WITH SLOWING GROWTH, UNILEVER SAID LOOKING TO SELL PRESTIGE UNIT

Byline: Jennifer Weil

LONDON — Is another Calvin Klein company on the block?
Even though the climate for acquisitions has cooled, speculation is heating up again that Unilever PLC is poised to shed its prestige beauty business — which includes Calvin Klein Cosmetics. Industry sources say the Anglo-Dutch consumer products firm has prepared a dossier with a view to securing a quick transaction with one of a select group of industry giants.
In addition to Klein, Unilever’s prestige beauty business includes fragrance licenses for Cerruti, Karl Lagerfeld, Chloe, Valentino, Vera Wang, Nautica and BCBG Max Azria.
Sources described Unilever’s beauty activity as non-core for the food and personal care giant. What’s more, the business has been lagging since its star brand Calvin Klein peaked with CK One in 1994, and hasn’t matched that feat since.However, there has been a burst of launch activity this year and the Vera Wang fragrance has been this spring’s runaway success in the U.S.
Unilever declined comment on the speculation regarding its fine fragrance division. Among the firms expected to be approached are Procter and Gamble, The Estee Lauder Cos., LVMH Moet Hennessy Louis Vuitton, Wella AG and YSL Beaute.
Beauty firms canvassed Thursday, including Estee Lauder and Procter and Gamble, declined to comment on whether they have been approached by or are interested in Unilever’s fragrance business.
Some industry executives note that this could be a difficult time to find a buyer, considering the chaotic condition of the U.S. prestige fragrance market right now. Last Christmas marked the first holiday selling season in nearly a decade that fragrances suffered a decline.
Unilever’s prestige beauty business is estimated to generate volume of some $853.5 million, according to industry sources. Of that, the Calvin Klein beauty business takes the lion’s share, ringing up an estimated volume of $673.8 million.
It is most probable that Unilever would sell its brands in a package, for 1.5- to 2-times sales. However, sources say Unilever might sell Klein separately.
Like many large companies, Unilever has been consolidating and refocusing its business. In 2000, the group sold its Elizabeth Arden business to what was then FFI Fragrances for $240 million. And just this week, Unilever sold 19 food brands to Associated British Foods for a reported $364.7 billion, bringing the number of divested Unilever brands to 709 in two years.
Speculation that Unilever might unload its prestige beauty business first surfaced last November, as reported in these columns. This followed years of speculation of a possible divestiture, dating back to 1997.
In March of 2000, Unilever stunned the market by reorganizing its Klein business into a larger beauty superstructure, called Unilever Cosmetics International, of which Klein was a division.
Two other divisions were gradually added. Laura Lee Miller headed one, which included the beauty licenses of Nautica, Wang and BCBG. The third division, consisting of European designer licenses, has the beauty brands of Karl Lagerfeld, Chloe, Nino Cerruti and Valentino.
Unilever declined comment during last November’s round of rumors. But the group under chairman Niall FitzGerald has never disguised its lukewarm attitude toward prestige beauty.
FitzGerald has set high performance targets for all of Unilever’s businesses and has not hesitated to dispose of even the most venerable of the company’s brands if they don’t meet his targets.
It was Arden’s consistent failure to meet profits targets — with little chance of an upside — that resulted in its eventual sale by Unilever.
While Klein had been a runaway success for the company, prestige fragrances now make an odd fit with the FitzGerald-led Unilever, which is increasingly focused on food and mass-market personal care products like soap, shampoo, toothpaste and detergents.
The group sees these categories as offering the potential for fastest growth, especially in the lesser-developed markets Unilever believes will become increasingly important to its future in the years ahead.
FitzGerald has said consumers in most lesser-developed countries buy ice cream, soap or toothpaste and the group wants an increasing share of their expenditure in these areas.
He never discussed prestige fragrances which, as a luxury product, are in much less demand in these developing countries and generally are not the type of global brands Unilever is backing financially.

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