THE LIMITED’S GRYPHON TESTS ITS WINGS

Byline: Pete Born

NEW YORK — When The Limited chose Gryphon — the winged lion — as the name of its beauty think tank in 1988, there was more at work than corporate hubris. Gryphon Development is now taking flight.
The company, The Limited’s in-house manufacturing unit, has signed a list of deals to develop toiletries brands for other companies, mostly retailers.
In effect, Gryphon — and by extension, The Limited — has gone into business as a supplier for private label ventures while continuing to nurture the two Limited beauty brands, Bath & Body Works and Victoria’s Secret.
Last year, Gryphon marketed lines for the QVC TV shopping network, Target and Mervyn’s. The Target brand stumbled, but will be relaunched in April.
The latest developments involve introducing brands this year for the Walt Disney Co. and Sears, Roebuck & Co.
“My goal is to build the biggest and most profitable toiletries and personal care business in the U.S.,” stated Robert J. Ruttenberg, president of Gryphon, which was founded eight years ago as a joint venture between The Limited and Ruttenberg and his then-partner, George Friedman. The Limited, based in Columbus, Ohio, subsequently bought out the partners and Ruttenberg stayed on as the head of Gryphon. Since then, Gryphon has become one of six divisions of Intimate Brands, a public company that is 83 percent owned by the fashion retailer.
Gryphon was the brainchild of Limited founder and chairman Leslie H. Wexner, who needed a vehicle to give him entry into cosmetics. The market turned out to be ripe for a Nineties brand of value-driven toiletries marketing, which The Limited supplied.
Since 1973, when he left EstAe Lauder, Ruttenberg has dreamed of eclipsing the Lauder brand’s retail volume in the U.S. — estimated at $1.3 billion for the last fiscal year ended June 30 — and he appears to be only a year or two behind.
By 1994, Gryphon had developed a $500 million retail business. It has a toiletries line rolled out through the Victoria’s Secret lingerie and bath shops, and another larger brand in the Bath & Body Works chain of freestanding stores. Although the company does not break out figures, industry sources predict Gryphon’s retail volume this year will reach $1.2 billion.
Sources estimate Gryphon ultimately could do 20 percent of its volume in businesses outside of the Limited family, or at least $200 million a year.
Fueled by aggressive store openings and increased sales in existing units as well as the outside projects, the 1996 projection is expected to double again — to $2.4 billion at retail — over the next three years, analysts say.
Last year, the Bath & Body Works and Victoria’s Secret lines chalked up same-store growth of more than 30 percent, according to industry sources. In addition, the number of stores keep growing. At the end of 1995, there were 498 Bath & Body Works stores — a number that is expected to grow to 748 by the end of this year.
Victoria’s Secret operates 221 lingerie shops which also carry some semblance of the toiletries brand.
There are 450 Victoria’s Secret bath shops built adjacent to the chain’s lingerie shops, and another 16 “side-by-side” stores are slated to open this year.
Of the $1.2 billion volume projection, sources estimate about two-thirds will be generated by Bath & Body Works and the remaining third by Victoria’s Secret.
Gryphon’s five outside projects are expected to yield brands consisting of a combined 600 stockkeeping units, Ruttenberg estimated. By comparison, the Bath & Body Works boasts 900 sku’s and Victoria’s Secret, 550. Of the five, Disney and Sears are expected to generate the most volume.
Gryphon plans to launch a men’s fragrance and women’s scent for the Limited’s Abercrombie & Fitch division in the fall. In addition, the company is working on a brand for an undisclosed Limited division that does not now deal with Gryphon.
The company is contemplating venturing beyond its familiar terrain of toiletries, skin, hair and body care into color cosmetics, Ruttenberg said.
Here is a rundown of the new, outside brands:
* There will be three toiletries lines for Disney: an infants’ line, a bath collection for children and a seven fragrances for girls based on Disney’s female role models, such as Cinderella and Pocahontas. The target launch date is May 15, coinciding with the planned opening of Disney’s New York store on Fifth Avenue. Distribution will be rolled out to 30 Disney stores and two theme parks.
* The Sears brand, called Time Out and consisting of 160 sku’s of personal care and body products, toiletries, fragrances and accessories, is due to be launched Aug. 15 in 200 Sears stores. Distribution will be expanded to another 100 doors in the chain by the end of the year.
