Assignment 4

FLARE
FRAGRANCES
CO. INC.

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

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

FLARE FRAGRANCES CO. INC. 2

Assignment 4

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

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.
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.

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.

FLARE FRAGRANCES CO. INC. 3

Assignment 4

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.

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. 4

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

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

$2,233,229
$6,457,682
$878,856
$297,198
$297,198
$18,090,851
$42,456,818

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

$2,894,265
$7,811,212
$1,138,997
$359,491
$359,491
$22,151,578
$51,862,722

20.68%

20.78%

19.20%

FLARE FRAGRANCES CO. INC. 5

Assignment 4
Total Sales

$221,129,257

$232,185,72
0

$249,599,64
9

Financial Analysis: Advertising Budget (Natural/Drugstore)

Gross Sales
COGS
Contribution
Margin
Mftg Overhead

2008
$221,129,25
7
$122,660,39
9
$98,468,858
$5,019,634

Real Estate, Taxes,

Ins,
Util, & Dep
Adv & Promo

$4,334,133

$42,456,817

Field Sales Force

$16,142,436

G&A

$15,390,596

Net Pretax
Operating
Income

$15,125,241

2009
$232,185,
720
$128,793,
419
$103,392,
301
$5,270,61
6
$4,550,84
0

2010
$249,599,
649
$138,452,
925
$111,146,
724
$5,665,91
2
$4,892,15
3

$48,021,0
39
$16,949,5
58
$16,160,1
26
$12,440,1
23

$51,862,7
22
$18,220,7
74
$17,372,1
36
$13,133,0
27

Financial Analysis: Income Statement(Natural/Drugstore)

FLARE FRAGRANCES CO. INC. 6

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. 7

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.

FLARE FRAGRANCES CO. INC. 8

Assignment 4