Elizabeth Arden, Inc. Business Information, Profile, and History

History of Elizabeth Arden, Inc.

Elizabeth Arden, Inc. is one of the world's leading makers of prestige perfumes and cosmetics. Key brands include Elizabeth Taylor's White Diamonds, White Shoulders, Red Door, 5th Avenue, Green Tea, and Sunflowers. The company also sells a line of Elizabeth Arden brand color cosmetics, and skin care products under the names Ceramides, Visible Difference, and Millennium. Elizabeth Arden goods are sold in over 90 countries worldwide, with major markets in the United States and Europe. A world leader in the cosmetics industry since the 1920s, Elizabeth Arden was acquired by Unilever PLC, a conglomerate of consumer product companies, in 1990. It became an independent, publicly owned company in 2001, when it was purchased by FFI Fragrances. That company took the Elizabeth Arden name.

Erratic Beginnings

Elizabeth Arden, who founded the company in 1911, can be credited with singlehandedly laying the foundations of the modern American cosmetics industry. Elizabeth Arden was born Florence Nightingale Graham in Canada during the late 1870s. Named for the renowned nurse who served during the Crimean War, Graham grew up in a large, poverty-stricken family. When she was unable to finish high school because her family lacked the finances, she persuaded herself that nursing was her true vocation and began training for that profession. Graham quickly realized her mistake. It was sales, not suffering humanity, that finally lured her and tapped her real talents.

While a student nurse, Graham had met a chemist experimenting with a facial cream that could help acne sufferers. The concept intrigued her, leading to her conviction that most women would give anything for beauty. An unsuccessful early attempt to start a mail-order business marketing her own version of face cream failed largely because of her father's impatience with his madcap daughter's strange concoctions. Instead Graham toiled at a series of jobs in Toronto that afforded her a chance to display her salesmanship. At one point employed as a dental assistant, she doubled the dentist's revenues in a short time when she hit upon the idea of persuasively writing each patient to explain the necessity of regular dental check-ups.

Nearly 30 years old and unwilling to marry for fear of losing her independence, Graham set off for New York City in 1908. Landing a job as a bookkeeper for the prominent Squibb Pharmaceutical Company, she was impressed by the state-of-the-art laboratories and the constant attention to research and development. This inspired her to fashion a small lab of her own, where she might 'scientifically' test out her own ideas for beauty products. Before venturing into this unknown arena, however, Graham quit her job at Squibb to become an assistant in a newly established beauty culture salon. Catering to a wealthy clientele, these early beauty parlors came to be the nucleus of the future cosmetics industry. They emphasized skin care rather than hair care, and the methods for achieving glowing skin did not rest with makeup as much as with skin massage and the applications of creams and lotions.

Unfamiliar with the concept of beauty salons before coming to New York, what she learned there helped Graham lay the foundations for the cosmetics industry she was to eventually build. Graham was hired as a 'treatment girl' to deliver facial massages, mix the facial concoctions of the owner, Mrs. Eleanor Adair, and give manicures. Graham displayed unusual talent and sales ability, and quickly learned all the aspects of the beauty culture field.

Until then, Florence Nightingale Graham had never worn cosmetics. Even in the early 20th century, a proper woman simply hoped for a healthy complexion--facial 'paint,' usually applied without skill or finesse, was considered disreputable. However, higher levels of female education coupled with the women's suffrage movement provided the stimuli for change. By the time Graham arrived in New York, shorter hair and cosmetics were becoming increasingly associated with emancipation.

Soon Graham felt confident enough to go into business for herself. Without funds to finance the endeavor on her own, however, she formed a partnership with Elizabeth Hubbard in 1910. While the nameplate bore the partner's name--Florence Nightingale was rejected as suggestive of a hospital ward--the cosmetic mixtures and other ideas were clearly Graham's. She dubbed her pricey lotions and powders 'Grecian,' endowing them with a romantic allure and prestige that would become her trademark.

