Byline: Jackie Cooperman

MILAN — Launched as a joint venture with great expectations, the Ferragamo and Bulgari fragrance businesses are looking to go their separate ways and drafting the terms for what executives labeled an “amicable separation.”
The deal breaks up a four-year-long partnership that started in March 1997, when Ferragamo and Bulgari announced the creation of Ferragamo Parfums SA. That entity produced fragrances both for Ferragamo and for Ungaro, the French fashion house that Ferragamo acquired in 1996. Under the agreement, Ferragamo and Bulgari each took a 50 percent stake in Ferragamo Parfums SA and formed two operating companies: Ferragamo Parfums and Ungaro Parfums. Bulgari was given management responsibility under a service contract.
“We wanted to take direct control of the fragrance business. It’s not a divorce, but a taking over of the business,” said Alexander Zschokke, Ferragamo’s brand director, explaining that the companies have been negotiating the separation for the past three months. “We are taking 50 percent of shares from Bulgari, which we both agreed to do. They’ve reached critical mass and don’t need Ferragamo, and we have developed our know-how.”
Bulgari’s fragrance business is now nine years old and includes eight scents, while Ferragamo, which launched its first scent in 1998, now has more experience under its belt.
Industry sources expect the split to be finalized by May. Under the new agreement, Ferragamo would buy back its 50 percent stake and bring its fragrance business in-house, staffing the new division with about 25 people.
The move comes as Ferragamo is consolidating its business.
“For the past 24 months, Ferragamo has been acquiring control of the company’s business and subsidiaries in Asia, to take control of the distribution,” Zschokke said. However, he and several industry sources said that, given the strong ties that exist between the Bulgari and Ferragamo families, the parting is anything but acrimonious. Bulgari will likely support its former partner through the transition, said sources. And it will remain the Ferragamo distributor, said Zschokke.
“We have about 7,000 doors worldwide and we won’t make major strategy changes. We’re distributed with Bulgari and this will not change,” he said. “Our subsidiaries, Ferragamo and Ungaro perfume, will keep their relationship with distributors.”
Under the joint venture, Ferragamo introduced two fragrances — Ferragamo Pour Femme in 1998 and Ferragamo Pour Homme in 1999. The two fragrances won awards, with Pour Femme taking the Italian fragrance industry’s prize for best women’s fragrance in 1998 and Pour Homme winning best new men’s fragrance, in limited distribution, at the American FiFi awards in 1999.
Bulgari, though, has been far more aggressive about product launches. Since the joint venture, Bulgari has created an extensive family of scents, each based around tea notes. Those include the women’s scent, Eau Fraiche; the women and children’s fragrance Petits et Mamans; the unisex Black and the women’s fragrance Blv, which joined the debut 1992 women’s fragrance Eau Parfumee; 1994’s Bulgari Pour Femme; 1995’s Bulgari Pour Homme, and Eau Parfumee Extreme in 1996.
While neither company would provide fragrance sales information, Bulgari’s overall sales in the first half of 2000 were $266.7 million, and their fragrance accounted for 13 percent, or $34.6 million, of that figure. In 1999, Bulgari sales were $440 million, and fragrance sales accounted for about 16 percent, or $70.4 million. Industry sources estimate that wholesale figures for Ferragamo fragrances were about $18 million in 1999, and about $12 million for Ungaro fragrances.
Ferragamo, Zschokke said, will continue to use the Italian firm ICR to produce its fragrances, but was not considering partnering with any beauty companies, like Procter & Gamble, with which Ferragamo was in talks to develop a fragrance in 1994. That agreement never materialized.
“We needed four years to get an understanding of this market in terms of managing and distribution,” he said. “If we wanted to give it as a license, we would have stayed in the joint venture with Bulgari.”
Another factor, Zschokke said, was the positive response to Ungaro’s Desnuda women’s fragrance, launched worldwide last Valentine’s Day. “We thought it was better to change on a strong note,” he said, adding that Ferragamo will be introducing a women’s fragrance in fall 2002.
“For Ferragamo, we have two successful products but we haven’t been very active in launches,” Zschokke said. “We’ve started working on products for next year and I think that the key is to make a very strong fragrance and to keep it very much in our image and related to our core business.”

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