Double digit growth in Perfumes & Cosmetics lifts LVMH half year results; Ancora takes a stake in Vapour Organic Beauty; Prada to end fragrance license with Puig; and Australians still prefer bricks and mortar retailers says Monash study.
Double digit growth in Perfumes & Cosmetics lifts LVMH half year results
The world's largest luxury goods group exceeded analysts expectations for the first half of the year to reach sales of US$25.4 billion – a 10 per cent increase over the same period 12 months earlier. LVMH's Perfumes & Cosmetics division reported strong revenue growth of 16 per cent to reach US$3.35 billion, largely driven by Sephora and its stable of magic brands. Hotspots included the J'adore, Sauvage and Miss Dior fragrances from Christian Dior and Guerlain's Rouge G lipstick and Abeille Royale skincare ranges. Fresh, Fenty Beauty, Acqua di Parma and Benefit also enjoyed strong sales spurts.
Chinese consumers account for close to 30 per cent of luxury goods purchases, reports the Boston Consulting Group, and more than 70 per cent of the sector's growth. LVMH enjoyed a sales surge of 17 per cent in Asia last year and Chinese travel retail shoppers had a strong impact on other global markets. With Chanel and Kering, the owner of Gucci and Balenciaga, also reporting major upticks in global sales, LVMH is placing more focus on menswear and cosmetic launches for the second half of this year. Highlight debuts include a new fragrance from Dior fronted by Jennifer Lawrence, a new Givenchy perfume endorsed by Rooney Mara and a ground-breaking Guerlain serum.
Ancora takes a stake in Vapour Organic Beauty
Nicky Kinnaird, the founder of Space NK, is in the news again this week for a different reason. The beauty industry veteran co-founded Ancora Investment Holdings last year with Lori Perella Krebs, the former president of Fekkai, and private equity firm, Winona Capital. The goal was to create a new generation of investor to nurture niche and startup health, beauty and wellness brands. The partnership's first investment was in eco-chic skincare and lifestyle brand, Indie Lee, last year.
Ancora has now made a second investment in the upmarket clean beauty space by taking a stake in Vapour Organic Beauty, the US natural luxury cosmetics brand famous for its luminous foundation. Founded in 2009 by Krysia Boinis and Kristine Keheley, the brand has a range of 180 SKUs based on organically-derived botanicals. Vapour is available in eight stores in Australia, including three Green Organics outlets in Sydney and six online retailers, including Nourished Life and Beautiful Because.
According to Nicky Kinnaird: "Ancora is excited to work with brands that are championing the shift in the industry. Brands like Vapour that have the potential to be a truly authentic, authoritative voice in the clean colour cosmetics area".
Prada to end fragrance license with Puig
Valentino recently moved its fragrance license from Puig to L'Oréal. Prada is following suit and will not be renewing its lucrative license with the Spanish fashion and fragrance leader when the agreement expires at the end of 2019. Annual sales of Prada fragrances are estimated to be US$116.5 million, but the Italian fashion house is rumoured to be seeking more.
Coty has the fragrance license for Miu Miu, Prada's fully-owned fashion subsidiary aimed at younger consumers. L'Oréal is also keen to enhance its perfume leadership with another high-earning Italian name in its stable alongside Giorgio Armani and Valentino. Prada has plenty of time to consider potential suitors beyond these two giants, but their appeal is considerable.
Puig has set a target of reaching 3 billion euros (US$3.49 billion) in annual sales over the next six years and the loss of the Prada license could impact this longterm goal. About 90 per cent of Puig's revenues come from its fragrance business, including brands such as Paco Rabanne, Jean Paul Gaultier, Carolina Herrera and Nina Ricci.
Australians still prefer bricks and mortar retailers says Monash study
For all the talk that "everyone" buys online these days, bricks and mortar retail still accounts for over 90 per cent of sales in Australia. Even in China, the world's biggest e-commerce market, more than 80 per cent of goods are bought in shops. This ratio isn't about to change any time soon, reveals the latest quarterly survey from Monash Business School's Australian Consumer Retail and Services (ACRS) research unit. More than 65 per cent of Australians prefer to use bricks and mortar stores most of the time, by contrast to 18 per cent who prefer to shop online.
Australians are shopping more frequently this year than they were in 2016, according to the survey. We are also seeing similar trends overseas, says Dr Rebecca Dare, managing director of the ACRS research unit. "Nearly 80 per cent of shoppers in the USA purchased more than half their items in-store in 2017", she adds. "Australian retailers need to understand that customers want the experience that the physical store can bring. Retailers just need to provide it".
In a rare blast of common sense, Dr Dare confirms that human touches and the sensory experience of a store visit is increasingly important, particularly with Millennials, who prefer to spend more money on experiences than on material things. "Shoppers miss the customer experience of physical stores; real life connection with other people, touching things and trying them on is not an experience you get online".
Snippets from the Wires
- The global giants of fast fashion – H&M and Zara – have long been operating in the beauty and fragrance space. The Swedish titan is upping the ante with the launch of 25 new fragrances set to launch globally on August 16th. Created by leading perfume maker Givaudan, the range comprises 10 "Singles", based on one note such as vanilla, 10 "Reveries", more complex juices, and 5 "Essences" which are even more sophisticated EDPs and roll-ons.
- Estée Lauder launched Tory Burch fragrances in Australia last year and they have built up a cult following. The US designer's first fashion store opens in Westfield Bondi Junction on August 1. Five concept boutiques will open in David Jones flagship stores in Adelaide, Melbourne, Perth, Brisbane and Sydney and a standalone Melbourne store is scheduled for December.
- Inter Parfums enjoyed a 15.7 per cent uplift in global net sales for the three months to June 30 to reach US$149.4 million. Power brands Coach, Jimmy Choo, Lanvin and Montblanc all boasted significant revenue growth.
- Energy drinks based on caffeine, taurine and guarana are soaring in popularity in Australia, reports IBISWorld. The Functional Beverage Production Industry, as the sector is officially called, is expected to increase annual sales to AUD$431.2 million by the end of 2019.
- Tipping Point: Youth is fleeting. In the latest report on the US personal market, Reach & Markets predicts sales will increase to US$134.2 billion by 2025 – “largely driven by the ageing Millennial population".
