How L’Oréal Luxe Used Fashion Deals to Become Prestige Beauty’s Biggest Player

PARIS – L’Oréal’s luxurious division has had an eventful week: final Thursday, the group introduced annual revenues that confirmed the Luxe unit had surpassed Estée Lauder Corporations, making it the world’s largest participant in status magnificence. Friday, the model introduced its newest licence: the rights to promote fragrance and wonder merchandise for Prada’s fast-growing sister model Miu Miu.

On Tuesday, the group welcomed journalists and retail companions to Paris for an immersive occasion showcasing its historical past and newest improvements in its perfume strains together with Armani, Yves Saint Laurent, Valentino and Prada.

The group provided samples of signature components together with rose extracts for Lancôme — grown and distilled in Grasse — or an ultra-fresh, reasonable tuberose be aware extracted utilizing a technique that eschews solvents or warmth (the primary ingredient to stem from an unique deal signed final 12 months with French provider Cosmo). Friends additionally acquired an unique preview of Valentino’s new excessive fragrance line, which is ready to be revealed to prospects this spring.

Licensing has develop into a unclean phrase in some corners of the luxurious business. Gucci-owner Kering plans to bring beauty in-house for extra of its manufacturers whereas Spanish perfume-and-fashion big Puig more and more seeks to acquire brands outright.

The development hasn’t stopped L’Oréal from nabbing main licence offers: Previous to Miu Miu, the final 5 years have seen the group signal agreements with Prada and Valentino, in addition to buying buzzy Mugler (together with its vogue arm) and renewing its blockbuster partnership with Armani by means of 2050.

“We’ve saved gaining market share for the previous 13 years by constructing this very balanced portfolio of manufacturers, which reply to all types of buyer wants throughout geographies, ages, psychographies,” Cyril Chapuy, L’Oréal Luxe’s president, advised BoF.

The acquisition technique has boosted L’Oréal’s gross sales in recent times because of the speedy progress of latest perfume strains like Valentino’s Born in Roma or Prada’s Paradoxe. In the meantime, YSL — which is locked right into a “very long run deal” with L’Oréal — reinvigorated its perfume enterprise by rising its Libre scent fronted by singer Dua Lipa.

Gross sales in L’Oreal’s luxurious division grew 4.5 percent on a like-for-like foundation to €14.9 billion ($16 billion) final 12 months. Shares fell 7 p.c, nonetheless, as buyers reacted to a worse-than-expected downturn in China. The luxurious unit nonetheless surpassed rival Estée Lauder Corporations, whose revenues have fallen for six consecutive quarters.

The Case of Prada

For the luxurious vogue licences L’Oréal refers to as its “couture” phase, the group’s success rests on a “relationship of belief and shut collaboration” with companions, Chapuy mentioned. Almost 35 years into the group’s partnership with Armani — which has grown right into a multi-billion-per-year enterprise primarily based on its mixture of signature fragrances like Acqua di Gio and Sí and the recognition of its full color cosmetics vary together with nail polishes, lipstick and basis — the group continues to satisfy with founder Giorgio himself on a month-to-month foundation.

For Prada, owner-designer Miuccia and her husband and enterprise associate Patrizio Bertelli had been personally concerned in deciding how the model’s nuanced mixture of heritage and avant-garde codes can be translated to magnificence.

“They felt that the triangle, the Prada inexperienced, the checkerboard you see in shops had been timeless signatures that completely needed to be current,” Chapuy mentioned.

The unit’s first main fragrance launch at L’Oréal, Prada Paradoxe in 2022, met the temporary by crafting a triangle-shaped bottle, and is marketed by Emma Watson on a Prada inexperienced background.

Wresting management of Prada’s fragrance enterprise from former licensee Puig took longer than anticipated, delaying the relaunch underneath L’Oréal. However Chapuy nonetheless waited for brand new perfumes to hit the market earlier than moving into the realms of skincare and color cosmetics, which launched in August 2023.

“Fragrance is the class that actually incarnates luxurious, it has an indulgent, hedonistic high quality in addition to being linked to the world of desires,” Chapuy mentioned.

With Miu Miu, the group is prone to observe an identical course of: create a flagship perfume to anchor the model’s magnificence codes earlier than branching out. L’Oréal and Prada Group might want to align of their efforts to distinguish the message and goal buyer for Prada and Miu Miu, whose overlap has at instances been problematic.

“We see Miu Miu as being extra experimental, extra playful and extra free — along with interesting to a considerably youthful shopper,” Chapuy mentioned. “Prada is extra about sophistication, the avant-garde.”

Along with inking new licences, L’Oréal Luxe has sought to manage extra of the worth chain and scale back its reliance on wholesalers in recent times by opening dozens of freestanding boutiques for its couture manufacturers, notably in China, in addition to ramping up e-commerce.

The group accelerated its retail push considerably final 12 months with the acquisition of Aesop, the nature-inspired premium skincare and fragrance model which operates greater than 400 boutiques.

China Questions

Because the mud settles on the Miu Miu deal and information of L’Oréal Luxe’s triumph in its rivalry with ELC, questions linger relating to the group’s downturn in North Asia, which had beforehand powered progress for the division. Group-wide gross sales contracted 6 p.c within the area within the fourth-quarter, amid weak demand in Mainland China and slower sell-out in journey retail hubs like Hainan.

“Following modifications within the enforcement of daigou [duty-free import] rules final Might, the group will face fairly robust comparatives on this a part of the enterprise within the first half. But it is usually clear that the underlying demand state of affairs is harder,” HSBC analysts wrote in a be aware to purchasers. “Exterior China, the sweetness market stays dynamic and we anticipate it will stay the case in 2024.”

Chapuy emphasised the energy of the group’s globe-spanning portfolio. “We’ve constructed a balanced, international profile — since you are by no means actually secure from a regional disaster,” he mentioned.