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Vitality

Innovation Strategy & Management

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Introduction

Value Proposition

Concept

Market Opportunity

Business Cycle

Pro forma Financials

Execution Plan

Risks and Uncertainties

Conclusion

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Current Situation

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Current Situation - Industry

Consolidation (Mergers and Acquisitions) in the perfumery industry

Only 4 major global players left

Reducing points of differentiation between the top 4 fragrance houses

Increasing price pressure from major clients

They have launched initiatives to further reduce the working price

Gross Margin of fragrances sold to some clients below 20%

Our Specialty Chemicals whose patents have expired are copied by our competitors

Patented Specialty Chemicals copied by low cost manufacturers in China and India

Fragrances once a very profitable industry is now commoditized

We have not adapted as much as our competitors to our clients needs

Current model does not offer us major growth opportunities

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Current Situation – Business Units

Unilever

Firmenich, IFF & Givaduan each have a third of the market share.

Symrise invited to participate in some new projects

They have hired consultants to help them with their olfactive strategies

Low chances of increasing market share

Procter & Gamble

Restructured their perfumery division. They have started creating more fragrances

Launched Oracle and briefed all fragrance houses at lower prices

They have built their own compounding facilities

Replacing our specialty chemicals by cheaper copies by manufacturers.

They are reducing their dependence on fragrance houses

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Current Situation – Business Units

Colgate Palmolive

Core list agreement expired this year

The fragrance houses briefed now have increased from 2 to 3

Fine Fragrances

Our most profitable business unit

Market Dynamics have changed over the past 3 years

Too many new fragrances launched every year

These fragrances do not last in the market for more than a year. Lot of money invested in market research for a “one time order”

Margins reduced and low return on investments

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Value Proposition

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Value Proposition

Offer consumers Unique olfactive experience by creating their own signature scent

Start a new Business Unit to provide personalized fragrance solutions on the internet

Create the Firmenich brand value among consumers

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Concept

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Concept – www.osmoz.com

Osmoz, the fragrance community – A website run by Firmenich educates consumers online about fragrances and olfactive notes.

It announces the latest trends & fragrance launched in the market

With limited resources Osmoz has 320,000 registered members

75% of the members are females. 70% of the members are European, 15% from the US and remaining from Latin America & Asia.

In the first year, 2000 olfactive training kits at € 58/ unit were sold. 

Osmoz already has a data base of members and their olfactive preferences

Evolving Osmoz to a revenue generating business unit

Include a tool in Osmoz for members to tailor their own fragrance

Start a Perfume Club to raise olfactive awareness

Conduct olfactive workshops and fragrance bars in stores like Sephora, SAKS etc

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You are the Perfumer

Members can personalize their scent using these three options:

Novice: Members answer questions on the website. Based on their favorite 3 fragrances, personality and profile, the fragrance advisor ®(program) will suggest 3 fragrances with their olfactive triangles and a brief description of the fragrance. The consumer can select the fragrance and the packaging they would like to order.

Perfumer: Members can make their own composition using ready bases. The online fragrance creation program (Perfumer Online)® will guide them to create the fragrance. The perfume cost would depend on the ingredients added. The perfume in personalized packaging will be shipped to them in 3 days.

Master Perfumer - Members can order a perfume kit consisting of selected fragrance bases, pipettes, smelling strips, bottle & packaging material. They can try various combinations and make their own compositions. The cost of the bases would depend on bases ordered.

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Business Process

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Business Cycle / Process

Consumers

Order Browsing

Perfume Formulation / Suggestion

Mfg / Customized Pkg.Issue Base Kitfrom Warehouse

Shipping

Weekly Analysis

Marketing

Feedback / Tuning

Delivery

Production / Fulfillment

3rd Party Logistics

A B

C

Novice – Answer questionnaires. Perfume

selected by F.D.M* based onprofile

Perfumer – Design his/herown formula

Master Perfumer – Purchasethe base-kit and make perfume

at home

A

B

C

Note: F.D.M – Fragrance Development Manager engine

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Business Cycle / Process

Consumers Order Browsing

Perfume Formulation / Suggestion

Mfg / Pkg.

Issue Base Kitfrom Warehouse

Shipping

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Areas to be further tested out

Customer distribution among Novice, Perfumer, and Master Perfumer.

