Flare Fragrances Company, Inc. Britt Miller Rebecca Orsher Allie Steinle 12/07/2010
Executive Summary •
•
•
Flare Fragrances has experienced declining sales growth CEO set goal to increase incremental revenue by at least $7.5M and reverse declining sales trend Conducted two SWOT analyses to determine best strategy –
•
Emphasize Natural and increase drugstore presence
Developed advertising budget and implementation plan Flare Fragrances
Agenda •
SWOT – Savvy launch
•
SWOT – Natural emphasis and drugstore expansion
•
Financials – advertising budget and pro forma income statement
•
Implementation
•
Conclusion
Flare Fragrances
SWOT Analysis: Savvy Internal factors
Strengths • •
Name Favorable sales projections
Weaknesses • • • •
Unknown brand name Cannibalization of current sales For-go investment in current, established brands Higher price
Flare Fragrances
SWOT Analysis: Savvy External factors
Opportunities • •
• •
Reach a new customer segment: 18 – 24 year old females Arlmont study predicts prestige image fragrances will be best performers Innovation and originality Build relationships with department store channel
Threats • • • • • •
Dulcet brand to be launched at same time
High competition in market Difficult economic conditions – consumers trade down Declining sales in high-end department stores New fragrance may migrate to mass market quickly Competitors outspending Flare in advertising
Flare Fragrances
SWOT Analysis: Natural/Drugstore Internal factors
Strengths • Already have a drugstore sales team • Strong brand image and well-known products in “prestige” market • Loveliest is one of best-selling women’s fragrances in mass market
Weaknesses • Without Savvy launch, Natural will be the only product for younger
market • Drugstore sales team performance is uneven
Flare Fragrances
SWOT Analysis: Natural/Drugstore External factors
Opportunities • Expand into retail areas in which Flare products are not currently sold • Sales of prestige brands expected to grow in mass markets • Increase advertising for current brands • Increase scented product availability outside of gift sets
Threats • Two years since last product launch • Drugstore chains only want to sell highest turnover items • Drugstore sales could damage relationships with other channels and
may harm brand image
Flare Fragrances
Conclusion of SWOT Analyses Natural/Drugstore
Pursue Natural/Drugstore Strategy •
Increase support of Natural to continue sales growth
•
Strengthen presence in drugstore channel •
•
Take advantage of growing trend in mass market
Focus on existing brands – increase advertising •
Special emphasis on Natural and sponsorship events as well as sales materials for drugstore expansion
Flare Fragrances
Budget: Objective-and-Task Method Natural/Drugstore
Objectives: • Grow revenues by at least $7.5M in 2009 and reverse declining sales
trend • We believe we can achieve 5% sales growth in 2009 and 7.5% in 2010
• Increase support for Natural • Increase presence in drugstores
Tasks: • Increase advertising budget for all lines and communications • Special emphasis on Natural and sponsorship events as well as sales
materials
Flare Fragrances
Financial Analysis: Advertising Budget Natural/Drugstore 2008 Budget
2009 Budget
2010 Budget
Media, Advertising, & Promos $16,770,443
$18,782,896
$20,285,528
$169,827
$190,206
$205,423
Summit
$2,717,236
$3,043,304
$3,286,769
Essential
$1,443,532
$1,616,756
$1,746,096
$509,482
$570,620
$616,269
Natural
$2,755,447
$3,306,536
$3,571,059
Subtotal
$24,365,967
$27,510,319
$29,711,144
Co-op Advertising
$7,926,688
$8,877,891
$9,588,122
Sponsorships
$2,233,229
$2,679,875
$2,894,265
P.O.S. Samples
$6,457,682
$7,232,604
$7,811,212
Sales Sheets/Flyers
$878,856
$1,054,627
$1,138,997
Gift/Purchase Promos
$297,198
$332,862
$359,491
Public Relations
$297,198
$332,862
$359,491
Subtotal
$18,090,851
$20,510,720
$22,151,578
Total Communications
$42,456,818
$48,021,039
$51,862,722
19.20%
20.68%
20.78%
$221,129,257
$232,185,720
$249,599,649
Loveliest Awash
Swept Away
As % of Sales Total Sales
Flare Fragrances
Financial Analysis: Income Statement Natural/Drugstore
2008
2009
2010
Gross Sales
$221,129,257
$232,185,720
$249,599,649
COGS
$122,660,399
$128,793,419
$138,452,925
$98,468,858
$103,392,301
$111,146,724
Mftg Overhead
$5,019,634
$5,270,616
$5,665,912
Real Estate, Taxes, Ins, Util, & Dep
$4,334,133
$4,550,840
$4,892,153
Adv & Promo
$42,456,817
$48,021,039
$51,862,722
Field Sales Force
$16,142,436
$16,949,558
$18,220,774
G&A
$15,390,596
$16,160,126
$17,372,136
Net Pretax Operating Income
$15,125,241
$12,440,123
$13,133,027
Contribution Margin
Flare Fragrances
Implementation Current Market Standing
•
Natural has been on the market for two years –
•
•
•
Under Loveliest umbrella; promotes “green” lifestyle
Natural’s current
performance in Drugstore channel: 0.5% of all perfume sold Tough economic climate driving customers to more affordable retail outlets Flare has great opportunity to leverage the Drugstore channel –
Further develop Drugstore channel company reps’ skills in
negotiating product placement and store relationships Flare Fragrances
Implementation Drugstore Channel Benefits
•
Capture new consumers at a young age –
•
•
U.S. Market: 75% of teen girls, 74% of adult women use fragrance products.
Taking sales from competitor’s brands in the
$30-$45 range Has not actively pursued the Drugstore channel in the past –
Drugstore chains evolving, offering high-end beauty features Flare Fragrances
Implementation Growth in the Drugstore Channel •
Coordinate with chain Drugstores to be prominently featured with their more ‘upscale’ beauty offerings;
physical stores and online Attract younger customers Affordable offerings –
–
•
•
•
Prominent display cases Holiday promotions entailing gift baskets of Natural fragrance, soap, body mist Gift with Purchase promotions
Flare Fragrances
Drugstore channel Online sales and Promotion
Flare Fragrances
Implementation Strategies to invigorate sales
•
Spark Drugstore’s interest with co-op advertising
program –
•
Partner with an eco/green-charity in weeks bordering Earth Day –
•
Contribute percentage to store ads that feature Natural
Percentage of sales go to eco charity
Sponsor green fashion events and eco/green conventions Flare Fragrances
Conclusions •
Recommendations: –
–
•
Increase marketing support of Natural along with other products Further penetrate drugstore channel
Projections: –
5% increase in top line sales for 2009 ($11M incremental revenue)
Flare Fragrances
