Fragrances Co., Inc.
Joseph J Fortunato
May, 31, 2011
About Flare Fragrances:
Flare Fragrances Company, a small women’s perfume manufacturer, was started in 1955. Since inception, Flare has grown to be the #4 player in the U.S. women’s fragrance market. For 2008 EOY estimates were $221 million dollars up 2% over 2007 sales. In 1975 Flare introduced the brand “Loveliest” which was their sole focus until 1996 when they introduced “Awash”. Since that time, the company introduced a new fragrance every three years with Loveliest on the label.
Early on Flare fragrances sold its brands through premium and mid-tier department stores until the late 1970’s when Flare moved into private pharmacies and in the 1980’s began to mass market in large discount stores such as J.C. Penny, Wal-Mart, Target, and Kohl’s. They stayed away from international markets due to cost.
The typical target market for Flare is over 35 with the Loveliest, the Natural which appeals to an under 35 demographic who seek the environmentally safe or green product, and the 25 – 34 for all of the other brands that Flare Fragrances produces. Problem:
Flare Fragrances although they did make a profit especially through recessionary times, only achieved 2% overall growth in 2008 after a 12% growth figure in 2007 mostly due to economic downturn. CEO Joely Patterson addressing sales and marketing employees told them she was determined to make 2009 a better year. She told the group that they needed to find a way to deliver a minimum of $7.5 million in incremental revenue to reverse the declining sales trend. Arlmont Associates has submitted two recommendations to help Flare achieve this target. First to increase efforts in the drug store channel or to introduce a new perfume brand. She offered these two options as well as asked for someone to come up with a third if the two options seem unachievable. The company would like to go public but needs to boost sales. Market Analysis:
The Loveliest over performs in the mass market where Flare sees 74% of its sales. Gaps in the analysis show that where Flare underperforms and where great new prospects can come from are the prestige department stores, drugstore chains, as well as the internet. A review of the dynamics of current rescission-era fragrance industry (see Attachment A) as well as the industry trends outlined below.
* Consumers under economic pressure trade down from luxury brands to mass alternatives. * Diminishing exclusivity: mid-tier and premium brands increasingly available in mass channels. * Substitution of lower-priced scented products (body washes, sprays) or forgoing of fragrances in place of skin care creams and products which consumers expect to see change. * Constant hype, though recently a waning tend, of celebrity and designer fragrance introductions. * SKU and brand proliferation (over 400 new brands launched in the US since 2007). Channel Activity:
* Department store discounting, store closings, and incorporation of pop-prestige boutiques ( Sephora in J.C. Penney). * Mass market evolution as consumer traffic grows in these stores and as they overhaul beauty departments by stocking trendier fragrances and employing beauty consultants. * Blurring of the retail channels with upscale influences trickling down and new fragrances first introduced into prestige department stores more quickly being made available in smaller sizes through mass market retailers. * Overall market trends show slight declines in sales through high-end department stores and sales if mass brands through the mass channel, countered by small percent increase in sales of prestige brands though mid-tier department stores. A New Brand: (A Proposal of New Product Introduction.)
Marketing director Bill Charters suggested a new product introduction in conjunction with the recommendations of Arlmont...