Cooking With Gas: L’Oreal and Diesel in Major Fragrance Deal

L'Oreal announced a fragrance licensing deal with Diesel, and the first scent is due to hit perfumeries and department stores at the end of 2007.

PARIS — L’Oréal is revved up about Diesel, its newest fragrance license.

The French beauty giant has signed a long-term deal with the Italian denim firm, which is famous for its strong youth appeal and edgy advertising.

While specifics of the license were not disclosed, L’Oréal and Diesel executives told WWD their expectations for the new business. The first Diesel scent is due to hit perfumery and department store shelves at the end of 2007.

“We think Diesel has the potential as a brand to be in the top 10 of fine fragrances worldwide,” said Marc Menesguen, president of L’Oréal’s luxury products division. While Menesguen declined to offer specifics, it is generally understood that for a fine fragrance brand to land a top 10 position globally, it needs to generate about $365 million.

Renzo Rosso, Diesel’s chief executive officer, and Menesguen agreed the synergies between their two companies are manifold.

“I chose L’Oréal because it is very close to my mentality,” said Rosso. “The most important thing is to build something new, something different, something strong.”

He said the two companies share a passion for their work, too.

Explained Menesguen, “The first reason we signed with Diesel is because it is a huge business, and the second is that it is perfectly complementary with our existing brand portfolio. We have Giorgio Armani, which is Italian; Ralph Lauren, which is American, and Lancôme, which is French. With Diesel, we touch a new area of experience in fragrance.”

The billion euro, or $1.2 billion, Diesel brings a demographic reach different from that of L’Oréal’s other prestige brands, which include Viktor & Rolf, Parfums Cacharel, Paloma Picasso and Parfums Guy Laroche.

“Diesel is an icon among young people in all countries,” said Patricia Turck Paquelier, international brand president of L’Oréal’s prestige and collections division.

“We were amazed at how huge and exciting the brand is,” Menesguen said of Diesel, which was started in 1978. “It attracts men as well as women.”

L’Oréal was also lured to Diesel for what Menesguen called its “unique point of view.”

This story first appeared in the January 17, 2006 issue of WWD.  Subscribe Today.

Rosso characterized it as “unpredictable,” “brave,” “simple” and “trendy.”

L’Oréal and Diesel share other common visions, said the executives.

“Renzo Rosso wants to be the coolest of the biggest; we want to do that in fragrance,” said Turck Paquelier.

She likened Diesel’s provocative advertising campaigns, with themes such as revolution and self-identity, to L’Oréal’s vision of the beauty business.

“We believe fragrance is about story and about positive emotion,” she said.

“Diesel is a lifestyle brand that definitely goes beyond jeans,” continued Turck Paquelier. “Today, it perfectly complements a luxury wardrobe.”

L’Oréal’s luxury wardrobe has been expanding. Diesel is the second fashion brand the French beauty giant has added in four years. In 2002, L’Oréal inked a deal with Dutch design duo Viktor & Rolf, whose first fragrance — Flowerbomb — has been a hit in the select doors that carry it. According to Turck Paquelier, Flowerbomb ranked number one in Selfridges in 2005 and in Saks Fifth Avenue since its launch there.

For Diesel, the deal with L’Oréal is to “build something stable, not just a partnership for today,” said Rosso.

His brand formerly had a fragrance license with Germany’s Marbert Holdings, which ended in 2004. None of the scents created through that partnership are on the market today.

The Diesel license bolsters L’Oréal’s global leadership position in the fine-fragrance arena. Already, the company has three best-selling brands — Lancôme, Giorgio Armani and Ralph Lauren — in the category.

Lancôme women’s scent Hypnose has ranked in the top five of feminine fine fragrances in most European countries since its launch in the fall. And Giorgio Armani’s fragrance business ended 2005 with double-digit growth worldwide, despite a flat market, said Turck Paquelier.

In the U.S., Ralph Lauren’s Polo Black and Polo Blue came in among the top five men’s fragrances last year.

Such turnouts have kept L’Oréal in pole position.

“The L’Oréal Luxury Products division is number one in fine fragrances worldwide,” said Menesguen.

Yet the race for first place has become increasingly competitive.

In a WWD interview this summer, P&G Prestige Products global president Hartwig Langer claimed Procter & Gamble was a “close second” to L’Oréal in global fine fragrances. This largely is due to P&G’s acquisition of Cosmopolitan Cosmetics.

Another contender for the gold is Coty Inc. As reported, when asked why he bought Calvin Klein and the rest of the Unilever fragrance business, Coty ceo Bernd Beetz retorted that he wanted to become “the world fragrance leader.”

It’s a dream for the Estée Lauder Cos., as well. The company has long been the biggest seller of fragrances in U.S. department stores. And in the past, Lauder has let it be known that it is eager to grab a greater share of the European fine fragrance market.