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Surpassing €8 billion, LVMH’s Beauty Business Achieved a Record-breaking Revenue in 2023

French luxury goods giant LVMH has released its 2023 annual report, revealing a revenue of 86.2 billion euros for the year, marking a 13% year-on-year organic growth. Except for a decline in revenue in the Wines & Spirits business, all other businesses experienced growth in 2023. In particular, the Perfumes & Cosmetics business achieved a historic high with a revenue of 8.271 billion euros.

The Perfumes & Cosmetics business revenue surpasses 8 billion euros for the first time

LVMH announced that in 2023, the company generated a revenue of €86.2 billion, reflecting a 13% organic growth compared to the previous year. All business divisions demonstrated robust organic revenue expansion, except for Wines & Spirits, which encountered challenges due to a significant baseline and elevated inventory levels. Double-digit organic growth was achieved in Europe, Japan, and other parts of Asia. The fourth quarter specifically saw a 10% increase in organic revenue growth.

Looking at specific business segments, the organic revenue for the Wines & Spirits division experienced a 4% decline in 2023, totaling €6.602 billion, with a 2% decrease in recurring business profit. This marks the only business sector within LVMH to register a decrease in revenue for the year. The Fashion & Leather Goods business witnessed a 14% organic revenue growth in 2023, reaching €42.169 billion. The Watches and Jewelry business achieved a 7% organic revenue growth, amounting to €10.902 billion. The Selective Retailing business reported a 25% organic revenue growth in 2023, reaching €17.885 billion. In the Perfumes and Cosmetics sector, there was an 11% organic revenue growth in 2023, surpassing €8 billion for the first time and reaching €8.271 billion.

LVMH reported an 11% organic revenue growth in the Perfumes & Cosmetics business group for 2023, attributing this success to the group’s highly selective retail approach and dynamic innovation strategy, supported by the scientific excellence of LVMH’s research center. Profit from recurring operations saw an 8% increase. Christian Dior delivered an outstanding performance, strengthening its position in key markets. The success of iconic fragrances such as Sauvage, Miss Dior, and J’adore continued to drive positive results, with the addition of Francis Kurkdjian’s latest creation, L’Or de J’adore, contributing to the success.

Furthermore, the growth of the Maison was bolstered by contributions from makeup (with Dior Addict) and skincare (with Prestige and L’Or de Vie). Guerlain maintained its upward trajectory, fueled by the popularity of its Aqua Allegoria line, the high-end fragrance collection L’Art et la Matière, and the positive reception of its Terracotta Le Teint makeup. Parfums Givenchy continued to thrive, capitalizing on the sustained success of its fragrances. Benefit saw positive results from its skincare line, The Porefessional, while Fenty Beauty experienced strong growth, particularly propelled by the success of one of its recent mascara innovations.

LVMH reported that the Selective Retailing business group experienced a 25% organic revenue growth in 2023, with a significant 76% increase in profit from recurring operations. Sephora marked another record-setting year, achieving historic sales and profit figures while expanding its market share through a unique and innovative array of products and services. Notably, North America, Europe, and the Middle East witnessed particularly robust momentum.

The growth of its retail presence persisted, marked by the successful launch of the first two stores in the United Kingdom and the flourishing partnership with Kohl’s in the United States. A significant milestone in the year was the reopening of Sephora’s flagship store on Champs-Élysées in Paris. The store’s renovation aligned with Sephora’s sustainability strategy, targeting a 50% reduction in the energy consumption of its sales floor area.

DFS experienced positive outcomes from the gradual rebound in international travel, notably with the resurgence of tourists visiting key locations such as Hong Kong and Macao. The company unveiled its intentions to establish a new Galleria on Hainan Island in China by 2026. Le Bon Marché, exhibiting consistent growth, persisted in introducing inventive concepts and capitalizing on a devoted French customer base, along with the resurgence of international travelers.

Bernard Arnault, Chairman and CEO of LVMH, said: “Our performance in 2023 illustrates the exceptional appeal of our Maisons and their ability to spark desire, despite a year affected by economic and geopolitical challenges. The Group once again recorded significant growth in revenue and profits.”

