Inside Puig’s Transformation Via M&A

PARIS — When Puig misplaced its magnificence licences for Valentino and Prada in 2018, the Spanish fragrance-and-fashion group appeared to some observers as an organization in disaster.

The closely-held group risked getting squeezed for market share by listed giants like L’Oréal, which had scooped up the licences for each prestigious Italian manufacturers, and LVMH, whose magnificence manufacturers together with Dior and Fenty have surged, boosted by funding firepower and prime positions within the conglomerate’s personal retailers Sephora and DFS. On the identical time, a increase in pricier area of interest perfumes was difficult the dominance of designer fragrances, which has lengthy been Puig’s specialty.

However since shedding its huge licences, Puig has loved one thing of a renaissance: In recent times the group redirected investments to manufacturers it really owns — accelerating the expansion of blockbuster perfumes from Paco Rabanne and Carolina Herrera — in addition to embarking on a spate of acquisitions that quickly diversified its portfolio.

A 2018 deal to accumulate Dries Van Noten offered a stronger foothold in style, whereas the 2020 addition of British make-up model Charlotte Tilbury quickly boosted its publicity to color cosmetics. Final 12 months, Puig pulled forward in a race to accumulate fast-growing Byredo, bolstering its publicity to each area of interest perfumery and retail (a channel the place it’s traditionally treaded flippantly). The group additionally guess on wellness-inspired magnificence and the promising Indian market by buying pores and skin and hair care model Kama Ayurveda.

In 2022, Puig’s revenues grew 30 p.c on an natural foundation to €3.6 billion ($3.9 billion), the group stated Thursday, placing it inside placing distance of its goal for €4 billion in annual gross sales by 2025. EBITDA, a measure of working revenue, rose 37 p.c to €638 million.

In its core enterprise of airport- and department-store grade fragrances (a phase referred to by insiders as “status”), Puig surfed a wave of post-pandemic demand and grew sooner than rivals: its market share hit a report 10 p.c, in line with the group’s estimates. On the again of its latest acquisitions, make-up gross sales jumped 52 p.c to €626 million, whereas skincare gross sales grew 20 p.c to €328 million.

Collectively, skincare and make-up now make up greater than 1 / 4 of gross sales — marking speedy diversification for a corporation that was, just some years in the past, thought of a pure participant in perfume.

“15 years in the past we have been nonetheless a mid-size participant. We would have liked to give attention to a couple of issues and do them the most effective we will,” chairman and CEO Marc Puig instructed BoF in an interview forward of the corporate’s outcomes announcement. “Now that we have now a sure crucial mass, we will take into consideration different issues.”

The group didn’t get away gross sales of clothes and accessories (that are estimated to stay a small fraction of the enterprise) however stated the class was rising as quick as the general firm.

Final 12 months, Jean Paul Gaultier relaunched its style enterprise with a buzzy collaboration mannequin that included high fashion exhibits and ready-to-wear capsules signed by big-name visitor designers Y/Undertaking’s Glenn Martens and Balmain’s Olivier Rousteing. Paco Rabanne (designed since 2013 by Julien Dossena) and Carolina Herrera (designed by Wes Gordon since 2018) each “consolidated” their positions, whereas Nina Ricci laid the groundwork for a revamp in 2023 by naming a brand new inventive director, Harris Reed.

“In style, it’s true that we’re cautious, sure, and small — however we preserve investing. We’re progressively extra assured in our capability to run this enterprise,” Mr Puig stated. Even when manufacturers like Paco Rabanne, Jean Paul Gaultier and Carolina Herrera have been predominantly fragrance manufacturers for many years, the corporate nonetheless sees style as “a lighthouse that units the tone for the remainder of the model to observe,” Mr Puig added.

Trying forward, the tempo of M&A is more likely to cool. “There’s all the time holes or imbalances, however now we have now to digest a bit, and take time to assist these [recently acquired] manufacturers develop,” Mr Puig stated.

Puig’s talks to launch fragrances and sweetness for fast-growing Jacquemus, and even purchase the model, have been shelved. “We have been courting, however ultimately a wedding didn’t materialise,” Mr Puig confirmed. (BoF confirmed a December report by web site Glitz Paris that founder Simon Porte Jacquemus had purchased again an undisclosed minority stake the model offered to Puig in 2019, suggesting a deal is now firmly off the desk.)

Nonetheless, even when Puig is taking a breather from its acquisition spree, the corporate is in search of to burnish its company picture in a bid to make itself a extra enticing future acquirer, enterprise associate and employer. The family-controlled group traditionally saved a low profile in a bid to maintain the highlight on its manufacturers, however this posture has prompted market notion to lag firm developments. A extra differentiated positioning may additionally assist it stand out from giants like L’Oréal and LVMH.

“Most individuals whenever you say Puig, they nonetheless see this fragrance producer, manufacturing typically occasions for third events,” Puig stated. “However 95 p.c of our gross sales are manufacturers that we management, which is already a really totally different image from what many individuals consider.”

Final 12 months the corporate tapped former Vogue Espagne editor-in-chief Eugenia de la Torriente as its first chief communications officer. It’s began to explain itself as a “residence of affection manufacturers” and a “highly effective ecosystem of founders,” citing the continued involvement of figures like Charlotte Tilbury and Byredo’s Ben Gorham within the group.

Whereas Puig nonetheless operates licences for a couple of manufacturers, similar to Comme des Garçons and Christian Louboutin, the group says it’s bored with pursuing huge licensing offers going ahead.

“Should you do a foul job as a licensee, the manufacturers don’t renew. Should you do a superb job, you pay for the job you have got executed!” Puig stated, evoking latest offers like Estee Lauder’s transfer to pay $2.8 billion for management of Tom Ford, the place it has already invested closely in constructing the model’s fragrance line. “For a household enterprise that does issues long run, it’s very robust to justify.”