Perfume and Perfume and FranceFrance

from 80’s to 90’sfrom 80’s to 90’sCompetitionCompetition

InternationalizatioInternationalizationn

Definition of a competitive marketDefinition of a competitive market::A competitive market is one where no one firm has a A competitive market is one where no one firm has a

dominant position and where the consumer has plenty of dominant position and where the consumer has plenty of choice when buying goods or services. Firms in a choice when buying goods or services. Firms in a

competitive market each have a small market share. competitive market each have a small market share. There are few barriers to the entry of new firms which There are few barriers to the entry of new firms which

allows new businesses to enter the market if they believe allows new businesses to enter the market if they believe they can make sufficient profits.they can make sufficient profits.--

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Benefits of a competitive marketBenefits of a competitive market::Lower costsLower costsLower prices for consumersLower prices for consumersMore innovationMore innovationDriver for productivity growthDriver for productivity growth

Competition in FranceCompetition in France

Variability in perfume market shares over yearsVariability in perfume market shares over yearsTransfer of fragrance house names in second half of Transfer of fragrance house names in second half of

1980s1980sChanges of fashionChanges of fashionLaunch of new brandsLaunch of new brands

For ExampleFor Example::Lauder’s market share fell 40%Lauder’s market share fell 40%Chanel’s roseChanel’s rose

More RecentlyMore Recently::LVMH’s market share has held strong in USA, Asia, and LVMH’s market share has held strong in USA, Asia, and

Europe, despite economic climateEurope, despite economic climate

Competition in FranceCompetition in France

Competition In FranceCompetition In FranceExportsExports

French cosmetic industry is world’s fourth largest French cosmetic industry is world’s fourth largest exporter. 53% of 2003 production exported. Sold in 202 exporter. 53% of 2003 production exported. Sold in 202

Countries. Represents $8.57 billion in salesCountries. Represents $8.57 billion in sales

The 80s Market in The 80s Market in FranceFrance!!!!

Main featuresMain features

Marked decline in national saving fund Marked decline in national saving fund (SICAV)- (SICAV)- 1993- it accounted for 3000 billion Francs of 1993- it accounted for 3000 billion Francs of total GNP (7000 billion Francs)total GNP (7000 billion Francs)

Sustained economic growth- Sustained economic growth- Retained good standard of living for FrenchRetained good standard of living for Frenchalso state protectionalso state protectionHigh levels of exports- 6.1% of world exports High levels of exports- 6.1% of world exports behind Japan and Germany [1behind Japan and Germany [1stst] France [2] France [2ndnd]]

More features of the 80s More features of the 80s marketmarket!!……!!……

France had some biggest countries e.g. Danome, Elf, France had some biggest countries e.g. Danome, Elf, Sodexho, MichelinSodexho, Michelin..

Shift from national systems to privatisationShift from national systems to privatisation-- 19821982 - -major banks nationalised and state took over control major banks nationalised and state took over control

therefore control over moneytherefore control over money!!Problematic; people made redundantProblematic; people made redundant

Employment figures in 1983 as % of working populationEmployment figures in 1983 as % of working population ; ;Britain ~ 10%Britain ~ 10%France ~ 8.3%France ~ 8.3%

Germany ~ 7.7%Germany ~ 7.7%

HOWEVERHOWEVER advantage; promotion of enterprises advantage; promotion of enterprises

The 90s market The 90s market in Francein France

Shift from state ownership to private Shift from state ownership to private businessbusiness

The French economy opened up to The French economy opened up to world markets making France the world markets making France the

world’s fourth largest exporter of goods world’s fourth largest exporter of goods and third largest exporter of servicesand third largest exporter of services

But opening up markets always gives But opening up markets always gives rise to fears of competition for French rise to fears of competition for French businesses and constraints placed on businesses and constraints placed on

economic policyeconomic policy

The perfume industry The perfume industry and foreign tradeand foreign trade

In comparison to other industries, In comparison to other industries, perfumes have remained a niche in the perfumes have remained a niche in the market but they have had to evolve to market but they have had to evolve to

compete on the world marketcompete on the world marketFrench perfumes account for a substantial French perfumes account for a substantial

share of world exports and 4 of the 8 share of world exports and 4 of the 8 major groups in the sector are Frenchmajor groups in the sector are French

An industry with an ancient tradition- An industry with an ancient tradition- once family run firms, now major once family run firms, now major

corporationscorporations..

The perfume industry The perfume industry and foreign tradeand foreign trade

Grasse on the French Riviera has been Grasse on the French Riviera has been the capital since the 18the capital since the 18thth century and century and

perfumes are luxury goods important to perfumes are luxury goods important to the French reputation. Brands such as the French reputation. Brands such as

Guerlain refuse to hear of anything but Guerlain refuse to hear of anything but highly selective distributionhighly selective distribution..

