Hindsight may be 20/20, but Puig, which celebrates its centenary this year, also has clear goals for 2020 and beyond.
That’s the deadline for the family-owned firm to become the world’s third-ranked prestige fragrance player with 12 percent market share and produce zero waste and zero gasses, among other goals outlined by Marc Puig, the company’s chairman and chief executive officer.
“Midterm, our aim is to become a luxury brand owner with a hybrid model in the fragrance category, with owned brands and licensed brands,” said Puig, sitting in the company’s sleek new Paris headquarters on the Avenue des Champs-Élysées. The firm’s fashion business — including Carolina Herrera, Paco Rabanne, Nina Ricci and Jean Paul Gaultier — is a key driver for this.
Puig dipped into the luxury world in the Sixties with Rabanne, as its licensee.
“What happened over time is that at some point, some of the licensors with whom we were working — for whatever reason — approached us and said they needed support,” said Puig, whose grandfather founded the firm. “Our initial reaction was to protect what we had but not necessarily to do much with it.”
This was mostly in the Eighties and Nineties, when Puig also purchased Carolina Herrera. A strategic turning point came in 1998, with Nina Ricci’s acquisition.
“We realized it was an opportunity to [advance] our model,” explained Puig.
“The importance of a brand is not just to own it. It’s to build it,” said his cousin, Manuel Puig, the company’s vice chairman. (Marc and Manuel are the sole members of the family’s third generation to be involved in the company’s management.)
More than a decade later, Puig struck again, this time taking a controlling interest in Jean Paul Gaultier’s fashion business, in 2011. The lucrative fragrance part of the label will revert to Puig in mid-2016.
Perfume and fashion activities have a strong symbiotic relationship, and the upside can be huge. “When you look at the top rankings of the fragrance world, there is increasingly a correlation between a strong fashion house and a strong fragrance house,” said the ceo. “The brands that have a reality beyond fragrance are the ones that have the staying power.”
“Fashion amplifies the noise of the brand,” added Manuel Puig. “When you do it right, you can make a lot of noise with limited resources.”
Meanwhile, fashion brands are often buoyed financially by the hefty sales generated by their fragrance businesses.
There are, of course, exceptions like Paco Rabanne, whose fashion prowess today is still to be proven while its fragrance activity is estimated to be among the top five in the world already with such hits as 1 Million and Invictus.
Marc Puig cited the importance of running fashion and fragrance businesses separately.
“Organizations can do a limited number of things right, and if you try to brand the fragrance business as if it were a fashion activity or vice versa, most likely you are going to fail,” he said.
In 2012, Puig tapped Ralph Toledano, formerly Chloé’s chairman and ceo, to become president of its fashion division, overseeing all the brands save for Rabanne, which is run by José Manuel Albesa, Puig’s chief brand officer.
“Attracting someone like Ralph Toledano is proof that we are serious about these activities, and I think it’s proof that we can attract good talent,” said Puig.
The fashion labels, which receive royalties from fragrance activity, are run individually.
“They have their own teams, creativity and organization, even Web sites,” said Puig. “We are not trying to apply one formula to every house. Some houses are profitable and some clearly are not profitable at this point.”
Nina Ricci is seen as one of Puig’s houses with the most potential “because of the awareness and recognition of the brand worldwide,” he said. “But that house would have to earn its right to grow because fashion has to be the engine, clearly, for [it] to develop.”
Gaultier has another model. “We have a partner; we cannot make decisions on our own,” he said, referring to the designer. “We’re going to work with him, hand-in-hand, and make progress at a pace [at which we are both comfortable].”
Fashion today comprises a small part of Puig’s overall activity. The executives would not discuss specific numbers, but Puig said that over the past few years, fashion has grown either at the same pace or faster than total sales, which in 2013 advanced 1 percent to 1.5 billion euros, or $1.99 billion at average exchange. On a like-for-like basis, revenues rose 5 percent.
Between 2004 and 2013, overall company sales have risen 7 percent annually.
Industry sources estimate Puig’s 2013 beauty revenues were 1.32 billion euros, or $1.75 billion. About 75 percent of its fragrance business is made by its own brands, with approximately 25 percent through its licensed labels.
“For a family business that looks long term and generation after generation, our idea is to have a balanced portfolio [in which] we can make our own brands successful and at the same time build a healthy and sustainable license business,” said Puig.
The door isn’t closed for more acquisitions. In fashion, the firm showed interest in Valentino when it was for sale a few years ago, for instance. Puig acquired the Valentino fragrance license in 2010, before the fashion house was for sale.
