The Fekkai brand has changed hands again.
As part of its plans to divest parts of its beauty portfolio, the Procter & Gamble Co. has sold the business — which includes retail hair-care products and seven salons — to Fekkai Brands, a joint venture between Designer Parfums and Luxe Brands.
But P&G far from profited on the deal — a sign of both Fekkai’s struggles and how desperate P&G is to get rid of its underperforming businesses. Having paid an estimated $440 million for Fekkai in 2008, the consumer goods giant sold the brand for what sources estimated was only $50 million.
The price also reflects the work needed to turn around the brand and the capital expenses required to run the salons. Industry sources said that sales of Fekkai’s products have sharply fallen off from highs in the $125 million range to roughly $50 million last year. Sources estimate salon revenue at roughly $22 million.
Under the terms of the deal, the brand’s founder, Frédéric Fekkai, will retain his role as adviser. P&G’s disclosure of the sale confirms a report that appeared on WWD.com Thursday morning. Fekkai himself had tried to buy back his brand, but in the end could not put a deal together.
“He will be very much involved, including in any new innovations and as a spokesperson for his brand,” Dilesh Mehta, chief executive officer of Designer Parfums, said of Fekkai’s role.
Designer Parfums also purchased the skin-care brand DDF Skincare from P&G in 2014. In addition to DDF, Designer Parfums and Luxe Brands together have portfolios that include the House of Jean Patou and the upcoming Ariana Grande fragrance, among others.
Luxe Brands ceo Tony Bajaj said the two firms, which have experience in fragrance and more recently in skin care, were looking to enter the premium hair-care category, and that Fekkai more than fits the bill.
“It resonates with a broad spectrum of consumers,” said Bajaj. That said, he added that the joint venture will work to assess Fekkai’s current distribution, which P&G had broadened to the mass market.
Mehta added, “We are very much familiar with both sides of the market, so we can address where the brand should live.”
The newly formed entity Fekkai Brands would not comment on the size of the brand, but Bajaj acknowledged a sales slowdown in recent years. He noted that P&G had successfully stabilized sales last year and that Fekkai Brands expects to eventually ramp up to double-digit sales gains.
Some of that growth will come over the next several years as Fekkai reenters international markets that P&G exited. Bajaj said China, India, Europe and South America are all being considered.
The deal marks the third time the 20-year-old brand has been sold, proving that Fekkai is equal parts hairstylist and businessman. The French-born hairstylist first introduced his product range in 1995 as part of a joint venture with Chanel called Frédéric Fekkai Beauté. Nearly a decade later, Fekkai and Chanel parted ways when the brand was acquired by the private equity firm Catterton Partners. In 2008, P&G came calling and purchased the brand.
P&G quickly developed a two-tier distribution strategy for Fekkai, creating an Advanced line for prestige and a Classic collection for the mass market. The move prompted Sephora to swiftly drop Fekkai from its doors.
In 2013, P&G backed away from that strategy with a reformulated line intended to cut across all channels.
P&G’s gamble to distribute it to the mass market turned off key retailers and caused sales to plummet. Several stylists at Fekkai had begun to grumble about the quality of the product that P&G was producing and about the slow pace of decision making. Word of the sale had Fekkai employees feeling optimistic, said one employee, who added, “We were just a speckle of the P&G portfolio.”
The sale of Fekkai is part of P&G’s stated plan to sell or float its beauty brands. The industry has been speculating since March, when the plan was first revealed, about which brands the company might sell, with most of the early focus on who might buy the Cover Girl and Max Factor color cosmetics brands. The stock market generally shrugged off the Fekkai sale Thursday, with P&G’s shares remaining relatively flat at $80.41.