Chanel S.A.

founded: 1910

Contact Information:

headquarters: 135, avenue charles de gaulle
neuilly-sur-seine cedex, 92521 france phone: 33-1-46-43-4000 fax: 33-1-47-47-6034 url: http://www.chanel.com

OVERVIEW

Based in France, Chanel S.A. is a fashion design firm known for innovations such as the "little black dress," tweed suits, and two-tone pumps. Along with clothing and shoes, Chanel also sells cosmetics and fragrance lines at its 100 boutiques across the globe. One of the firm's most famous products is the Chanel No. 5 fragrance. Efforts in the late 1990s and early 2000s to target younger women and men helped revitalize the Chanel name.

COMPANY FINANCES

Despite its status as one of the top ten cosmetics makers in the world, Chanel held only 1.2 percent of the global cosmetics market in 2000, compared to the 16.8 percent held by leader L'Oreal SA. Chanel's cosmetics sales that year totaled $413.3 million. The firm was also the world's seventh-largest maker of fragrances, with sales of $570.4 million and a market share of 2.8 percent in that sector in 2000.

HISTORY

Chanel has at its roots the creation of a millinery (hat shop), in Paris, France, by Coco Chanel in 1910. The new shop, called Chanel Modes, began to attract attention when well-known French actresses began wearing Chanel hats. In 1913, Chanel expanded with a clothing boutique in Deauville. Two years later, Chanel opened a fashion house in Biarritz. Harper's Bazaar featured a Chanel dress design for the first time in 1916.

The Chanel No. 5 fragrance was released in 1921. Three years later, Chanel began to sell jewelry and beauty products, along with perfume and clothing. Vogue referred to Chanel's "little black dress," unveiled in 1926, as the "new uniform of the modern woman." The first Chanel tweed suits made their debut in 1928. By then, Chanel's simple clothing designs, in many cases modeled after men's clothing, had become accepted as a more casual option for women than the traditional fashion of the time. Chanel's designs also helped make the use of fabrics like chamois more commonplace. An accessories department was added to the fashion house the following year. Roughly 4,000 employees worked for Chanel by 1935.

Chanel shut down in 1939 when France entered World War II. The firm reopened again in 1954, after Coco Chanel, at the age of 74, returned to France from Switzerland. Her suits and simple black dresses became some of the most well-known designs in the fashion industry. In the mid-1950s, Chanel's quilted purse with the shoulder strap became an industry standard. Coco Chanel was named the most influential designer of the twentieth century at the Fashion Oscar awards in Dallas, Texas, in 1957. After her death in 1971, the firm struggled to find someone to fill the shoes of its legendary designer. Chanel began to distribute its accessories on a worldwide basis in the late 1970s. The firm moved into Korea in 1979, opening a shop in the well-to-do city of Pusan. Chanel's widower, Arie Kopelman, was hired by Alain Wertheimer (whose family owned Chanel by then) to take the reins of Chanel Inc., the firm's new U.S. subsidiary, in 1985. Two years later, Chanel diversified into watches for the first time.

The Egoiste fragrance for men was released in the early 1990s. In 1993 Chanel added fine jewelry to its product lineup when it unveiled a new collection of jewelry and watches in Paris. The firm released the Allure fragrance in 1996. Chanel and famous French hairdresser Frederic Fekkai created a joint venture in 1997; the Frederic Fekkai Beaute began selling hair care products and fragrances in New York that year. Chanel forged its first licensing agreement ever in 1999, allowing eyeglasses giant Luxottica to distribute Chanel sunglasses. The deal increased the number of places selling Chanel eyewear from 200 Chanel boutiques to roughly 5,000 retail outlets. The reason for Chanel's reticence in licensing its brand to other retailers had been its desire to maintain an image of exclusivity for its products.

Boutiques featuring handbags and shoes made their debut in Paris in 1999. Two years later, Chanel opened similar shops in the United States. Plans for a 3,000-square-foot fine jewelry shop on Madison Avenue in New York City were also launched by Chanel Inc. in 2001. That year, Macys.com began to sell Chanel, Estee Lauder, and Clinique beauty products via its Web site.

FAST FACTS: About Chanel S.A.

Ownership: Chanel S.A. is private company owned by the Wertheimer family.

