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In the spring of 2009, the Women in Flavor & Fragrance Commerce (WFFC) technical affairs and education committee met to decide the topic of this year’s fall seminar. The intent was to focus on the most relevant issue and design a program that would help the WFFC members not only navigate towards, but also to create, their own success in the industry. Accordingly, this year’s fall seminar discussed a topic that is continues to weigh on everyone’s mind—the economy and its effect on corporations and individuals.
The seminar began with Linda Bowden, regional president, PNC Bank, Northern New Jersey, presenting some challenges that women face in the industry. Bowden noted that during the recession women’s wages fell faster than men’s, and that women are more likely than men to hold subprime mortgages. Moreover, statistics suggest that, as recently as 2005, for every $1.00 that men earn, women earn $0.77. However, she added, we also live in what is sometimes referred to as the “Lipstick Economy,” where for every 100 men that graduate from a college or university, 135 women graduate, and women hold 60% of graduate degrees. As such, while women have a bright future, they have to build and use their networks, seek out mentors, and offer to mentor others.
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The second speaker at the event was Keith Aleardi, director of investment and senior vice president, PNC Bank, who discussed the overall economy and demonstrated the relevance of some seemingly abstract statistics to individuals. Comparing economists to weathermen, he said a weatherman’s temperature evaluation of 56 degrees is different from the actual “feels like” temperature of 49 degrees, if we consider the wind chill factor; the same holds true the economy. So, while it appears that the recession is technically over (and the worst is probably behind us) it will most likely take another 12-18 months for it to feel like the economy is improving. However, Aleardi noted, as the economy stabilizes and businesses gain confidence in the industry’s growth prospects and their ability to plan for and predict the future, they will begin making new investments and hiring more people. Further, believing that there is a considerable pent-up demand in the economy, Aleardi pointed out that compared to five years ago there was an additional $4 billion in cash available for investment and consumer purchases, which should translate to a positive business environment.
The Future of the F&F Industry
Next, Dietmar Hirt, managing director, Conexus Capital Advisors, Inc., discussed the landscape of the flavor and fragrance industry, calling the top five F&F houses as the “Billion-Dollar Club”—all having annual revenues in excess of $1 billion, and together possessing over 50% market share (by revenue). Hirt believed that consolidation in the industry will continue, and although the industry will rebound as the economy improves, he does not see a major re-stocking occurring. There will be fewer entrants into the industry in the coming years, largely due to entry barriers such as regulatory issues, he said, stressing the need for companies to build sustainable business models. Companies cannot be everything to everyone, and they need to focus on their strengths and to decide how and where to compete. Most of all executive management must be proactive. It is okay to pursue more than one strategy simultaneously, but a long-term strategy is of vital importance, Hirt said.
Complementing Hirt’s presentation, John Vanarthos, chairman of the Norris McLaughlin & Marcus corporate law department, discussed the more technical and legal aspects of mergers and acquisitions. To simplify, he identified 10 steps to the process of buying or selling a company—(1) identify what it is you want; (2) prepare; (3) go through the sales process; (4) structure and negotiate; (5) sign the letter of intent; (6) complete due diligence; (7) negotiate and sign the transaction contract; (8) complete post-contract and pre-closing activities; (9) close; and finally, (10) wrap-up post-closing items. Preparation was cited to be of the utmost importance.
Customers are Key
The seminar’s next speaker, Stan Frankenthaler, executive chef/director of culinary development, Dunkin’ Brands, focused on the flavor side of business, by making the important distinction between consumers and customers—consumers, he said, are people that are analyzed in blocks with certain bookends (for instance 16-24 year olds could be a consumer group.) Frankenthaler noted that customers, on the other hand, are individuals that support a business on a regular basis; customers (and not consumers) are key, as is repeat business.
Creating a Future
Taking this discussion a step further, Herma Schmitz, principal, Executive Coaching Group, Inc., spoke on people empowerment to cause a breakthrough in performance. Excluding shareholders for the moment, Schmitz explained the three levels of conversations that occur in an organization: (i) the executive level, where leadership lives, discusses and creates the long-term future of the organization; (ii) the middle or operational level, where the viability of the organization lives, people engage in projects that are measurable in time; (iii) the individual level, where short-term conversations occur. In addition, there are two different types of language, Schmitz noted— (i) the descriptive that includes stories and opinions, and is based on past events, and (ii) the declarative that signifies the act of making a statement, thus allowing something to become possible in the future that was not possible without the declaration. According to Schmitz , for an individual, as well as the organization to succeed, one needs to first make a declaration, and then manage the conversations in order to fulfill that declaration. If a declaration is not made, then one accepts the “default” future, which is nothing more than a continuation of the past. Thus, Schmitz stressed that it is up to leaders to make declarations and cause the future, and up to managers to manage the breakdowns along the way; the individuals, meanwhile, have the power to make their own declarations and create their futures, she added.
Fragrance’s Next Chapter
Next, Leslie Smith, vice president of fragrance technology for Coty, discussed the role of technology in the fragrance world, noting that the three main technology platforms are based on added benefits, sex/emotion/psychological attributes, and performance. Explaining this further, he said added benefits could include antibacterial, anti-aging, slimming or deodorant properties; technology to improve performance includes processes such as encapsulation and film-forming. Finally, underlining the importance of new molecules in the fragrance industry, Smith said, new molecules can improve creativity, take a fragrance in a new direction, replace scarce naturals and contribute to sustainability, and replace regulated ingredients.
The conference wrapped up with a presentation from Ruth Sutcliffe, senior director, international fragrance development, Coty, who discussed how fragrance (like fashion) evolves in cycles and often imitates fashion itself. To explain this, she cited examples from the era of depression and prohibition in the United States, and the creation of fragrances like Tabac and Old Spice; the abstract expressionism of the 1940s and 1950s coincided with the launch of Miss Dior and Youth Dew; the popularity of green florals and fougere grew in the 1960s and 1970s; the rise of very loud fragrances occurred in the booming 1980s, followed by the marine notes of the 1990s; today, new musks rule the innovation landscape. In this complex backdrop of trends, Sutcliffe cited some steps that one can take to innovate and stay ahead of trends. For one, it is crucial to read a variety of magazines, newspapers, and literature every day, she said. In addition, one can look at architecture, jewelry and electronics to see what is new in those categories; use trend agencies; and look at the sciences, politics, pop art, blogs, social media. Being aware of one’s competitors is crucial, Sutcliffe added, as is being passionate and open minded.