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Inter Parfums Inc.

Inter Parfums Inc.

551 Fifth Avenue, Suite 1500
New York, New York 10176
U.S.A.
Telephone: (212) 983-2640
Fax: (212) 983-4197
Web site: http://www.interparfumsinc.com

Public Company
Incorporated:
1985 as Jean Philippe Fragrances, Inc.
Employees: 201
Sales: $236.05 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: IPAR
NAIC: 325620 Toilet Preparation Manufacturing

Inter Parfums, Inc., formerly known as Jean Philippe Fragrances, is a New York City-based manufacturer and distributor of fragrances and cosmetics. The companys brand name and licensed designer fragrance lines, including Burberry, Lanvin, and S.T. DuPont, are marketed and sold through independent distributors, inhouse executives, and international agents and importing companies. The company also produces so-called alternative or knockoff fragrances (imitations of expensive designer fragrances) in perfume or cologne forms as well as in skin creams, body sprays, and deodorants. These are sold for low prices through mass merchandisers, supermarkets, and drug stores. Substantially all Inter Parfums products are produced in the United States or France, in leased factories or plants using subcontractors for production requirements, in conjunction with its majority-owned French subsidiary, Inter Parfums S.A. In 2005, the company added a new line of specialty retail business, agreeing to produce signature scents for Gap and Banana Republic stores.

ORIGINS

The history of Inter Parfums may be traced to the 1985 founding of Jean Philippe Fragrances. Using a contraction of their first names to christen their new company, Jean Madar and Philippe Benacin set out to produce knockoff or inexpensive fragrances that imitated such higher priced designer fragrances as Passion and Calvin Kleins Obsession. Three years following incorporation, the company went public. In 1989, the company formed a subsidiary, Elite Parfums, Ltd., for its more upscale products. The following year, Jean Philippe bought fragrance and cosmetic rights from Jordache Enterprises along with the exclusive rights to the Jordache trademark. This move focused on the strength and awareness of the Jordache trademark, a brand name once hugely successful during the 1980s designer jeans craze.

In 1991, Jean Philippe acquired two French companies that also served as its major suppliers. Inter Parfums made fragrances that the company distributed exclusively in the United States and Canada. The other company, Selective Industrie, produced Regine perfume, among others, which Jean Philippe also sold in the United States. Since the two suppliers were enterprises under the control of Jean Philippe, their acquisition removed conflict-of-interest questions that had been aimed at the company.

In 1993, Jean Philippes French subsidiary, Inter Parfums S.A., acquired the license and inventory of the Ombre Rose fragrance brand from Alfin Inc. Jean Philippe regarded the Ombre Rose brand as complementing its existing line of fragrances, thereby allowing the use of existing distribution channels without incurring significantly greater costs. Also that year Jean Philippes French subsidiary acquired the selective Burberry fragrance from the Royal Brands division of Brigade International, pursuant to a ten-year license agreement. This acquisition was the stepping-stone used by the company to build a portfolio of luxury brands through direct acquisition of existing brand names.

BUILDING THE BUSINESS: 199496

The perfume fragrance market at the time could be divided into two categories. Selective lines, consisting of brand-name products with luxury imaging, were distributed through perfumeries and department stores, while mass lines, consisting of moderately priced products, were distributed to a broad customer base with limited purchasing power via mass merchandisers. After the acquisition of the selective Burberry fragrance, Jean Philippe continued to aggressively expand its markets and product lines through licensing agreements or through direct acquisition of existing product lines. Licensing agreements allowed the right to use brand names, create and package new fragrances, and determine product positioning and distribution, in exchange for payment of royalties proportional to the brands net sales.

The company purchased the Molyneux and Weil brand names in early 1994 from Cosmetiques et France-I.D. S.A. for approximately $3.6 million in cash and 200,000 shares of the companys common stock valued at approximately $2.2 million. The Molyneux brand name was originally created in the early 1900s by the fashion designer Edouard Molyneux. The Molyneux name enjoyed ranking among the institutional brand names of French perfumery; it had been well established in other Western European countries, and it enjoyed a very prominent market position in South America, especially through the Quartz line for women. The company was also attracted to the synergies between the Molyneux name and the Burberry brand name.

