VERDICT ON P&G’S GIORGIO DEAL: IT’S A BEAUTY
Byline: Pete Born and Soren Larson
NEW YORK — “It’s a great purchase for them.”
That’s the opinion of Bloomingdale’s chairman Michael Gould about Procter & Gamble’s acquisition this week of Giorgio Beverly Hills. And it’s typical of the feeling throughout the beauty industry, which thinks that P&G has taken a bold step into the prestige market as a result of its deal with Avon Products.
Gould is no stranger to the parties involved; he was president of Giorgio from 1986 to 1991.
“Giorgio is not past its prime,” he said. “It just needs to have attention and money spent on it, and it’s going to get that.
“This is part of a major strategic plan by [P&G] to build a prestige business,” he added.
Andrew Shore, a security analyst for PaineWebber Inc., speculated that P&G was inspired by the growth in beauty of another consumer products giant, the Anglo-Dutch Unilever.
“They saw what [Unilever] did with Calvin [Klein Cosmetics] and the skin care brands of Elizabeth Arden, and they said, ‘Why can’t we do it?”‘ said Shore.
So far, however, P&G has had what Shore considers a “mixed” track record in beauty. The company’s prestige fragrance division, Eurocos Cosmetic GmbH, based in Frankfurt, Germany, has had “limited success,” Shore noted, and Cover Girl’s share of the mass cosmetics market dipped from 27.5 percent in 1992 to 26.3 percent in 1993.
Diana Temple, an analyst for Salomon Bros., said the Giorgio sale can allow Avon to explore new product categories, such as vitamins and the new lingerie line, both of which have contributed to recent sales gains.
She agreed that the acquisition of Giorgio will give P&G a strong presence, but cautioned there is a difference between that industry and the marketing of household functional products.
Allan Mottus, an industry consultant, emphasized that P&G is trying to stay in step with Unilever.
“Unilever has been going outside for acquisitions and [P&G chairman Edwin] Artzt takes that seriously,” he said. “This also puts both Giorgio and P&G on more solid footing. P&G can use Giorgio’s existing sales force, and it gives them a critical mass that will get retailers’ attentions,” Mottus noted.
“I think Giorgio will prove to be a valuable complement to the personal products business that P&G is assembling,” said Eugene Grisanti, chairman of International Flavors & Fragrances. He added, “It’s important that P&G consolidates its foothold.”