Byline: Soren Larson / Janet Ozzard

CANNES, France — Executives from the travel retail industry who convened here this week face an uncomfortable reality: Their business is on the cusp of fundamental changes that could leave a number of players out in the cold.
The European Commission has shown no inclination to change its plan to abolish duty-free business in the European Union in June 1999.
Currency fluctuations and depressed economies in Asia have led to a slowdown in sales where steady volume growth had been expected. Consolidation has reduced the number of retailers, and has even brought some stores and vendors together — LVMH’s purchase of DFS in January is the prime example.
It all added up to consternation and uncertainty for the international crowd gathered for the Tax Free World Exhibition — which was, by coincidence, celebrating the 50th anniversary of the first duty-free establishment at Shannon, Ireland. There were 527 companies exhibiting this year, up from 512 last year. Lobbying efforts were intense throughout the 133,000-square-foot convention center here.
Not everyone was worried about the impending change. Several, especially companies relatively new to duty-free, said they weren’t concerned their growing businesses would suffer if duty-free were abolished. Travel in general is on the increase, they say, and an evolution is already under way.
The areas that would be particularly affected are ferry cities such as Calais, which depend on intra-European traffic; international airports, which will always have travel retail in some form, may not be as adversely affected.
But the abolition was the hot topic at the four-day fair, which ended Thursday.
Mickey Kantor, former U.S. Secretary of Commerce, spoke at the opening ceremonies Monday and expressed his support for the industry’s efforts to convince the EC to postpone abolishing duty-free.
“If in 1999 there is no renewal, you will lose so much — it would be, in fact, a tragedy,” he said. “What we’re fighting for today are the jobs at stake and the revenue [duty-free] creates, especially as airport transport becomes more important. When we have created this wonderful industry, why would we want to destroy it? This is not in the best interests of Europe.”
According to the Tax-Free World Association, the global group that organizes the show here, the ban could jeopardize nearly 150,000 jobs — a heavy toll for those European countries already battling unemployment of more than 10 percent.
Duty-free sales topped $21 billion in 1996, of which fragrances and cosmetics accounted for $4.6 billion. Europe generated nearly 50 percent of the beauty volume.
The predicament has those retailers who have built their existence around duty-free especially worried. Dan Sten Olsson, chairman of the Swedish ferry company Stena Line, called it “an absurd situation.”
“The EU ferry business is the largest customer the duty- and tax-free industry has,” he said. Without tax-free shopping, the number of passengers would decrease by half, he predicted, which would mean Sweden and Denmark in particular would be worse off because of “a weaker infrastructure, less trade and a smaller tourism sector.”
Jean Fleury, chairman of Aeroports de Paris, said the end of duty-free in Europe would eliminate a lucrative segment that provides steady taxes to governments and jobs. The search for income has become “a real obsession for airports,” he noted, even though traffic in Paris has grown an average of 4.1 percent a year for the last five years.
“Duty-free purchases are by nature impulse buys,” he argued. “These purchases would not all be transferred to duty-paid shops. Moreover, this loss would not be compensated for by a rise in sales in the domestic market.”
Members of the trade have banded together in a lobbying campaign designed to convince the EC to retain the status quo. Many of the visitors were wearing blue ribbons to express their support.
A good portion of the showgoers were optimistic. At the end of a symposium on Tuesday discussing the 1999 deadline, audience members were asked whether they thought they could succeed in their efforts to postpone the decision. Nearly every hand went up.
“I’m more convinced than ever that [duty-free] will continue,” said Walter Farnsteiner, president of Eurocos, which does between 20 and 30 percent of its sales in travel outlets. “The industry as a whole has been able to convince the government of its importance.”
However, retailers and vendors were hedging their bets and preparing strategies to deal with a new landscape in 2000 and beyond.
Christian Courtin, president of the international division of Clarins, said duty-free has become “very innovative” in merchandising.
“If you look at the stores, they are changing their look every two to three years,” he said. “It’s also a fantastic showcase when you count the number of people who cross the airport.”
“Duty-free shopping is not about just buying less expensive. We are providing a beautiful space where customers feel comfortable,” added Chantal Roos, president of Beaute Prestige International, who was showing new merchandising displays for the Issey Miyake and Jean Paul Gaultier fragrance brands.
DFS, the world’s largest travel retailer, is already concentrating on downtown units that cater to travelers, not bargain hunters. However, even DFS is frustrated.
The new Hong Kong location, Chek Lap Kok, which is slated to open in April, will have a vast array of stores in a conglomeration called the Hong Kong Sky Mall. All the bids for space have been accepted — and DFS did not receive a location, though it made a $1 billion bid.
While many eyes are turned to Hong Kong and other Asian markets as the source of future growth, not all is proceeding as hoped. Sales in the Asia/Pacific region for many suppliers are down 15 to 20 percent, according to Peter Midwood, executive vice president and general manager of Elizabeth Arden’s international division, due to currency devaluations and the depressed economy in Japan.
A major problem in Asia — setting consistent pricing strategies — is a huge concern for vendors when it comes to travel retailing, Midwood said.
While the industry may be having its growing pains, the convention also had its usual abundance of new product launches on display. Among the names making news:
Lancaster executives aren’t talking, but sources say the company is working on Isabella Rossellini’s first fragrance, called Manifesto, which will be launched next year.