However, with stiffer competition from However, with stiffer competition from abroad perfume is more widely abroad perfume is more widely

distributeddistributed: : ““Perfume. like Champagne will soon be sold in Perfume. like Champagne will soon be sold in

all supermarkets” – Cartierall supermarkets” – Cartier

Business Description Founder : Gabrielle "Coco" Chanel opened her first boutique in 1913

Company type: Private, independent company, Thus, financial results and strategy are not featured

Owners: These have changed over the years. Today the main players are:Chairman: Alain Wertheimer CEO: Francoise MontenayPresident: Maureen Chiquet (in 2003)

Top competitors: Gucci, Prada, LVMH

Company audience: shifted to a younger market after Coco Chanel died in 1971

Chanel Owns: 100 boutiques worldwide: more than 35 are in japan.

Chanel also owns Eres and Paraffection

Chanel and going International

With regard to the international sector, Chanel has been open to international interests, and

not let French ideals come in the way:

Chanel was interested in getting involved int.

Chanel's first post-war collection was presented in 1954. The French were not impressed;

the Americans loved it .1983:Karl Lagerfeld, who was hired away from Chloe by the House of Chanel in, revitalized the name and make it an international brand.

Won 2004 Award:“is now a global business Chanel”

Today Chanel No.5 sells a bottle every 30 seconds

Chanel and Chanel and ProductionProduction

19211921 Ernest Beaux created Chanel No. 5 Ernest Beaux created Chanel No. 5 for Coco Chanel

Chanel and Finance:“Money for me has only one sound: liberty. “Gabrielle Chanel

From the beginning:Gabrielle “coco” was able to finance herself throughArthur 'Boy' Capel. He financed her move from her Balsans studio to her shop in Paris in Rue Carbon.1935:At the height of her fame in Chanel employed 4,000 workers (compare to today: Worldwide, Chanel employs approximately 10,000)During the Great depression: 1930’s:As the thirties drew to a close, Chanel became very bitter about her financial situation. The U.S.A were interested in the Workers at Chanel stirked in her office, and got locked in1939: All Chanel stored were closed and all workers were laid offIn the 20th century: Perfume started to be mass produced

However, at this time the designer himself was in charge, and the group had its base in France and was present abroad only through its licensees.

Business Description: Christian Dior’s international fame dates back to 1947.

Since then, an international network of stores has been developed. It has grown from 66 boutiques in 1998 to 184 at the end of 2004. By the end of the current year, it will be close to 200 boutiques.

These can be found in high-potential zones all over the world.

France is home to world-famous brands such as L'Oréal, Chanel, Guerlain, Yves Saint-Laurent, Clarins, Dior, and Givenchy.

They hold 30% of international market shares, ahead of the United States and they have made France the world's number one perfume and cosmetics exporting country.

Business Description:The business is split into the following segments:

Christian Dior couture wines and spirits fragrances and cosmetics watches and jewellery fashion and leather goods and selective retailing

These account for approximately: 4.2%, 16.9%, 33.2%, 17.4%, 4%, and 24.3% of sales respectively.

Christian Dior consists of three subsidiaries: Christian Dior Couture (100% owned), Financiere Jean Coujon (100% owned) and LVMH, which is 42.5% owned by Financiere Jean Coujon.

LVMH accounts for all the company's revenues apart from the Christian Dior Couture segment.

Dior was bought in 1987 and now belongs to the Louis-Vuitton-Moët-Hennessy (LVMH) Group.

Christian Dior has tripled its revenues since 1998.

LVMH is the world's largest luxury goods company, with many well-known brands, including: wines and spirits (Dom Pérignon, Moët & Chandon, Veuve Clicquot, and Hennessy) perfumes (Christian Dior, Guerlain, and Givenchy), cosmetics (Bliss, Fresh, and BeneFit) fashion and leather goods (Christian Lacroix, Donna Karan, Givenchy, Kenzo, and Louis Vuitton)watches and jewellery (TAG Heuer, Ebel, Chaumet, and Fred).LVMH also owns the Sephora cosmetics stores, Le Bon Marche Paris department stores and 61% of the DFS Group.

For the fiscal year of 2004 the company generated total revenues of E13,208 million thus representing organic growth of 11% over 2003.

LVMH is a publicly traded company. The chairman (Bernard Arnault) as well as several directors are members

of the board of both companies. Christian Dior's has control of the group as it owns 42.5% of the shares .

Between 2002 and 2004, its net income grew more than 80%.

