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Marionnaud Parfumeries SA

Marionnaud Parfumeries SA

5-7 avenue de Paris
94300 Vincennes
France
Telephone: +33 (0) 1 48 08 69 69
Fax: +33 (0)1 48 08 01 51
Web site: http://www.marionnaud.com

Public Company
Incorporated: 1984
Employees: 6,150
Sales: EUR 770.9 million ($747.39 million) (2001)
Stock Exchanges: Euronext Paris
Ticker Symbol: MAR
NAIC: 446120 Cosmetics, Beauty Supplies, and Perfume Stores

Marionnaud Parfumeries SA is one of Europes leading retail perfume specialists. With 1,118 perfume shops in 13 countries, the French company ranks number one in terms of doors and lags only Germanys Douglas in terms of sales. Marionnauds sales topped EUR 770 million in 2001. The company is also number one or two in many of its markets, especially in France, its single largest market, but also in Switzerland, Spain, Italy, Portugal, Austria, and in much of the Eastern European markets. Marionnaud has achieved its position by growing rapidly through a massive acquisition program, typically of smaller retail groups and independent perfume storesbetween 2000 and 20002, the company has tripled the number of stores in its network. Marionnaud separates its stores into two categories: the larger espaces, which reach up to 400 square meters and more and offer more than 16,000 products, including the worlds leading perfume and cosmetics brands, and which combine self-service with knowledgeable sales staffs; and the smaller boutiques, typically found in downtown locations and averaging 100 square feet of sales space, and which offer personalized service. The bulk of Marionnauds retail network is made up of the smaller boutique stores. Marionnaud is led by Marcel Frydman, backed by his sons Gerald and Jean-Pierre. The Frydman family maintain a major ity of the voting rights for the company, which has been listed on the Euronext Paris stock exchange since 1998.

Perfumed Present in the 1980s

Born in Paris in 1931, Marcel Frydman had already built up a successful business specialized in the liquidation of unsold stock. In 1984, Frydman, using his own savings and joined by friends, bought a small perfume shop in the Parisian suburb of Montreuil as a gift for his wife. Frydman quickly showed a flair for retail, cutting prices by some 20 percent to attract more customers in a neighborhood of relatively modest incomes. By the end of that first year, Frydman had succeeded in tripling the stores sales.

The Frydman familys entry into the retail perfume market came at just the right time. In the mid-1980s, the perfume sector was highly fragmented among thousands of small, independent boutiques. Yet these stores were already under heavy pressure from the rise of the hypermarketlarge-scale stores combining supermarkets with traditional department store offerings, including perfumes.

Frydman quickly recognized the potential of forming a retail chain dedicated to perfume sales, buying a second store, now in Paris itself, in 1985. By 1986, Frydman decided to leave his stock liquidation business to dedicate himself to his perfume stores. Frydman then began searching for new stores in the Paris areait was easier and less expensive to acquire existing stores and their often loyal clientele. As his interest moved more and more beyond Paris, Frydman often relied on his suppliers, who informed him of stores that were considering putting themselves up for sale.

Frydman applied the same formula to each new store, cutting prices and insisting on strong customer service. Yet the interior design of the stores was left mostly unchanged, in part so as not to alienate existing clientele. Meanwhile, the company had yet to adopt a unified brand name for its growing number of stores. With four stores in 1988, Frydman prepared to step up his acquisitions. Whereas the companys initial purchases had come from reinvesting its profits, Frydman now turned to outside sources, such as the bank Credit National.

By 1992, Frydmans retail group had grown to 16 stores in a market that remained highly fragmented, even hostile to consolidation, as the nations perfumeries clung to their status as independent shopkeepers. As Frydman told Nouvel Economiste: It was profession where nothing was happening. When wed reached eight stores, I prepared a business plan in which we would grow to 30 stores. That seemed enormous to me.

In the early 1990s, however, Frydmans confidence in his business model continued to grow. The companys ambitions grew as well, and by 1992 the company drafted a new growth target, that of 100 stores and FFr 1 billion (EUR$150 million) in sales.

Yet Frydman was no longer alone in his belief in the consolidation of the retail perfume sector. A number of other groups had begun setting up their own retail networks. Chief among these was Bernard Marionnaud, who had started building a chain of discount perfume shops at the beginning of the decade. By the middle of the 1990s, Marionnaud controlled an empire of 48 stores posting combined sales of more than FFr 550 million (EUR 84 million). Marionnaud had especially become famous throughout France for its discount formula, which offering up to 25 percent off on the major name brands in perfumes and cosmetics.