Instead of a parlor, the establishment was referred to as a salon, since Graham thought it would appeal to higher class society women. Although the partners could barely afford the rent, Graham had insisted on lavish quarters in a brownstone on New York's Fifth Avenue, which was rapidly turning into a major business district. The partners quarreled soon after their salon opened its doors, however, and Elizabeth Hubbard abruptly departed, leaving Graham to pay the huge rent. Borrowing $6,000 from her brother to keep her salon open, Graham worked as a manicurist after hours to supplement her income.

In addition to the problems of trying to pay the rent, it was necessary for Graham to decide on a name for her salon. While the suffragettes were taking steps towards women's rights, their emancipation had not reached the point where 'Miss' connoted respectability, and Graham decided to use 'Mrs.' Her former partner's name, Elizabeth, appealed to her, although a new last name was harder to come by. She finally chose Arden after reading the name in a poem by Alfred, Lord Tennyson. The new name seemed to evoke the prestige and understated glamour that Graham not only craved for her business, but for herself as well. Thus Florence Nightingale Graham became Elizabeth Arden.

After hours, when she was not manicuring nails for extra income, Arden experimented with cosmetics. One of her distinctive contributions was the addition of fragrance to the lotions and powders of the day, which had been lacking scent. The facial creams sold at the time were greasy and heavy, but Arden hired a chemist to formulate a light, fluffy cream that became an instant success. It was at this point that she developed her 'total beauty' idea. The concept initially involved sharing her salon quarters with a 'prestige' hairdresser and a milliner; later a clothing shop was included. Eventually the idea was further expanded to include beauty spas.

Elizabeth Arden's hard work and imagination paid off, making her salons enormously profitable. Without serious competitors for the first several years after establishing her business, her success was also aided by changing attitudes toward equality of the sexes. Emancipation had progressed so far as to soften the prejudices against women who wore short hair and cosmetics. Times were changing so rapidly that by 1914, Elizabeth Arden removed the 'Mrs.' from her nameplate and substituted 'Miss.' It was good for business.

A steady stream of products was marketed in the initial years of Elizabeth Arden's business, including rouges and fragrant, tinted powders that she taught her 'girls' to apply with subtlety and finesse. In 1914, on the eve of the outbreak of World War I, Arden traveled to Paris, her first trip abroad. During her summer-long sojourn, Arden became acquainted with the more sophisticated Parisian techniques of beauty culture and makeup application. She brought these techniques back with her, in addition to the cosmetic products, including the eye makeup worn by wealthy dames of Paris society. Though chemists improved on the products, Arden found it difficult to convince her clients to apply it--eye makeup for many was going too far. It was America's entry into World War I, however, that provided the necessary catalyst. While the men were away at war, women found themselves employed in many lines of work formerly closed to them, and as they gained even greater independence, many of the restrictive taboos became outdated. Women began experimenting with Elizabeth Arden's eye makeup, the first to be introduced in the United States.

Elizabeth Arden's Venetian line of cosmetics along with her velvety Cream Amoretta--in her signature chic bottling--were being sold in department stores all over the East Coast, and her salon with the famous red door was duplicated in Washington, D.C., in 1914, proving an instant success. A year later Arden perfumes were introduced, further expanding the line of products offered in the salons. However, her reign as undisputed queen of cosmetics was not due to last. After the war, competition came to the fore, marking the beginning of the lifelong personal animosity between Elizabeth Arden and her chief rival, Helena Rubenstein. The cosmetics industry began growing at a rapid pace and became steadily more lucrative, especially to women, for whom it was one of the few lines of business in which they could rise to the top and be leaders.

Increasing Success: 1920s-30s

However, Elizabeth Arden was, more often than not, the industry standard bearer. By the start of World War II in Europe, there were dozens of Elizabeth Arden salons all over the world, and hundreds of products being marketed, including soaps, bath salts, even toothpaste, as well as perfumes to go with either morning, afternoon, or evening dress. No one advertised cosmetics as frequently nor as lavishly as Elizabeth Arden. This was in accord with her philosophy, held throughout her life, that in order to make money, one had to spend it. Meanwhile, American women were in fact spending $6 million annually on cosmetics by 1925, barely 15 years after Elizabeth Arden had hung up her shingle. That year her company reaped over $2 million in sales, a figure that doubled only four years later.

