Kering buys the high perfumery house Creed, a “nugget” with “high profitability”

2023-06-27 07:33:39

The acquisition of Creed will allow Kering to have a critical size in the high perfumery market, which is experiencing the strongest growth. Creed

“It is the largest independent global player present in the fast-growing high-perfumery market,” said the general manager of the Kering Beauté division.

For Kering, this is a step “founder”. This Monday, the world number two in luxury (Gucci, Saint Laurent, Balenciaga, etc.) announced the signing of an agreement for the 100% acquisition of the luxury perfume brand Creed, from the BlackRock fund. The group is thus concretizing its desire to make a comeback in cosmetics, four months after making it official with the appointment of Raffaella Cornaggia as head of a division newly dedicated to beauty. He left in 2008, after the sale of Yves Saint Laurent Beauté to L’Oréal, to focus on sport and lifestyle. The transaction, still subject to the green light from the competition authorities, and the amount of which is unknown, should be finalized by December.

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“The acquisition of Creed, which is Kering Beauté’s first strategic initiative, demonstrates our ambition to build a solid position for the group in the most exclusive segment of this category”said François-Henri Pinault, CEO of Kering, in a press release. “Creed will very quickly give us a critical size in the high-end perfumery segment, which is experiencing the strongest growth”, completes Jean-François Palus, Deputy CEO of the group. With more than 250 million euros in turnover, the brand, born in couture, has its roots in 1760 in England, then in France in the middle of the 19th century. Known for having dressed the great royal families of Europe, she then specialized in perfumery. Until becoming, with 10% of the luxury perfume market in 2021, the challenger of Jo Malone (Estée Lauder) on the fashionable segment of niche perfumes. These are very typical juices, appreciated by the younger generations, and whose price per bottle easily exceeds 200 euros. According to the Bain firm, sales of these ultra premium perfumes, estimated at 5 billion euros, will grow by an average of 15% per year until 2026. That is three times faster than prestige and consumer perfumes.

“Exceptional profitability rate”

Above all, and contrary to mass-market perfumes, the price sensitivity of customers of these fragrances is less strong. This offers a strong ability to increase prices on the labels. “Creed has an exceptional rate of profitability”, according to Raffaella Cornaggia. According to our information, it would exceed 20% of gross operating margin (Ebitda). “The brand is very present in the United States and the United Kingdom, but retains incredible potential, especially in China, where it is not very present. But also in airports or, within two years, in other segments such as body care and the home (candles, home fragrances, etc.), continues the CEO of Kering Beauty. On its best-selling Aventus, or its Silver Mountain Water and Wind Flowers ranges, the British brand, historically very masculine, already has versions for women. A diversification that Kering intends to accelerate. The group finally plans to inflate the network of 36 shops bearing the image of Creed. And to develop its presence beyond the 1,400 current selective points of sale (perfumes, department stores, etc.).

With this operation, Kering wants to find a place in the competitive market of high-end perfume where L’Oréal, Dolce & Gabbana, Puig or Coty have sharpened their weapons for two years, but on which external growth targets remain rare. “In beauty, this is the segment most naturally in tune with our luxury brands,” adds Jean-François Palus. Compared to cosmetic products, their development is also technically less complex. Within eighteen months, the group should launch its first juices branded Bottega Veneta, Balenciaga or Alexander McQueen, whose licensing contract with the American perfumer Coty has just expired. On the other hand, on its flagship brand Gucci, whose beauty ranges are also developed by Coty – and on which Kering did not hide its disappointment – ​​the license agreement runs, according to analysts, at least until the end of 2025.