How much do luxury brands love the beauty industry?
Shiseido has acquired the fragrance business authorization of the Italian luxury fashion brand Max Mara, LVMH Group’s luxury brand Celine has launched its first cosmetics line, and FENDI has relaunched its fragrance line after nearly 10 years… This year, luxury brands from around the world have made a “run” into the beauty industry, stirring up a storm.
Recently, Dolce & Gabbana (referred to as “D&G” below), a luxury brand from Italy, revealed its performance data, becoming one of the few luxury brands in the beauty industry to exceed 10 billion yuan in sales, attracting industry attention. According to reports, Gianluca Toniolo, CEO of D&G Beauty, stated in a media interview that D&G’s beauty line achieved sales of approximately 11.818 billion yuan in 2023 and plans to double its performance by 2027.
It is worth mentioning that the Chinese beauty market has become a battleground for global beauty conglomerates and luxury brands. However, since the “insulting China” incident in 2018, the D&G brand has had no hope of returning to mainland China, and its beauty line has not been officially introduced to the Chinese market. How did D&G, absent from the world’s second-largest beauty market, China, manage to “make a fortune in silence”?
After leaving Shiseido, D&G beauty skyrocketed.
According to public information, in 1985, two fashion designers founded Dolce & Gabbana in Milan. These Italian designers engraved the splendid, romantic, and charming qualities of Sicily into the brand’s soul. In October of the same year, the brand’s first collection debuted at Milan Fashion Week, receiving industry recognition for its unique style and exquisite craftsmanship.
D&G quickly established its own brand characteristics and developed into a globally renowned luxury goods international group, extending its charm to the cosmetics and fragrance series.
In 1992, D&G launched its first perfume, which won the annual Best Women’s Fragrance award from the Italian Perfume Academy, also known as the “Oscars” of the perfume industry. In 1995, the first men’s fragrance was also named the Best Men’s Fragrance by the same academy.
In addition to perfumes, D&G also ventured into the fields of makeup and skincare relatively early. Like many luxury brands, D&G initially chose to license its beauty business to global beauty conglomerates rather than operate independently. In 2014, D&G licensed its perfume business to Procter & Gamble for production and sales. In March of the same year, Procter & Gamble introduced D&G’s high-end makeup products to China, while several fragrances were entrusted to Guangzhou Naimee Trading Co., Ltd., marking the official entry of D&G perfumes and cosmetics into the Chinese market.
Furthermore, D&G’s skincare line is also categorized under Procter & Gamble’s Prestige division. Industry analysts suggest that while the mass market has Olay as the dominant player and the ultra-high-end segment is led by SK-II, D&G skincare products can fill the gap in the middle market.
At that time, D&G’s beauty business was thriving. Data shows that the brand’s cosmetics line had annual sales of over $500 million (approximately CNY 3.636 billion), making it the top brand in Procter & Gamble’s fragrance business.
However, in July 2015, along with its cosmetics business, Procter & Gamble sold more than 40 brands to Coty. After rejecting Coty, in July 2016, D&G ultimately chose Shiseido, with Shiseido’s wholly-owned subsidiary BPI fully responsible for the research and development, manufacturing, and distribution of D&G perfumes, makeup, and skincare products.
After four years of collaboration, in April 2021, D&G announced the termination of its strategic partnership with Shiseido in the beauty sector. D&G’s cosmetics business changed hands twice and finally transitioned from “outsourcing” to “self-operation.”
In February 2022, D&G established the beauty business company Dolce & Gabbana Beauty to independently operate its perfume and cosmetics business, with a starting capital of 250 million Euros.
D&G’s beauty business may seem low-key, but according to Toniolo, in the first year of operating its beauty business independently, D&G exceeded its targets and achieved sales of 1.5 billion Euros, far surpassing the previous estimate of 1 billion Euros.
Compared to other similar brands, D&G’s annual sales exceeding 10 billion Euros have already surpassed Hermès. Data shows that in 2023, Hermès Group’s revenue from perfumes and beauty products was 492 million Euros, only one-third of D&G’s beauty sales. However, it should be noted that Hermès only began launching its makeup line in 2020 to expand its beauty product line beyond perfumes, so its performance slightly lags behind, which is considered normal.
CHAILEEDO found that it is rare for luxury brands in the beauty business to achieve annual sales above 10 billion. According to media reports, GUCCI’s beauty global retail sales in the 2020 fiscal year may have exceeded $1 billion. L’Oréal’s financial report shows that Armani and YSL brands entered the 1 billion Euros club before 2019.
Additionally, according to WWD statistics, Chanel’s beauty products had sales of $8.32 billion in 2023.
It is worth mentioning that after experiencing a surge in the brand’s popularity, D&G has also entered an accelerated mode. According to CHAILEEDO, D&G’s newly launched makeup series, Boundless Beauty, includes 11 products, covering foundations, lipsticks, eyeshadows, blushes, mascaras, and more. This series was launched in the boutique store of the UK’s Harrods on July 8th and simultaneously launched at D&G Beauty counters in Hong Kong’s Harbour City and Taiwan’s Pacific SOHO.
In 2022, D&G Beauty accounted for 5% of D&G’s total sales, but Toniolo plans to increase this proportion to 30% within three to five years. “Currently, we have 80 SKUs, and we plan to have a complete production line with 350 SKUs by 2025, entering the skincare field and launching an anti-aging skincare product. Our goal is to become a dual-axis brand between perfumes and cosmetics.”
However, due to the “insulting China” controversy, D&G has been absent from the Chinese market for a long time, and its beauty line has not officially entered the mainland this time either. However, at the fourth China International Consumer Products Expo held this year, D&G exhibited the Devotion fragrance and makeup series, perhaps waiting for an opportunity to “resurrect” in the Chinese market.
