In October 2023, global luxury brand giant Kering (a group that operates brands such as Gucci, Saint Laurent, Balenciaga, and Alexander McQueen) completed the acquisition of luxury fragrance company Creed. This deal is considered important in both fashion and beauty terms due to its size and high price tag. And such deals include Spanish fashion giant Puig’s acquisition of a majority stake in British beauty brand Charlotte Tilbury in 2020 and Estée Lauder Companies’ acquisition of Tom Ford in April this year. It follows other large acquisitions and mergers in the field. In September 2023, Richemont announced the creation of a perfume and beauty division.
But why has the fusion of fashion and beauty accelerated? And can fashion really succeed in expanding into such a dynamic and competitive global beauty market? Beauty Independent’s Deal Maker Summit EU/UK 2023 was held in 2023 and was attended by financial and market experts.
Sandra Nait-Amer, Managing Director of independent financial services group Rothschild & Cosaid it is certainly interesting to observe how business ideas have evolved in recent years.
“Big business is born from beauty”
Mr. Knight-Amer, in luxurious fashion, told attendees: Recent “complete shift in strategy”was driven by “the realization that there is big business in beauty.”
According to her, what beauty brought to fashion was a break from fashion’s typical cycles, more visible cash flow, and access to a larger, more dynamic global market. Through beauty, high-end fashion brands have the potential to reach a broader audience of “aspirational luxury consumers,” she said.
“…if you look at brands like Chanel and Dior, 40% of the brand’s sales come from fragrance and beauty. It makes a lot of sense to leverage the value of a brand that has been created,” she emphasized.
Luxury fashion brands also “take a lot of time to build,” so when it comes to growth, creating products that deliver beauty within the brand rather than acquiring another fashion house to scale. makes sense, she said.
And the potential for luxury fashion brands to succeed in the beauty field was already “well proven”said Knight-Amer.
For example, Armani had a strong track record in makeup, and Chanel had a strong presence in all beauty fields. “In the past, [fashion brands] You probably only saw the beauty potential in launching your own fragrance under the same name, but now you can actually build an entire beauty business worth billions of dollars beyond just fragrance. . The size of the prize is much larger than people originally thought. ”
Exclusively for major fashion brands
However, a financial expert said: Pursuing beauty only makes sense for larger, more mature fashion brands – “Mega Luxury Brands” – Because it makes more sense for young and growing fashion businesses to focus on their core business. Entering the beauty sector also requires “significant investment”, particularly in internal talent development, which is often only available after scaling up, she said. In addition to this, she said higher levels of investment make more sense for companies with multiple fashion brands in their portfolio than for single-brand fashion companies.
Angela Chow, investor at UK-based venture capital firm Felix Capitalagreed, saying it was “tough” for the founders to venture into the second sector at such an early stage. “Most of the more important conversations are about geography, new product categories, and wholesale,” Chow said.
She said there are obviously exceptions, and some fashion founders got into the beauty field early on, but in that case they’re likely to move into fragrance. Crossing the “vague line” between beauty and fashion.
Mr Knight-Amer added: For the time being, fashion giants have shown no interest in acquiring a piece of the beauty supply chain. Instead, we focused on onboarding and brand pickup. “I don’t think any of these fashion groups want to build a vertically integrated supply chain in beauty. The beauty of beauty is that the ecosystem is very strong, and outsourcing is very strong. There is no need to internalize these functions because the whole supply chain is full of professionals who work very well with these products, but the pace of beauty is much faster than fashion. , that level of innovation and agility is very difficult to replicate.”
Beyond fragrance, where?
When asked what the most promising beauty categories are for fashion majors, Knight-Amer said there are only a handful that make sense.
Fragrances and color cosmetics, for example, were “two examples of well-trodden paths.”[s]” It aligns well with the creative side of fashion, she said. The skincare space, on the other hand, has been much more difficult to break into as a fashion brand because consumers shopping in this space tend to look for science, efficacy and authenticity over brand power, she said. For Fashion to succeed in skin care, she said, it makes more sense to acquire vertical companies rather than building in-house capabilities.
Nader Naimi Rad, founder and publisher of Beauty Independent, said one innovative area where fashion could successfully expand into beauty is wellness and athleisure. Ta.
“Athleisure is fashion, and it’s what wellness is to beauty. You might not buy Chanel skin care products, but Patagonia SPF products and The North Face supplements make sense. So , I think wellness and athleisure are one area where that fusion might be possible. They’re both off-center. And you can create something exciting. Both worlds remain authentic,” said Neimi Rad.