During the Depression, Elizabeth Arden predicted--and advertised accordingly--that the American woman would not stint on beauty. Unlike most American businesses, Elizabeth Arden's company earned handsome profits during those years, even making strides with innovative lipsticks which, until 1932, had come in only a few basic shades. Elizabeth Arden believed that just as perfume should go with the costume, so too should lipstick. Her 'lipstick kit' containing several different shades was a big hit at the height of the Depression, creating a sensation in the industry as competitors scrambled to imitate the concept. Then in 1934 she established her extremely successful 'beauty spa' in Maine--another was opened in Arizona in 1946--where women shed excess pounds and immersed themselves in Elizabeth Arden bath salts and afterbath lotions for $500 per week. By the mid-1930s there were 29 Elizabeth Arden salons around the world, while her company manufactured and marketed 108 different products.

The outbreak of World War II, which spelled a loss of overseas markets and raw materials, did not catch Elizabeth Arden by surprise. Just as she had done before World War I, Elizabeth Arden stocked up on raw materials early, and offset the loss of income from her overseas salons by concentrating on expanding her domestic market. Her products were not only carried in department stores coast to coast, but the war years saw Arden expanding into all of the major drugstore chains of the day. Consequently in 1944, at the height of the war, business at Elizabeth Arden's was booming, and the company remained a pacesetter. A line of clothing was added in the 1950s, and Elizabeth Arden became the first in the industry to target male customers by marketing men's fragrances and opening a 'men's boutique.'

Changing Hands After Arden's Death

Elizabeth Arden continued her reign as grande dame of the cosmetics industry until her death in 1966. By then the cosmetics industry in the United States had grown into a multibillion-dollar business, and large corporations were mass producing personal care products that, while lacking in prestige, could be sold at much lower prices. Friends and relatives had urged Arden to sell her profitable business as early as 1929, when a $15 million offer was made. She refused, and no further mention of selling or merging occurred. However, negotiations for the sale of the company began shortly after her death. Elizabeth Arden Co. was finally acquired in late 1970 by the pharmaceutical company, Eli Lilly & Co., which cut costs and instituted streamlined procedures before putting it up for sale again in 1987. The company changed hands twice more until 1990 when it was purchased by the Anglo-Dutch conglomerate Unilever PLC. Two years later Unilever established the Prestige Personal Products Group, which included Elizabeth Arden Co. and Calvin Klein.

A constant during these changeovers was Elizabeth Arden's president and CEO, Joseph F. Ronchetti, who had joined the company after Arden's death. In 1986, when the company was still a subsidiary of Eli Lilly, Ronchetti devised a five-year plan to revitalize Elizabeth Arden Co. and make it more competitive. While the budget for advertising--especially targeted at baby boomers--was doubled, more modern packaging and innovative bottling was instituted. Ronchetti stuck with the plan throughout the changes in ownership. By the end of the five years, advertising was conducting an average of 200-300 promotions a month, and research and development had created many pace-setting products, including a line of ultraviolet (UV) sun protection creams and lotions that was distinguished by awards from the Skin Cancer Foundation. In addition, Elizabeth Taylor's White Diamonds became the number one selling fragrance in 1991 after the famous actress personally introduced the scent in ten U.S. cities. Elizabeth Arden had also become more responsive to its social environment--animal-testing of its cosmetics was virtually never done, and considerable donations were made to such causes as AIDS research and child welfare.

