PARIS — Puig is reorganizing its business structure with the aim of hitting 3 billion euros in sales in 2023.
The family-owned Spanish company announced Wednesday that it will establish three divisions — Beauty and Fashion, Charlotte Tilbury, and Derma — starting on Jan. 1.
Puig executives have been working toward this new structure for years, well before the coronavirus pandemic unfurled, Marc Puig, the company’s chief executive officer, told WWD. He explained the shift has two main drivers.
“Number one, family businesses think in generations,” he said, adding that for about the last 20 years, the Puig family’s third generation has chosen how it wanted to operate the company. “Now, we are initiating a new phase, which is thinking how we are organizing this group once we start thinking of transferring the business to the fourth generation.”
The second reason for the restructuring stems from industry changes over the past few years. Fifteen years ago, Puig opted to focus on fashion and fragrance. At the time, it had a large, less coherent brand portfolio. So the company chose to compete specifically in the fashion and fragrance sectors, in order to succeed and gain critical mass, before possibly broadening its scope.
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“We used to say: ‘We build the image of a brand through fashion, and we translate that image into the fragrance world — whether that image is from a fashion brand we own or a license,’” Puig recalled.
Numerous evolutions during the past few years have caused the company to rethink that strategy.
“Number one, licensing big brands doesn’t seem to us attractive [anymore],” Puig said.
A few major fragrance licenses Puig has had, such as with Prada and Valentino, will soon be or recently have been terminated.
“That’s why we bought Jean Paul Gaultier in 2011. We bought its fragrance business when the license finished with Shiseido,” Puig continued. “We bought a majority stake in Dries Van Noten. So we have been betting on brands where we have control or ownership.”
He also noted the rise of niche brands in all product categories, not least fragrance, which is why Puig acquired Penhaligon’s and L’Artisan Parfumeur. And in tandem with emerging markets’ ascendance, Puig has taken minority stakes in labels such as Granado in Brazil.
All that contributed to Puig upping its share of the prestige fragrance market from 3 percent to nearly 10 percent today.
“Now, we’re the fifth player — half the size of the largest one, more or less,” Puig said. “The question is: ‘OK, what do we want to do now?’”
He believes the greatest challenges lie in the rise of digital and the Chinese consumer.
“These two movements have benefited much more the makeup and skin-care categories versus fragrance,” said Puig, referring to the latter category that generates the lion’s share of the Puig business.
With selfie culture, makeup and skin care have taken center stage, and their sales growth has surpassed that of fragrance, a trend that’s expected to continue.
“Fragrance is not a visual category,” Puig said, “but makeup and skin care are, and that has tremendous consequences in many areas — the way you sell, the way you promote.”
Regarding China, there’s no deep-rooted tradition for fragrance-wearing, and there prestige perfumes ring up 7 percent of the overall beauty sales, versus 65 percent in a country such as France.
“Fragrance is growing in China. We think it’s going to take a bigger share, but it will take many years to change behaviors,” Puig said. “Many of the other companies in the industry were benefiting from the makeup and skin-care territory, and we were not. So we decided to make a move.”
In March 2018, Puig signed a beauty license with Christian Louboutin, marking its first incursion into the world of makeup.
Then last June, Puig took a majority stake in Charlotte Tilbury, a highly successful color-cosmetics brand with a large digital footprint. That brand is to become its own division.
Puig’s beauty and fashion division will comprise the owned Paco Rabanne, Carolina Herrera, Jean Paul Gaultier, Nina Ricci, Dries Van Noten, Penhaligon’s and L’Artisan Parfumeur brands, plus the Adolfo Dominguez, Antonio Banderas, Shakira and Benetton fragrance licenses.
“Puig is putting all its activities in the beauty and fashion world under one roof because we feel it’s well-organized, has professional governing bodies and good mechanisms that we feel comfortable with,” Puig said.
Those labels’ fragrance activities make the company the fifth largest global group in prestige perfumes, with Paco Rabanne, Carolina Herrera and Jean Paul Gaultier figuring among the top 20 brands worldwide.
The Puig family holding company is putting in the new Derma division its two owned dermocosmetics brands sold through pharmacies, Uriage and Apivita, plus the 50 percent interest it has in Isdin.
Together, the three brands make Puig the largest dermocosmetics-maker in Europe, after Pierre Fabre and L’Oréal, with Uriage and Isdin ranking in the top 10 there.
Some executive appointments linked to the three divisions will be announced in due time, according to Puig.
The group’s new organizational structure is being put in place not only to pave the way for the Puig family’s fourth generation, but also to help the company attain sales of 3 billion euros in 2023, and more than 4 billion euros in 2025.
Puig forecasts its 2020 revenues, hard-hit by the coronavirus pandemic, which forced domestic and travel-retail stores to shutter for extended stretches of time, will reach 1.5 billion euros. That compares to the 2.03 billion in revenues registered in 2019.
Puig anticipates substantial recovery in business as the pandemic ebbs, and expects its 2021 sales will exceed the 2 billion euro mark, which the company surpassed for the first time in 2019.
By 2025, the group should have two brands with annual sales close to 1 billion euros — Paco Rabanne and Carolina Herrera; two brand with sales of 500 million euros — Isdin and Charlotte Tilbury; and numerous brands — such as Jean Paul Gaultier, Penhaligon’s, Dries Van Noten, Uriage, Apivita, L’Artisan Parfumeur and the Christian Louboutin license — with sales in the range of 100 million euros to 500 million euros.
By 2025, as well, Puig expects its digital and China businesses to make up 30 percent and 25 percent, respectively, of overall sales.
The group has also inked agreements to take majority stakes in some companies it already owns minority shares in, such as Kama Ayurveda in India and Loto del Sur in Colombia.
Marc Puig said the company’s reorganization “creates a portfolio of brands in different sectors, all of them tremendously attractive.”
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