FLARE

FRAGRANCES CO.
INC.

Assignment 4

FLARE FRAGRANCES CO. INC. 1

Assignment 4

THE PROBLEM STATEMENT

Launched in 1965, Flare had developed a good place in the US fragrance market initially.
With the introduction of Loveliest in the year 1975, most of the revenue was generated by it and
thus Flare could position itself as a Prestige Brand.
Then Flare also entered the pharmacy area followed by mass market arena in the 90s.
3% of the fragrance market in US was contributed by Flare.
Awash, Summit, Essential and Swept Away followed after Loveliest that were liked by customers.
Natural, manufactured under the umbrella of the Loveliest, was to penetrate the pharmacy market.
There was Savvy to be launched in 2009, which was heartily accepted by the focus group.
With heavy competition in the market where new products are being launched with strong
promotional plans, Flare has a shaky chance of being blown away from the market.
Moreover Flare needs to come up a sustaining strategy whether to continue with Naturals along
with expanding the drugstore or go with introducing Savvy to the customers.

To carry on with the implementation, lets start with the SWOT analysis of the Savvy and Naturals to get
a thorough knowledge on how are both doing in the fragrance world.

SWOT FOR THE SAVVY

STRENGTH
Favorable response from the focus group.
Target customer being 18-34 aged group
women, for whom the name would ne
definitely catchy.
If attached with Loveliest. There could be
more benefits.
There are fair chances of the sales growth.
Customers loyal to the brand Loveliest
will be drawn towards Savvy too.

OPPORTUNITY
Target a new customer segment that id
young and always ready to try something
new and exciting.
Being in the Prestige category, there is a
chance to be accepted by the Innovators,
Achievers, Thinkers and Believers, as per
the VALS framework.
After success in the Prestige category,
other VALs zone and also can come up
with other varieties to suit different age

WEAKNESS
Launching a new product has risk factors
attached to it.
Cannibalization of current sales will also
include certain risk in it.
Price is at a higher side.
Focus has to be put completely on it as the
promotions and advertising would take a
lot of efforts.

THREAT
Dulcet Brand could give a tough
competition.
There is already a pool of competitors in
the market.
The financial state of Flare is also at a poor
situation. The need to carefully plan the ad
and promo part for launching a new
product.
There has been a declination in the sales,
It a challenge for Savvy.

FLARE FRAGRANCES CO. INC. 2

Assignment 4
groups.
Apart from welcoming an innovated
product, this can also build good
relationships with the department store.
Stagnation of the product is also
prevented.

Failure could prove to be an irreversible

process to gain back the reputation built
so far.

SWOT ANALYSIS FOR NATURALS AND UP- SCALING OF THE DRUG STORE
STRENGTH
There is already a dedicated team working
on this, so no additional ideas to be
generated. Just improvement tactics can
help.
There is already a brand image attached to
it, no need of additional promotions
needed.
The shade under Loveliest umbrella is
already helping Naturals to perform well in
the market.
Anything associated with health attracts a
huge crowd irrespective of age, as health
is
something
which
cannot
be
compromised upon.

OPPORTUNITY
Focus would be on those areas where
Flare had not stepped in yet. Drug store is
a new opportunity which might call up
new more opportunities in future.
From Prestige, focus can also be put on
the Mass markets.
They can come up with a new line of
products too in market.
Its existing products can also be marketed
in the new retail market.

WEAKNESS
The drug store team performance in not
consistent. Thus for better sales, a lot of
training need to be done.
There is nothing trendy attached to the
name.
Only 20% of the crowd would prefer
buying perfumes from a drug store.

THREAT
Its been 2 year already that the product
has been launched.
Drugstore prefers selling only the top
brands and products. So Naturals have to
buckle up.
Selling in drugstore could prove a
dangerous to the other channels.
Chances of diluting the brand image.

