Entering the first week of 2024, significant mergers and acquisitions have emerged in the beauty industry. Firelight Capital Partners acquired Fromm International, a prominent manufacturer of hair tools and accessories. Society Brands took over Primal Life Organics, a skincare and oral care products manufacturer based in Akron, Ohio. Additionally, L’Occitane acquired Dr. Vranjes Firenze, an upscale home fragrance brand from Italy. This move by the French cosmetics company, which was surrounded by privatization rumors last year, comes after achieving a historic high in net sales for the first half of the 2024 fiscal year. They are once again focusing on luxury brands to expand their high-end product portfolio.
Dr. Vranjes Firenze achieved sales of 42 million euros in 2023
Dr. Vranjes Firenze is a luxury home fragrance brand renowned for its exquisite, meticulously crafted scents. Founded in 1983 by pharmacist and chemist Dr. Paolo Vranjes, the brand is celebrated for its unique and refined perfumes, drawing inspiration from the rich cultural heritage and artistic traditions of Florence, Italy.
Offering a range of products including home diffusers, and scented candles, each meticulously formulated to evoke emotions and memories through unique high-quality ingredient blends. They provide home fragrances, aromatic candles, and an expanding line of body perfumes. Operating in 75 countries, the brand boasts 28 flagship stores and operates in a total of 650 retail points. Dr. Vranjes Firenze is renowned for its dedication to quality, innovation, and elegance, establishing itself as a prominent name in the realm of luxury home fragrances.
In 2023, Dr. Vranjes Firenze achieved a sales turnover surpassing 42 million euros with an EBITDA profit margin reaching 30%. The transaction is expected to be completed in the first quarter of 2024.
Dr. Vranjes Firenze will join the existing global brand portfolio of the L’Occitane Group, which includes L’Occitane en Provence, Elemis, Sol de Janeiro, and Grown Alchemist.
With a focus on in-house production and research, Dr. Vranjes Firenze consistently delivers the “Made in Florence” experience through its range of home diffusers, scented candles, and expanding personal fragrance collections, expected to become an integral part of the brand’s product lineup.
In 2007, Bluegem Fund acquired 70% of Dr. Vranjes Firenze. By 2023, the company achieved a turnover of 42 million euros. A year ago, the brand reinstated its direct operations in Japan, its second-largest market after Italy.
Since the brand’s acquisition in 2017, Bluegem has expanded distribution into international and omnichannel markets. Currently, digital sales account for over 25% of the revenue. The brand’s entry into new regional markets, especially in the Middle East and Asia, along with the introduction of product lines such as personal fragrances and scented candles, has driven its expansion.
Reinold Geiger, chairman of the L’Occitane Group said, “We are thrilled to continue to grow our global brand portfolio with the addition of Dr. Vranjes Firenze, which is complementary to our existing collection of premium beauty and fragrance brands, each with a strong identity and a genuine desire to make a difference.”
L’Occitane achieved a historic high in sales for the first half of the fiscal year 2024
In L’Occitane’s product portfolio, there are three main brands: their flagship brand L’OCCITANE en Provence, the premium British skincare brand ELEMIS, and the luxury Brazilian body care brand Sol de Janeiro. According to the latest report for the first half of the 2024 fiscal year, these three main brands accounted for 90.03% of L’Occitane’s overall net sales.
Interestingly, both ELEMIS and Sol de Janeiro were acquisitions by L’Occitane. In early 2019, L’Occitane acquired ELEMIS for $900 million, marking its largest acquisition since its listing in Hong Kong in 2010.
In November 2021, L’Occitane further expanded its portfolio by acquiring Sol de Janeiro for an enterprise value of $4.5 billion. Sol de Janeiro was founded in 2015 by Heela Yang, a former employee of L’Oréal and Estée Lauder, who graduated from Yale University and Harvard Business School.
Unlike other beauty giants that have divested underperforming assets in the past year, L’Occitane, with its limited core brands, embarked on acquisitions of high-end brands in the first week of 2024 to enrich its product offerings. The recent acquisition of Dr. Vranjes Firenze, established for 40 years with a stable global network across 75 countries, exemplifies this strategy. These mature independent brands, seeking to expand their product portfolios to drive growth, naturally caught the attention of L’Occitane.
In the first half of the 2024 fiscal year, L’Occitane’s net sales surpassed €1 billion, reaching €1.072 billion, marking an 18.5% increase based on constant rates and a 24.9% increase based on constant rates. This milestone represents the first time L’Occitane’s semi-annual net sales have exceeded €1 billion, setting a historic record.
L’Occitane attributes this significant growth in net sales primarily to the outstanding performance of Sol de Janeiro and the stable growth contributed by L’OCCITANE en Provence, driven by the recovery trend in China.
Breaking down the performance of specific brands, Sol de Janeiro’s sales in the first half of the 2024 fiscal year, calculated at constant rates, accelerated further, achieving a sales growth of 188.8%, reaching €270 million. ELEMIS achieved a net sales increase of 7.6% year-on-year, totaling €109.2 million in the first half of the year at constant rates. L’OCCITANE en Provence achieved a 3.5% growth, totaling €595.6 million in the first half of the 2024 fiscal year at constant rates, largely fueled by the recovery trend in China.
Looking at the overall data, the net sales of acquired brands ELEMIS and Sol de Janeiro accounted for 35.37% of the group’s total in the first half of the 2024 fiscal year.
