CTFA: BOCA BRAVES ECONOMIC JITTERS
Byline: Julie Naughton
BOCA RATON, Fla. — What recession?
While the rest of the world seems concerned about an economic slowdown, beauty executives gathered here last week for the Cosmetic, Toiletry and Fragrance Association’s three-day annual meeting didn’t seem worried about it, judging by the heavy launch schedules they were touting.
Clairol’s launching a new hair color line that will beef up its best-selling range, Herbal Essences; Procter & Gamble is planning launches for nearly all its brands and Revlon has three major launches coming in the next three months — and they’re not the only ones.
Stephen Sadove, senior vice president of Bristol-Myers Squibb and president of its worldwide beauty care group, expects Clairol’s new hair color launch, Herbal Essences, to add as much as $150 million to the Herbal Essences franchise in its first year. That’s on top of a masterbrand that’s already expected to do more than $700 million this year.
“I feel good about the pipeline of product launches, and especially about this one,” said Sadove. “There’s room for growth in the hair color category, and it’s a category that has lots of segmentation and a high rate of incidence.”
Sadove also noted that the company has just signed boy band 98 Degrees for an Herbal Essences TV ad which will begin running March 26. “Herbal Essences is the number-one brand among teenagers, so we’re targeting some of this new advertising toward them,” he said.
Sadove was less talkative about the impending sale of Clairol by Bristol-Myers Squibb, which has decided to focus on its pharmaceutical business. Industry observers have noted that a deal could come in the next eight to 10 weeks.
Jeff Nugent, president and chief executive officer of Revlon, came to CTFA right after back-to-back telephone conferences with Wall Street. “I’m encouraged by the reactions we’ve gotten from retailers and analysts,” he said. “And as far as the economy goes, I’m less concerned about fluctuations than some of the prestige companies here.”
Nugent was much more interested in talking about his company’s launch schedule, which includes the new Almay Kinetin line for June, Revlon’s new Absolutely Fabulous lip color line, launching in April, and a new Revlon hair care line bowing in June. “The pulse of the business is new products,” said Nugent, who was accompanied by Revlon’s other top executives — Cheryl Vitali, executive vice president, and Vanessa Solomon, also executive vice president. Even former Revlon ceo Jerry Levin and his wife Carol, who have a nearby house in Boca Raton, showed up at the Givaudan party.
Jean Hoehn Zimmerman, executive vice president of sales and marketing for Chanel, spoke of the toughness of the American market versus the global market. “It’s a bit tough in some of the department and specialty stores,” she said.”The economy is affecting luxury brands. It’s a little early in the year to tell how it will shake out, but the first quarter seems to be soft for the industry in general. But I don’t expect this slowness to last.”
Chanel is launching several new products, including the Coco Mademoiselle fragrance in April. “We’re supporting the brand with major skin care and fragrance launches and three to four new color launches this year. I think we’ll do well.”
Joseph Horowitz, president and ceo of Groupe Clarins USA, admitted that 2000 was a rough year for the industry, “and I expect 2001 to be tough,” he said. “But I believe that we have the right recipe for growth.” Horowitz said that “a major second-half initiative” will boost the company’s color cosmetics business and he is expecting continued growth from the company’s new Hugo Boss Woman scent. “We already have a very strong men’s fragrance business, and we think that Boss Woman is going to be one of our strongest women’s scents,” he said. Horowitz is also looking forward to the late-spring launch of Gloss.com, in which Clarins is partnering with Estee Lauder Cos. and Chanel. “It will allow us to get a foot into e-commerce, and it will also allow us to direct sales to our department store partners,” Horowitz said. “I don’t know how much e-commerce we’ll do — probably as much as we’d do in a large door — but it will raise brand awareness. And we’re delighted with the company we’re keeping.”
Michael McNamara, president of Neutrogena, believes 2001 will be a “tricky” year. “We’re growing, but I think in general it’s going to be a tough year for mass market brands to grow,” he said. “The mass market retailer environment needs to be more open to bringing in new products. Also, customers are seeing alternatives to the mass market — namely, specialty stores. The competitive dynamic is changing rapidly.” McNamara is also seeing growth with some of its newer categories, like hair care. “Before we came out with the Clean line, our hair care business was down 15 percent,” he said. “A year into it, our business is growing and we have new products coming for the fall.”
