Welcome back to Full Coverage.
First off, thank you to everyone who came out to our sunny breakfast with Unilever on Tuesday morning at Nine Orchard in New York. It was filled with the best of the best. I can’t name drop because these community events are meant to be intimate, and that would be gauche.
Email Amy (Amy.Lore@businessoffashion.com) if you want to come to the next one or partner with The Business of Beauty. Btw, if you haven’t purchased your VOICES tickets or signed up for the livestream, do it now! The speaker slate is packed and I’m personally excited to hear Riz Ahmed and Luca Guadagnino.
The week’s biggest story emerged early: Kering sold Creed and all of its cosmetic and fragrance licences to L’Oréal in a $4.6 billion dollar deal on Sunday, sending ripples across beauty, fashion and luxury. Daniela Morosini wrote a great explainer on Tuesday, but I’ve got my thoughts below.
I’ve also got a first look at fragrance label Amouage’s results and a chat with chief executive Marco Parsiegla and chief creative officer Renaud Salmon down below, some quick thoughts on what happens to Kendo if Fenty is up for sale and what Biologique Recherche’s big distribution moves means for exclusivity. And, yes, I heard about those Meghan Markle beauty rumours, too.
Let’s start with Markle: The actress-turned-Duchess filed a trademark in 2022 for a zillion products and services under her As Ever label (previously American Riviera Orchard). The Business of Beauty got word from someone very close to the brand…
…who said it has no plans to expand into beauty at this time.
This sounds like the kind of denial a politician makes before they run for office (I’m looking at you Governor Gretchen Whitmer).
Right now, As Ever sells wine, flower sprinkles and shortbread cookie mix; a beauty play could be as plausible for Markle as it was for Martha Stewart or Gwyneth Paltrow. It’s well known the Duchess of Sussex explored an investment in Flamingo Estate before starting her own business. Last I heard, she was talking to a few beauty incubators but Markle is spread very thin and we all know success in the category is no longer a guarantee.
Now onto the rest.
Kering, L’Oréal and the Seduction of Luxury
I hope you’re not sick of talking about Kering’s $4.6 billion sale of its beauty division to L’Oréal, because I’m not.
When I spoke with industry insiders after the news broke over the weekend, the consensus was that Kering chief executive Luca de Meo’s decision was surprising, but also unavoidable. Here’s the thing though; de Meo may have pulled the trigger, but my sources tell me that conversations to spin off beauty started at least six months ago.
When a Kering beauty arm was dreamed up it was probably seen as easy money rather than a business that would be laborious and intensive. Now, the $3.8 billion dollars François-Henri Pinault paid for Creed in 2023 is seen as one of the worst financial decisions in luxury’s recent history.
Kering’s brands are in good hands. L’Oréal has proven that with YSL Beauty, so gaining Gucci, Balenciaga, Bottega Veneta and the rest is smart. It also follows the desires of Cyril Chapuy, president of L’Oréal luxe. A few executives told me that Chapuy would scoop up every designer label if he could. He has done an extraordinary job, convincing Prada, Miu Miu and Jacquemus to hand over their licences, and he is not done yet.
Kering’s beauty business is clearly desirable for L’Oréal, but my question is if it is actually a runway to long-term growth?
For a company that covets luxury and also has a bit of an inferiority complex about its place in the upper echelons, Gucci is a godsend for L’Oréal. But does it need more luxury, and to that end luxury fragrance?
In its third-quarter results announced on Tuesday, L’Oréal’s luxe division, which is where Gucci and Bottega Veneta would sit, was essentially flat. Its fragrances are doing well — older scents like YSL Libre and new launches like Valentino’s Born Roma, Paradigme by Prada and Miutine by Miu Miu are all popular — but the arm could use some help in luxury makeup and skincare. Offerings within YSL, Lancôme, Skinceuticals and Armani (which is still on the table for L’Oréal) can’t be the only pieces holding up the house.
There are so many makeup brands in the market, and I’m not sure if any fit perfectly into L’Oréal’s agenda. Chief financial officer Christophe Babule alluded to the company’s downgrade on makeup in earnings, but if there is anytime to buy a makeup brand and anyone – it’s now and it’s L’Oréal.
There are also a slew of skincare brands. Remember when everyone was talking about Augustinus Bader and Barbara Sturm? The conglomerate wouldn’t accept the high sale prices being floated, but isn’t there something else out there it could grab? Beiersdorf has done the high-low thing well.
