Flare Fragrances Company, Inc.: Analyzing Growth Opportunities
Key issue: Flare wants to deliver at least $7.5 million incremental revenue in
2009 and survive the severe economic environment. Two methods are
available, one involves launching a new brand – Savvy; the other involves intensifying Flare’s penetration into the drugstore channel.
Current situation of the industry: In US market, 2008, 74% women and 75% girls use fragrance products. The total US fragrances retail market was $5.7 billion in 2007, among them $3.8 billion was women fragrances. Flare takes 9.5% market share, exceeded by Depuis, Suzanne Weber and Aromatique. Sales channels of fragrances include mass market, ...view middle of the document...
5 million incremental revenue, the shares of drug store channel and department store channel should increase by 2% and 0.8%, respectively, after the penetration. As is shown in Exhibit 6, Savvy’s target market and its price are not so much different from those of other brands under the Loveliest. Savvy is not a proper to be a breaking-out brand and is less likely to shore up department store market. Moreover, since Loveliest already has five brands with it, the adding of another will not dilute so heavily. Therefore, Savvy should be
advertised with Loveliest labelled on it and the media plan should be $2,2500,00 according to Exhibit 7. The risk-and-return analysis of each option is as follows: Project Project 1 Cost Launch and advertisin g ($2.25 million) advertisin g Expected task Revenue 7.5 million Risk Cannibalization of existing brand; possible failure of launching Damage to relationship with other retail accounts; Return A breaking-out brand with possibility to make halo effect ; Increasing revenue; more share in drug store channel
Increase the market share of the channel by 2%.
Launch and advertisin g ($4.5 million)
Increase the High cost; Shore up market share of Possible failure of department store the channel by the launching channel; open high0.8%; Revenue end market; making $7.5 million halo effect to launch more premium brands.
Final recommendation: According to the above analysis, the final recommendation is Project 3: introducing
a new breaking out premium brand targeting at high-end market (Retail price...