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 womens 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 Special emphasis on Natural and sponsorship events as well as sales materials for drugstore expansion

Focus on existing brands increase advertising

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 Media, Advertising, & Promos Loveliest Awash Summit Essential Swept Away Natural Subtotal $16,770,443 $169,827 $2,717,236 $1,443,532 $509,482 $2,755,447 $24,365,967 $18,782,896 $190,206 $3,043,304 $1,616,756 $570,620 $3,306,536 $27,510,319 $20,285,528 $205,423 $3,286,769 $1,746,096 $616,269 $3,571,059 $29,711,144 2009 Budget 2010 Budget

Co-op Advertising Sponsorships

$7,926,688 $2,233,229

$8,877,891 $2,679,875

$9,588,122 $2,894,265

P.O.S. Samples
Sales Sheets/Flyers Gift/Purchase Promos

$6,457,682
$878,856 $297,198

$7,232,604
$1,054,627 $332,862

$7,811,212
$1,138,997 $359,491

Public Relations
Subtotal

$297,198
$18,090,851

$332,862
$20,510,720

$359,491
$22,151,578

Total Communications As % of Sales Total Sales

$42,456,818 19.20% $221,129,257

$48,021,039 20.68% $232,185,720

$51,862,722 20.78% $249,599,649

Flare Fragrances

Financial Analysis: Income Statement

Natural/Drugstore
2008 2009 2010

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
$122,660,399 $98,468,858 $5,019,634

$232,185,720
$128,793,419 $103,392,301 $5,270,616

$249,599,649
$138,452,925 $111,146,724 $5,665,912

$4,334,133 $42,456,817 $16,142,436 $15,390,596

$4,550,840 $48,021,039 $16,949,558 $16,160,126

$4,892,153 $51,862,722 $18,220,774 $17,372,136

$15,125,241

$12,440,123

$13,133,027

Flare Fragrances

Implementation
Current Market Standing

Natural has been on the market for two years

Under Loveliest umbrella; promotes green lifestyle

Naturals 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 competitors 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 Drugstores interest with co-op advertising program

Contribute percentage to store ads that feature Natural

Partner with an eco/green-charity in weeks bordering Earth Day

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