The Smell of Money

Making scents of the world's perfume industry.

As for knowing when a fragrance has reached its full potential in a particular tier, “there is no magic formula,” he says. “You [just have remain] close to the commercial performance as well as the supply-chain implications.”

Whether consumers will want more Calvin Klein and J Lo scents remains to be seen. In the US, Fishoff notes, prestige brands are growing only 1% to 2% a year. Thus finance at Coty has a big role to play when it comes to identifying “the few untapped users,” including consumers in their teens.


If there’s one firm that understands the “mass” of masstige, it’s Procter & Gamble. Launched just 15 years ago from P&G’s slick, modern base in Geneva, its fragrance division has used the $68 billion multinational’s financial muscle — and its vast supply chain — to become one of the largest perfume companies in the world.

A big part of CFO Feola’s job recently has been to integrate one of P&G’s biggest-ever acquisitions, Germany’s Wella — a deal he helped close three years ago while director of acquisitions and divestitures at P&G Global Beauty Care in Ohio. Thanks to that acquisition, P&G’s portfolio of fragrance brands jumped from eight to around 40.

But Feola — just like Lyn Harris in London — is honing a global expansion strategy that relies on exclusivity and luxury. “Our focus has been to reduce the number of brands,” he says. Faced with a sprawl of overlapping distribution, manufacturing and sales networks, the past year or so has been spent closing redundant warehouses and the like, and even selling some of the perfume businesses it inherited, including the classic Cologne-based 4711. In terms of what the CFO calls “the brand growth potential” of each fragrance in the portfolio, “4711 just didn’t fit.”

This realignment forms part of a new strategy that is aiming for “fewer, bigger and better” brands, Feola says. Similar restructuring elsewhere in the industry is a sign of the increasing maturity of the perfume business, as companies get smarter about targeting customers, says D’Arpizio of Bain. “In the past, these conglomerates just bought market share,” she explains. “Now they’re using their brands to cover different consumer segments in a more complete way, serving as a cushion against a change in tastes or an economic downturn.”

A key segment that P&G is going after is the luxury line, a consumer segment not often associated with a company more known for laundry detergents and pet food. That explains the fashion-house fragrances — including those licensed from Hugo Boss, Valentino and Dolce & Gabbana — found in its portfolio.

For someone like Feola, whose background is in M&A, fashion-house fragrances adds a new complexity to the CFO role. “These licensing deals are much more complicated [than an acquisition],” he says. “It’s not only the pricing, but also defining how you’re going to work together. When you buy a company, you’re integrating it. In a licence agreement, you have to plan for a long-term relationship.” And the name of the game, says Feola, is to build these relationships around fewer fragrances that sell for longer. “We want to create more classics in a way that maximises the rate of success for every initiative and satisfies consumer craving for newness.”


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