In March 1994, Jean Philippe acquired the worldwide trademark for the Intimate and Chaz fragrance lines from Revlon Consumer Products Corp.; in June of the same year it acquired the worldwide trademarks for Aziza from Chesebrough-Ponds USA, an operating unit of Unilever N.V. Aziza was a hypoallergenic eye cosmetic line that at its peak was distributed in approximately 22,000 mass-market outlets with an estimated wholesale volume of $60 million. Aziza was also the first mass-market brand that focused solely on the eyes and the first brand of hypoallergenic makeup on the market. Chesebrough-Ponds discontinued the line in 1992 in the face of plummeting sales. For Jean Philippe, however, the Aziza acquisition was a strategic move to expand into the mass-market fragrance and cosmetics industry. The company followed the acquisition with two years of extensive market research and product development with the goal of reintroducing the product line.

By August 1994, Jean Philippe had also obtained from Chesebrough-Ponds the rights to manufacture and distribute Cutex nail and lip color in the United States and Puerto Rico. Chesebrough, which had been marketing Cutex, retained ownership of the Cutex trademark and continued to distribute the Cutex nail polish removers. The licensing agreement fit into each companys strategic plans. Chesebrough planned to focus on skin care, oral care, and deodorants, while Jean Philippe intended to continue its focus on cosmetics and fragrances as well as expand into mass markets. According to trade publications, the Cutex nail care and lip color products division had a wholesale volume in excess of $20 million in 1993.

COMPANY PERSPECTIVES

Prestige brands are the core of our businesswe intend to add new prestige beauty brands to our portfolio. Over the past decade, we have built our portfolio of well-known prestige brands through acquisitions and new license agreements. We intend to further build on our success in prestige fragrances and pursue new licenses and acquire new brands to strengthen our position in the prestige beauty market. We identify prestige brands that can be developed and marketed into a full and varied product line and, with our technical knowledge and practical experience gained over time, take licensed brand names through all phases of concept development, manufacturing, and marketing.

While the company had an impressive stable of alternative designer fragrances from other distribution channels, the company had no mass-market entries until March 1995 when it introduced A Man & A Woman, a knockoff version of Calvin Kleins CK One. Jean Philippe was keenly aware of the vast potential of the alternative designer fragrance market and wanted a piece of that pie. In 1995, after ten years of growth, the alternative market had grown from a $95 million retail business into a $275 million business. In July, the company advanced its participation in the mass market with the launching of Romantic Illusions, a collection of 12 imitations of department store perfumes packed in cartons designed to look like romance novels. That project allowed the company to differentiate itself from its competitors. Recognizing that romance novels represented a billion-dollar industry and comprised nearly 40 percent of the paperbacks sold in the mass market, Jean Philippe decided to capitalize on womens interest in these books to create a new niche.

To appeal to the younger, trendy mass-market consumer, the company introduced Jordache Denim, a group of three knockoffs. The collection consisted of Red Denim, a version of Giorgios Red; White Denim, a knockoff of Vanilla Fields by Coty; and Blue Denim, an imitation of Elizabeth Ardens Sunflowers. This line not only imitated popular scents but also borrowed a marketing concept from the prestigious designer, Gianni Versace, who one year earlier introduced Red Jeans and Blue Jeans, a womans and mans scent, respectively. The company planned to continue the trend with additional line extensions under the Jordache brand name.

By February 1996, Jean Philippe was ready to relaunch the Aziza hypoallergenic eye cosmetic line. The Aziza brand-name recognition provided Jean Philippe the opportunity to introduce a new line of products to an existing loyal customer base. The line was developed to incorporate the 38 best-selling eye care products to meet the needs of the 1990s consumer. The primary distribution channels for the new line were mass-market merchandisers, drug chains, and supermarkets.

REFOCUS AND RESTRUCTURE: 199698

In the mid-1990s, Jean Philippe began restructuring in an effort to focus its resources on its profitable core fragrance business in the United States and abroad. An integral part of that process was to relinquish the Cutex lip and nail product license and to begin expanding its prestige portfolio. It achieved the latter by signing an exclusive 11-year license agreement with S.T. DuPont for the creation, manufacture, and global distribution of S.T. DuPont perfumes.

