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It’s show time at Barcelona’s vast Palau de la Música concert hall. But on this particular evening in early April, the audience has assembled to listen to beauty-business gospel, not a symphony orchestra.
“Hola!” “Bonjour!” “Ni hao!” The overlapping of greetings makes a vibrant song of its own as more than 1,000 of Puig’s top executives and distributors stream into a majestic space topped by a multicolored stained-glass dome and festooned with terra-cotta flowers.
To say it’s an international crowd is an understatement: People have jetted in from more than 140 countries to attend this celebration of the company’s centenary, the centerpiece of 2014’s corporate gathering.
Silence descends fast as the conference begins. After a brief introduction, Marc Puig, maestro of the Spanish fragrance and fashion group, strides onstage. There’s no hesitation; it’s like he’s speaking with someone in his living room.
“One hundred years—a long way, but here we are,” says the chairman and chief executive officer. “We made it.
“Over the last few months and the last weeks people have been asking me, what are we doing for this 100th-year anniversary?” he continues. “And I know that excitement is high, the expectation is even higher, the expectations are very high—and when this happens, the level of anxiety also is high.”
Still, Puig keeps his cool, as is his custom. Direct yet warm, the executive commands attention and respect. Puig talks of the past, present and future, outlining the company’s aim to become the world’s third-ranked prestige fragrance player by 2020. Bursts of applause punctuate his presentation.
There’s plenty to clap about. Since taking over the family-owned firm in 2004, Puig has posted solid growth. Over the past decade, net profits have soared from the 2004 level of 1 million euros, or $1.2 million at average exchange for the year, to 176 million euros, or $233.8 million, in 2013. Sales have risen 7 percent annually, from 790 million euros, or $982.5 million, to 1.5 billion euros, or $1.99 billion. Puig has also globalized the business, with international sales growing from 51 percent to 86 percent.
Last year, the firm solidified its number-six spot in global fragrances with 8.6 percent market share in the prestige scent segment. It now trails only behemoths such as L’Oréal, LVMH Moët Hennessy Louis Vuitton, Procter & Gamble, Chanel and Coty.
“Each one of them is number one in the world in something,” points out Puig during an interview in mid-February in the newly minted Paris headquarters, ticking off the attributes of each. “Take L’Oréal—the number-one beauty company. Estée Lauder—the number-one prestige beauty company. Procter & Gamble—the number-one consumer-goods company. Chanel—the best brand out there. LVMH—the number-one luxury company in the world.”
The success of Puig, which uses a unique hybrid model comprised of owned brands, such as Carolina Herrera, Nina Ricci, Paco Rabanne and Jean Paul Gaultier, and licensed fragrance labels, including Prada, Valentino and Comme des Garçons, is the stuff of legends—so much so that Harvard Business School has conducted a case study of the firm that is due to be presented in the second half of 2014.
Describing Marc Puig, Carolina Herrera, whose signature company formed an alliance with Puig in 1995, says: “First of all, he’s a gentleman, following this tradition of his family and his father. [Marc] creates confidence, has a clear mind, listens to advice and knows how to delegate—which is very important.”
Delphine Hervé-Turra, head of beauty buying and merchandising at Printemps France, lauds the mix of labels that the ceo has created—diverse, yet complimentary. “Their fragrance portfolio enables us to target a sophisticated, fashion-oriented customer with [scent brands] such as Valentino, Prada or Nina Ricci, but at the same time a wider audience with fragrances such as Paco Rabanne,” she says.
Herrera is in the audience this April evening, alongside the likes of Antonio Banderas and Ágatha Ruiz de la Prada, who also have fragrance licenses with Puig. Puig family members from the second generation (including Marc Puig’s father, Mariano, and his uncles, Antonio and José Maria), third generation and fourth generation are all there, too.
They bear witness to the crowd’s euphoria when Puig announces as part of the ongoing centennial celebrations that company employees will receive one extra month of salary in 2014, a perk that epitomizes Puig’s adeptness at both human relations and out-of-the-box thinking.
The day before, the Princess of Asturias and her husband (heir apparent to the Spanish throne), visited Puig’s new corporate headquarters in Barcelona, the Puig Tower, alongside the Catalan President Artur Mas. Given the divide between Spain and Catalonia—which has been lobbying for political independence—it was a historic meeting at the building, a 23-floor structure that was designed by Rafael Moneo and has an open, bright, airy layout. Here, there’s a well-equipped gym, a sleek restaurant and an area with two fragrance cabins allowing for unadulterated scent development and evaluation. The building is in part meant to symbolize the future hope and ambition of the company, explains Puig.
