Prestige beauty marketer Estee Lauder Cos., rumored to be in pursuit of designer Donna Karan's beauty business, surprised competitors last week with its purchase of Sassaby, parent to the popular cosmetics brand jane.
Although it has estimated total sales of just $30 million, jane is the fastest-growing cosmetics brand, up more than 40% this year thanks to its popularity among young women.
FIRST STAB AT MASS MARKET
The acquisition marks Lauder's first entry in the mass market; years ago, it is said to have discussed a private-label line with Wal-Mart, but the deal never materialized and the shelves of retail giants like Kmart and Target have remained unfamiliar territory for the marketer.
"The jane brand fits our criteria for acquisition very well, especially its unique market position with consumers, which is complementary to our other brands," said Lauder Chairman-CEO Leonard A. Lauder, who had kept an eye on the brand since its 1994 launch. "With jane, we were attracted to its success in a niche market and its first-rate management team, who are experts in their field."
That team includes Sassaby President Howard Katkov and Senior VP-Marketing Don Pettit.
Lauder's first move into the mass market is significant both in the U.S. and overseas.
"On an international basis in Asia, it's either very high end or low end and Lauder is positioning its MAC at the high end and can put jane at the low end, especially in a lot of developing countries," said industry consultant Allan Mottus.
"In the U.S., it validates the pricing below Revlon," he continued. "With [Revlon's] ColorStay, every marketer in mass traded up in terms of pricing, leaving no big advertised middle price brand."
ONLY $2 MIL FOR ADS
Jane will also benefit from Lauder's marketing muscle. Currently, the brand spends a minuscule $2 million a year on advertising, a figure that is expected to grow under its new owner. Brash, New York, is likely to remain the brand's agency.
Based on data from food, drug and mass merchandisers, jane has sales of $22 million, making it the 14th ranked brand in the $2.5 billion category, according to Information Resources Inc. However, the brand is ranked No. 7 by IRI in those stores where jane is actually sold.
While Donna Karan is known to be negotiating a sale of its beauty business, a Lauder spokesman said the company does not comment on speculation.
Copyright September 1997, Crain Communications Inc.