Economic turbulence in Eastern Europe and Brazil resulted in sales declines during this time, and Jean Philippe was forced to close its Brazilian subsidiary, Jean Philippe Do Brazil, in 1998. Still, Jean Philippe continued to market products in Brazil and entered into a distribution agreement with a well-known Brazilian fragrance distributor, which included the purchase of existing inventory. This action embodied the companys philosophy on the risks and benefits of global marketing, enumerated in the companys 1998 annual report: The Companys worldwide position, which makes it subject to global economic turbulence, should also benefit the Company in the future, as countries emerge from their economic troubles. The economic conditions in a number of markets during 1998, such as Eastern Europe and Brazil, certainly dampened the Companys short-term results. However, the Companys long-term focus will not allow it to abandon these markets, as the company would lose the opportunity to capitalize on the potential resurgence of these countries. Jean Philippe did successfully weather the tumultuous periods brought on by its international markets by streamlining the sales and administrative structure of its U.S. operations.

KEY DATES

1985:
Company is founded as Jean Philippe Fragrances.
1989:
Elite Parfums Ltd. subsidiary is formed.
1990:
Jordache cosmetics and fragrances are acquired.
1991:
Inter Parfums S.A. and Selective Industrie S.A. are acquired.
1993:
Subsidiary Inter Parfums S.A. acquires exclusive license for Burberry and Ombre Rose fragrances.
1998:
Companys Brazilian subsidiary, Jean Philippe do Brazil, closes.
1999:
Company adopts name of subsidiary Inter Parfums.
2000:
Revenues exceed $100 million.
2004:
Lanvin license and majority of Nickel S.A. acquired.
2005:
Gap Inc. licenses Inter Parfums to create fragrance and personal care products.

BUILDING THE LUXURY BRAND PORTFOLIO: 199899

In April 1999, the company launched the Parfums Deja New fragrance line that aimed to appeal to a wide range of consumers in an emerging middle market and compensate for a relatively flat alternative fragrance market. The goal of this action was to blur the distinction between prestige and mass-market fragrances. Moreover, Jean Philippe introduced two successful S.T. DuPont fragrance lines in 1998. A line of complementary bath products was introduced in the first half of 1999, further enhancing the brands image.

A 12-year exclusive license agreement with internationally renowned British designer Paul Smith, in December 1998, added to the buildup of the companys prestige fragrance portfolio. The agreement allowed for the creation, manufacture, and worldwide distribution of Paul Smith perfumes and cosmetics. The companys international launch of its first line of Paul Smith perfumes was scheduled for July 2000.

In March 1999, the company entered into an exclusive license agreement with the Christian Lacroix Company, a division of LVMH Möet Hennessy Louis Vuitton S.A. (LVMH) to enable the worldwide development, manufacture, and distribution of perfumes. The new alliance with a prestigious fashion label that bottled such luxury fragrances as Christian Dior and Givenchy was designed to further strengthen the companys position in the prestige fragrance industry.

In August 1999, LVMH acquired a 6.3 percent stake, some 467,000 shares, in Jean Philippe, which during this time changed its name to Inter Parfums, Inc. The stock transaction was valued at $4.2 million. LVMH disclosed in a Securities and Exchange Commission filing that they considered the Inter Parfums business portfolio complementary to their own and intended to open negotiations with Inter Parfums about increasing its ownership to a significant minority position. LVMH also stated in the filing that it intended to increase its participation on a friendly basis coincident with the execution of a customary strategic minority investment agreement. By November 1999, LVMH had increased its equity investment to approximately 20.5 percent.

The name change from Jean Philippe Fragrances, Inc., to Inter Parfums, Inc., in July recognized the success of its French subsidiary, Inter Parfums S.A., over the previous five years. For the year ending December 31, 1998, the French subsidiary represented 66 percent of net sales. Since the French subsidiary had helped the company become a formidable competitor in the prestige industry, the company strategy held that the name change would allow even greater industry exposure and open the way for greater license and acquisition opportunities. The company, however, retained the brand name, Jean Philippe Fragrances, for its mass-market products.

2000 AND BEYOND

Among Inter Parfums primary goals for the future were to focus on new product introductions and prestige brand names, as well as keep its U.S. operations profitable in the face of economic downturns abroad. Toward those ends, the company launched a totally new fragrance, Quartz by Molyneux, as well as a new line of S.T. DuPont Signature perfumes. The company looked forward to the international launch of its first line of Paul Smith perfumes and two new perfume lines under the Burberry name, which continued to be the companys leading selective brand-name fragrance. In June 2000, Inter Parfums announced that it would produce and market a new line of fragrances under the FUBU name, a popular American line of fashions for young people. Also, the U.S. debut of Christian Lacroix was made in February 2000 through an exclusive distribution arrangement with Saks Fifth Avenue. Distribution of the Christian Lacroix line in South America was also planned for 2000. On the other end of the market spectrum, Inter Parfums planned a new Aziza II line of low priced eye shadow kits, mascaras, colorful lip gloss products, and pencils created for the dollar store market. Revenues exceeded $100 million in 2000.