Officers: Alain Wertheimer, Chmn.; Francoise Montenay, CEO and Pres.; Arie Kopelman, Pres. and COO, Chanel Inc.

Principal Subsidiary Companies: Chanel S.A. operates U.S.-based Chanel Inc., as well as other subsidiaries around the world.

Chief Competitors: Competitors to Chanel S.A.'s products include fashion and beauty brands such as Gucci, Prada, L'Oreal SA, and LVMH.

DESPITE A 15-YEAR HIATUS, CHANEL MAKES A COMEBACK

When World War II arrived in France in 1939, Coco Chanel decided to shutter operations. After the war ended in 1945, Chanel was exiled to Switzerland when her affair with a Nazi soldier during the War was discovered by French authorities. Chanel lived in Switzerland until 1954. Despite the scandal, she was able to reopen a successful business upon her return.

STRATEGY

Chanel faced heightened competition in both Europe and North America from a growing number of luxury clothing and accessory lines, such as Christian Dior, Fendi, Gucci, Louis Vitton, and Prada in the 1990s. In the cosmetics sector, firms like Bobby Brown and MAC began to steal market share. Designer Karl Lagerfeld, who had been hired in 1983, began to focus on marketing the Chanel brand to a younger, more hip market. Lagerfeld added separates to the firm's traditional line of suits and expanded its handbag and shoe offerings to include less expensive options. A new skin care line, dubbed Precision, made its debut in mid-1999. In North America, Kopelman made the decision to pour more dollars into advertising, particularly for the 26 new skin care products. In fact, Chanel Inc. spent roughly $20 million on the Precision launch and upped its fashion and beauty marketing budgets by at least 20 percent. This strategy also included the upgrading of several Chanel boutiques in the United States and Asia to appeal to younger shoppers. Chanel's "plan to put a fresh focus on its brand around the world," paid off, according to an August 2000 issue of WWD: "Chanel is enjoying a resurgence worldwide with its glamorous, ladylike styles."

CHRONOLOGY: Key Dates for Chanel S.A.

1910:

Coco Chanel opens her first boutique

1921:

Chanel releases the Chanel No. 5 fragrance

1979:

Coco Chanel dies

1985:

Chanel Inc. is founded in the United States

1999:

The firm allows Luxottica to sell Chanel sunglasses

2001:

Macys.com begins selling Chanel beauty products

A FASHION REVOLUTION

Coco Chanel began to design her own clothes because she was unable to afford the expensive clothes that were in fashion early in the twentieth century. At first, she made clothes simply for herself and her friends. She modeled her early designs after the clothing worn by men during different sporting events, such as horse racing. The fabric and styles she chose for her early clothing lines revolutionized European fashion in the 1920s.

PRODUCTS

Chanel sells suits, dresses, separates, an extensive line of skin care products, hair care products, sunglasses, handbags, shoes, and other fashion accessories. A line of men's and women's fragrances includes Allure, Egoiste, Chanel No. 5 and Coco Mademoiselle, launched in 2001. Subsidiary Eres manufactures beachwear and lingerie in France.

SOURCES OF INFORMATION

Bibliography

aktar, alev. "at chanel: catching arie's act." wwd, 29 june 2000.

chanel s.a. home page, 2002. available at http://www.chanel.com.

daswani, kavita. "chanel's asian extravaganza." wwd, 24 august 2000.

raper, sarah. "chanel signs its first licensing agreement." wwd, 10 may 1999.

sauer, pamela. "a makeover of global proportions." chemical market reporter, 3 december 2001.

wilson, marc. "new gem on madison; chanel melds 5 stores for mega jewel box." wwd, 2 may 2001.

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. chanel s.a.'s primary sics are:

2331 women's, misses' & juniors' blouses and shirts

2339 women's, misses' & juniors' outerwear, not elsewhereclassified

2844 perfumes & cosmetics

also investigate companies by their north american industry classification system codes, also known as naics codes. chanel s.a.'s primary naics codes are:

315232 women's and girl's cut & sewn blouse & shirt manufacturers

315234 women's and girl's cut & sewn suit, coat, tailoredjacket, and skirt manufacturers

325620 toilet preparation manufacturing