Luxury giant Kering Group has hired former Estée Lauder Companies senior executive Raffaella Cornaggia in a new—and critical—role as CEO of Kering Beauté. The move accelerates expansion into a new sector for the French fashion-to-jewelry conglomerate that might have given Kering’s current beauty licensing partners, like Coty, some restless nights. Turns out the US beauty house is sleeping soundly.
Jean-François Palus, Group Managing Director of Kering, said in a statement: “Cornaggia brings us considerable experience in a segment that we see as strategically important for our houses. We are building this new area of expertise to ensure that our brands can fulfill their potential in this category.”
Those labels are some of the best-known in fashion including Alexander McQueen, Balenciaga, Gucci, and Saint Laurent, plus jewelry houses Boucheron, Pomellato, DoDo and Qeelin. Several are already powerhouse beauty brands, developed through licensing agreements.
Rather than sharing the sales proceeds with other companies, Kering would like it all. The group—with revenue of €17.6 billion in 2021—has had huge success with this strategy in eyewear, a division it also built from scratch starting in 2014. Kering took all its licensed business in-house and it now has 16 brands and turned over €700 million ($750) in 2021.
Beauty is a Big Beast
Beauty is an even bigger money spinner with high margins, and larger volumes that eyewear. It could be a good way to deliver better profitability and higher EPS for Kering’s shareholders. The company has had this prize in its sights for some time, so L’Oréal, Coty and other beauty partners had been forewarned.
L’Oréal’s position seems safe. It bought YSL Beauté from PPR (now called Kering) after agreeing a licensing deal in April 2008 “for a very, very long time” according to a L’Oréal spokesperson. Coty is on shakier ground as it has more to lose. It holds the license for Gucci—one of its pillar brands—and did for Alexander McQueen, Balenciaga and Bottega Veneta as well.
In a statement on Friday February 3, Kering said that, in Cornaggia’s new role, she would help develop beauty expertise for Alexander McQueen, Balenciaga, Bottega Veneta, Pomellato, and Qeelin, supported by a team of seasoned professionals. “The beauty category is a natural extension of the universe of these brands,” said Kering.
While Gucci was not mentioned in the Kering statement, Coty confirmed to BeautyMatter that it had relinquished the other three, describing them as “smaller growth brands with a more limited scale and footprint”, but did not say when the terminations occurred. The brands have already been removed from Coty’s website.
As niche labels, Alexander McQueen, Balenciaga and Bottega Veneta may not have delivered the huge volumes that Gucci does for the New York-listed company. More significant could be that, in Kering’s hands, the beauty business of these brands could become significant new rivals in the fragrance or color cosmetics sectors, Balenciaga in particular.
But what of Gucci? While much has been made of this potential loss to Coty in the media, if it ever happens it is not likely to be a near-term event. Coty told us: “We have no major license up for renewal in the next six years, and the average remaining length of our major licenses is 10 years.” Kering would have to buy Coty out of the Gucci arrangement before then.
The Coty spokesperson added: “Gucci’s world-renowned brand and creative direction, coupled with Coty’s global capabilities in development, manufacturing, distribution and marketing have created a beauty titan in both fragrances and color cosmetics. In fact, we have nearly doubled the brand in the past five years.”
Success is Not Guaranteed
Even if the Gucci license agreement was shorter, nothing is a given. Yes, Kering has been successful with bringing eyewear in-house, but beauty is a more complex category. Burberry tried to do it in 2013 after dropping partner Interparfums. After four years, the British brand threw in the towel and sought a license again, this time with Coty even though it claimed it had elevated the business in the interim.
Kering may have better luck with Cornaggia who joins the company’s executive committee and will be based in Paris, reporting to Palus. An Italian national with more than 25 years of experience in beauty, Cornaggia has done the rounds.
She began her career at L’Oréal where she spent 10 years in various roles before joining Chanel Parfums Beauté as Global Vice President, Marketing Makeup. In 2008, she joined Estée Lauder Companies to lead the marketing for Estée Lauder and Tom Ford Beauty in the EMEA region. By 2020 she had become International Senior Vice President and General Manager for the for Estée Lauder and Aerin brands.
Kering will reveal its 2022 full-year results on Wednesday February 15.
