Luxury, Makeup, Blue Ocean, Is Prada Late?

"L'OREAL can fully help Prada develop its potential in various new projects, and attract more audiences with Prada's perfume characteristics. Cyril Chapui, President of L'OREAL luxury products department, said the L'OREAL luxury product division will complement Prada's new ideal product mix.

Without any warning, Prada group issued a statement on the Hongkong Stock Exchange on 12 th Beijing time, announcing that it has reached a long-term licensing agreement with L'OREAL group on 11 and L'OREAL will create, develop and distribute high-end color cosmetics products series for Prada, which is expected to take effect in January 1, 2021. It is expected that the agreement will take effect in January 1, 2021.

L'OREAL group is the largest beauty group in the world, and is also responsible for the beauty business of luxury brands such as Tom Ford, Armani and YSL. In October of this year, L'OREAL group announced the acquisition of designer perfume brand Mugler and Azzaro from the Groupe Clarins of France skin care products group. The takeover plan is scheduled to be completed in the first quarter of 2020. L'OREAL's Valentino perfume business proxy came into effect in January this year. Earlier in the spring of 2018, L'OREAL group and Giorgio Armani renewed their fragrance and beauty agency business until 2050.

Partizio Betley, chief executive of Prada group, said why she chose L'OREAL as a partner.

Join hands with L'OREAL to stimulate new growth thrust

Some analysts expect that the launch of the beauty series will stimulate Prada group's performance to rise further.

In fact, compared with the brand "self-sufficiency", some luxury brands prefer to empower the beauty cosmetics business to professional dealers. Prada is one of them. As early as 2003, Prada signed a licensing business agreement with the Spanish cosmetics group Puig (Pu Yi Ge), and jointly operated Prada's perfume and skin care products worldwide through 50:50's shareholding.

In collaboration with Puig, Prada divided the original beauty and skin care products into three departments, namely, basic nursing department, special professional nursing department and color department. The number of cosmetic products dealers increased from 100 to 1500. According to reports, the Prada beauty brand is only about $ten million a year from the agency.

Subsequently, Prada launched its first perfume in 2004. Despite the downturn in the market economy in 2013, despite the downturn in the luxury goods market, the perfume and cosmetics business known as "profit cows" has grown.

At the end of 2013, the world's leading beauty dressing company, Cody group, announced the establishment of an exclusive partnership with Prada group. The two sides will develop and release a series of fragrance products for MiuMiu. MiuMiu will first join the global high-end fragrance field through this cooperation.

However, until July 2018, Prada was broken out of cooperation with Puig group for 15 years, and it will be formally terminated after the expiration of the 2019 contract. One of the reasons why Prada chose not to renew the agreement is that the sales of perfume are not up to expectations. Because sales are far from planned, Prada has to terminate the cooperation agreement and find another way out.

Luxury brands usually empower perfume and beauty business to professional manufacturers, but the opinions of the authorized team and the authorized team in the design and marketing of perfume are not always consistent. The differences between the two sides in shaping the brand image are also very common.

Therefore, some luxury brands will choose to run their own beauty and perfume business, such as Dior and Chanel. But self management will bring corresponding risks. In 2012, Burberry converted the perfume makeup business to a direct battalion and bought a huge amount of compensation and bought the brand authorization from the Interparfum, a French beauty company. But 4 years later, they sold exclusive perfume and beauty makeup to us beauty giant Coty for $160 million. Burberry disclosed in its annual report last year that the old perfume and beauty products worth more than 10 million were destroyed in the conversion process.

Nowadays, L'OREAL, which is responsible for the luxury brand related cosmetic business such as Armani and YSL, is obviously the most attractive choice for Prada.

Cyril Chapuy, President of L'OREAL luxury group, said: "we are very pleased to sign this agreement with Prada. Prada is one of the most prestigious companies in the global luxury brand industry. Prada brand symbolizes excellence and avant-garde. Its unique and distinctive brand philosophy attracts customers from all over the world. This cooperation will definitely add a lot to L'OREAL's iconic brand portfolio.

The luxury brand of transboundary beauty and perfume products has gained a lot in recent years. This joint L'OREAL will further develop the beauty cosmetics business, or will further boost the growth of Prada group's performance. And for L'OREAL group, it will usher in another impressive growth momentum.

The scale of cosmetic industry increased to 57 billion euros in 2020.

Jean-Paul Agon, chief executive of L'OREAL group, said the beauty industry was not affected by changes in the economic environment.

Giovanni Battista Vacchi, partner of Ernst &Young, said it expects sales of global luxury cosmetics products to increase to 57 billion euros in 2020, of which skin care products and men's care products will be the focus of growth.

During the period from 2001 to 2009, Giovanni Battista Vacchi was a global production leader in luxury yacht group FerrettiGroup (Ferretti group). In 2009, he founded G.B.V.& Partners, a private equity fund. In December 2014, he became the CEO of Zucchi, the largest enterprise in Italy household art and clothing industry.

Vacchi said there are many factors that contribute to the growth of the cosmetic industry, including the brand development strategy, the emergence of an innovative sales platform, and the green products that are launched for the needs of the new generation of consumers.

Vacchi also mentioned: "the income level of Asia and Africa is rising, and the heat of these new cosmetic market is also increasing. They will be the main market for the cosmetic industry in the future.

Enter the beauty industry, but Prada is obviously slow.

In luxury circles, Prada always seems to be unique. In recent years, other luxury brands have been involved in the scramble for the beauty market. Prada seems to be an industry spectator, always keeping a distance from the heat.

Obviously, as the global economy enters a low growth cycle, Prada is now in urgent need of "cash cows", such as beauty cosmetics, to stimulate business.

However, the timing of Prada election is slightly slower than other brands, except for Dior, Chanel, TOM FORD and BURBERRY, which had already seized the market. Last year, Gucci and early Hermes have entered the make-up pit.

In March this year, Hermes announced that it will launch a series of makeup in 2020, which will be supervised by Axel Dumas, the chief executive of the group, including two series of make-up and skin care products.

In May, Gucci of Kai Yun group also brought the new lipstick products back to the make-up market. The $1 million Gucci lipstick hit the market in the first month, setting a sales record of 1 million. It brought a revenue of $38 million to Gucci in one month.

In the first half of this year, Gucci showed obvious signs of slowing down after 7 consecutive quarters of rapid growth. As a rapidly growing category, color make-up has gradually become an important category of Gucci promoting brand aging and performance growth. According to Gucci's color makeup authorized manufacturer Coty group, it is estimated that in the 2020 fiscal year, the global retail sales of Gucci cosmetics will be expected to reach 1 billion dollars, and the sales target in the Chinese market is 600 million yuan.

The competition in the make-up market is fierce now, and there are constantly new entries in the market. Whether Prada has the chance or not depends on how it does marketing. It is a requirement and test for Prada to lay down a body and communicate with young consumers faithfully.