NEW YORK — Coty Inc. greatly expanded its fashion horizons Thursday by acquiring the beauty licenses of two of the hottest names on Seventh Avenue, Marc Jacobs and Kenneth Cole, while the seller, LVMH Moët Hennessy Louis Vuitton, was able to shut the books on a three-year experiment in designer niche marketing of fragrances.
While neither party would discuss the terms of the deal, which was signed Thursday afternoon, sources in the market estimate the sale price between $45 million and $50 million for both licenses combined. That would leave LVMH with an aftertax profit on its total investment, according to estimates by market sources.
This story first appeared in the May 30, 2003 issue of WWD. Subscribe Today.
The sale of the Jacobs and Cole licenses follows the May 8 divestiture of the Michael Kors beauty business to The Estée Lauder Cos. for a sum estimated by industry sources in excess of $20 million. Thursday’s developments confirm a report that first appeared in WWD on April 11.
The Jacobs and Cole brands will be handled by Coty’s Lancaster Group, which is headed by president Michele Scannavini. Lancaster already has three designer licenses — Jil Sander, Wolfgang Joop and Vivienne Westwood. It is also home to Jennifer Lopez, who stunned the prestige fragrance world last fall with the success of her Glow by JLo fragrance. The Coty Beauty mass market division followed up this spring with another celebrity launch with a scent by Celine Dion.
Bernd Beetz, chief executive officer of Coty Inc., described the two designer businesses as “fitting extremely well” within the Lancaster mix and the stature of the designers will allow Coty to “give special attention to the U.S. market.” Jacobs’ fragrance business has mostly been centered in specialty stores, and Beetz indicated that the acquisition of the two licenses will allow Lancaster to extend its distribution deeper into more fashionable turf. In an earlier prepared statement, he said, “The whole team at Lancaster Group is looking forward to working with Kenneth and Marc to create new fragrances that will appeal to their existing clientele and beyond.” Speaking by telephone from Spain Thursday, Beetz added that he also has designs on the rest of the world, with plans to take Jacobs and Cole into Europe and Asia.
Beetz is familiar with the workings of LVMH, since he previously was president and chief executive officer of Parfums Christian Dior France. The market-leading J’adore fragrance was launched under his direction.
He asserted that Coty has an ability to capture the spirit of a particular brand by developing products that bring names to life in their respective distribution channels. As proof, he pointed to the Glow fragrance, whose ingredients reflected the personality of Lopez. Coty, he added, is having “a very good year” with expectations of finishing with double-digit growth.
Beetz also acknowledged the achievement of LVMH in building the Jacobs and Cole fragrance business when he earlier stated, “The licenses, which are already so well developed, provide us with strong growth opportunities for our ‘American Luxury Brand Unit’ within the Lancaster Group.”
While Scannavini will lead the development of the Jacobs and Cole businesses, it is expected that Catherine Walsh, vice president of marketing, cosmetics and American licenses for the Lancaster division, will also take part.
Marc Jacobs, who remains creative director of LVMH’s key Louis Vuitton accessories and fashion business, could not be reached for comment Thursday. Despite rumors in the market that Jacobs officials are disgruntled, a spokeswoman declined comment.
But Paul Blum, president of Kenneth Cole Productions, said, “We’re very happy to be joining Coty and the Lancaster division.” He added that the fragrance brand has had a great run with LVMH. “[Coty has] a great group of people who have made themselves very familiar with our brand and our direction, and they are very supportive. We’re excited about the continued development of the brand and our plans remain in place to aggressively continue building the fragrance brand.”
LVMH has been on a campaign of shedding non-core assets. In December, the French luxury conglomerate sold two California-based cosmetics brands, Hard Candy and Urban Decay, to the Falic Group, a travel retailing company. LVMH continues to own a number of other beauty brands, including Parfums Christian Dior, Guerlain, Parfums Givenchy, Parfums Kenzo and Bliss, as well as partial interests in BeneFit Cosmetics, Acqua di Parma, Fresh and Make Up For Ever.
The divestiture of the Jacobs and Cole licenses following the sale of the Kors business spells the virtual end of the American Designer Fragrances division of the New York-based Parfums Givenchy Inc., which LVMH launched with great fanfare in the fall of 2000. At the time, Kors and Jacobs both designed for LVMH’s fashion holdings in various capacities. With the addition of Kenneth Cole, the fragrance unit was estimated to rack up a combined global wholesale volume of $120 million this year, with the potential of breaking even by yearend.
According to industry sources, Marc Jacobs’ women’s fragrance, which is in limited distribution, rang up retail sales of $19.5 million in 2002 and $5.7 million for 2003 through mid-May in U.S. department and specialty stores. His men’s fragrance did $2.8 million in 2002 and $1.9 million this spring.
Cole had a mirror experience, racking up $14.7 million for his men’s fragrance in 2002 and $7.7 million for women’s. For this spring, the Cole men’s scent did $4.2 million and the women’s did $2.4 million, according to industry sources.
Patrick Choël, president of the LVMH Perfumes & Cosmetics Group, said in a statement, “The formation of [the American Designer Fragrance division] was a substantial effort that delivered value, innovation and increased visibility in the marketplace for LVMH. This will deliver ongoing benefit to the group as we work to further build our core fragrance brands.”
The architect of ADF, Camille McDonald, is the head of the Givenchy and Guerlain businesses in this country and she intends to turn her full attention to the American businesses of Guerlain and Givenchy. While predicting the “two powerful and evocative fragrance collections [of Jacobs and Cole] will continue to thrive with their new licensing partner,” McDonald stated that “we will be able to focus our resources and creativity on capitalizing on the success of Parfums Givenchy and Guerlain in the U.S market.”
In an interview Thursday, McDonald seemed philosophical, asserting that the sale of the licenses provided a double benefit. The creation of the ADF business provided a value that could be “harvested” while allowing management to prune and streamline operations. “We were gaining value at the same time we were streamlining,” she said.
The final question mark concerned McDonald herself. For weeks, rumors have circulated as industry figures speculated that she may leave LVMH for another job at Lauder, Coty or elsewhere. Her response Thursday was to the point: “I have no plans to leave LVMH.”