MILAN — At a conference here Thursday, Fabio Rossello, president of Cosmetica Italia — the Italian association of cosmetics companies — underscored the features that make the beauty sector attractive for mergers and acquisitions, led by its countercyclical trend that enables it to register positive figures even in difficult economic times.
Beauty companies had global sales last year of 205 billion euros, or $230 billion at current exchange, up 4 percent compared to 2015. Italian companies reported revenues of 10.5 billion euros, or $11.8 billion, up 5 percent on the previous year.
In addition, Rossello mentioned the industry’s high rate of employment and amount of investment in research and development. Italian cosmetic companies invest more than 7 percent of their sales in R&D, which is double that made by other local industries. The frequency of product launches and high competition add to the vitality of the beauty sector.
Among its biggest players, L’Oréal Group posted revenues of 26 billion euros, or $29.2 billion, in 2016, with the company’s Luxe division listed as one of the best-performing sections. Roberto Serafini, general director of L’Oréal Luxe Italia since 2011, explained how the last three years in particular registered significant growth, involving the three main product categories of perfumery, makeup and skin care.
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“Six years ago L’Oréal Luxe didn’t have a fragrance in the worldwide top 10 list, while now it has four in the first 12 globally,” he said at the Luxury Beauty Summit hosted here by Italian daily paper Il Sole 24 Ore. Makeup is an area gaining real momentum, Serafini observed, while skin care still has unexploited potential and should focus on further developing hybrid products combining makeup elements.
The company has expanded its portfolio with three new brands, two of which were acquired last summer. The $1.2 billion acquisition of the American It Cosmetics will considerably boost the skin-care and makeup ranges of the group, while the incorporation of Atelier Cologne “gets us into the niche [segment], where we’re weaker,” Serafini said.
Asked about the reasons behind such transactions, Serafini said they were not meant to only increase revenues. “Ideas are always worth more than numbers, and we constantly need ideas,” he said, adding that, in general, this kind of operation is aimed at filling the gaps every company has in covering the market.
In addition, Proenza Schouler’s licensing agreement for the creation of fragrances is in motion. Serafini sounded ambitious about the project, praising the label as “contemporary luxury” and defining it as the Yves Saint Laurent of the future, in 30 years time.
Gianluca Toniolo, country general manager for LVMH Moët Hennessy Louis Vuitton perfumes and cosmetics, underscored the importance of constantly eyeing start-ups. In particular, he referenced the recent LVMH acquisition of a majority stake in the Maison Francis Kurkdjian niche perfume label, created in 2009.
Toniolo also stressed the importance of keeping true to each brand’s identity when acquiring new labels, pointing to LVMH group’s acquisition of Bulgari and the decision to keep the company in Rome since the city is part of the brand’s DNA.
Perfume and cosmetics contribute 14 percent to LVMH’s global revenues, with a value of five billion euros, or $5.6 billion. Toniolo explained how the division is growing, also thanks to new strategies and a different internal organization, and how the goal is to double sales figures in five years.
In order to do so, the group has identified travel retail as an important channel for its cosmetic business and decided to create a dedicated division, which will be led by Toniolo starting from June 1. Asian markets are registering the best performance, followed by the Middle East, in particular by the United Arab Emirates and Iran.
E-commerce is also more and more pivotal for boosting sales, as shown by the launch of LVMH’s online platform 24sevres.com, which will gather more than 160 luxury fashion and beauty brands. “We’ve been inspired by our own brick-and-mortar model of Le Bon Marché,” Toniolo said, referencing the Parisian luxury department store and explaining how the online platform will include customized services, such as personal shoppers to guide clients’ purchases. “Our goal is to reach 200 million euros [or $223.7 million] in three years,” he concluded.
In general, in 2016 online beauty purchases climbed 20.7 percent worldwide and 35 percent in Italy. Even if this is not the leading retail channel in the country, its rise is contributing to the difficult time selective perfumeries are facing.
“The revamp of this channel was my mission but I haven’t accomplished it yet,” Serafini said. The executive praised Fenapro — the Italian federation of perfume retailers — for launching the “Beauty Coach” project, which aims to unify and enhance the training standards of sales assistants. To provide additional value and experience is key to relaunch perfumeries, but Serafini also urged brands to advertise them through an institutional campaign.