LVMH-backed private equity firm L Catterton accelerates beauty investments

From the perspective of LVMH’s Perfumes & Cosmetics business, although its revenue has been consistently growing in recent years, its growth rate has been lower than the overall group level. Additionally, looking at the trend over these years, the proportion of its beauty business within the entire LVMH group has also declined. In 2019, the revenue from its beauty business accounted for 12.74% of the total revenue, which dropped to 9.75% in 2022. In 2023, it saw a slight further decrease to 9.6%. Consequently, over the past three years, L Catterton, a private equity firm backed by LVMH, has been increasingly involved in investments in the beauty sector.

In 2021, L Catterton invested in the customized beauty brand Function of Beauty. Function of Beauty is the foremost brand in customized beauty, offering uniquely tailored haircare, body care, and skincare products. Established in 2015 by a team of highly skilled engineers, cosmetic scientists, and developers from MIT, every product is uniquely formulated through the application of cutting-edge science and technology.

In 2022, L Catterton led a $50 million Series D funding round for the Indian cosmetics brand SUGAR Cosmetics. SUGAR Cosmetics is one of India’s fastest-growing premium beauty brands, renowned for its best-selling products in lip, eye, face, nail, and skincare categories. The brand offers a cruelty-free product range characterized by elegant style and exceptional performance. Committed to crafting handmade products that perfectly complement diverse Indian skin tones across different seasons and calendars, SUGAR Cosmetics has a presence in over 550 cities and is available in more than 40,000 retail outlets.

By 2023, L Catterton’s investments began accelerating, totaling 7 investments in the beauty sector, a significant increase compared to the previous two years.

In April, L Catterton invested in the color cosmetics brand DIBS Beauty. Established in September 2021, DIBS Beauty marks the collaboration of TULA Skincare’s Co-Founders, Ken Landis (also a Co-Founder of Bobbi Brown Cosmetics), and tech entrepreneur Dan Reich, along with Austin-based entrepreneur and mother Courtney Shields, and former Chief Operating Officer of ARod Corp, Jeff Lee. L Catterton had previously joined forces with TULA in 2017 until its acquisition last year by Procter & Gamble.

In July, L Catterton invested in the Italian skincare brand Irene Forte Skincare, founded in 2018 by Irene Forte, who serves as the wellness director for the Rocco Forte Hotels chain, the brand was initially created for utilization in the spas of the hotel. Irene Forte Skincare stands as a leading Italian skincare brand at the forefront of the ‘Natural Science’ movement, rooted in 35 years of research focused on the medicinal application of plant extracts for addressing various skin conditions.

In September, L Catterton continued its investment by acquiring the Swedish premium hair care brand Maria Nila. Additionally, through L Catterton’s early-stage beauty platform Elevate Beauty, L Catterton invested in a luxury skincare brand Eighth Day. Founded in 2018 by Dr. Antony Nakhla, a specialist in reconstructive and skin cancer surgery as well as an expert in wound healing, Eighth Day has introduced products enriched with Peptide-Rich Plasma. This proprietary blend of biologically active ingredients is patent-pending. The flagship product, The Regenerative Serum, is designed to target ten observable signs of aging, enhancing skin texture for a more youthful and healthier appearance.

Subsequently, in the Chinese market, L Catterton invested in three beauty enterprises, including its initial investment in the Chinese collagen recombination company Trautec. In December, it further invested in the foundation brand Blank Me and the emerging children’s skincare brand Hi!Papa.

Simultaneously, examining the business types of investment targets, it covers various aspects such as skincare, hair care, foundation, ingredients, and children’s care. This illustrates L Catterton’s diversified approach in the beauty industry, seeking variety not only in brand investments but also in ingredients.

Despite the growth in LVMH’s beauty business revenue, the rate is below the overall group level, and the proportion within the group is gradually decreasing. Therefore, with an increasing focus on beauty investments, in 2023, LVMH’s fund, L Catterton, accelerated its beauty investments, spanning various areas such as makeup, skincare, hair care, foundation, and children’s care. This underscores a significant commitment to the beauty business and demonstrates a keen interest in diversified investments within the beauty industry.