ADDING PRESTIGE

Most of Inter Parfums headlines related to prestige brands, though the mass-market business remained something of a buffer against hard times. Expanding global markets also provided something of a cushion. When the North American luxury market went flat around 2002, the company found untapped demand for high-end Western brands in China and Japan.

The company typically renewed its long-term licensing agreements, but the case of Celine was a little different. In May 2000, Inter Parfums signed up to develop, manufacture, and distribute a line of fragrances for the luxury fashion brand, which was a unit of LVMH. However, the two parties agreed to terminate the arrangement ahead of schedule at the end of 2007.

While the mass-market business continued to grow, Inter Parfums continued to expand the Prestige side by adding more high-fashion licenses. It introduced a line of cosmetics and fragrances for designer Diane von Furstenberg in August 2003. This marked the companys entry into prestige cosmetics. Inter Parfums posted net sales of $185.6 million (EUR 124.6 million) for 2003 as net profits leapt 39 percent to $13.8 million (EUR 12.7 million).

A majority holding in the French company Nickel S.A., which produced a mens skin care line sold in spas and high end department stores, was acquired in March 2004 for about $6 million. Though relatively small, it represented a new growth sector.

The Lanvin fragrance license was also acquired in 2004; it soon became the companys second largest brand, achieving nearly $35 million in sales in 2005. Lanvin, a couture house dating back to 1889, had been selling fragrances since the 1920s.

Even after the addition of such new licenses, the Burberry brand continued to account for almost three-quarters of total sales. The line was extended with the very successful launch of Burberry Brit for women in late 2003, followed by a mens version the next year. In October 2004 Inter Parfums renewed its Burberry licensing deal for another 12 and one-half years, plus an option for five more. Revenues were $236.1 million in 2004.

NEW MARKET SEGMENTS

Gap Inc., the U.S. clothing giant, licensed Inter Parfums to create a line of fragrance and personal care products for its Gap and Banana Republic stores in 2005. Gap had been selling its own fragrances for about ten years; previously, however, it had produced them in-house. The Gap deal marked the beginning of a whole new market for Inter Parfums: specialty retail. Inter Parfums posted revenues of $273.5 million in 2005; net income was down slightly at $15.2 million.

New scents for established brands were developed. Paul Smiths Story, unveiled in October 2006, was said to be inspired by antiquarian books. Mens and womens fragrances under the name called Burberry London were also added in 2006. By the end of the year, the Burberry line accounted for less than 60 percent of total sales. Prestige brands altogether made up about 90 percent of Inter Parfums total sales.

The company continued to expand its prestige business with brands both old and new. An agreement with Van Cleef & Arpels added First, a fragrance the venerable jeweler had begun selling in the mid-1970s. It had sales of $20 million a year, mostly in Europe, and Inter Parfums made plans to extend the line with a new scent. Quiksilver Inc.s Roxy and Quiksilver brands were licensed around the same time. These global lifestyle brands, oriented toward active youth, were enhanced by the fragrance and skin care lines that Inter Parfums introduced to the product mix.

Ana Garcia Schulz
Updated, Frederick C. Ingram

PRINCIPAL SUBSIDIARIES

Inter Parfums Holdings S.A. (France); Inter Parfums S.A. (France, 74%); Inter Parfums Grand Public S.A. (France); Inter Parfums Trademark S.A. (France); Jean Philippe Fragrances LLC; Inter Parfums USA LLC; Nickel S.A. (France, 68%); Nickel USA, Inc.

PRINCIPAL COMPETITORS

Coty Inc.; Elizabeth Arden, Inc.; Estée Lauder Inc.; LOréal SA; Parlux Fragrances, Inc.

FURTHER READING

Brookman, Faye, AM Cosmetics Buys Itself a Mass Niche, WWD, April 11, 1997, p. 9.

Company Interview: Jean Madar; Inter Parfums, Inc., Wall Street Transcript, Roth Capital Partners Growth Conference, March 2003.

Costello, Brid, Celines His-and-Hers Fragrance Duo, WWD, October 5, 2001, p. 12.

Cunningham, Thomas, LVMH Buys 6.3 Percent Stake in Inter Parfums, WWD, August 6, 1999.

