Kering SA, the parent company of luxury brand Gucci, has recently made a strategic move into the beauty industry by acquiring high-end fragrance house Creed. This acquisition not only allows Kering to establish a strong position in the fragrance market but also paves the way for potential expansion into cosmetics and skincare.
While the specific financial terms of the deal were not disclosed, Kering revealed that Creed had achieved sales of over €250 million ($274 million) with high margins in the year leading up to March 31. Market analysts estimate that comparable beauty brands have recently been sold for around four times their sales and 20 times their earnings before interest, tax, depreciation, and amortization. This suggests that Creed’s enterprise value could range from €1 billion to €2 billion ($1.1 billion to $2.2 billion), placing it among the higher end of the spectrum.
Traditionally, major beauty companies like L’Oreal and Estée Lauder have acquired brands to leverage their established distribution networks and boost sales. However, Kering has chosen a different approach with its acquisition of Creed. The fragrance house caters to luxury consumers in the highest echelons of the perfume market, who are increasingly seeking artisanal fragrances. This segment is experiencing three times faster growth compared to the premium and mass-market categories. By acquiring Creed, Kering not only secures a global market share of approximately 10% but also gains access to manufacturing, research and development, and distribution capabilities.
Creed has a notable presence in the US and UK markets, particularly in men’s fragrances. There are significant opportunities for expansion in Europe, China, and other parts of Asia, as well as in categories such as women’s fragrances, travel retail, home scents, and body scents. While Kering may encounter challenges in entering these markets without established beauty distribution networks, its expertise in transforming fashion brands and its existing store network in Asia, along with strong e-commerce capabilities, provide a solid foundation.
The acquisition of Creed goes beyond simply adding the brand to Kering’s portfolio; it also serves to build scale and create a platform for future growth. Kering has already integrated several fragrance brands into its fold, including Alexander McQueen, Bottega Veneta, and Balenciaga. Additionally, there is the possibility of bringing Gucci’s beauty and fragrance business under the Kering umbrella in the future. Currently licensed to Coty, industry analysts predict that this arrangement could expire around 2027. In the long term, if Kering’s fragrance expansion strategy proves successful, it could even produce and distribute perfume for brands outside of the Kering group.
Looking ahead, Kering should consider developing color cosmetics and skincare capabilities to further strengthen its presence in the beauty industry. While the skincare market is highly competitive, especially with competitors like LVMH, Kering possesses the resources and expertise to pursue such opportunities. Expanding its foothold in beauty would also reduce Kering’s reliance on Gucci, which accounted for about half of its sales and two-thirds of operating profit last year.
Kering’s acquisition of Creed represents the company’s serious intentions in the beauty industry. With substantial financial resources and a strong track record in brand management, Kering is well-equipped to make a substantial impact in the beauty market. This move is likely to attract founders and financial sponsors who are seeking an exit strategy, while also presenting new opportunities for future acquisitions and partnerships.
Useful links:
1. Creed Official Website
2. Kering SA Official Website
