Leave it to the charm of the French.
Christian Courtin-Clarins, president and chief executive officer of the Clarins Group, addressed the beauty crowd with a disarming joke about his accent. But, by the end of the speech, an insightful and comprehensive analysis of the fragrance market since 1980, Courtin-Clarins had proposed a solution to a problem that bedevils the industry: how to rein in nonstop product launches and return to an era of sustainable profit growth. His answer: Stop haggling at retail.
“I had a dream,” Courtin-Clarins said, adding that he had been reminded of his vision while listening to William P. Lauder, ceo and president of the Estée Lauder Cos.
The Clarins chief said that, instead of constantly arm wrestling over margin, retailers and manufacturers should join forces, “go hand in hand and look at the reality of our business.” He continued, “Instead of always fighting over margin — because we need that margin money to bring people to the store — we need money to do advertising.”
Speaking from experience, he said, “When we reduced our advertising budget in many countries, we increased the number of promotions in the store. But we are just looking for the same customer; we didn’t bring in new customers.”
He then sharpened the point by alluding to another keynote address by Andrea Jung, chairman and ceo of Avon Products Inc. Courtin-Clarins said he was surprised to hear Jung say that the American consumer spends an average of $123 a year on beauty products. In France, the figure is $300 a year for more expensive products in selective, or prestige, distribution stores. The challenge, he said, is to convince American shoppers to fulfill their basic beauty needs in prestige outlets and raise the U.S. statistics to $300 or $350 a year.
Courtin-Clarins then went through an exercise, imagining what products the women in the room used that day, and he described a basket of products totaling $200. If those products have a shelf life of two months, the challenge for the industry is to get the customer to resupply six times a year, or spend a total of $1,200.
When asked later how he would do that, Courtin-Clarins said the first method is to increase advertising because brands must express themselves and there are more methods of expression now, such as the Internet. “Maybe we can also reduce promotion because you end up with the customers who are going to move from one promotion to the other,” he said. “You don’t build a brand on promotion. You build a brand on advertising, on service, on know-how, on many, many things. That’s my conviction. And the word conviction in our group is key, because without conviction, you go nowhere.”
In his presentation, Courtin-Clarins portrayed the fragrance market as both diversifying and consolidating over the last three decades, with the number of product launches spiraling upward and the success rate spiraling downward. Pointing to a sales growth rate of 1.5 percent, Courtin-Clarins said for 100 fragrances launched in a year, “80 will totally disappear in five years,” and three will rank in the top 30. “So it means that we maybe have to rethink the speed of launch,” he said, and “rethink the quality and the novelty to be really novel.”
Since 1980, the percentage of European perfumeries represented by chains rose from 14 percent to more than 75 percent, while the world market is becoming more global with the rise of new power players, such as travel retail and Brazil.
As for fragrances, single-brand houses such as Chanel are surrounded by groups. The top 10 represented 60 percent of the market in 2000, but by 2004, they accounted for 83 percent.
“Brands started to be less important for the big groups because it was more important to play the portfolio in order to increase their weight,” he said. “The brands have a tendency to disappear in this case.”
And the groups have become more segmented. In the Eighties, the category of companies called Couture, and including Yves Saint Laurent and Christian Dior, represented 70 percent of the fragrance market. The other camp was Cosmetics, companies such as Estée Lauder, which occupied 25 percent of the market. Now Courtin-Clarins has divided the fragrance market into seven families. The two most dynamic are Createurs — Thierry Mugler and Jean Paul Gaultier, for example — and Designer, meaning houses such as Calvin Klein, Ralph Lauren and Giorgio Armani.
The Clarins chief charted the personality differences between the two poles, pointing out that the Createurs often demand maximum support for their first scent. Designer-license companies, meanwhile, often pay more attention to the second effort. He pointed out that Calvin Klein’s first scent flopped, but Obsession took the market by storm.
In all of this, the consumer — who has grown tired of marketing gimmicks and is seeking environmental sustainability — has changed the most radically. Courtin-Clarins described her as “full of paradox,” mixing chic and cheap and shopping at both Colette in Paris — “the most snobbish outlet that you can find” — and Carrefour. “They will buy jeans and fashion; they love what is free and they love what is costly,” he said. “They love natural, but they do Botox, and now they are thinking more East-West than North-South. That’s the customer that we have to handle with a lot of care.”