Neil Katz, president of Liz Claiborne Cosmetics, noted that deep discounts in fashion made for a tough Christmas season, but said that Valentine’s Day was a bright spot for the company. “I think most of the fear [about the economy] is coming from the fact that most people had a tough Christmas,” he said. “But it will pick up. In fact, I’m looking for 20 percent growth this year for our business.” The Claiborne men’s business grew 15 percent last year, Katz said, and the women’s business is “holding its own.” Part of the growth this year, he said, will come from a pair of fragrances geared at Gen X that will be launched this August.
“I’m very optimistic about business this year,” Katz added. “We’ll be over $200 million in factory sales this year, which puts us on target to meet our goal of $250 million in factory sales by 2003.”
Laura Lee Miller, president of Unilever Prestige, is looking forward to the company’s BCBG fragrance brand, which launches in September. The much-anticipated Vera Wang fragrance will have a soft launch at Christmas and an official launch in early 2002, she said. “We’re looking forward to a good year,” she said.
So is Howard Bernick, president and ceo of Alberto-Culver, who said his year is already off to a “great start. In the first quarter, we had 12.9 percent sales growth and 13.5 percent profit growth,” he said. “We’re anticipating a great year. We’re ahead of schedule to reach our goal of $4 billion in global sales by 2006.”
Jess A. “Buddy” Bell, Jr., chairman and ceo of Bonne Bell, is also confident about growth. “We expect to be the number-five brand in mass cosmetics within the next three years,” he said. Despite the economic storm clouds, Bell said, “with our new products and our additional space in Wal-Mart, we’re in a position to double the size of our business in the next five years.”
Marc Pritchard, vice president and general manager of Procter & Gamble Cosmetics, who was at CTFA representing all of Procter & Gamble’s beauty brands, is planning launches that span every beauty category. They include Cover Girl’s new Outlast semi-permanent lip color, launching now; Max Factor’s LipFinity, also a semi-permanent lip color, which is currently rolling out, and Cover Girl Triple Mascara, which launches in July. “Our mascara business hasn’t been as strong as we’d like it to be, and Triple Mascara is addressing that,” he said. He noted that Olay’s Total Effects line will be extended to other parts of the body, including foundation and lipstick.
While both of P&G’s new semi-permanent lip color lines hit fairly high price points — $9.50 for Cover Girl’s Outlast and $12.50 for Max Factor’s LipFinity — Pritchard isn’t seeing a lot of price resistance for either. “With the two-step systems, people see the value,” he said. In fact, Pritchard said, value is a key word for P&G this year. “We’re pushing the value of our products, emphasizing the right and superior products with great packages at the right price,” he said. “There’s a complexity in how we’re looking at the whole value chain, and we’re learning now to be more global in the way that we run our businesses.”
But despite the massive launch schedules product companies are touting, Patrick Firmenich, vice president of fine fragrances worldwide for Firmenich, said he’s noticed slightly fewer new projects than a year ago. “I’m not sure if it’s seasonal or if it’s ongoing at this point,” he said, noting that his firm typically works a year to a year and a half out from new launches.
Firmenich is also keeping an eye on a proposed product-labeling effort by the European Union which would require manufacturers using 26 ingredients identified as possible fragrance allergens to put warning labels on their products. “We’re trying to keep the EU from implementing it,” he said. “No one wants that. As an industry, we need to lobby to reduce the effects of this effort.”
“This year’s CTFA convention marks Givaudan’s first as an independent company, and this year is an extremely important one for Givaudan,” said Errol Stafford, president of fragrances worldwide for Givaudan. “This year, we will be moving our fine fragrance creative centers into New York and Paris. This move ensures greater access and a closer partnership with our clients during the development process.”
“Everyone’s worried about the economy,” added Dick Goldstein, chairman and ceo of International Flavors and Fragrances. “But I think that consolidations in the consumer products industry bode well for the fragrance industry. It creates new opportunities for us. And many of the products we provide flavors or fragrances for are recession-proof.”