Beauty and luxury goods are equally important.
Compared to most other luxury brands, D&G Beauty seems to be a unique presence, and its rapid growth has piqued curiosity in the industry.
Upon careful observation of D&G’s beauty strategy, it is not difficult to find some clues to the brand’s growth. First and foremost, the affirmation of beauty at the strategic level, rather than treating it as a mere accessory. It is understood that from the inception of D&G Beauty, the group brought the development, manufacturing, and operations of the beauty division to its headquarters in Milan, which is a first in the 39-year history of the group.
“Introducing beauty products into the brand was a difficult decision, but it will completely change our business scale and perception of D&G cosmetics,” said Toniolo at the 7th Pambianco Beauty Summit held in Milan in 2023. He highlighted this as something he had never seen in other luxury groups, stating, “The two founders recognized the importance of beauty, just like jewelry and handbags.”
In line with this, D&G has built a specialized team by recruiting skilled personnel. From 2022 to 2024, D&G Beauty rapidly expanded its scale and recruited over 300 new employees. Toniolo proudly stated that he was the company’s first employee. With his extensive industry experience as the regional manager of LVMH’s perfume and cosmetics division in Italy, D&G Beauty achieved billions in sales in its second year under his leadership.
For luxury brands, one of the biggest concerns is that beauty products deviate from the brand’s culture and identity, resulting in a “backfire.” By taking control of the operations, the brand has absolute autonomy and control to prevent a sense of inconsistency and ensure that the design and concept of beauty products align with the brand’s image.
Toniolo said, “The secret to a brand’s success lies in having each product represent all categories of the brand.”
All of D&G Beauty’s products are benefit-oriented, prominently featuring luxury and elegant elements in their packaging and DNA, consistently reflecting the D&G style. In the “Devotion” makeup collection launched last year, the lipstick, perfume, mascara, and other products all bear exquisite and intricate logo designs inspired by the heart motif, aligning the high aesthetics of the beauty products with the glamorous and romantic style of D&G’s clothing and jewelry, creating a unique and memorable Italian flair.
The counter manager of D&G Beauty in Taiwan’s Pacific SOHO informed CHAILEEDO that the Devotion series received great acclaim since its launch last year. The pricing of various beauty products is not considered expensive, ranging from 1,750 to 2,700 Taiwanese dollars, targeting women over the age of 30.
In media interviews, Toniolo stated, “The target customers of D&G Beauty are the Z and Alpha generations, who are interested in beauty products today and may become brand consumers tomorrow. The makeup styles we offer are consistent with fashion items, which other brands cannot achieve.” For example, the Eye Dare You eyeshadow palette immediately evokes the image of a D&G handbag for consumers.
It is evident that when luxury conglomerates manage their own beauty products, taking control of the product’s tone, technological development, and marketing operations, they can secure a place in the fierce market competition. Moreover, D&G is one of the few luxury brands that have achieved a comprehensive layout in perfume, cosmetics, and skincare, which reflects the strategic positioning of beauty business for the brand.
Of course, D&G entered the beauty industry early on and gained a certain market advantage through collaborations with Procter & Gamble and Shiseido in the initial stages. For instance, in March 2021, D&G Beauty signed a retail agreement with Lookfantastic, Europe’s largest beauty e-commerce platform, marking its first entry into mainstream third-party beauty retailers.
According to Toniolo, North America is the main perfume market. Additionally, the brand has performed exceptionally well in Italy and Spain, as well as achieving good results in Latin America and the Middle East.
Luxury brands are “running” into the beauty market.
Worldwide, the process of luxury conglomerates entering the beauty market is accelerating.
According to CHAILEEDO’s analysis, more than 10 luxury brands have entered or expanded into the beauty sector this year. For example, in March of this year, Celine, a luxury brand under LVMH Group, announced its entry into the beauty market by launching its first-ever makeup line, “Celine Beauté.” Recently, there have been reports that Celine will also launch liquid hand soap, hand cream, body lotion, and hair spray this autumn.
More and more luxury brands are making efforts in the beauty market. An undeniable background is that the luxury goods industry, which was once considered resilient to market fluctuations, has also been affected by the wave of consumer differentiation in recent years, resulting in a slowdown in industry growth.
International top investment bank Morgan Stanley has lowered its earnings per share expectations for the luxury goods industry in 2024 by 6%, citing a noticeable decline in luxury consumption in the United States and a slowdown in Chinese consumption since 2022.
According to the latest report released by the globally renowned management consulting firm Bain & Company, global luxury goods market sales in the first quarter of 2024 are expected to decline by 1% to 3% at current exchange rates, with significant differences between regional markets and within individual markets.
Therefore, perfume, which was once considered an entry-level luxury product, has been given a new mission in the current business environment: to attract new customers and develop perfume enthusiasts into potential customers for handbags, clothing, jewelry, and other luxury goods.
At the same time, luxury brands are also starting to explore cosmetics and skincare beyond perfumes. This is because, despite the volatility in the global beauty market, the high-end beauty market is still considered a “cash cow.” According to Euromonitor International data, in 2022, the global market share of high-end luxury beauty products reached $50.1 billion, and the compound annual growth rate is expected to reach 4.9% between 2023 and 2028.
Bain & Company also points out that the spending of “aspirational” consumers is shifting towards small luxury items such as cosmetics, perfumes, and eyewear. Therefore, according to CHAILEEDO’s understanding, luxury brands such as Dior, Chanel, and Gucci are showing some resilience in their perfume and cosmetics businesses.
With industry giants leading the trend of entering the beauty market, it is foreseeable that the high-end beauty market will face fierce competition, leveraging the brand effect of luxury conglomerates.
