Flare Fragrances Company, Inc.

: Analyzing Growth Opportunities

Key issue: Flare wants to deliver at least $7.5 million incremental revenue in

2009 and survive the severe economic environment. Two methods are

available, one involves launching a new brand Savvy; the other involves
intensifying Flares penetration into the drugstore channel.

Current situation of the industry:

In US market, 2008, 74% women and 75% girls use fragrance products. The
total US fragrances retail market was $5.7 billion in 2007, among them $3.8
billion was women fragrances. Flare takes 9.5% market share, exceeded by
Depuis, Suzanne Weber and Aromatique. Sales channels of fragrances
include mass market, drug stores, department stores and others.

SWOT analysis of Flare Fragrances Company:

S: Flare is the No.4 player in the U.S. womens fragrances market.
Loveliest is maintaining its 3% share of the market-$77 million.
Flare dominates sales of fragrances through mass channels.
W: The company was confined to the United States.
The drugstore sales team lacks experience and management level
O: The potential market for womens fragrance is huge
Traditionally higher-end fragrances will be the best performers in the coming
years.

Department/drugstore channel have huge markets but Flare accounts for

only 5.7% and 2.6%
T: major competitor Aromatique would launch a new perfume brand, Dulcet.
Mid-tier and premium brands increasingly available in mass channels

Evaluation of each option:

Project 1: Launching Savvy
Project 2: Deepening Flares penetration into drag store channel
Project 3: Launching a new premium brand targeting at high-end market
and thus shore up and even penetrate department stores/Prestige channel
According to Exhibit 1, Flares shares of drug store channel and department
store channel are 2.6% and 5.7%, with the each market size of $367 million
and $930 million. To meet the goal of $7.5 million incremental revenue, the
shares of drug store channel and department store channel should increase
by 2% and 0.8%, respectively, after the penetration.
As is shown in Exhibit 6, Savvys target market and its price are not so much
different from those of other brands under the Loveliest. Savvy is not a
proper to be a breaking-out brand and is less likely to shore up department
store market. Moreover, since Loveliest already has five brands with it, the
adding of another will not dilute so heavily. Therefore, Savvy should be

advertised with Loveliest labelled on it and the media plan should be

$2,2500,00 according to Exhibit 7.
The risk-and-return analysis of each option is as follows:
Project

Cost

Expected task

Risk

Return

Project
1

Launch
and
advertisin
g ($2.25
million)

Revenue 7.5
million

Cannibalization
of existing brand;
possible failure
of launching

A breaking-out
brand with
possibility to make
halo effect ;

Project
2

advertisin
g

Increase the
market share of
the channel by
2%.

Damage to
relationship with
other retail
accounts;

Increasing revenue;
more share in drug
store channel

Project
3

Launch
and
advertisin
g ($4.5
million)

Increase the
market share of
the channel by
0.8%; Revenue
$7.5 million

High cost;
Possible failure of
the launching

Shore up
department store
channel; open highend market; making
halo effect to launch
more premium
brands.

Final recommendation:
According to the above analysis, the final recommendation is Project 3: introducing

a new breaking out premium brand targeting at high-end market (Retail price
$80 for 1.7 oz.), thus Flare thus can shore up and even penetrate
department stores/Prestige channel. The new brands target consumers are
women aged from 34 to 65, who have the highest likelihood to buy perfume
and to be loyal to a favourite brand and scent. In addition, using its possible
halo effect due to umbrella brand, Flare can gain more profit in long-term

profits. The trade margin and introductory deals are as the same as savvy in
Exhibit 6.

Implementation plan:
Based on the media plan for savvy, the advertising budget for this new brand
is $4.5 million for a celebrity launch. Accordingly, the retail sales are
estimated to be $7.5 million. The production of 0.5 million 1/8 oz. samples to
be distributed free at the point of sale costs $0.4 million.
Taking full advantage of the earlier-stage work that has been done for Project
1 and Project 2, the implementation plan is as follows:
Plan and preparation: January, February
Earlier-stage advertising (targeting at both men and women): March to
September
Launching: first order accepted in May, 2009, first shipments in September,
2009.
Sales team for department store Channel: the whole 2009

Risk and contingency assessment of the recommendation plan:

1. Consumers under economic pressure trade down from luxury brands to

mass alternatives, which is a negative trend for premium brands. But the
current market is still large.
2. The difficulty of rooting a new brand into the target consumers as they
have low willingness to try new scent. But once they choose this brand,
they will have high loyalty.