“Literally everyone in the industry wants to work [at Puig],” says an industry insider, who spoke not for attribution. “They have hired cool, fun, creative people, and they’ve created a place where these people want to work. This is down to the management, who are themselves cool, fun and creative.”
The company’s top brass include Manuel Puig, Marc Puig’s cousin who serves as the firm’s vice chairman, and José Manuel Albesa, Puig’s chief brand officer.
“[The bosses] get involved in the recruitment; it’s not left exclusively in the hands of human resources,” the source continues. “They take recruiting very seriously and don’t follow the headhunters’ approach of who has done exactly this job already for several years at a competitor.”
Over the past 18 months, for instance, two new recruits to the company’s board of directors include Manel Adell, the former ceo of Barcelona-based retailer and wholesaler Desigual, and Jordi Constans, who had worked as Louis Vuitton’s chairman and ceo.
Indeed, Puig seems like a happy place to work, particularly today, during a press conference in the new headquarters to present the company’s annual results. “Welcome,” Puig beams as journalists stream past him to go downstairs to the auditorium. A few feet away stands a Joan Miró sculpture on loan, called Dona, which resembles the Agua Brava flacon designed for Antonio Puig by André Ricard in the late Sixties. Puig outlines the firm’s long-term aspirations: to be a group “that owns luxury labels—luxury brands recognized as such worldwide while keeping our hybrid model composed of our own brands and licensed brands in the world of perfume making. That’s our bet, that’s our commitment.”
Puig describes the firm’s overall financial position as “solid,” noting it “has no debt, and a cash position that is quite comfortable.”
That wasn’t always the case.
“Ten years ago we were in a difficult moment,” he admits, during the interview in Paris. In the Nineties, the fragrance category overall faced major challenges: It was mature, there was consolidation in the distribution channel and labels had gone from small designer houses to large multinational, multibrand companies ever more demanding of their licensees. “Our view was that there would be few winners—the bigger multibrand companies would get bigger and you would also have niche players,” says Puig. “But those companies caught in the middle [that] didn’t have a critical mass would probably have a difficult time surviving, and we were one of those. We decided to focus on a few things.”
The company exited areas where it didn’t feel it could compete, selling some toiletries brands, such as Lactovit, Kinesia and Denenes, for instance. “We focused on this hybrid model … where we have some brands that we own, and we exploit this in fashion and fragrances,” he continues, adding it was clear a certain minimal critical mass needed to be reached.
A goal of achieving 10 percent market share in prestige fragrances was set. “Until we reach this, we’re not going to get distracted with other things because it might put our survival or existence or sustainability in question. So that’s where we are,” adds Puig.
To reach that figure, Puig has made it a mandate that brands create compelling narratives. “You have to excite the imagination of the consumer because the sense of smell is not necessarily the most developed in human beings,” he says. “You ask somebody to describe a smell, and most people have difficulties in finding the words.
“Being good at storytelling, at exciting the imagination and then being very good at translating that into the whole value chain—from product to bottle to packaging and to point of sale—is key. We have been very consistent and very strong at that. We have been willing to take risks in telling those stories. That is what makes the difference,” says Puig. “It sounds very easy, but that’s our secret.”
The recent launch of Paco Rabanne’s men’s scent Invictus bears Puig out. Invictus marks Paco Rabanne’s entry into the sports-fragrance segment, but on its own terms. “The brand has always challenged the status quo,” says Puig. “We asked, how can we exploit this world with this brand, and we came up with this idea of Invictus.”
It’s all about the ecstasy of victory. Paco Rabanne fragrances are always about different fantasies, and each one has an ironic twist. To wit: The Invictus fragrance bottle takes the shape of a trophy and wings (of victory) appear on the scent’s outer box. The ad campaign blends reality and mythology, with colossal gods and goddesses. The victorious athlete (embodied by Australian rugby player Nick Youngquest) enters a stadium, poses for photographers, then displays superhuman power to foil charging, otherworldly opponents. When he returns to the locker room, a bevy of beauties await him; he grins impishly.
“Here, it’s the winner gets all, the rest loses,” says Puig. “It’s a basic animal-kingdom reality, let’s say.”