In terms of regional performance, the Americas continued to be the top-performing region, experiencing a 63.6% growth in the first half of the 2024 fiscal year at constant rates, primarily driven by Sol de Janeiro. Wholesale and other channels remained the fastest-growing, experiencing a 44.9% growth in the first half of the 2024 fiscal year at constant rates. Online channels grew by 26.9% at constant rates, mainly attributed to the launch of a new online platform by Sol de Janeiro and L’OCCITANE en Provence in China. Retail achieved a solid growth of 3.7% at constant rates due to improvements in the situation in China.
Apart from ELEMIS and Sol de Janeiro, most of the brands under L’Occitane were acquired, including Grown Alchemist from Australia in 2022, Erborian, a herbal skincare brand from South Korea acquired in 2012, LimeLife, a personalized beauty brand from the United States acquired in 2018, and Melvita, a French skincare brand acquired in 2008.
Within L’Occitane’s product portfolio, the proportion of acquired brands in its performance is increasing. With relatively fewer main brands compared to other international beauty giants, the acquisition of Dr. Vranjes Firenze is a crucial move for L’Occitane to expand its product range and explore new avenues for growth.
The focus will shift to the Chinese market
On July 26th of last year, reports surfaced indicating that the majority shareholder of L’Occitane was considering a potential deal to take the skincare company private, though they stated that a final agreement had not yet been reached. Following the news of the potential privatization, L’Occitane’s stock price surged over 40% in just a few days.
Subsequently, on September 5th, L’Occitane announced that the company’s majority shareholder had decided not to proceed with the privatization deal. As a result of this announcement, L’Occitane’s stock price plummeted by 17.27% on the same day.
Some market analysts viewed L’Occitane’s attempted privatization as a move by its shareholders to artificially inflate the stock price in the short term. Following the withdrawal from privatization, L’Occitane released its fiscal year 24 performance report on October 24th, marking the first time its net sales exceeded €1 billion, but also revealing a significant drop of 44.96% in net profits. Therefore, L’Occitane’s acquisition of Dr. Vranjes Firenze is considered a pivotal move in seeking quality assets to boost profitability.
To boost profits, L’Occitane has shifted its focus to the Chinese market. During a conference call following the release of the mid-year performance for the 2024 fiscal year, André Hoffmann, Vice Chairman and CEO of L’Occitane Group, stated plans to open 10 to 15 stores annually in China over the next five years. Additionally, there are hopes for growth of the high-end skincare brand ELEMIS within the Chinese market.
From L’Occitane’s financial reports, the Americas stand as its largest market, accounting for 41.3% of the overall sales. The Asia-Pacific region comes in second, representing 34.6% of the net sales. When considering individual markets, the United States stands as the biggest market, accounting for 36.4% of net sales, primarily driven by the rapid growth of Sol de Janeiro. China follows as the second-largest market, holding 12.6%, followed by the United Kingdom at 7.6%.
As early as the 2021 fiscal year, the Chinese market had become L’Occitane’s largest global market and the only market within the L’Occitane Group to experience positive growth. In the 2022 fiscal year, L’Occitane’s sales in China continued to soar, reaching a sales figure of 2.2 billion RMB, accounting for 18.1% of the group’s business, up from 17.1% the previous year.
However, by the 2023 fiscal year, the Chinese market slipped to become the second-largest market, accounting for 14.0% of the total net sales, marking an 8.84% decline compared to the previous year. The United States region has surged to become L’Occitane’s largest market, comprising 27.2% of the company’s net sales.
In the first half of the 2024 fiscal year, L’Occitane’s net sales in China declined further, accounting for only 12.6%. Consequently, amid declining profitability, L’Occitane has been continually advancing its investments in the Chinese market.
L’Occitane has undertaken robust marketing campaigns and flexible product strategies in the Chinese market to enhance the visibility and relevance of its core brand in key markets. L’Occitane en Provence, the flagship brand, boasts the largest marketing budget, investing heavily in major markets, particularly China, as well as in other strategic markets and channels such as the United States, Japan, South Korea, and travel retail. Despite consumer confidence in the overall economy weakening, sales of the core brand in China saw a significant 22% growth in the first half of the 2024 fiscal year, calculated at fixed exchange rates, demonstrating considerable success.
Additional investments in China are focused on key categories like facial care, body care, and hair care. This includes impactful marketing campaigns for their best-selling products, aimed at enhancing brand awareness and increasing average transaction value to offset reduced foot traffic offline.
Moreover, L’Occitane highlighted one of its major marketing initiatives in the first half of 2024 in China, centered around elevating the visibility and relevance of its best-selling Almond series. This initiative features lifestyle-oriented content marketing and occasion-based Key Opinion Leader (KOL) collaborations, leveraging partnerships with social platforms like Xiaohongshu, and cross-promotional activities with high-end yoga studios. This campaign delivered robust double-digit sales growth for the Almond series from January to September 2023.
L’Occitane stated that its high-end brand ELEMIS experienced a sales growth of over 200% in the first half of the 2024 fiscal year in China. This surge was attributed to accelerated marketing investments on social media channels, particularly highlighting its globally popular products like the Pro-Collagen Cleansing Balm. Key Opinion Leaders (KOLs) conducting live streaming sessions on platforms like Douyin also significantly contributed to the brand’s sales growth.
Overall, L’Occitane’s acquisition of Dr. Vranjes Firenze is a crucial step in enriching its product portfolio and seeking high-quality assets to enhance profitability. For L’Occitane, the Chinese market is poised to be pivotal in elevating its profitability.