L’Oréal is a business built on mergers and acquisitions, and this Kering deal can only be part of its puzzle. Just look at its balance sheet — plenty of cash and credit lines — it very much needs to be eyeing its next purchase.
Inside Amouage’s Success Story
While other niche fragrance lines are starting to feel pressure — you already know the Creed story and Advent is eager to sell Parfums de Marly — Omani fragrance line Amouage has been revelling in its glory. The 42-year old brand has steadily refocused and its strategy is working. Chief executive Marco Parsiegla and chief creative officer Renaud Salmon sat down with me to share their approach to world-building.
Priya Rao: Your retail sales for the quarter passed $300 million. Amouage is not a new business, what was necessary to get these kind of results?
Marco Parsiegla: When we came on about six years ago, we had 6,000 distribution points; we cut more than two thirds. The strategy is really about high-quality distribution. We opened some more of our flagships, which we are very proud of, but these are not transactional spaces; they are immersive spaces. We also evolved our communication. We made a choice to stop paid advertising and focus on earned [media].
Rao: There is a rush to fragrance right now; are you worried about sales slowing?
Parsiegla: Here, it is important to look at the numbers. If I look at the Middle East, we’re up more than 90 percent. If you take Europe, you will be surprised that we’re [up] more than 70 percent. In Germany, in our segment, the market is flat, but we’ve doubled the business; in the US, it’s [up] about 50 percent. These numbers are broad based, it’s not just one country which is driving the set.
Rao: How are you thinking about innovation and newness?
Renaud Salmon: There is a lot of noise out there. I’ve been trying to propose creations that stand out. It feels very single minded and intentional, and a genuine take on luxury. When it comes to fragrances, it’s always either you talk about craft, you are very distant and you are not approachable. And then you talk about the value factor, it’s more about mood. I want people to feel the humanity in Amouage.
Rao: How do you express that humanity?
Parsiegla: For us, we are obsessed with control. We tell the stories, we create the emotions, control all the production. We own the whole process from maceration, maturation, filtering. It’s not a series of outsourcing, licensing stuff, or an agency; we do all our communication in house and that enables the standard. We are about to produce our millionth bottle. I think this is happening on Sunday and it’s very important for the craftswomen, craftsmen on the floor but then there is a very strong link about how we produce and what clients want to know.
Rao: How are you thinking about the future? Everyone wants a quick exit and L’Oréal is a minority investor in Amouage.
Parsiegla: What we need to work on is how to be successful at scale and keep the DNA that has made us successful so far. That’s much easier to do in-house.
This conversation has been edited for clarity.
The Kendo Conundrum
Reuters reported on Wednesday that LVMH is considering a sale of Rihanna’s Fenty Beauty line. Wow, what a weird time.
Developed in 2017 by the company’s incubator, Kendo, and the pop star, Fenty has been the celebrity brand to buck the odds. Kendo developed Kat Von D, Marc Jacobs Beauty, Bite and others before, but Fenty became a rocket ship because of its beloved and approachable founder and its 40 — and then 50 — shades of foundation.
I can’t imagine LVMH completely cutting ties with Rihanna, especially since she is the new face of Dior’s J’adore and Fenty is still a good business. But Kendo has been slowly getting rid of its lines. It shuttered Marc Jacobs in 2021 and sold off the troubled KVD recently. Without Fenty, the incubator will only have Lip Bar, which is difficult to scale because of its customisable model, and skincare maker Ole Henriksen in its stable.
In-house incubators have paled in comparison to pure players like The Center and Luxury Brand Partners. Kendo was the outlier. But maybe it’s just redundant now that LVMH’s Sephora is so good at getting “in the kitchen” with early-stage lines.
The Future of Biologique Recherche
WWD had a story with Biologique Recherche chief executive Jean-Guillaume Trottier this week. Trottier shared that the coveted luxury brand, found in spas and salons, was opening up its distribution network. Besides opening a flagship in New York, it is also relaunching at Le Bon Marché and entering Bloomingdale’s…
Biologique Recherche made its name on an if-you-know-you-know kind of skin science — stinky products with great results that you could only buy at a registered esthetician’s office. It has also been a prize that many conglomerates have wanted to win, but it’s been tough for PE firms or strategics to wrap their heads around because of its vast and complex sales model.
Biologique Recherche’s expansion will yield top-line sales (and make the label more more digestible and attractive to would-be buyers), but it also will eat away at the exclusivity that made the brand what it is.
That was a long one; see you next week!
Priya