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Procter & Gamble Co. Chairman Ed Artzt may be discovering that when it comes to beauty, even the best painted face can crack.

Last week, P&G pulled the plug on its unprofitable Clarion cosmetics, just months after a $6 million repositioning campaign broke from Leo Burnett USA, Chicago.

The makeover failed to stanch Clarion's loss of real estate in U.S. stores, where 1993 sales fell 22.5% from the prior year to $69 million, according to Information Resources Inc.

Clarion's phase-out won't obviously affect P&G. But it puts the spotlight on other snags in the company's nearly $2 billion beauty business.

The much trumpeted global relaunch of Max Factor in 1993 by P&G's cosmetics and fragrances group has been disappointing. And the EuroCos fine fragrance unit, P&G's first venture into department stores, hasn't yet had a major U.S. hit. As a result, Wall Street is now wondering about


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P&G's future in glamor.

"The jury is still out on whether P&G should be in the cosmetics business. P&G will learn how to do cosmetics, but the questions are how long will it take, how much money, and how do you define success?" said PaineWebber analyst Andrew Shore.

Some have an even more dramatic spin.

"Is cosmetics P&G's biggest blunder-on the order of cookies and soft drinks?" mused Oppenheimer analyst Gabe Lowy. "It's harder for them to market fashion-oriented products and they shouldn't be in fragrances, which have short product life cycles and a low return on investment, if the product doesn't become a huge success."

The Venezia fragrance, introduced in 1993 via a $15 million campaign from Grey Advertising, New York, was to have been EuroCos' first big U.S. splash, following a successful 1992 European launch.

Instead, the fragrance is now said to carry a $6 million to $10 million loss in the U.S. That's acceptable in fragrance marketing circles but doesn't sit well with P&G, said one executive close to the marketer.

Incognito, a mass-market fragrance, has also disappointed P&Gers and been a drain on the marketer's one fragrance success, Navy.

Some executives close to P&G have suggested that all fragrances be sold off, leaving the company to focus on technologically advanced cosmetics and skincare products.

"It's just being discussed. But the big question is whether [Mr. Artzt] would ever let [fragrances] go," said one P&Ger.

Most believe that given Mr. Artzt's affinity for the beauty business, he won't sell off fragrances. Others argue that if he retires in 18 months, as expected, there will be a movement to spin off the business. A P&G spokeswoman denied any plans to jettison fragrances.

An even thornier problem is Max Factor cosmetics, relaunched last summer as an international color line. P&G's official position is that the restage is starting to produce "very strong growth."

But even with an estimated $20 million-plus in U.S. advertising from Lotas Minard Patton McIver, the restage has failed to boost market share, which for the four weeks ended Dec. 25 was at 6.3%, down slightly from the previous five months, according to industry data.

"The relaunch of Max Factor is still iffy," said PaineWebber's Mr. Shore. "Early indications suggest that it's not meeting budget in the U.S.," though it's doing well internationally.

On the plus side, P&G's market leader Cover Girl cosmetics have reached a record high share of more than 26% in the $2.1 billion cosmetics mass market. And Mr. Shore calls Oil of Olay skincare the "best-managed global brand."

Still, the failure to save Clarion and the Factor struggle may mean introduction of an Olay color line will be pushed back from late this year to 1995, if it ever comes.

A delay could give others an opening. Chesebrough-Pond's is already said to have made color cosmetics a priority for its Pond's skincare brand.

"That is the power of P&G," said industry consultant Allan Mottus. "P&G can make its competition react faster than anybody else."M

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