In fact, at least two oil houses are dabbling in new ways to build the scent category. Both Quest International and Mane USA were touting their new alliances to do Internet sampling; Quest’s deal with DigiScents and Mane’s with TriSenx will allow customers that buy a peripheral device to sample scents off the Internet. According to Dexster Smith, president of DigiScents, his peripheral will retail for about $200 and will be available this fall.
“What excites us is the potential not only for fragrance sampling but for the entertainment industry,” noted Paul Austin, vice president of marketing and new business development for Quest. “The digital scent market is unproven, but it looks promising. And at a time where the fragrance market is fairly flat, we want to spur a greater interest in fragrances.”
“We’re seeing it gain momentum,” added Paul Dreschler, chairman and ceo of Quest.
Thomas Dunleavy, president of Risdon-AMS USA, noted an increasing trend toward color identification — for example, matching the plastic coloring of a lipstick tube with the lipcolor inside. “People are trying to do more with lipcolor — moisture, SPF, etc.,” he said. “And while there was a tremendous surge in the lipgloss category about two years ago, that’s leveled off considerably.” Dunleavy, who will be retiring at the end of the month, will be succeeded by current vice president and senior sales executive Steve Pearlman.
Of the conference itself, Michel Mane, president of Mane USA, summed up the opinions of many when he noted, “There seem to be more magazines than marketers here.” And many agree that upping manufacturer attendance count is a task that newly elected CTFA chairperson Andrea Jung, ceo of Avon, will have to focus on during her two years.
While Jung, the first female head of the organization, wasn’t talking about her CTFA organizational plans quite yet, she was optimistic about Avon’s business for the year. “We spent last year strategizing; this year we’re implementing,” she said, noting that the company’s entry into the wellness category and retail sales are just two of the initiatives the company has planned this year.
In fact, the retail venture, BeComing, will not only drive growth in the U.S. when it is launched in Sears and J.C. Penney doors this fall, it will drive global business in 2002. According to Jung, BeComing will go global next year, heading into doors in Europe, Asia and Mexico. “Our focus for this year is launching it here,” she said. BeComing’s price points average twice as much as their direct-sales counterparts, said Jung, noting that a core lipcolor retails for about $5, while a BeComing lipcolor will retail for $9.50. “We don’t want to cannibalize our core; we want to add to the business,” she said.
Jung isn’t fazed by the predicted economic slowdown, either. “We have the ammunition to go up against last year,” she said, noting that the company’s sales were up 7 percent in 2000. “We’re predicting growth in the mid-single digits for this year,” she said. She added that she expects the new wellness initiative, which launches at the end of the second quarter, to add $50 million net to Avon’s numbers this year.
Globalization is a goal of E. Edward Kavanaugh, president of CTFA, also. “Over the next two years, we’ll be focusing more resources in the international arena,” he said. “The whole market has become so global that this is an important direction for us. In the short term, especially, we’re keeping a close eye on many things that are going on in Europe — like proposed fragrance labeling and animal testing regulations. In the long term, we’re refining our game plan for dealing with the rest of the world.”
That’s not to say, however, that the CTFA is ignoring the U.S. “In particular, we’re concerned about proposed FDA labeling restrictions,” he said.
And Kavanaugh is also keeping a close eye on Asia. “It’s still a work in progress,” he said. “But as Japan deregulates on April 1, I think it will open up the market significantly. We should see some dramatic breakthroughs there. And China is a huge opportunity.”
Although the conference also gave the market a chance to meet a few new ceos, including E. Scott Beattie of Elizabeth Arden and Isaac Cohen of New Dana, it wasn’t all work and no play. Firmenich held its annual boat ride on Lake Boca, while Givaudan hosted Club Givaudan, a Forties-themed dinner complete with a swing band and dancers.
IFF tapped party planner Robert Isabell to create a vintage Miami-nightclub feeling that included a sushi bar, a deejay spinning danceable tunes and huge, Austin Powers-type couches to lounge on, accented by Robert Wilson-like lighted cube tables. And both Quest and Takasago International held receptions. The annual chairman’s dinner, honoring Look Good…Feel Better, featured entertainment by comedienne Rita Rudner and dance music by the Kid Brothers Band.
Despite comments that the crowd seemed thinner than in years past, Kavanaugh said the conference attendance of 900 was on a par with last year’s total.