, LVMHS Inter Parfums Stake Increasing to 20%, WWD, September 29, 1999.

Evans, Matthew W., Diane Von Furstenberg: Back in Beauty, WWD, May 23, 2003, p. 6.

, Nickel to Keep Spa a Focus, WWD, September 3, 2004, p. 8.

Inter Parfums in Burberrys/Ombre Rose Acquisitions, Cosmetics International, August 15, 1993, p. 1.

Inter Parfums Is Smelling Like a Rose, Business Week, June 18, 2001, p. 167.

Inter Parfums Restructures to Support Plans for Growth, Duty-Free News International, March 15, 2005, p. 38.

Jean Philippe, Soap & Cosmetics, April 1999, p. 22.

Jean Philippe Buys Aziza Makeup Mark, WWD, June 28, 1994, p. 12.

Jean Philippe Gets Rights to Cutex, WWD, June 3, 1994, p.6.

Jean Philippes Numbers, WWD, March 29, 1996, p. 12.

Kagan, Cara, Cutex Enters Chapter 2 with Jean Philippe, WWD, March 10, 1995, p. 6.

, Jean Philippe Gives 61 Year Old Aziza a Facelift, WWD, November 3, 1995, p. 8.

, Jean Philippes Launch Strategy: Follow the Alternative Route, WWD, March 31, 1995, p. S18.

Marcial, Gene G., Copycat Scents Are Far from Stale, Business Week, February 15, 1993, p. 104.

, Inter Parfums: The Sweet Smell of Success, Business Week, December 18, 2006, p. 148.

, Knockout Knockoff Scents, Business Week, August 16, 1993, p. 94.

, Smelling Sweeter at Inter Parfums? Business Week, July 14, 2003, p. 126.

, Sweet Smells from a Parfumerie, Business Week, April 29, 1991, p. 80.

Ozzard, Janet, October Launch for Lacroixs Second Scent, WWD, September 10, 1999.

Parlux Agrees to Buy Famous French Brands, Knight-Ridder/Tribune Business News, January 16, 1996.

Purchasing Power, WWD, February 2, 1996, p. 5.

Q&A: Inter Parfums, Inc., GCI, August 2002, pp. 1718.

Smelling Very Sweet Indeed, Business Week, July 10, 2000, p. 203.

Taking Charge, WWD, April 4, 1997, p. 10.

Tyree, Michelle Dalton, Scent of a Partnership: Gap and Inter Parfums to Create Beauty Brands, WWD, July 19, 2005, p. 1.

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Inter Parfums Inc.

Inter Parfums Inc.

551 Fifth Avenue
New York, New York 10176
U.S.A.
Telephone: (212) 983-2640
Fax: (212)983-4197
Web site: http://www.inter-parfums.com

Public Company
Incorporated:
1985
Employees: 84
Sales: $87.14 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: IPAR
NAIC: 325620 Toilet Preparation Manufacturing

Inter Parfums, Inc., formerly known as Jean Philippe Fragrances, is a New York City-based manufacturer and distributor of fragrances and cosmetics. The companys brand name and licensed designer fragrance lines, including Burberry, Ombre Rose, S.T. DuPont, and others, are marketed and sold through independent distributors, in-house executives, and international agents and importing companies. The company also produces so-called alternative or knockoff fragrances (imitations of expensive designer fragrances) in perfume or cologne forms as well as in skin creams, body sprays, and deodorants. These are sold for low prices through mass merchandisers, supermarkets, and drug stores. Substantially all Inter-Parfums products are produced in the United States or France, in leased factories or plants using subcontractors for production requirements, in con-junction with its 79-percent owned French subsidiary, Inter Parfums S.A.

1980s Origins

The history of Inter Parfums may be traced to the 1985 founding of Jean Philippe Fragrances. Using a contraction of their first names to christen their new company, Jean Madar and Philippe Benacin set out to produce knockoff or inexpensive fragrances that imitated such higher priced designer fragrances as Passion and Calvin Klines Obsession. Three years following incorporation, the company went public. In 1989, the company formed a subsidiary, Elite Parfums, Ltd., for its more upscale products. The following year, Jean Philippe bought fragrance and cosmetic rights from Jordache Enterprises along with the exclusive rights to the Jordache trademark. This move focused on the strength and awareness of the Jordache trademark, a brand name once hugely successful during the 1980s designer jeans craze.

