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London giant readies global push behind new prestige group

In beauty department stores across the country, Elizabeth Arden and Calvin Klein vie to lure the capricious customer to their cosmetics stands. The two beauty lines have developed a raft of winning brands, built strong retailer relationships and spent about $24 million in advertising to catapult their products to growth at a time when a host of competitors are reeling from consumer retail belt-tightening.

The Arden and Klein success story caught the attention of parent Unilever PLC. An executive shuffle last week assures Unilever of more control over the fortunes of the two companies. As the power move plays out, bets are on that Unilever will use its global marketing clout to translate Arden and Klein into leading players in the worldwide cosmetics marketplace.

While Arden cosmetics have established a beachhead in many European countries, Klein still gets minor distribution. While the separate identities of the two companies have been nurtured since their acquisition in the late 1980s, London-based Unilever is taking the reins in typical style and applying its global mentality toward pairing them for competition overseas.

Last week the company announced the creation of a prestige personal products division to separate Arden and Klein from Unilever’s third U.S. unit – mass-market Chesebrough-Pond’s.

Arden and Klein will continue reporting to chairman Robert M. Phillips. Among the shifts, Chesebrough will report directly to the London office rather than under the disbanded personal products group. Phillips will assume oversight of the new prestige products unit and will become Arden president when current boss Joseph Ronchetti retires in August.

Officially, Ronchetti’s departure after 27 years at Arden is by choice. But some industry executives close to the company suggest that Unilever’s dowdy, conservative personality clashed with Ronchetti’s aggressive management style.

Whatever the reason for Ronchetti’s leaving, the move is yet another step at positioning prestige products for greater worldwide distribution, says John Campbell, an analyst with County NatWest Securities in London.

“The prestige market is key to Unilever because of its higher profit margins,” Campbell says. “That’s where their growth will come from.”

For the past few years, Arden and Klein have outlasted the difficulties in selling through department stores. Today department stores make up about 21% of U.S. cosmetics and fragrance sales compared with 30% five years ago.

As department store volume continues to decline, Arden and Klein sales are up. Arden has seen double-digit growth – as high as 25% since 1989 – since beginning a five-year makeover plan. Under Ronchetti, the company has upgraded its stodgy image and basks in the success of fragrances like Red Door and Elizabeth Taylor’s Passion and White Diamonds.

When Ronchetti leaves the company, marketing strategy both overseas and domestically will remain under the aegis of Phillips, Joseph Spellman, executive vice president of market development and creative services, and Paul Masturzo, executive vice president and general manager of Arden U.S. Insiders say Spellman is the creative mind behind Arden’s growth.

Word is that Unilever plans to keep Arden and Klein marketing budgets in the U.S. stable while increasing spending for the worldwide market. A big push, industry watchers say, will come with Calvin Klein’s Obsession and Escape, which have seen limited distribution outside the U.S.

But whether the company can transport that success overseas without Ronchetti’s leadership remains to be seen. Ronchetti is credited for persevering with his five-year plan to transform Arden’s image even under three different owners. Now the brunt of the global marketing challenge will fall on Phillips as Arden faces intense competition from the likes of L’Oreal.

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