By  on March 31, 2011

In a surprise move, the Estée Lauder Cos. Inc. is assuming the worldwide fragrance license of the Ermenegildo Zegna Group from L’Oréal, effective July 1.

Terms of the deal were not disclosed. Industry sources noted that the license, which L’Oréal acquired in January 2008 as part of its 1.15 billion euro ($1.68 billion at the time) deal for YSL Beauté Holding from PPR subsidiary Gucci Group, had two years remaining with the French beauty giant, although Lauder executives declined comment on that point.

The licensing rights give Lauder exclusive global rights to market fragrances under the Ermenegildo Zegna Group, as well as develop new product lines in the grooming segment. The business will be handled by the Aramis and Designer Fragrances division of Lauder. The Zegna fragrance collection currently includes five scents in addition to a centennial celebration fragrance and several limited editions.

“This agreement is a strategic opportunity for the Ermenegildo Zegna Group,” Gildo Zegna, chief executive officer of the Ermenegildo Zegna Group, told WWD Wednesday. “With the Estée Lauder Cos., we can build a successful men’s offering in the fragrance market, and I strongly believe that [Lauder] is the logical partner for us to develop our fragrance business into one of the most compelling men’s grooming brands in the global luxury market. The men’s fragrance market is expanding with strong opportunities all around the world and in China with tremendous growth. ” China is Zegna’s largest and fastest-growing market, according to the company. In addition to selling in luxury retailers and travel retail worldwide, Zegna operates 300 stand-alone stores globally.

Fabrizio Freda, president and ceo of the Estée Lauder Cos., noted that “most importantly, Zegna and Lauder share a passion for product quality, innovation, creativity and family values.” As well, he noted, the Zegna deal gives Lauder a springboard to grow its fragrance business in both Europe and Asia, particularly China. “There is a huge opportunity for us in Asia, especially in China, where the size of the fragrance business is growing rapidly,” said Freda. “Zegna already has a very high-quality image there, and we have the opportunity to build a good, growing fragrance business together and start serving the luxury segment of China. Men’s grooming is another category that is very quickly growing in Asia, and Zegna also has equity in this region. Europe and travel retail are also very big opportunities; adding a strong European-based house will strengthen that business. Russia, Latin America and other emerging markets also represent strong opportunities.”

The great majority of the existing brands in the Aramis and Designer Fragrances portfolio are North American brands.

“We’re thrilled with [the portfolio’s] results, but also want to transform our business model to increase margins and build more on our Asia, European and travel retail businesses,” said Veronique Gabai-Pinsky, global brand president, Aramis and Designer Fragrances. “We’re doing that with existing brands, but given Zegna’s strong presence in Europe and Asia, we foresee a great deal of opportunity with this license.”

“The Ermenegildo Zegna Group and the Estée Lauder Cos. share a tradition of serving prestige consumers and retailers over generations of family leadership,” stated William P. Lauder, executive chairman of the Estée Lauder Cos.

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