In 1991, Jean Philippe acquired two French companies that also served as its major suppliers. Inter Parfums made fragrances that the company distributed exclusively in the United States and Canada. The other company, Selective Industrie, produced Regine perfume, among others, which Jean Philippe also sold in the United States. Since the two suppliers were enterprises under the control of Jean Philippe, their acquisition removed conflict-of-interest questions that had been aimed at the company.

In 1993, Jean Philippes French subsidiary, Inter Parfums, S.A., acquired the license and inventory of the Ombre Rose fragrance brand from Alfin Inc. Jean Philippe regarded the Ombre Rose brand as complementing its existing line of fragrances, thereby allowing the use of existing distribution channels without incurring significantly greater costs. Also that year Jean Philippes French subsidiary acquired the selective Burberry fragrance from the Royal Brands division of Brigade International, pursuant to a ten-year license agreement. This acquisition was the stepping-stone used by the company to build a portfolio of luxury brands through direct acquisition of existing brand names.

Building the Business: 1994-96

The perfume fragrance market at the time could be divided into two categories: selective lines, consisting of brand name products with luxury imaging, were distributed through perfumeries and department stores; while mass lines, consisting of moderately priced products, were distributed to a broad customer base with limited purchasing power via mass merchandisers. After the acquisition of the selective Burberry fragrance, Jean Philippe continued to aggressively expand its markets and product lines through licensing agreements or through direct acquisition of existing product lines. Licensing agreements allowed the right to use brand names, create and package new fragrances, and determine product positioning and distribution, in exchange for payment of royalties proportional to the brands net sales.

The company purchased the Molyneux and Weil brand names in early 1994 from Cosmetiques et France-I.D., S.A. for approximately $3.6 million in cash and 200,000 shares of the companys common stock valued at approximately $2.2 million. The Molyneux brand name was originally created in the early 1900s by the fashion designer Edouard Molyneux. The Molyneux name enjoyed ranking among the institutional brand names of French perfumery, it had been well established in other Western European countries, and it enjoyed a very prominent market position in South America, especially through the Quartz line for women. The company was also attracted to the synergies between the Molyneux name and the Burberry brand name.

In March 1994, Jean Philippe acquired the worldwide trade-mark for the Intimate and Chaz fragrance lines from Revlon Consumer Products Corp.; in June of the same year it acquired the worldwide trademarks for Aziza from Chesebrough-Ponds USA, an operating unit of Unilever N.V. Aziza was a hypoallergenic eye cosmetic line that at its peak was distributed in approximately 22,000 mass-market outlets with an estimated wholesale volume of $60 million. Aziza was also the first mass-market brand that focused solely on the eyes and the first brand of hypoallergenic makeup on the market. Chesebrough-Ponds discontinued the line in 1992 in the face of plummeting sales. For Jean Philippe, however, the AZIZA acquisition was a strategic move to expand into the mass-market fragrance and cosmetics industry. The company followed the acquisition with two years of extensive market research and product development with the goal of reintroducing the product line.

By August 1994, Jean Philippe had also obtained from Chesebrough-Ponds the rights to manufacture and distribute Cutex nail and lip color in the United States and Puerto Rico. Chesebrough, which had been marketing Cutex, retained ownership of the Cutex trademark and continued to distribute the Cutex nail polish removers. The licensing agreement fit into each companys strategic plans. Chesebrough planned to focus on skin care, oral care, and deodorants, while Jean Philippe intended to continue its focus on cosmetics and fragrances as well as expand into mass markets. According to trade publications, the Cutex nail care and lip color products division had a wholesale volume in excess of $20 million in 1993.

While the company had an impressive stable of alternative designer fragrances from other distribution channels, the company had no mass market entries until March 1995 when it introduced A Man & A Woman, a knockoff version of Calvin Kleins, CK One. Jean Philippe was keenly aware of the vast potential of the alternative designer fragrance market and wanted a piece of that pie. In 1995, after ten years of growth, the alternative market had grown from a $95 million retail business into a $275 million business. In July, the company advanced its participation in the mass market with the launching of Romantic Illusions, a collection of 12 imitations of department store per-fumes packed in cartons designed to look like romance novels. That project allowed the company to differentiate itself from its competitors. Recognizing that romance novels represented a bil-lion dollar industry and comprised nearly 40 percent of the paper-backs sold in the mass market, Jean Philippe decided to capitalize on womens interest in these books to create a new niche.

