Britt Miller

Rebecca Orsher

Allie Steinle

12/07/2010

Flare Fragrances Company, Inc.

Executive Summary

Flare Fragrances

• 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

Agenda

Flare Fragrances

• SWOT – Savvy launch

• SWOT – Natural emphasis and drugstore expansion

• Financials – advertising budget and pro forma income statement

• Implementation

• Conclusion

SWOT Analysis: Savvy Internal factors

Flare Fragrances

Strengths • Name • Favorable sales projections

Weaknesses

• Unknown brand name • Cannibalization of current sales • For-go investment in current, established brands • Higher price

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

SWOT Analysis: Savvy External factors

Flare Fragrances

Strengths • Already have a drugstore sales team

• Strong brand image and well-known products in “prestige” market

• Loveliest is one of best-selling women’s fragrances in mass market

Weaknesses • Without Savvy launch, Natural will be the only product for younger

market

• Drugstore sales team performance is uneven

SWOT Analysis: Natural/Drugstore Internal factors

Flare Fragrances

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

SWOT Analysis: Natural/Drugstore External factors

Flare Fragrances

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

• Focus on existing brands – increase advertising • Special emphasis on Natural and sponsorship events as well as

sales materials for drugstore expansion

Conclusion of SWOT Analyses Natural/Drugstore

Flare Fragrances

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

Budget: Objective-and-Task Method Natural/Drugstore

Flare Fragrances

Financial Analysis: Advertising Budget Natural/Drugstore

Flare Fragrances

2008 Budget 2009 Budget 2010 Budget

Media, Advertising, & Promos

Loveliest $16,770,443 $18,782,896 $20,285,528

Awash $169,827 $190,206 $205,423

Summit $2,717,236 $3,043,304 $3,286,769

Essential $1,443,532 $1,616,756 $1,746,096

Swept Away $509,482 $570,620 $616,269

Natural $2,755,447 $3,306,536 $3,571,059

Subtotal $24,365,967 $27,510,319 $29,711,144

Co-op Advertising $7,926,688 $8,877,891 $9,588,122

Sponsorships $2,233,229 $2,679,875 $2,894,265

P.O.S. Samples $6,457,682 $7,232,604 $7,811,212

Sales Sheets/Flyers $878,856 $1,054,627 $1,138,997

Gift/Purchase Promos $297,198 $332,862 $359,491

Public Relations $297,198 $332,862 $359,491

Subtotal $18,090,851 $20,510,720 $22,151,578

Total Communications $42,456,818 $48,021,039 $51,862,722

As % of Sales 19.20% 20.68% 20.78%

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

Financial Analysis: Income Statement Natural/Drugstore

Flare Fragrances

2008 2009 2010

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

COGS $122,660,399 $128,793,419 $138,452,925

Contribution Margin $98,468,858 $103,392,301 $111,146,724

Mftg Overhead $5,019,634 $5,270,616 $5,665,912

Real Estate, Taxes, Ins,

Util, & Dep $4,334,133 $4,550,840 $4,892,153

Adv & Promo $42,456,817 $48,021,039 $51,862,722

Field Sales Force $16,142,436 $16,949,558 $18,220,774

G&A $15,390,596 $16,160,126 $17,372,136

Net Pretax Operating

Income $15,125,241 $12,440,123 $13,133,027

• Natural has been on the market for two years

– Under Loveliest umbrella; promotes “green” lifestyle

• Natural’s 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

Implementation Current Market Standing

Flare Fragrances

• Capture new consumers at a young age – U.S. Market: 75% of teen girls, 74% of adult

women use fragrance products.

• Taking sales from competitor’s brands in the $30-$45 range

• Has not actively pursued the Drugstore channel in the past – Drugstore chains evolving, offering high-end

beauty features

Implementation Drugstore Channel Benefits

Flare Fragrances

• 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

Implementation Growth in the Drugstore Channel

Flare Fragrances

Drugstore channel Online sales and Promotion

Flare Fragrances

• Spark Drugstore’s 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

Implementation Strategies to invigorate sales

Flare Fragrances

• 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)

Conclusions

Flare Fragrances