Sales thus far are booming. On counter for less than a year, Invictus already ranks in the top three in many countries. “When you have a good story, it’s like a self-fulfilling prophecy because then you show to your partners, you show to retailers and everybody gets excited and wants to give you the most possibilities and opportunities to succeed,” says Puig.
“Puig is able to create stories and specific universes that are aspirational, trendy and attractive to young customers,” says Sandrine Williamson, commercial director of Marionnaud France. “They generate traffic to our stores by recruiting customers.
“We work with them in a very collaborative way,” she continues, lauding in particular Puig’s strategy of launching new products in the summer months—atypical yet effective. “They are inventive, and they share information and analysis regarding the selective market. They really want to build a strong partnership with us in the long term—with exclusive products, for example.”
In the U.S., the story is similar. “Puig is one of our fastest-growing vendors in fragrances, with many top-selling brands in the department-store category,” says Muriel Gonzalez, executive vice president and general merchandise manager for cosmetics and fragrances at Macy’s Inc. “The broad scope of their brands appeals to many customer demographics and preferences, positioning them for a substantial share of the marketplace. With their focus on the customer, Puig has the ability to fill voids in the market and leverage the heritage of its prestige brands, such as Prada, to drive sales.”
Printemps’ Hervé-Turra acknowledges Puig has been able to stand out in the ever more competitive and challenging beauty market by launching “audacious” fragrances, such as Paco Rabanne’s 1 Million and Invictus. “The company has shown a strong ability to break the codes and come up with innovative concepts from the product concept to the media campaign,” she says.
Being based in Barcelona also sets Puig apart, as does its name, which is hard for people—even Spaniards—to pronounce properly, since it’s Catalan.
“So I go around the world and people say ‘Mr. Pig’ sometimes,” says Puig with a laugh.
Another point of difference is that the company remains family-owned in a sea of public multinationals. “Our aspiration is that in our generation we take the baton from the prior generation, grow the business and eventually pass it to the next generation,” says Puig. “When you have this time frame—generations rather than quarters—being a brand owner is a much more attractive proposition, because it passes the test of time versus just being a licensee. We are very happy with this license business, and we think this is an area for us of big potential for growth. At the same time, we want to continue exploiting the possibility to grow our fashion business because those are our own brands.”
Puig notes that translating the family’s values into its business remains a tremendous motivator. “The fact that you have this combination of a committed family behind the project, a strong set of values and people who are comfortable with them makes a strong proposition,” says Puig.
“Although Puig is a multinational company employing thousands around the world, it still manages to retain the values of the family business it still is,” says Peter Copping, Nina Ricci’s creative director.
“The corporate culture is very related to the values of the former generation,” adds Karine Ohana, a partner at investment firm Ohana & Co., who calls Puig among the best-performing companies in the industry. “The [second generation] are the inspiring force, who gave the vision to their sons and the willingness to be hard-working and extreme performers. They were humble, ambitious and visionary for their children. Like them, both Marc and Manuel are on top of everything—accessible and always quickly aware of market opportunities.”
However, traps remain in a family-owned business, the lion’s share of which don’t typically make it past the third generation. “In a family, decisions are taken by love, because you love all of your children and all of your family members,” says Puig. “Business needs hierarchy, and it’s sometimes difficult to balance those two realities.” To this end, about 14 years ago Puig implemented what it calls “self-disempowerment,” which involves the company board having two family members and eight independent directors. The nominating and compensating committee is comprised wholly of non-family members.
“By doing that we balance the family, or we have reduced the power of the family,” says Puig, explaining it’s a move the family made for its own sake. “Will this mechanism work or not? Time will tell, but basically it’s how we have tried to solve these issues.”
One big decision has recently been finalized vis-à-vis the younger Puig family members. “The next generation will not work at the company,” says Puig. “They have to find their own way and will be trained as shareholders—that’s how we’re planning. As a company grows, the chances that you will find the best leadership inside the small group of family members rather than the large pool of employees is more rare,” he explains. “If we eventually had somebody who was so successful elsewhere, then whoever is at the time responsible for [Puig] will call for that person—but not the other way around.”
Among the executive’s favorite parts of being ceo is seeing the organization—and the people within it—develop. “You sometimes give challenges to them that they don’t even think they can do, and then by motivating them and pushing them you see them grow,” says Puig. “When I see the organization meet challenges or goals we didn’t even think we could achieve, it’s very rewarding.
“If somebody had asked me 10 years ago to do what we’ve done now, I would have said, ‘That’s impossible,’” he says. “I would have presented my resignation. We have continuously overachieved.”