To appeal to the younger, trendy mass market consumer, the company introduced Jordache Denim, a group of three knockoff s. The collection consisted of Red Denim, a version of Giorgios Red; White Denim, a knockoff of Vanilla Fields by Coty; and Blue Denim, an imitation of Elizabeth Ardens Sun-flowers. This line not only imitated popular scents but also borrowed a marketing concept from the prestigious designer, Gianni Versace, who one year earlier introduced Red Jeans and Blue Jeans, a womans and mans scent, respectively. The company planned to continue the trend with additional line extensions under the Jordache brand name.

By February 1996, Jean Philippe was ready to relaunch the Aziza hypoallergenic eye cosmetic line. The Aziza brand name recognition provided Jean Philippe the opportunity to introduce a new line of products to an existing loyal customer base. The line was developed to incorporate the 38 best selling eye care products to meet the needs of the 1990s consumer. The primary distribution channels for the new line were mass-market merchandisers, drug chains, and supermarkets.

Refocus and Restructure: 1996-98

In the mid-1990s, Jean Philippe began restructuring in an effort to focus its resources on its profitable core fragrance business in the United Stales and abroad. An integral part of that process was to relinquish the Cutex lip and nail product license and to begin expanding its prestige portfolio. It achieved the latter by signing an exclusive 11-year license agreement with S.T. Dupont for the creation, manufacture, and global distribution of S.T. Dupont perfumes.

Company Perspectives:

When we started this Company we laid the foundation for the legacy of Jean Philippe Fragrances, a company that makes high quality products affordable for the benefit of millions of people around the world. As time went on we met with our employees and customers and it became apparent that what we were building was a world of opportunity opportunity to provide our customers with quality products, opportunity to create value for our shareholders and opportunity for our employees. Our job was to take this company and move it forward; to make sure that future growth would define us, new products would enrich us and our operating culture would energize us year after year. In recent years, not every opportunity taken has produced the expected results. However, we have learned from these experiences and our flexibility enables us to overcome them.

Economic turbulence in Eastern Europe and Brazil resulted in sales declines during this time, and Jean Philippe was forced to close its Brazilian subsidiary, Jean Philippe Do Brazil in 1998. Still, Jean Philippe continued to market products in Brazil and entered into a distribution agreement with a well-known Brazilian fragrance distributor, which included the purchase of existing inventory. This action embodied the companys philosophy on the risks and benefits of global marketing, enumerated in the companys 1998 annual report: The Companys worldwide position, which makes it subject to global economic turbulence, should also benefit the Company in the future, as countries emerge from their economic troubles. The economic conditions in a number of markets during 1998, such as Eastern Europe and Brazil, certainly dampened the Companys short-term results. However, the Companys long-term focus will not allow it to abandon these markets, as the company would lose the opportunity to capitalize on the potential resurgence of these countries. Jean Philippe did successfully weather the tumultuous periods brought on by its international markets by streamlining the sales and administrative structure of its U.S. operations.

Building the Luxury Brand Portfolio: 1998-99

In April 1999, the company launched the Parfums Deja New fragrance line that aimed to appeal to a wide range of consumers in an emerging middle market and compensate for a relatively flat alternative-fragrance market. The goal of this action was to blur the distinction between prestige and mass market fragrances. Moreover, Jean Philippe introduced two successful S.T. Dupont fragrance lines in 1998. A line of complementary bath products was introduced in the first half of 1999, further enhancing the brands image.

A 12-year exclusive license agreement with internationally renowned British designer Paul Smith, in December 1998, added to the build-up of the companys prestige fragrance portfolio. The agreement allowed for the creation, manufacture, and worldwide distribution of Paul Smith perfumes and cosmetics. The companys international launch of its first line of Paul Smith perfumes was scheduled for July 2000.

In March 1999, the company entered into an exclusive license agreement with the Christian Lacroix Company, a division of LVMH Moet Hennessy Louis Vuitton S.A. (LVMH) to enable the worldwide development, manufacture and distribution of perfumes. The new alliance with a prestigious fashion label that bottled such luxury fragrances as Christian Dior and Givenchy, was designed to further strengthen the companys position in the prestige fragrance industry.

