Beauty groups take over fashion

Tamara Mellon for Jimmy Choo Parfums

The recent acquisition of British luxury leatherwear company JIMMY CHOO by the Reimann family, owners of COTY  has come as no surprise given the gradual recovery the beauty industry has been seeing in the past 6 months. The fifth wealthiest familiy in Germany, with assets over 1 billion euros, the Reimanns reportedly paid over 570 million euros for Jimmy Choo through its Austrian based investment arm, Labelux, which already owns Bally, Derek Lam and Zagliani.

Earlier this week, Labelux CEO Reinhard Mieck stressed that the synergies between Jimmy Choo and the Coty Group also played an important part in what he saw as a strategic investment in a brand with high growth potential.

But just how important is the addition of Jimmy Choo to the fashion portfolio of beauty products giant COTY? To understand the strategic acquisition, one would have to consider the huge importance of licensing revenues from beauty products for the major international luxury fashion and jewellery brands.

For instance, Armani Group is reported to cash in over 600 million euros, annually, from L’OREAL, which produces and markets, in licensing,  the ARMANI product line, which includes: fragrances, cosmetics and make up. Another relevant example is TOM FORD which has been making over half million dollars, annually, from its licensing agreement with ESTEE LAUDER for its fragrance line, figure which accounts for over 70% of the company’s turnover.

As early as last month, the world’s fifth largest fragrances manufacturer, Spanish PUIG acquired the majority stake in ailing Jean Paul Gaultier from HERMES, overtly admitting that the future the perspective of taking over the licensing of Gaultier fragrances and cosmetics, currently licensed by Shiseido, played a cruicial part in the strategic investment. PUIG already owns brands Nina Ricci and Paco Rabanne, which have been maintaining a minimal fashion presence only to support, from an awareness point of view, the fragrances business of the two.

BVLGARI is another extremely relevant example, the leading international jeweller with the largest fragrances and cosmetics business, currently produced in licensing by Procter & Gamble. Bvlgari’s purchase by LVMH Group, world’s number one luxury group in March this year has been making headlines, international media and analysts overlooking the importance of the fragrance and cosmetics business for BVLGARI, the product line of the brand with the highest future potential growth.

But probably the largest deal which has been rumoured for the past two years is L’OREAL’s possible acquisition of the ARMANI Group, despite repeated firm denials from its owner Giorgio Armani. The synergy between the two companies is obvious and so is the lack of future ownership of the Armani Group, Mr Armani himself having no direct faimly heirs. The only ”challenge” remains the big price tag for the Italian group, estimated at 2 billion euros, which makes the deal highly unlikely this year, before a more significant recovery in L’Oreal mass market division.

Oliver Petcu