PARIS — After months of speculation, Kering has begun taking its beauty business back in-house.
The French luxury conglomerate said Friday that it has appointed Raffaella Cornaggia chief executive officer of Kering Beauté, a new position in a new division.
The Italian executive joins the company from The Estée Lauder Cos. where she worked for 14 years in a variety of positions, most recently as international senior vice president and general manager of Estée Lauder and Aerin. She will be based in Paris and report to Kering group managing director Jean-François Palus.
“In her new role, and supported by a team of seasoned professionals, she will help develop an expertise in the beauty category for Bottega Veneta, Balenciaga, Alexander McQueen, Pomellato and Qeelin. The creation of Kering Beauté will enable the group to support these brands in the development of the beauty category, which is a natural extension of their universe,” Kering said on Friday.
“Kering is confident it can create value for the group and its houses, drawing on each of their unique identity in a way that is fully consistent with their strategy and market positioning,” the French luxury group added.
The buzz had been intensifying about whether Kering would take its beauty activity back in-house during 2023 — and if so, what that might take, especially in regards to the jewels in the crown, Gucci and Yves Saint Laurent.
A graduate of Bocconi University in Milan, Cornaggia began her career at L’Oréal where she occupied various roles for 10 years in Italy and in France with brands including L’Oréal Paris, Garnier and Helena Rubinstein. From 2005 to 2008, she was global vice president, marketing makeup at Chanel Parfums Beauté.
Cornaggia will be a member of Kering’s executive committee.
“I am delighted to welcome Raffaella Cornaggia, who brings us considerable experience in a segment that we see as strategically important for our houses,” Palus said. “We are building this new area of expertise within our group to ensure that our brands can fulfill their potential in this category.”
Analysts welcomed the move.
“Overall, we view the decision to progress with Kering Beauty as positive on a mid-term time frame, as it should provide Kering with sufficient time to build and develop its in-house capabilities in the category with smaller brands, and over time, offer an alternative in-house option for Gucci Beauty (fragrances and makeup) for when the Coty license deal expires,” RBC Capital Markets analyst Piral Dadhania said in a note. “Near-term revenue contribution is not likely to be meaningful given the initial scope of brands within its remit”.
Kering is no stranger to beauty. Until the late Aughts, the group, then called PPR, took a more hands-on approach to fragrance and cosmetics. At the time, PPR’s Gucci Group had a beauty subsidiary named YSL Beauté, which included fragrance and beauty brands and licenses, such as Yves Saint Laurent, Stella McCartney, Boucheron and Ermenegildo Zegna, before it was sold to L’Oréal in 2008 for 1.15 billion euros.
The YSL Beauté business was never huge. In 2007, the activity generated sales of 649 million euros, placing it 29th globally among beauty manufacturers in the WWD Beauty Inc Top 100 ranking.
After YSL Beauté’s sale, Kering retained ownership of the Yves Saint Laurent, Boucheron and Stella McCartney fashion brands, and L’Oréal divested some of its acquired holdings.
Today, Gucci has a 50-year beauty license that is held by Coty Inc. and expected to expire in 2028. There’s also Yves Saint Laurent, with a long-term beauty license, which was sold to L’Oréal. Industry sources estimate those brands’ beauty activities generate sales of around 500 million euros and 1 billion euros, respectively.
Among Kering’s other owned fashion and jewelry labels, Interparfums runs Boucheron’s business in perfume, while Lalique Group develops Brioni’s fragrance activity.
Coty Inc. had held the Bottega Veneta, Balenciaga and Alexander McQueen licenses, while Pomellato had a dormant fragrance business. The producer of Qeelin’s one fragrance could not be learned.
Industry experts believe it makes good strategic sense for Kering to sharpen its focus on beauty, especially as the group now has a stronger balance sheet and net cash position with which to carry out deals.
Over the past two decades, luxury goods companies, such as Puig, have been taking back full control of the brands they own. That can pack a powerful punch, giving them more consistency, synergies and power.
LVMH Moët Hennessy Louis Vuitton, which runs its fashion brands’ beauty operations, as well as other labels, ranked sixth in WWD Beauty Inc’s most recent Top 100 ranking, reflecting companies’ 2021 sales. Puig comes in at number 19.
Kering’s internalizing beauty could echo the success of its taking eyewear in-house six years ago. The group has been encouraged by the accomplishments of that division, which was launched in 2015 and has set a revenue target of 2 billion euros in the medium term.
Kering indicated it was interested in expanding into beauty last July following the publication of its first-half results.
“Our success with Kering Eyewear demonstrates that we can create a lot of value for the brands, on the one side, and as a consequence, for the group, by taking some disruptive and innovative approaches,” Palus told analysts at the time. “So beauty is definitely an area where we could contemplate some initiatives in the future and all options are open.”
Industry sources have said Kering was interested in acquiring Byredo, which was snapped up by Puig in late May 2022, and Tom Ford, which was purchased by the Estée Lauder Cos. in December 2022.
Kering recently joined forces with L’Occitane Group on a project. In December 2022, they launched the Climate Fund for Nature, committing 140 million euros to conservation, biodiversity and regenerative farming projects in countries where they source raw materials.