The battle for control of luxury giants

Kering launched its own cosmetics division earlier this year, opening the door for the giants to follow the same path started years earlier with children's fashion and optics: moving from licensing to control.A brand licensing contract is nothing more than an agreement whereby a licensor (which is the holder of the industrial property right, the brand) licenses and empowers a third party (the manufacturer in this case) to exploit its brand on certain products. The licence agreement determines the territory and time and is regulated by Article 48.2 of the Trademark Act.L'Oréal, in addition to its own brands (Lancôme, NYX Cosmetics, Khiel's) also markets perfumes and has the licence for perfumery brands such as Cacharel and Ralph Lauren. Coty, owner of Max Factor, Procter & Gamble, Bourjois and more than 40 other brands, has acquired the licences for Gucci, Hugo Boss and Lacoste, which before 2016 were owned by Procter & Gamble. The deal also saw the transfer of licences for other brands such as Bruno Banani, Escada, Mexx, James Bond, Gabriela Sabatini, Stella McCartney and Alexander McQueen.L'Oréal is the group with the largest number of licences in the cosmetics marketDespite this, there are more and more news reports announcing how these licences are being truncated. And this has a clear intention: to regain control of the helm in order to get the brands back on track. Controlling the creation, development and distribution of their products is crucial to drawing up a successful strategy, and thus to producing greater economic profitability. A good example of this is the Kering group. Earlier this year they announced the creation of their own cosmetics division. This new area will develop product enhancements for its brands such as Bottega Veneta, Balenciaga and Alexander McQueen. Kering had expressed on numerous occasions its desire to boost business in the beauty sector. But from within. Without relying on anyone. Over the past few months, it has closely scrutinised the trajectory of Dior and Chanel, which already control their own beauty lines. Dior and Chanel own and operate their beauty divisions and this has translated into good results for both firms, which sell more perfumes than any other brand in the world. This allowed them to look cautiously and with perspective at the performance and performance of their own brands Bottega Veneta and Saint Laurent.Until then, Kering relied on established licences with Coty, Gucci, and L'Oréal for its fragrance business, but also for make-up and skincare products. Dior and Chanel own and operate their beauty divisions and this has translated into good results for both firms, which sell more perfumes than any other brand in the world.Coty rules in favour of its interests: the Gucci licence will be the group's for five yearsThe whole situation has led to a crossroads between Coty and Kering, triggered by the French group's acquisition of Creed. After Kering's move, Coty's CEO Sue Naby explained in a press conference that there was no discussion between the two companies on the renewal of the licences. Naby was adamant that the licence will be extended for at least five years, the length of the contract. However, the statements issued by Kering do not say the same, and it is suspected that the French group intends to agree to suspend its licence in order to regain control of beauty in its other brands.Kering wants the cosmetics division to follow in the footsteps of Kering Eyewear, its eyewear business. That the group has paid a figure in excess of €3.5 billion to take over Creed can be interpreted as a sign of what the group is willing to do to gain control of its brand and the high expectations placed on its beauty line.In-house cosmetics and perfumery divisions proliferate in the major groupsAnother of those involved in the licensing universe is Interparfums. At the beginning of the year, the French group reached an agreement with Coty for 90 million euros to license Lacoste perfumes from 2024. In this way, Interparfums manages the development of brands such as Montblanc, Jimmy Choo, Coach, Rochas Donna Karan or DKNY. This week, moreover, it was announced that the French group had bought the Roberto Cavalli licence.On the other side of the board is Puig's strategy. It seems that the Catalan group has realised that the licensing model does not fit in with its philosophy and is committed to growth through its own brand.I could not conclude this piece without mentioning another of the greats of luxury: Estée Lauder. The American multinational seems to want to imitate the model followed by Puig. Estée Lauder bought Tom Ford in a bidding that reached 2.8 billion dollars. Other giants such as Shiseido also tried to take over the company, but failed to meet the financial demands that Estée Lauder was able to satisfy. This became the biggest deal in the history of the luxury market. After the purchase, ELC (Estée Lauder Companies) announced its intention to create Tom Ford Beauty, with big goals for the next two years: to consolidate in the premium fragrance category and to reach a turnover of 1 billion dollars in the next two years.

The battle for control of luxury giants

L'Oréal, Coty and Kering, among other major companies in the sector, are now fighting to establish themselves in the beauty sector as well