Activity in the luxury industry is unquestionably heating up, whether it’s Labelux buying Jimmy Choo, LVMH acquiring Bulgari, the Italian jewellery powerhouse, or Fung Capital buying a majority stake in Robert Clergerie, the French shoe brand.
However, one relatively discrete corner of the market is generating a surprising amount of heat.
Spain’s Puig Group has been on a spending spree. Last month, it bought Hermès’s 45 per cent stake in the house of Jean-Paul Gaultier, plus another 10 per cent of the stock from the designer himself. In February, it officially took over the Valentino fragrance licence from Procter & Gamble and this June will launch its first perfume with the House.
Next season, it will reintroduce, for the first time in five years, Paco Rabanne women’s wear, with a runway show during the Paris Collections.
It’s a troika of initiatives designed to raise Puig’s profile and increase its market share, but it also points up the group’s rather singular experience during the past three years of the recession.
Marc Puig, chairman and the third generation of the family to run a company founded in 1914, says “2008 to 2010 have been our best years on record,” citing sales growth last year of 22 per cent to €1.2bn ($1.8bn). As to why this might be so, given the difficult times experienced by the luxury industry in general, he says: “We don’t really follow the normal rules.”
Indeed. Puig is an anomaly in the luxury market in a number of ways. It is the only Spanish luxury group. It is private and remains family-run. And it is, as Mr Puig says, a “hybrid” of fashion and fragrance: it owns the houses of Nina Ricci, Rabanne, Carolina Herrera (and now Gaultier); creates prestige fragrances for those brands (save for Gaultier), as well as Comme des Garçons and Prada; and also works in the “masstige” (mass prestige, or downward brand extension) scent market with celebrities such as Antonio Banderas and Shakira.
Though there are some fashion brands that have fragrances (Chanel, Dior), fragrance brands that are prestige scent only (Guerlain) and beauty groups such as Coty and L’Oréal, attempts to integrate the perfume and clothes sectors within luxury have generally failed. L’Oréal divested itself of Lanvin in 2001, and P&G gave up on Rochas fashion, licensing the name to Gibo.
Fashion and fragrance, even Mr Puig admits, are different businesses that demand different timelines and skill sets. However, as a private company he says it had more than a decade to “learn” the fashion business (and there were many public missteps along the way: Nina Ricci has had four designers since Puig bought the brand in 1998), and the group decided that it could turn its dual structure into an asset.
It began, says Mr Puig, in 2004. Though the rest of the industry was experiencing the beginning of a period of explosive growth, “we were in trouble”.
After acquiring Spanish beauty companies Myrurgia and GAL, the group had an unsustainable amount of debt. In retreat, it played safe with what it did know – fragrance – and as a result, according to Mr Puig, “had no major successes; between 2002-2005 we didn’t launch a single fragrance that really stuck; because we were afraid of failure, they were all too commercial.”
The group decided, he says, that its skill lay in taking a brand, translating it into fragrance, and then using that strength to grow the brand.
“Seventy per cent of the prestige fragrance business is inspired by fashion brands,” says Mr Puig. “Fragrance is a way into a world, and fashion is a way to describe that world.”
Puig sold non-core businesses such as bath gels and soaps, closed the Nina Ricci cosmetics line, and put Rabanne women’s wear on hold. Ironically, these decisions put the group in a notably strong position when the recession hit.
When things are hard, consumers often restrict spending to entry level products – perfume, even premium fragrance, still allows that access; Puig’s share of the global prestige fragrance market increased from 3.7 per cent in 2005 to 7 per cent in 2010. This in turn gave the group the financial wherewithal to relaunch Rabanne.
“It was time,” says Mr Puig. “This is a brand with great name awareness and a very successful perfume [One Million], and it probably could have gone another two or three years without a ready-to-wear line, but more than that and a generation loses the image, and it stops being a workable proposition.”
As it happens, Puig is relaunching Rabanne under the creative leadership of an Indian designer – Manish Arora – (the chief executive will be Mr Puig’s cousin, Manuel Puig, who also runs Nina Ricci). This choice speaks to the synergies they have identified between fragrance and fashion in emerging markets, especially in Latin America.
International sales now account for 75 per cent of revenues, from 62 per cent in 2006, and Puig is present in 130 countries. In some, fragrance leads fashion; in others – such as China and Japan, which have less of a scent heritage –, “we lead with fashion, and then introduce the fragrance”.
Though fragrance still makes up the bulk of Puig’s revenue, fashion grew 25 per cent last year – one of the reasons the group was interested in the Gaultier acquisition, despite the fact the house came without its very successful perfume, which is currently licensed to a rival, Beauté Prestige International. That contract expires in 2016, and Puig clearly hopes to take over production at that point. But even without the perfume, says Mr Puig, his group wanted the brand.
That may seem strange, Mr Puig acknowledges, but he doesn’t care. “It shows that we are serious,” he says.
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