Marionnaud, however, had run into trouble at the end of 1995, rattled by strikes by its employees and by the refusal of a number of major brands, such as Christian Dior, to supply its stores. The company began losing money, and finally was forced to find a buyer for its network. Twice the size of Frydmans group, Marionnaud was unable to attract an interested buyer among the countrys large retail groups. Finally, Marionnaud had no choice but to negotiate with Frydmanand to sell his chain for just EUR 10 million. Which wasnt too much, Frydman told Challenges, It was the chance of a lifetime. I was buying the most famous perfumery in France.

Frydman quickly capitalized on the Marionnaud name, adopting the new name of Marionnaud Parfumeries across his entire retail network. Frydman as quickly brought the acquired group back into profitability, applying his own recipe for success. Meanwhile, Frydman continued buying up stores, adding a further 27 by the end of 1997 and boosting sales to EUR 117 million.

Joined by sons Gerald, who had worked as a consultant at KPMG, and Jean-Pierre, whose interest in IT systems led the company to put into place a sophisticated tracking system linking sales at Marionnauds stores both to its headquarters and to a growing network of distribution centers, Frydman rolled out the companys two-tiered retail approach of small boutiques and larger espaces.

By 1998, the company owned and operated 76 boutiques and 14 espaces and began looking for new large-scale acquisitions. Marionnaud nearly snared one of its main competitors, the Marie-Jeanne Godard retail group. But luxury goods powerhouse LVMH, which had acquired another perfumery rival, Sephora, in 1997, snapped up the Godard chain.

European Perfumery Leader in the 2000s

Marionnaud responded by going public, with a listing on the Paris Stock Exchanges Secondary Market in July 1998. The Frydman family holding was reduced to just two-thirds of the companys stock after the listing. The company now had greater access to capitaluntil then, Marionnaud had gone to its bankers for financing for each acquisitionand began plans to step up its expansion across France. Frydman once again adjusted the growth target for his company, now forecasting the networks growth to 160 boutiques and 30 espaces by 2001.

Once again, Frydmans targets were to prove too modest. By the end of 1998, the company had already grown to more than 150 stores, including 15 espaces. This was achieved through the acquisition of a number of small independent shops, but also by the acquisition of two more important retail groups, Kleber, with 27 stores, acquired in October 1998, followed by the 24 stores owned by Saresco and operated under the names Silver Moon, Liz Parfums, and Opéra Chic. The company finished the year with sales of more than EUR 145 million.

By the end of 1999, Marionnauds sales had jumped past EUR 227 as the company continued its aggressive expansion effort. At the end of that year, the company reached an agreement to acquire the 75-store chain of Patchouli stores, boosting the companys totals past 200 stores. That acquisition was soon followed up by two more purchases at the beginning of 2000, those of the Marie Bernard Group, which, with 24 stores, helped extend the companys network into Frances Brittany region, and the Annebelle store group, which had 58 stores located primarily in the south of France. Fueling these purchases was the Frydmans willingness to reduce their own shareholding in the company, which dropped below 50 percent, and was to sink to below 25 percent by 2002although the family maintained control of Marionnauds voting rights.

Marionnaud had succeeded in gaining the lead in France, outpacing Sephora in number of stores. Yet the company had long been reluctant to pursue growth internationally, especially given the difficulties of its major competitors, particularly Sephora, to gain profitability overseas.

In July 2000, Marionnaud made its first international expansion move when it acquired Switzerlands Alrodo, which, with 103 perfumeries operating under the Alrodo and Europarfums names, controlled 16 percent of the Swiss market. This acquisition was quickly joined by a smaller Swiss purchase, that of the five-store Geneva-based chain Parfumerie Principale. Together, these acquisitions added more than EUR 100 million to the companys sales, while making it the leader in the Swiss retail perfume market.

Company Perspectives:

The essence of Marionnauds success: The Marionnaud spirit; a motivated team in a convivial company; a leading brand backed up by a strong business strategy; balanced growth supported by financial solidity.

The companys entry into Switzerland was quickly followed by a move into Italy, with the purchase of La Chiocciola, a chain of 35 perfume shops. By the end of 2000, Marionnauds network had grown to more than 400 storesincluding its freshly inaugurated Champs-Elysées flagship store. Revenues topped EUR 500 million, as the company now claimed 20 percent of the French market.

The share grew still greater at the beginning of 2001, with the purchase of DSP, owner of the store brands Bel Espace Parfumerie and Beauté Actuelle, adding 112 stores, for the most part franchised stores. The company decided to maintain these two store brands as the basis for a franchise operation to attract additional storeowners who preferred to maintain their independence while gaining access to Marionnauds purchasing and marketing strength.