FLARE FRAGRANCES CO. INC. 3

Assignment 4

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
2008 Budget

2009 Budget

2010 Budget

Media, Advertising, &

Promos
Loveliest
Awash
Summit
Essential

$16,770,443
$169,827
$2,717,236
$1,443,532

$18,782,896
$190,206
$3,043,304
$1,616,756

$20,285,528
$205,423
$3,286,769
$1,746,096

Swept Away
Natural
Subtotal
Co-op Advertising

$509,482
$2,755,447
$24,365,967
$7,926,688

$570,620
$3,306,536
$27,510,319
$8,877,891

$616,269
$3,571,059
$29,711,144
$9,588,122

$2,233,229
$6,457,682
$878,856
$297,198
$297,198
$18,090,851
$42,456,818
19.20%
$221,129,257

$2,679,875
$7,232,604
$1,054,627
$332,862
$332,862
$20,510,720
$48,021,039
20.68%
$232,185,720

$2,894,265
$7,811,212
$1,138,997
$359,491
$359,491
$22,151,578
$51,862,722
20.78%
$249,599,649

Sponsorships
P.O.S. Samples
Sales Sheets/Flyers
Gift/Purchase Promos
Public Relations
Subtotal
Total Communications
As % fo Sales
Total Sales

Financial Analysis: Advertising Budget (Natural/Drugstore)

2008

2009

2010

FLARE FRAGRANCES CO. INC. 4

Assignment 4
Gross Sales
COGS
Contribution Margin
Mftg Overhead
Real Estate, Taxes, Ins,
Util, & Dep
Adv & Promo
Field Sales Force
G&A
Net Pretax Operating
Income

$221,129,257 $232,185,720 $249,599,649

$122,660,399 $128,793,419 $138,452,925
$98,468,858 $103,392,301 $111,146,724
$5,019,634
$5,270,616
$5,665,912
$4,334,133
$4,550,840
$4,892,153
$42,456,817
$16,142,436
$15,390,596
$15,125,241

$48,021,039
$16,949,558
$16,160,126
$12,440,123

$51,862,722
$18,220,774
$17,372,136
$13,133,027

Financial Analysis: Income Statement(Natural/Drugstore)

FLARE FRAGRANCES CO. INC. 5

Assignment 4

IMPLEMENTATION
Flare fragrance company as per above given calculations can go for various methods to increase their
market share and profitability. But, the most feasible and better solution would be the 2 listed below:
1. To increase the market support for all products but majorly targeting Natural.
2. Increase the penetration in Drugstore channel.
These two options are analyzed and their implementation is discussed below:
Year
Revenue
2006
7 million
2008
9.1 million
2006
10.4 million (estimated)
Increase Naturals marketing budget
Position Savvy so as to reduce competition from Natural.
Expected revenue form Young and Classic segment: $7 million.
Natural promotes the Green lifestyle.
Eco charity and sponsorship of Environment events/conventions during and around Earth Day.
Its drugstore sales: 0.5% of perfumes sold, to target this channel.
Drugstore interest via co-operative advertising.
Percentage sharing to stores advertisement budget that display Natural.
Drugstores have been evolving and they offer high end beauty products.
o Upscale beauty offering
o Purchase promotions (gifts, etc.)
o Prominent display in Cases
o To attract younger customers with affordable offerings.
Target US Market: 74% Adult women & 75% of Teenage girls.

FLARE FRAGRANCES CO. INC. 6

Assignment 4

RECOMMENDATIONS
Flare should expand their existence in the market by doing several things; Flare should introduce a new
scent into the market. After doing the market analysis and product development in the marketplace,
Flare should be able to know the kinds of scent that customers needs. Tastes and likings of customers
keep on altering and companies that want to remain competitive in the marketplace must guarantee
that they keep up with these drifts in the market.
Existing Channels/Markets

New Channels/Markets

Existing offerings

Market Penetration
('Natural' - Drugstore)

New Channel Development

New offerings

New Offering Development

(Saavy)

Diversification
(Saavy)

I think that Flare Corporation should also ponder upon extending in to the drug channel. The drug
network would offer revenue to the company when the fragrance line is down. Drug dispersal has one
of the highest success rates in the market. This fact could be credited to the poor lifestyle and eating
habits of people all over the world. This has led to illnesses like diabetes, heart failure, kidney and liver
problems. All these sicknesses must be cured with medication. The drug network business chance is a
viable and is highly profitable especially for suppliers, who usually get higher numbers of deals as
compared to makers. Given the economic situation of Flare; with declining sales, the enterprise needs
such a promising business venture that will turn around its sales direction and make it positive. To
ensure that the company gets high sales, the company should market its goods by doing online
advertising, sales and delivery through its companys website. By increasing their product mix into the
drug channel, the company will ensure its existence in the competitive market.