Revolving Door at the Top in the 1990s

Unilever's purchase of Elizabeth Arden, coupled with that of Fabergé, Inc. in 1990, made the conglomerate the second largest cosmetics company in the world. With a distribution network in virtually every country on earth, in addition to state-of-the-art research facilities, Elizabeth Arden Co. stood to benefit from its acquisition by the corporation. Yet under Unilever's umbrella, Elizabeth Arden suffered years of poor direction and disappointing earnings. In what was billed as a 'surprise resignation,' Joseph Ronchetti stepped down from the presidency of Elizabeth Arden in 1992. In two years with Unilever, Elizabeth Arden had seen substantial sales growth despite a general slowdown in the prestige cosmetics market, and it had introduced the highly successful White Diamonds and then Red Door perfumes. According to a June 1992 New York Times article, Ronchetti had transformed the Arden brand from 'a line for grandmothers into a brand that younger career women wanted to wear.' Ronchetti claimed he wanted to leave Elizabeth Arden while everything was going well. But filling his job was difficult for the company. The presidency of Arden was taken by Robert M. Phillips, who had been chairman of Unilever's Chesebrough-Ponds, Calvin Klein, and Arden units.

Phillips left after two years, to become worldwide director for Unilever's personal products businesses. Kim Delsing then became president and CEO of Elizabeth Arden. Delsing, who had previously run Unilever's Calvin Klein unit, came in during a restructuring of Arden's global business. The company consolidated management for its Western Hemisphere business, and its two U.S. divisions were combined. Elizabeth Arden was estimated to have sales of around $1 billion worldwide in the early 1990s, but by 1994 one of the reasons given for the management changes was to boost profitability. Kim Delsing was replaced in 1995, having lasted just a year. At that point, the financial rockiness of Elizabeth Arden was exposed. Though the company had seemed to be doing well just a few years earlier, Delsing's job was described as pushing Arden through a difficult turnaround. Gross margins were said to have eroded, and inventories were obsolete. The other half of Unilever's prestige products division, Calvin Klein, was said to have a profit margin of around 20 percent. Industry estimates put Arden's profits at just 4 percent in 1994. Sales volume was also estimated to have slid, from $1 billion in 1993 to only $850 million two years later. To add to its problems, it was not clear what direction the company was moving in. Delsing had run into difficulties with the launch of a new perfume, Elizabeth Taylor's Black Pearls. A dispute with several major department stores led Arden to introduce Black Pearls at mass market stores such as J.C. Penney and Sears. The deemphasis on high-end stores chipped away at Arden's prestige image. Peter England took over the shaky Arden from Delsing, and worked to assure the industry that his company was not turning into a mass market business. But Arden's sales fell, hurting profits at Unilever's personal products division. Unilever's chairman Michael Perry told WWD (February 21, 1996) that the 1995 losses at Arden were 'a hiccup,' not a disaster, and estimated that the unit would be profitable again in 18 months. Poor financial results for the personal products division in 1997 were again blamed on Elizabeth Arden. At that time, Unilever had announced plans to sell off underperforming units. Unilever's chairman claimed that Arden was not yet in the sell-off group. Sales and profits at Arden improved in 1999, especially after the introduction of a new fragrance, Splendor.

Despite Arden's recovery, Unilever sold the unit in 2001 to FFI Fragrances. FFI, formerly French Fragrances, Inc., was a perfume marketer that dealt in prestige as well as mass market products. FFI paid roughly $190 million in cash for Elizabeth Arden, plus an exchange of stock which gave Unilever an approximately 18 percent stake in the publicly owned company. FFI changed its name to Elizabeth Arden, Inc. At the time of the transaction, annual sales at Arden were estimated at $890 million. This was still below the company's peak in the early 1990s. The company's new leadership hoped to improve Arden's international business, and to streamline order fulfillment and materials management.

Principal Competitors: The Estée Lauder Companies Inc.; Coty, Inc.; Inter Parfums, Inc.

Chronology

• Key Dates:

• 1911: Company is founded in New York City by Canada-born Elizabeth Arden.
• 1934: Arden opens first beauty spa.
• 1966: Founder Arden dies.
• 1970: Firm is bought by Eli Lilly.
• 1990: Business becomes part of Unilever PLC conglomerate.
• 2001: Company is purchased by FFI Fragrances, which assumes the Arden name.