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Business Cycle / Process Keith / Haresh

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Market Opportunity

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Market Opportunity

Game changer – none of the fragrance houses provide this service

Pioneering the Perfume Club

Huge market potential & Areas of growth

Extremely high margins

Can increase offerings – Skin creams, Body Lotions & Home fragrances with the same fragrance

Reduce dependency on clients like Unilever, PG, LVMH, Estee Lauder etc.

Creating brand value – people will know about Firmenich

Leveraging existing capabilities and strengths

Making perfumes would be adding an additional step in the manufacturing process – Bottling and packaging

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Market Opportunity

Leadership position in fine fragrances

Strong consumer insights in all major countries

Pool of talented employees

Very good collection of fragrances and bases

Sales offices in most of the countries around the world

Factories in USA, Brazil, Switzerland, India, China, Indonesia and Singapore

Strong Logistics support – DHL

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Market Analysis The total fine fragrance market is $36.8 Billion

Fragrances sold over the internet are 3.8% = $1.392 Billion

Higher Tier brands(Price $60/100ml and above) like Estee Lauder, Armani, DKNY etc. account for 81.6% of the market share worth $30.03 Billion

Mid tier brands (Price $20/100 ml) like Avon, Oriflame, Natura etc have a market share of 18.4% worth $ 6.8 Billion.

Few perfumers do offer personalized perfumes. These are extremely expensive starting from $400 - $4500/100 ml of fragrance.

None of the perfume houses or our clients offer this service.

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Pricing

The price of the fragrances would vary

Novice – $25/50 ml bottle or $40/100 ml bottle

Perfumer – Price starting from $25/50 ml bottle. The price of the perfume bottle would depend on the ingredients used, could be higher to few hundred dollars/100 ml.

Master Perfumer – Variable Price. It would depend on the bases ordered in the kit for e.g. Rose base cost $10/25 ml, Green Apple base cost $5/25 ml, Iris Base $40/25 ml.

First Year Sales:

Novice – 50,000 (50 ml bottles) @ $25 = $ 1,250,000

25,000 (100 ml bottles) @ $40 = $ 1,000,000

Perfumer – 40,000 (50 ml bottles) @ $25 = $ 1,000,000

20,000 (100 ml bottles) @ $60 (Average) = $ 1,200,000

Master Perfumer

30,000 (25 ml bottles) @ $30 (Average) = $ 900,000

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Proforma Financials

Michael & Haresh

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Execution plan

Business Unit & Team

New business unit reporting to the corporate sponsor – Vice President (Fine Fragrances)

CMI (Consumer Market Insights) – Paris

1 Brand Manager (New Recruit) – Paris

6 Marketing Managers – New York, Sao Paulo, Shanghai, Mumbai, Singapore, Tokyo

2 Fragrance Development Managers (one each in Paris and New York) (Full time)

1 Information Technology Manager – Paris

12 Compounders – (2 on each site – Princeton, Sao Paulo, Geneva, Shanghai, Mumbai, Singapore, Tokyo)

Part Timers

1 Safety & Regulation Officer (on need basis)

4 Perfumers - support (on need basis)

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Execution plan

Website & Program

Hire Infosys for website modification

Interactive tools for fragrance creation fragrance advisor ® & Perfumer Online®

Perfume Ordering into SAP ?

Secured Payment modes – Credit Cards, Pay Pal etc.

Regulations

Register a brand globally

 Fragrance Creation

Based on consumer insights, prepare a collection of 35 ready fragrances with their olfactive triangles

Prepare fragrance bases to be used for mixing perfumes and sold

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Execution plan

Test Marketing & Promotions

Target females and males in France and United States

Advertising with Yahoo & Google to come on their top 4 searches

Manufacturing

Logistics

Shipping

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Uncertainties & Risks

Tim

Customer Buy –in

Product Safety issues – allergies etc..

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Go-to-market strategy – Cecilia / Ajay

Channel – various internet website / magazines

Pricing

Product – how many choices are we offering?

Positioning

Influencers

Forums

Loyalty program – coupons, award, star systems

Cecilia ????

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Conclusion

Quick Summary

Projections

Budget needed for further work

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Appendix

Appendix:

Market data from Euromonitor

Market Segmentation data

Current osmoz subscriptions

Sample Questionnaire

Sample formulation

Website - Osmoz

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Sample formulation for a feminine fragrance

Rose Base 25%

Lily of the Valley Base 15%

Peony Base 15%

Sea Side Base 05%

Melon 05%

Chocolate 05%

Musk 15%

Cedar wood 05%

Sandalwood 05%

Sensual Amber Accord 05%

Total 100%