The company celebrated its entry onto the Paris Bourses Primary Market in May 2001. Marionnaud then stepped up its presence in Italy, buying eight Riviera stores located in and around Venice, then another 36 stores in Piedmont, 22 stores in Milan, and six stores in Tuscany. The company also had entered Austria that year, boosting its number of stores in that country to 85 at the end of the year with the acquisition of 35 stores from the Hölzer group. Meanwhile, Marionnaud took its first steps into Spain, buying the eight-store chain Xplora. The company meanwhile continued to build up its portfolio of stores in France, adding the Odylia chain of 12 Parisian stores at the end of 2001.

With sales topping EUR 770 million and a network of stores of nearly 830, including more than 300 stores outside of France, Marionnaud was on its way to achieving its newest goal: that of becoming the undisputed European retail perfumery specialist. That goal appeared within reach at the beginning of 2002, as the company entered Eastern Europe with a 51 percent share in a joint venture controlling more than 107 stores.

The company continued to add more stores in 2002, notably with the purchase of the 30-store chain La Maison Blanche, in Spain, which was quickly followed in that country with the acquisition of 43 stores from the Conrado Martin chain, coupled with an agreement to acquire an additional 45 stores from that company by the end of the year. Then in August 2002, Marionnaud cemented its leadership of the Spanish market with the acquisitions of 22 Cusco stores and 12 Mendoza stores. These purchases helped push the companys store total to 1,118 stores.

Marionnaud showed no sign of slowing down, entering Tunisia and Portugal, with plans to enter Greece, among other markets. Meanwhile, arch-rival Sephoras losses continued, giving rise to rumors that LVMH might begin plans to sell off that subsidiary. Marionnaud appeared well placed to snap up its more internationally oriented competitor, should its ambitions take it beyond Europe and onto a global scale.

Principal Subsidiaries

Alrodo (Switzerland); Impo (Austria); Marionnaud Parfumeries Italie; Quadrifoglio (Italy); SAS Marionnaud Kleber; Snail (Italy); Xplora (Spain);

Principal Competitors

Bath & Body Works, Inc.; BeautiControl Cosmetics, Inc.; The Body Shop International PLC; The Boots Company PLC; Buth-Na-Bodhaige Inc.; Duane Reade, Inc.; Sephora SA; The Estée Lauder Companies Ine; Galeries Lafayette; Pinault-Printemps-Redoute.

Key Dates:

1984:
Marcel Frydman buys a perfume shop in Montreuil, a Paris suburb, for his wife.
1985:
Frydman buys a second store in Paris.
1992:
The company opens its 16th store.
1995:
The company acquires the Bernard Marionnaud chain of perfume shops and adopts the Marionnaud brand name.
1998:
Marionnaud goes public on the Paris stock exchange; the company acquires the Kleber store chain, then Saresco, which operated 24 stores under the Silver Moon, Liz Parfums, and Opéra Chic names.
1999:
The company acquires the 75-store Patchouli chain.
2000:
The company acquires the 24-store Marie Bernard group in the Brittany region and the Annebelle group, with 58 stores in the south of France; the company acquires Alrodo, with 103 stores in Switzerland, marking its first international expansion, and then acquires La Chiocciola, of Italy, with 35 stores.
2001:
The company acquires DSP, of France, with 112 franchised stores; the company acquires more than 60 stores in Italy and enters Austria and Spain.
2002:
The company acquires La Maison Blanche, in Spain, with 30 stores and 43 Conrado Martin stores in Spain; the company enters Tunisia and Portugal.

Further Reading

Bouaziz, Franck, Marionnaud vend de lamour, Nouvel Economiste, May 3, 2002.

Cazenave, Frédéric, Marionnaud Parfumeries Le Canada Dry du luxe, Newsbourse, January 20, 2002.

French Perfume Group Is Aiming to Take Over Europe, Cosmetics International, November 25, 2001, p. 6.

Leboucq, Valérie, Marionnaud va continuer les acquisitions, Les Echos, May 22, 2001, p. 12.

Le Hen, Véronique, Marionnaud oule parfum du succes, Dynamique Commercial, March-April 2002.

Marionnaud Goes from Strength to Strength, Cosmetics International, August 15, 2002, p. 6.

Marionnaud Is Spains Top Perfumery, Cosmetics International, July 25, 2002, p. 5.

Rivaud, Francine, Le parfumeur des familles, Challenges, June 2001.

M.L. Cohen

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