Top Competitors: MetaphoraEscada AGGucci GroupHugo Boss AGTommy Hilfiger Corporation Pinault-Printemps-Redoute SAPolo Ralph Lauren CorporationPuig Beauty & Fashion

Some of the biggest designers have followed one another at the head of the group, beginning with Christian Dior himself, then Yves Saint-Laurent, Marc Bohan, Gianfranco Ferré and John Galliano.

Number of employees:

58,679 ( 12/31/2004) 56,815 ( 12/31/2003)

Date of first listing: 4/12/1991Initial listing price: €15.63

Latest price: €66.80

Dior PerfumesDior Perfumes

19471947--Miss DiorMiss Dior1949-Diorama1949-Diorama

1957-Diorissimo1957-Diorissimo1963-Diorling1963-Diorling

1963-Eau Fraiche (W)1963-Eau Fraiche (W)1966-Eau Sauvage1966-Eau Sauvage

1972-Diorella1972-Diorella1976-Dior Dior1976-Dior Dior

1979-Dioressence1979-Dioressence1980-Jules for men1980-Jules for men

1984-Eau Sauvage Extreme1984-Eau Sauvage Extreme1985-Poison1985-Poison

1988-Fahrenheit for men1988-Fahrenheit for men1991-Dune (W)1991-Dune (W)

1994-Dolce Vita1994-Dolce Vita1994-Tendre Poison1994-Tendre Poison

1995-Eau Svelte (W)1995-Eau Svelte (W)1997-Dune for Men1997-Dune for Men

1998-Eau de Dolce Vita1998-Eau de Dolce Vita1999-Hypnotic Poison (W)1999-Hypnotic Poison (W)

1999-J'Adore (W)1999-J'Adore (W)1999-Lily (W)1999-Lily (W)

2000-Eau de Dior Coloressence2000-Eau de Dior Coloressence2000-Eau de Dior Energizing2000-Eau de Dior Energizing

2000-Eau de Dior Relaxing2000-Eau de Dior Relaxing

20002000--DioreverDiorever2000-Remember Me (W)2000-Remember Me (W)

2001-Fahrenheit Summer (M)2001-Fahrenheit Summer (M)20012001--Higher (M)Higher (M)

2002-Forever and Ever (W)2002-Forever and Ever (W)2002-Addict (W)2002-Addict (W)

2002-Dune Sun (W)2002-Dune Sun (W)2002-J'Adore Eau d'Ete (W)2002-J'Adore Eau d'Ete (W)

2003-ILove Dior (W)2003-ILove Dior (W)2003-Chris 1947 (W)2003-Chris 1947 (W)

2003-L'Or J'Adore (W)2003-L'Or J'Adore (W)2003-Fahrenheit O Degree (M)2003-Fahrenheit O Degree (M)

2003-J'Adore New Eau de Toilette (W)2003-J'Adore New Eau de Toilette (W)2003-J'Adore So Dior (W)2003-J'Adore So Dior (W)2003 -Higher Energy (M)2003 -Higher Energy (M)

2003 -Addict (W)2003 -Addict (W)2003 -Lily Dior (W)2003 -Lily Dior (W)

2004 -Addict Eau Fraiche (W)2004 -Addict Eau Fraiche (W)2004 -Fahrenheit Fresh (M)2004 -Fahrenheit Fresh (M)

2004 -Eau Noire (M)2004 -Eau Noire (M)2004 -Cologne Blanche(M)2004 -Cologne Blanche(M)

2004 -Boise d'Argent (M)2004 -Boise d'Argent (M)2004 -Pure Poison (M)2004 -Pure Poison (M)

2004 -Dior Me, Dior Me Not (W)2004 -Dior Me, Dior Me Not (W)2005 -Miss Dior Cherie(W)2005 -Miss Dior Cherie(W)

In 1947 Christian Dior perfume company is set up and he christens the first perfume "Miss Dior".

Summary of important eventsSummary of important events::

19471947--Christian Dior perfume company set upChristian Dior perfume company set upMany well-known designers take over the house over Many well-known designers take over the house over

the years (after Dior’s death in 1957)the years (after Dior’s death in 1957)..19851985 - -Bernalt Arnault becomes chairman (Bernalt Arnault becomes chairman (# 40 on # 40 on

World's Richest People 2003)World's Richest People 2003) 19871987--company is bought and becomes part of LVMH company is bought and becomes part of LVMH

groupgroup19911991 - -Group becomes privatised and enters the Group becomes privatised and enters the

stockmarketstockmarketPerfumes and cosmetics form the biggest part of sales Perfumes and cosmetics form the biggest part of sales

and increase the group’s revenueand increase the group’s revenueMore emphasis placed on perfume industry in last few More emphasis placed on perfume industry in last few

yearsyears

ConclusionConclusion