Five Star Fragrances, which acquired the Vicky Tiel license from Parlux this year, showcased Ulysse, Tiel’s first men’s fragrance. Taking its name from the French word for the Greek warrior Ulysses, the scent will be launched around the world in March. In the U.S., it will be sold alongside Tiel’s Sirene fragrance, in limited distribution at Neiman Marcus, Nordstrom and Bergdorf Goodman.
Jeffrey Dame, president of Five Star, said he expects each brand to have a global wholesale volume of $4 million to $5 million in 1998.
Bulgari presented a new unisex fragrance, Black, that’s packaged in a glass and rubber bottle designed to look like a camera lens. It is rolling out worldwide and should be in 7,000 doors by 1998. The 75-ml. version goes for $46. A bath line will follow in about six months, as well as a possible 40-ml. size. The brand’s volume is expected to equal the firm’s bestseller, the signature women’s scent.
Francesco Trapani, president of Bulgari Parfums, said the company may test color cosmetics late next year.
Kenzo Jungle Pour Homme launched in duty-free and will roll out at the beginning of next year, starting in Europe and then in the Mideast and Latin America. The scent is packaged in a clear glass bottle with a brush on the cap striped to look like a zebra mane.
The parent company is still working on recreating its American distribution after pulling it from Givenchy in what president and managing director Pierre Broc described as a “strategic decision.” He said the company will focus on building presence in major cities such as New York and Los Angeles.
Wella’s new Cosmopolitan Cosmetics division was in attendance and executives were talking about Envy for Men, the follow-up to Envy, which will be presented to the press in January.
Escada’s sixth limited-edition seasonal fragrance — to be launched in the spring and sold through the summer — will be called Sunny Frutti. About 1.1 million pieces will be shipped; purses, scarves and scented candles will be part of the promotional arsenal. In addition, Escada has packaged miniature versions of all six seasonal scents together as a limited-edition item.
Fred Hayman’s Hollywood, the newest effort for Hayman by Parlux, which holds the designer’s fragrance license, will hit the Mideast late in the year before arriving in the U.S. in time for Valentine’s Day. The new brand, which is designed to exude Hollywood-style glamour, is expected to pull in $20 million at wholesale worldwide next year, according to Zalman Lekach, president of Parlux.
Givenchy hosted a clandestine gathering — where press was excluded and buyers were sworn to secrecy — to unveil its next fragrance. The women’s scent, an extension of Amarige called Extravagance d’Amarige, will be launched in May.
L’Oreal presented its Natural Sea Beauty skin care line, created in conjunction with its Israeli subsidiary, Intercosmetics. The 19 sku’s, which include body scrub, bath salts, moisturizers and mud scrubs, are made with Dead Sea minerals and will hit the U.S. and Canada in January. The line is priced about 50 percent higher than Plenitude, said Gil Leurent, duty-free manager for L’Oreal. The company also introduced line extensions for its Harley Davidson fragrance called Hot Road and for its Daniel Hechter line, called XXL.
Fashion brand Les Copains will have its first women’s fragrance on the market in Italy in November. The scent will roll out to other markets next year. Eurocosmesi, which also showcased its Iceberg Universe brands for men and women, is marketing the scent.
Trussardi introduced its new eau de toilette, Light, in versions for women and men. The scent, available only in a 75-ml. size, is targeted at 18-to-25-year-olds.
Elizabeth Arden was displaying its new Very Valentino and Jako by Karl Lagerfeld fragrances, as well as a new merchandising look for its treatment and color cosmetics lines. The self-serve displays will take about two years to be in all Arden duty-free shops, said Midwood. Arden does about 15 to 20 percent of its business in duty-free.
Perfumers Workshop threw a cocktail party for Sonia Rykiel’s signature scent, which is hitting the duty-free shops in a variety of packages, along with a bath and body line. The company is also extending its Samba line with two new fragrances, Zipped for men and Unzipped for women, that are being launched simultaneously now.
Jacques Greep’s Parfums de Paris is rolling out Stradivarius d’Arman, a new line done in collaboration with Arman, the modern artist known for his sculptures with musical instruments. The red, yellow, blue and limited-edition clear bottles are shaped like violins. Parfums de Paris is also launching actor Alain Delon’s Pharos for men and Lyra 3 for women.
Tiffany introduced an alcohol-free Trueste Voile Parfumee and Silkening Body Voile cream, to be launched for spring 1998.
La Perla, which recently signed on LPI as its North American distributor, plans to add to its fragrance stable with Parfum Prive. The scent will arrive in Italy in November; foreign plans are still in the works.
Gary Farn Ltd. will launch a new St. John fragrance next spring. Gary Farn was making the rounds at Cannes and said he may hook up with Eurocosmesi as the U.S. distributor for Les Copains.
The first 007 fragrance — called Bond, James Bond — will arrive in conjunction with the next Bond movie, “Tomorrow Never Dies.”
“We want to be in the U.S. in time for the film in December,” said Bengt Runars, president of the Stockholm-based AB Barlach, which holds the Bond fragrance license worldwide.
He has already lined up distribution in South America and Europe for a launch next month. “We know it’s a great name,” he said. “It can be different things to different people — high tech or romantic.”
Bond L’Homme is in the works for next spring.
Back in Paris, Michel Mosser said he will resign, effective Jan. 1, as president of the Federation des Industries de la Parfumerie, France’s beauty industry association.
Mosser has been with the Federation since 1987.

load comments
blog comments powered by Disqus