Estée Lauder Cos. Inc. ventured to take another step into the future Tuesday when it signed a deal to purchase Le Labo, an indie fragrance brand loaded with a direct-to-consumer merchandising appeal and buzz tailor-made for Millennials.
This story first appeared in the October 15, 2014 issue of WWD. Subscribe Today.
Lauder and Le Labo executives declined to disclose financial details. But industry sources estimate that Le Labo generates $20 million to $30 million annually in retail sales. Sources also speculate that the purchase price could amount to as much as two times the sales.
The deal marks the first major, high-profile acquisition Lauder has made since purchasing Smashbox in 2010, which featured not only a jazzy Hollywood positioning, but an alternative distribution attack consisting of specialty chain distribution and TV shopping. That purchase was heralded as the first deal made by Fabrizio Freda, Lauder’s president and chief executive officer. Le Labo is his second.
The pioneering spirit the Smashbox acquisition began is continued with Le Labo, which has reinvented the perfumery in contemporary terms. Lauder described the business as “a high-end fragrance and sensory lifestyle brand with a distinct French heritage and an emphasis on fine craftsmanship and personalization in its products and services.”
The cofounders, Fabrice Penot and Eddie Roschi, two former L’Oréal executives, opened their first store at 233 Elizabeth Street in Manhattan’s NoLIta neighborhood in 2006, offering freshly prepared fragrances, which consisted of creating finished scents by mixing essential oil blends with alcohol and water right before the eyes of the customer. The popularity of the shop mushroomed and it led to a string of 35 points of sale, including 10 freestanding stores, the latest in Hong Kong. Other Le Labo stores are based in London, Paris, Los Angeles, San Francisco and Tokyo, with counter units in prestige department stores in global cities, such as in the expanded fragrance grouping in Saks Fifth Avenue, plus the brand’s Web site. The founders established offices in New York and London.
A “perfume lab for the nose, an amusement park for the nose” was how Penot described the brand’s positioning during a presentation at the WWD CEO Beauty Summit in Palm Beach, Fla., in May. “We don’t launch a perfume because our marketing plan demands it,” he stated. “We cherish craftsmanship. Man-made versus industrialization. There is fast-food versus slow food. We are the slow perfumery.”
“Le Labo is the perfect complement to our portfolio of prestige beauty brands,” Freda stated. “Fabrice and Eddie have built a beautiful, incredibly unique brand with a focus on craftsmanship, personalization and high-touch services. We look forward to collaborating closely with them to continue building on their extraordinary success with discerning global consumers.”
In a joint statement, Penot and Roschi called Lauder “the ideal home” for them and the brand. “The Estée Lauder Cos. not only understands and respects the core elements of our business, but also has the resources to help us continue to grow into a more fully expressed sensory lifestyle brand.” In addition to fragrances, Le Labo also markets candles and body-care products.
The acquisition will be overseen by John Demsey, group president in charge of the Estée Lauder brand; MAC Cosmetics; Tom Ford; Prescriptives; Bobbi Brown; La Mer; Bumble and bumble; Smashbox, and Aramis & Designer Fragrances. Demsey also oversees Jo Malone, the London-based company that was a cult fragrance brand with a global following when Lauder bought it in 1999.
William P. Lauder, executive chairman, pointed to Lauder’s historic penchant for entrepreneurship and noted that Le Labo fits the bill, along with “its strong growth trajectory as a global fragrance and sensory lifestyle brand.”