* The Mervyn’s line, Pacifica Produce, is based on a California theme, with toiletries containing fruity and floral notes. Prices range from $3.99 for a lip gloss to $20 for a gift set. Ruttenberg said the line is doing well enough to have been granted extra wall and shelf space in the 300 stores of the California-based chain.
* The Target brand, French Country Bath, was launched in 35 stores last fall and floundered, according to Ruttenberg. “The packaging was too convoluted, too confusing and too discombobulated,” he said. “I take full responsibility.”
The line has since been repackaged and repriced. “The concept is still French,” he said, “but it’s not as sophisticated. It’s much cleaner and easier to understand.”
Individual products start at $1.99 for a 2-oz. shower gel. Gift sets run from $4 to $16.99.
One art Gryphon had to master was pricing that sparks sales, but provides attractive margins. “It was a struggle for us,” Ruttenberg noted. “Price sensitivity in this arena is extremely important.”
* Intimate Brands made its debut on QVC last October with a show called Abby’s Garden, which depicts a mother and daughter making products from home-grown ingredients. The toiletries line of 58 sku’s is organized in sets, priced from $20 to $50. The show has been broadcast five times, with strong sales results, according to Ruttenberg. QVC executives could not be reached for comment.
Ruttenberg added that Gryphon is working on two other businesses for QVC, including a collection of fragrance accessories for the Kenneth Jay Lane jewelry brand.
Ruttenberg said one of the biggest advantages of his operation is that his company owns its own retail universe; he is free to spend his time creating products, rather than haggling with store executives.
“Do you realize how much energy is saved by not fighting with each other all day?” he asked. Cosmetics industry analyst John Horvitz agreed real estate ownership is a major plus. “They get real estate at 5 percent less than anybody in town,” he said, adding, “It’s not only the price of the real estate, but the quality. Wexner has the best locations there are in terms of sales per square foot.”
The Bath & Body Works stores and the Victoria’s Secret Bath Shops are headed by Beth M. Pritchard, president and chief operating officer. The stores are a division of Intimate Brands, like Gryphon.
Ruttenberg pointed out that by owning the real estate, Intimate Brands gets an extra profit margin — once when Gryphon delivers products to the stores, and a second time when products are sold to the consumer.
He declined to cite profit figures. But Richard Baum, retail security analyst with Goldman Sachs, estimated Gryphon’s pretax profit percentage is in “the mid 20s.” Baum, who did a major study on Intimate Brands in December, figures that the margin gained by Limited’s largest competitor, the Body Shop, is “somewhere in the teens.”
Speaking of the Intimate Brands operation, he said, “It’s certainly the best specialty operation in the field. It’s the largest, the most rapidly growing and the most profitable. What else is there?”
Industry consultant Allan Mottus noted, however, that Gryphon should trade up to make higher-margin goods that are more common to department stores, rather than continuing with drugstore-oriented merchandise. In other words, there should be more focus on prestige fragrance, rather than toiletries, and more skin care and color cosmetics. Gryphon is already marketing the former and studying the latter.
Gryphon gauges the profitability of each sku as it continually spews out a stream of new items. This year, Bath & Body Works will have 300 new sku’s and Victoria’s Secret another 100.
Ruttenberg traced the evolution of the new private label initiatives to a conversation he had with Wexner a year and a half ago, when The Limited took control of Gryphon. “He said,” Ruttenberg recalled, “that if we didn’t do it, someone else would.”
The head of Gryphon credited Wexner with being the first to fuse manufacturing and retailing with product development, merchandising and promotion under one roof.
Wexner, whose background is in retailing and fashion, played a decisive role in The Limited’s entry into cosmetics. “In some cases, he gets more involved than I do,” Ruttenberg said. “He even gets involved in naming products.”
This is noteworthy, Ruttenberg said, because Wexner has no background in packaged goods.
Ruttenberg added that it was Wexner who had the idea for the down-home ambience of Bath & Body Works, with its country-store decor. “It was a totally new twist at that time,” Ruttenberg recalled, remembering the mood of the early Nineties. “Everything was green and recyclable and he came up with the heartland image of a small-town shop in Ohio.
“We had worked hard to set ourselves apart from the New York cosmetics world,” Ruttenberg continued. “Otherwise, we would be just another company in a string of companies.”

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