ANNA SUI’S THREE-CORNERED BEAUTY GAME

Byline: Pete Born, New York / Melissa Drier, Cologne

NEW YORK — Anna Sui, the latest designer to throw her hat in the fragrance ring, says she “always wanted to do a perfume.”
Now she is. As reported here Thursday, she has licensed Wella AG, the haircare giant based in Darmstadt, Germany, to create a scent.
“I’m a perfume girl,” she said Wednesday, shortly after the deal was announced. “I wear it a lot. But I’ve never liked that many fragrances. I’ve always dreamed of creating my own.”
But there is a practical side. In addition to the licensing royalties, which Sui described as a typical deal generating a percentage in the low-to-mid-single digits of sales, Sui said her new beauty venture will provide synergies by complementing the fashion.
Executives at Wella declined comment on volume projections, but industry sources estimate that the Sui fragrance business could hit $100 million.
Sui actually has two beauty deals in an unorthodox three-way partnership. Isetan, the Tokyo-based department store retailer, had the Sui license for all merchandise within Japan. Isetan had previously sublicensed color cosmetics and skin care to a family-owned Japanese firm, Albion.
When Wella entered the picture, Isetan waived its fragrance rights on the condition that Albion be made the Japanese distributor for the Sui fragrances produced by Wella. Under the agreement, Wella and Albion will sell their respective products to each other.
“For us, it’s a perfect deal,” said Werner Hofmann, one of Wella’s regional vice presidents. “It gives us great potential in Asia and a chance to work with a very good partner.”
He added that Wella will work with Albion — and together with Sui — to develop the designer’s beauty business.
“I’ve had meetings with retailers in North America, and they want the fashion and they want the makeup, even if they get the perfume six months later,” Hofmann said. “We will focus on exclusivity and specialty store distribution. Through the synergy of makeup, fashion and fragrance, I think we will put Anna Sui’s name on the map.”
Albion is developing a color cosmetics collection for launch in late August 1998, and Wella plans to introduce the first Sui women’s fragrance in 1999.
Reached in his Ginza office in Tokyo, Shoichi Kobayashi, Albion managing director, said, “The image of Anna Sui fashion fits very well with the image of Anna Sui makeup.”
The first priority, he said, is to develop a fresh and original color line that, in Kobayashi’s estimation, “could compete with American makeup artist brands.” Later on, he added, a skin care range can be developed.
Kobayashi said plans call for building distribution to 50 outlets, mostly department stores, in three years. He said the sales target is $24.7 million (3 billion yen) at current exchange rates.
On the Wella side, the Sui project will be handled by Cosmopolitan Cosmetics, a subsidiary that serves as an umbrella for the German company’s fragrance brands.
Cosmopolitan Cosmetics is headed by Heiner Gurtler, chief executive officer.
During a press conference in Cologne Wednesday, Wella not only unveiled the Sui deal, but also announced a reorganization of its beauty holdings. Cosmopolitan currently manages its prestige fragrances in Paris and its mid-market brands in Cologne.
Wella was negotiating the Sui deal at the same time it was pursuing a far less fruitful prospect — Donna Karan, who later signed with Estee Lauder Cos.
The Sui deal came first, Hofmann and Gurtler stressed, and the Sui license “would have happened anyway,” even if Wella had landed Karan.
Gurtler, who is also a member of Wella’s board for responsibility over fragrance, said he had “mixed feelings” over the outcome of the Karan talks. “We tried to establish a partnership and work together — preferably in a joint venture — to develop the beauty business with Donna Karan,” he said. “We were close to coming to an agreement, but with the new management [at Donna Karan], priorities may have shifted and they opted for a pure licensing agreement.
“Maybe if we had changed our terms, we might have had a chance,” he continued, “and Donna Karan is definitely a brand that would have fit into our strategy. But we also would have had lots of problems at the beginning.”
Gurtler cited cost-control problems and the possible return of merchandise from stores, which usually accompanies a change in ownership.
In New York, Rod Kosann, president of Anna Sui, said the company has prospered in Japan with its Isetan license. He estimated that 15 to 20 percent of the company’s $20 million global wholesale volume, including jeans and other licensing, is done in that market alone.
Isetan opened two freestanding Sui stores — one in Tokyo in May and the other in Osaka in September — with each measuring 10,000 square feet, much like Sui’s SoHo store in New York.
There are also shops-within-shops in five or six Isetan stores, and Sui’s fashion distribution numbers 40 or 50 stores, he estimated. Isetan also wholesales the clothes to other retailers through its Mammina subsidiary.
Kosann said he expects a significant ruboff from the fragrance and cosmetics launches around the world, boosting Sui’s fortunes in the core markets of Asia, Europe and the U.S.
He noted, “It is a great complement to our overall brand strategy. There’s a lot of opportunity in all parts of the world.”

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