“If we were to get involved in another fashion house, it would be one that already had either a reality or a potential reality for fragrance,” said Puig.
However, the Puig family holding could invest in a pure fashion player.
The ceo maintained, “We already have a portfolio that we see has great potential to grow if we do the right things. Our priority at this point is to make sure that we take the most potential out of what we have, and grow in depth.”
“We are not a collector of brands,” added Manuel Puig.
Puig signed a long-term agreement to create, develop and distribute new United Colors of Benetton fragrances, which began Jan. 1.
“One reason we are interested in a brand like Benetton is because one of the big opportunities in the years to come will be in emerging markets and the growth of the middle class,” explained Marc Puig. “In those areas, in order to have critical mass, to be able to build your own structure…you need a presence in the masstige fragrance category. Otherwise, the prestige market is still very small.”
Puig has 21 subsidiaries and its products are sold in more than 140 countries. Years ago, Puig showed its commitment to focus on international expansion and emerging markets. International sales have grown to represent 86 percent of total turnover in 2013. The latest subsidiaries opened were United Arab Emirates in 2000, Austria in 2004 and the Netherlands in 2009. The firm is developing its business in emerging markets such as Brazil and Russia — it opened subsidiaries in each in 2010 — and Chile.
Puig has a wide-ranging fragrance brand portfolio, including the Prada license. “I hope we can make this one of the biggest brands worldwide,” said Puig.
A more recent addition was Valentino, whose designers, Maria Grazia Chiuri and Pierpaolo Piccioli, Puig lauded for their “amazing” work. The idea here, too, is to translate that olfactively.
“Comme des Garçons is a very exciting, different approach to fragrance, and it’s not for everybody, [so] that’s the way we are also approaching it,” said Puig.
The firm’s other fragrance licenses include designer Ágatha Ruiz de la Prada, celebrities Shakira and Antonio Banderas, plus toiletries such as Agua Lavanda Puig and Payot skin care.
There are rewards and risks being a relatively small family company. The plus side includes the ability to look long-term, that certain values associated with the family permeate throughout the organization, there’s less leadership change and greater flexibility. The main dangers are infighting and nepotism, but Puig has mechanisms to try to prevent those.
“I think there are many risks of being small, especially in a world that is consolidating. That has been one of our obsessions in the past few years,” said Puig, who has acknowledged that 10 years ago, when he took the company reins, it was going through a difficult time. The fragrance category was mature, there was distribution consolidation and labels had gone from small designer houses to large multinational, multibrand companies ever more demanding of their licensees. The fear was that players like Puig at that point would have difficulty surviving.
It opted to exit areas where it felt it couldn’t compete, selling some toiletries brands, such as Lactovit, Kinesia and Denenes, for example. Puig also focused on its hybrid model, set the goal of reaching 10 percent market share in fragrances and, to do that, mandated that brands create compelling narratives.
The strategy has born fruit. Over the past decade, Puig’s net profits have soared from the 2004 level of 1 million euros, or $1.2 million, to 176 million euros, or $233.8 million, in 2013. The business was globalized, as well, with international sales growing from 51 percent to 86 percent.
Last year, the firm solidified its number-six slot in global fragrances, with 8.6 percent market share in the prestige scent category.
“I think we have passed that niche size,” said Puig, who explained taking the firm public is not on the horizon today.
“From a financial point of view, the company is in a very solid position. Any projects that we want to initiate can be financed with our own internal resources and those we generate,” he said. In the future, however, Puig could be willing to consider a public offering if it was being prepared for another generation or considering an ambitious project, for instance. “We’re not saying categorically we will never look at this.”
Puig said there’s never been thought of selling the company, as the mandate of the family’s third generation was to take the baton from the prior generation, grow the business and pass it to the fourth, whose members, it has been decided, are to be trained as shareholders. Currently, there are no plans that the next generation will be in management.
“Selling the company doesn’t fit with that mandate,” he said.
The main focus this year has been on the company’s 100th anniversary. In April, it inaugurated the Rafael Moneo-designed Puig Tower in Barcelona. The 23-floor building stands 328 feet high and has LEED Gold certification for its energy and environmental design. In fact, Puig has launched a comprehensive program to boost sustainability through 2020, based on five areas: product, sourcing, manufacturing, logistics and employee facilities.
Assouline published a retrospective tome for the centennial, a retrospective film was created, the new corporate Web site went live and there is to be a presentation of a Harvard University case study on Puig.
But once the birthday celebrations finish, it’ll be back to business entirely.
“I believe that we will probably have to again look at certain things differently without changing our course,” said Puig. “I think companies have to reinvent themselves every now and then.”
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