Interview with PH Ceo, Dino Pace

22/01/2015 - source: BW Confidential (22nd January 2015)

Italy’s Perfume Holding, which was formed through the merger of Morris Profumi and Selective Beauty in 2010, is rationalizing its portfolio with a focus on the selective and niche segments. Ceo Dino Pace tells BW Confidential about his plans for trading up

How are your plans to take the Ferrari brand more upscale progressing?

In 2014, our like-for-sales [excluding Benetton, whose license went to the Puig group in 2014] were forecast to grow by 5% to €130m wholesale, and thanks to Ferrari we are growing our base solidly in most regions. With Ferrari we have presented the market with two brands: Scuderia Ferrari, the masstige, bread-and-butter part of the business with products that are good value for money at between €30 and €40; and the Essence Collection, which is the luxury, premium part of the brand, is very selective and priced at around €80. The line has five EdPs, which will be complemented by three EdTs this year. We created these two lines as there are consumers addicted to the Formula 1, sporty, edgy side of the brand, and those who like the luxury, lifestyle aspect. This strategy is paying off as the luxury line is working well in all of its markets.
We still have a lot of room for growth with Ferrari and we want to double the brand’s business in the next four years. We think we can do this as there are markets that we are not covering properly and where the brand is not yet distributed.

Perfume Holding says Essence, its luxury line for Ferrari, will enable it to widen its consumer base
 
Ferrari represents a large part of your sales. Do you want to better balance your sales between brands?

Ferrari is our biggest pillar, representing about 44% of our business. However, we don’t feel that we have to rebalance the portfolio, as Ferrari still has a lot of potential and we recently secured the license until 2023. But we are working on optimizing our portfolio. This means we are cleaning up brands that are not strategically important and looking for new opportunities.
 
We will keep our masstige brands as they are a cash cow, but we want to invest in the selective and niche segments. We have our own brand Atkinsons, which is niche and high-end and which we are rolling out internationally. It is in 150 doors and we are targeting top retailers in each key market. The line is priced at €130-€200, so it is not too expensive, but is still niche. We will grow the business, but we aren’t in a rush to expand distribution. Atkinsons will still be limited, and in a year’s time it will be almost a €4m business. More recently we acquired the Liu Jo license, which is a fast-growing brand, not only in Italy, but in key markets where it has stores. We have launched the brand in Italy, the Netherlands and Belgium and it has been successful—we did sales of €2.5m in the first six months. We will now roll out to key countries where brand awareness is good, such as Spain, Germany and Russia. We will evaluate Asia, as the brand has some stores there, but it is not a priority for now. In three years time we are targeting sales of €10m for the brand.
 We also want to diversify the portfolio and are looking for brands with a business potential of at least €10m. If there are opportunities to buy a niche brand, we could look at that, or we could look at skincare, which would be an opportunity to grow in Asia.
 
 Are you getting rid of brands?

We no longer distribute Ducati and some minor masstige brands in Italy, but that is all. How have you been impacted by the loss of the Benetton brand? Benetton was a €15m business and the loss was a bit painful at the beginning, but we are taking measures to compensate it and grow. Thanks to Ferrari, which is growing in double digits, and the Liu Jo launch, a good portion of [Benetton’s] sales and profit will be covered in a year’s time.
 
What will you do with John Galliano brand?

It is a big question mark. We have the license for three more years. It is dormant—we are doing what sales we can, but we are not bringing new products to market.
 
How are you looking to develop La Perla?

La Perla was bought two years ago by Silvio Scaglia, who is injecting resources to revamp the business. The brand has a new luxury collection and is restyling its stores with a new premium concept. We have to be consistent with those plans and so we want to go much more premium. La Perla’s distribution has to be more selective and there is some cleaning up to do, but we are already doing this in some markets. In Italy we need to cut at least one third of our turnover. Then we need to deliver more high-end products to the market. We are working on a new line to launch in 2016 with massive investment. Today La Perla is a €10m business and we want this to grow.
 
What are your priorities in terms of regions?

We are targeting key countries like the US, China, and Latin America as our growth engine for the future. Our business is well balanced by region. Europe, including Russia and Italy, represents 59%, Asia accounts for 12%, the Middle East 12%, Latin America 12% and North America 5%. Everyone knows Europe is a mature market and suffering, but we are not too dependent on Europe and we grew there in 2014. Spain grew well, we achieved targets in Germany and the UK, although we were prudent and were not forecasting a big increase, and we are stable in Italy. We have also been growing in the Middle East and Asia and are very healthy in Brazil. Brazil started 2014 with a slowdown, but we are recovering quickly and closed the year at record sell-out levels, which that means that 2015 will be a good year for us there. This is due to investment in advertising, especially digital. In Brazil this year we will have a very aggressive strategy to gain share and we will invest quite a lot in media. We believe we can grow very rapidly in Latin America. In the rest of the region, media is not the key tool to gain share; it is more about proper investment at the point of sale. We need to deliver better sales in the rest of Latin America, but that is mainly a distribution problem which we are fixing; there is huge demand there.

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