumeries division.
Another 20,000-square-foot store is planned in Cologne and similar branches are slated for Hamburg, Munich, Dusseldorf and Berlin.
The Nuremberg store’s basement is devoted to men’s fragrance, skin care and body care. The ground floor is devoted to makeup, with a makeup artist on staff.
The second floor is given to women’s fragrances, which are arranged according to scent families, such as floral or fruity, rather than by manufacturer.
Skin care is the focus of the third floor, which in addition to facial care includes a body care section, products for the sauna, accessories such as brushes and sponges and a VIP lounge reserved for Douglas Card club members.
Among the eye-catching elements are a waterfall that flows from the top floor to the bottom and a large stage where beauty companies can stage promotional events or concerts can be held.
The shop is an entirely open-sell facility and customers can easily see and reach products.
But Douglas continues to emphasize service and counseling. The idea, Mingers said, was to create a “world of experience” and clearly to present the entire range of brands.
“But this is not self-service,” he stressed. “We have made sure there is always someone there to assist and [service] will remain a big part of our success.”
Diesel’s New Fuel: Milk
It’s party time for Diesel Fragrances: The company has been throwing late-night bashes in youth-oriented nightclubs around Germany this month to plug the launch of Diesel Plus Plus.
Diesel is aiming to take a step beyond the unisex trend, and the new brand is described as “cross-gender.” It’s available in two scents — Plus Plus Masculine and Plus Plus Feminine — but the products are targeted to the consumer’s mood or temperament, rather than sex.
“We all have a female side and a male side,” said Alessandro Gualtieri, a junior perfumer and product manager at Diesel Fragrances. “We wanted to offer more than just one choice for everybody.”
Along with its gender-jumping, Diesel is using another marketing ploy for Diesel Plus Plus: The product line contains genuine milk extracts and the packaging is dairy-oriented. The eaux de toilette come in silver milk cartons. The white rubber bottles for the fragrances, body lotion and shower milk are reminiscent of old-style milk bottles, and the display units continue the milk carton theme.
Gualtieri noted that in developing the concept, Diesel started “with white as a color, because we wanted something simple and pure,” then settled on a milk theme. The name Plus Plus was chosen “to communicate a sense of added quality.”
Plus Plus is rolling out in Great Britain, Germany, Scandinavia, Italy, Holland, Austria and Switzerland to about 6,500 perfumery and department store doors. The company is in joint-venture talks in Korea and China, and a U.S. launch is planned for next spring.
The goal through September 1998 is sales of one million pieces, according to Gualtieri.
Though Diesel is an Italian company, the Plus Plus distribution in most of Europe is being handled by the Dusseldorf-based Marbert Cosmetics, which is owned by Piofrancesco Borghetti, who also holds the Diesel fragrance license.
Launch activities vary from the German club parties to professional in-line skaters hired to skate around towns brandishing oversized versions of the milk-bottle scents. But the upcoming campaign may prove the most memorable.
Wanting to keep to the white theme, Diesel held a European casting of albinos. Looking like mermaids floating in a milky sea, a Scandinavian woman and a young Venezuelan man spent three days swimming naked in a tank before Diesel — known for provocative fashion advertising — hit upon the desired image. It is not known if it will be shown in the U.S., due to some bare breasts, Gualtieri noted.
Gualtieri admits he “drove several people crazy” trying to find a milk scent, experimenting with the smells of butter, sour milk and boiled milk before hitting upon a “creamy, very light, almost no-smell” fragrance.
The Plus Plus Masculine scent has a fougere note — a fragrant concoction traditionally used in men’s brands — introduced into the milky base; the Plus Plus Feminine version mixes in a floral accord.
The line starts with a 75-ml. eau de toilette of either scent for $28 (49 marks), and a full complement of body products is also available. Prices range from $8 (14.50 marks) for a soap to $22 (39 marks) for a Masculine face balm.