Continuing to bet on the Chinese market

While the revenue of LVMH’s beauty business has been growing annually, the proportion of revenue from Asia (excl. Japan) within the beauty segment has shown a declining trend. In 2020, the share of revenue from Asia (excl. Japan) in LVMH’s beauty business was 45%, but by 2023, it had decreased to 33%. China is the largest market in Asia (excl. Japan), indicating a decline in LVMH’s beauty business in China.

Given China’s status as the world’s second-largest cosmetics market, LVMH is undoubtedly vying for a significant presence. Amid the continuous contraction of the beauty business and the declining Asian market, LVMH urgently needs the Chinese market to boost its beauty business. Following the gradual easing of pandemic restrictions this year, LVMH has also undertaken a series of activities in China to revitalize its market presence.

Firstly, there were several significant changes in personnel at LVMH in March 2023. Among them, the former leader of Guerlain was appointed as the President and CEO of Dior, while the former leader of Make Up For Ever became the President and CEO of Guerlain.

However, the most crucial personnel change was the appointment of Stéphane Rinderknech, former CEO of L’Oréal China, as the President and CEO of the Beauty Business Group at LVMH. He is responsible for overseeing all perfume and cosmetics operations under the LVMH umbrella.

In 2016, when Stéphane Rinderknech assumed the role of CEO for L’Oréal China, the company experienced a decline in its business in China. However, within just two years of his leadership, in 2018, L’Oréal achieved its highest growth rate in the Chinese market since 2007. Simultaneously, the group’s three major brands became the largest in the Chinese market. Rinderknech single-handedly reversed L’Oréal’s decline in China. The appointment of Rinderknech, who is highly familiar with the Chinese market, reflects LVMH’s ambition to rejuvenate its presence in the Chinese market.

In addition to personnel appointments, LVMH has also begun to draw closer to the Chinese market in terms of research and development.

In April of 2023, following the footsteps of international giants like L’Oréal and Estée Lauder, LVMH established the “Beauty Asia Research and Development Center” in Shanghai. It is introduced as the largest R&D center set up by LVMH in Asia, comprising skincare and makeup labs, color development labs, and other innovative product development labs. The primary task of this center is to conduct a series of R&D innovations for the Chinese market and consumers, continually enhancing innovation and vitality in the Chinese market.

Moreover, in June last year, Sephora unveiled its second store in Asia and the first future concept store in China on Nanjing East Road, the core commercial district in Shanghai. The store provides consumers with an abundance of exclusive high-quality selections, professional in-store services, innovative smart makeup solutions, and an all-encompassing upgrade to the consumer’s beauty shopping experience.

Lastly, in terms of investments in Chinese brands, L Catterton, the private equity firm backed by LVMH, began gradually investing in three beauty-related companies in September of the second half of 2023. This includes an investment in the collagen recombination company Trautec at the end of September, and in December, consecutive investments in the Chinese foundation brand Blank Me and the children’s care brand Hi!papa. In 2023, L Catterton made a total of 7 investments in the beauty field, with 3 of them in China. This strongly emphasizes LVMH’s attention and commitment to the Chinese market.

In addition to the series of moves mentioned above, the presence of LVMH President Bernard Arnault in China further underscores the company’s emphasis on the Chinese market.

At the end of June this year, Bernard Arnault appeared successively in Beijing and Chengdu, China. Accompanying him were his daughter Delphine Arnault, son Jean Arnault, and Louis Vuitton CEO Pietro Beccari, among others.

The arrival of several key executives in China after the relaxation of pandemic restrictions also indirectly demonstrates LVMH’s eagerness to revitalize the Chinese market.

With luxury giants continuously intensifying their focus on beauty, the Chinese market has become a battleground for global luxury giants. Following the acquisition of the perfume brand Creed by Kering, the competition for the beauty market among luxury powerhouses has entered a highly competitive stage. The Chinese market may well become the primary battleground for these luxury giants in the beauty sector.