PARIS — Dolce & Gabbana and Shiseido Co. Ltd. have signed a worldwide beauty licensing agreement.
The deal, whose financial terms were not disclosed, includes the development, manufacturing and distribution of the Italian fashion brand’s fragrance, makeup and skin care.
The deal will take effect on Oct. 1, subject to a green light given by antitrust authorities.
“The license agreement is aimed at strengthening our brand portfolio for the sake of future top-line growth, which is part of my Vision 2020 for Shiseido Group,” said Masahiko Uotani, company chief executive officer. “The collaboration of our two companies, with their heritage rooted in such diverse cultures as Mediterranean and Japanese, opens excellent opportunities for creating new exciting values.”
According to the companies, the Italian brand’s makeup and skin-care activities combined in 2015 generated retail sales of around 400 million euros, or $443.8 million at average exchange for the year.
Industry sources estimated that Dolce & Gabbana’s large portfolio of fragrances together with beauty products add up to annual wholesale revenues of more than $500 million.
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“We expect considerable synergy effects from this alliance, as it will take full advantage of the scale of the Shiseido Group EMEA HQ [Europe, Middle East and Africa headquarters] organization,” continued Louis Desazars, president of that division and president of Beauté Prestige International, Shiseido’s fragrance arm, who spearheaded the acquisition.
With the new license, Shiseido expects to expand its position in the luxury beauty industry and greatly grow its sales abroad. Last year, the company placed fifth in WWD Beauty Inc’s Top 100 ranking of beauty manufacturers.
The announcement of the new beauty pact came just over six months after surprising news broke in January that the proposed deal Coty Inc. had made with Procter & Gamble Co. for Dolce & Gabbana — as part of its July 2015 agreement to acquire 43 brands for $12.5 billion — didn’t pan out and that the brand was still looking for a beauty licensee.
L’Oréal, Shiseido and Puig had been seen by sources as competing suitors.
It was believed that some interested parties were wary of numerous demands, such as Dolce & Gabbana’s steep royalty rate, considered among the priciest in the industry — estimated to be as high as 8 percent to 10 percent. Also, there was reportedly the hefty cost of required advertising spending and support for the color-cosmetics and treatment brands, whose estimated losses range as high as $70 million a year, according to sources. Other possible sticking points were said to have been antitrust issues, since a brand as big as Dolce & Gabbana could tip the scales, particularly in key markets such as Germany and the U.K., and the requirement for a $100 million advance.
Shiseido has of late been building its brand portfolio, most recently in June by buying Laura Mercier and ReVive. Shiseido was understood to still be on the hunt for fragrance brands to make up for the loss of the Jean Paul Gaultier fragrance license, which went to Puig on Jan. 1.
For the Dolce & Gabbana-Shiseido transaction, J.P. Morgan Ltd. served as financial advisor to the fashion label and Rothschild Global Advisory was Shiseido Group’s financial adviser.