In August 1999, LVMH acquired a 6.3 percent stake, some 467,000 shares, in Jean Philippe, which during this time changed its name to Inter Parfums, Inc. The stock transaction was valued at $4.2 million. LVMH disclosed in a Securities and Exchange Commission filing that they considered the Inter Parfums business portfolio complementary to their own and intended to open negotiations with Inter Parfums about increasing its ownership to a significant minority position. LVMH also stated in the filing that it intended to increase its participation on a friendly basis coincident with the execution of a customary strategic minority investment agreement. By November 1999, LVMH had increased its equity investment to approximately 20.5 percent.

The name change from Jean Philippe Fragrances, Inc. to Inter Parfums, Inc. in July recognized the success of its French subsidiary, Inter Parfums, S.A., over the previous five years. For the year ending December 31, 1998, the French subsidiary represented 66 percent of net sales. Since the French subsidiary had helped the company become a formidable competitor in the prestige industry, the company strategy held that the name change would allow even greater industry exposure and open the way for greater license and acquisition opportunities. The company, however, retained the brand name, Jean Philippe Fragrances, for its mass market products.

2000 and Beyond

Among Inter Parfums primary goals for the future were to focus on new product introductions and prestige brand names, as well as keep its U.S. operations profitable in the face of economic downturns abroad. Toward those ends, the company launched a totally new fragrance, Quartz by Molyneux, as well as a new line of S.T. Dupont Signature perfumes. The company looked forward to the international launch of its first line of Paul Smith perfumes and two new perfume lines under the Burberry name, which continued to be the companys leading selective brand name fragrance. In June 2000, Inter Parfums announced that it would produce and market a new line of fragrances under the FUBU name, a popular American line of fashions for young people. Also, the U.S. debut of Christian Lacroix was made in February 2000 through an exclusive distribution arrangement with Saks Fifth Avenue. Distribution of the Christian Lacroix line in South America was also planned for 2000. On the other end of the market spectrum, Inter Parfums planned a new AZIZA 11 line of low priced eye shadow kits, mascaras, colorful lip-gloss products, and pencils created for the dollar store market.

Principal Subsidiaries

Inter Parfums, S.A. (79%; France).

Principal Competitors

Coty; French Fragrances; Parlux Fragrances.

Key Dates:

1985:
Company is founded as Jean Philippe Fragrances.
1989:
Elite Parfums, Ltd. subsidiary is formed.
1990:
Jordache cosmetics and fragrances are acquired.
1991:
Inter Parfums, S.A. and Selective Industrie, S.A. are acquired.
1993:
Subsidiary Inter Parfums, S.A. acquires exclusive license for Burberry and Ombre Rose fragrances.
1998:
Companys Brazilian subsidiary, Jean Philippe do Brazil, closes.
1999:
Companys adopts name of its subsidiary Inter-Parfums.

Further Reading

Brookman, Faye, AM Cosmetics Buys Itself a Mass Niche, WWD, April 11, 1997, p. 9.

Cunningham, Thomas, LVMH Buys 6.3 Percent Stake in Inter Parfums, WWD, August 6, 1999.

, LVMHS Inter Parfums Stake Increasing to 20%, WWD, September 29, 1999.

Jean Philippe Buys Aziza Makeup Mark, WWD, June 28, 1994, p. 12.

Jean Philippe Gets Rights to Cutex, WWD, June 3, 1994, p.6.

Jean Philippes Numbers, WWD, March 29, 1996, p. 12.

Jean Philippe, Soap & Cosmetics, April 1999, p. 22.

Kagan, Cara, Cutex Enters Chapter 2 With Jean Philippe, WWD, March 10, 1995, p. 6.

, Jean Philippe Gives 61 Year Old Aziza a Facelift, WWD, November 3,1995, p. 8.

, Jean Philippes Launch Strategy: Follow the Alternative Route, WWD, March 31, 1995, p. S18.

Marcial, Gene G., Copycat Scents Are Far From Stale, Business Week, February 15, 1993, p. 104.

, Knockout Knockoff Scents, Business Week, August 16, 1993, p. 94.

, Sweet Smells from a Parfumerie, Business Week, April 29, 1991, p. 80.

Ozzard, Janet, October Launch for Lacroixs Second Scent, WWD, September 10, 1999.

Inter Parfums in Burberrys/Ombre Rose Acquisitions, Cosmetics International, August 15, 1993, p. 1.

Parlux Agrees to Buy Famous French Brands, Knight-Ridder/Tribune Business News, January 16, 1996.

Purchasing Power, WWD, February 2, 1996, p. 5.

Taking Charge, WWD, April 4,1997, p. 10.

Ana Garcia Schulz

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