As reported by Financial Times, Vogue Business, Reuters, Dolce & Gabbana is taking their beauty destiny into their own hands. The Italian luxury group is in the process of establishing Dolce & Gabbana Beauty, which will assume complete control by January 2023 of the manufacturing, sales, and distribution of its €1 billion fragrance and makeup business.

The impetus to bring beauty in-house came last year when Shiseido disclosed plans to terminate the licensing agreement signed in October 2016, which is estimated to translate into a $323 million loss. The decision was part of Shiseido's medium- to long-term strategy "WIN 2023 and Beyond," which refocuses on its prestige skincare business. Shiseido will continue to produce Dolce & Gabbana beauty products worldwide until the end of 2022.

The move by a fashion brand to manage beauty in-house is not a first. Chanel and LVMH manage their beauty businesses, Burberry did it for a time before returning to a licensed structure in a deal with Coty in 2017. However, most still opt for outsourcing beauty, turning over control in the category for a percentage of annual sales.

The timing of bringing the beauty business in-house as part of a plan to diversify revenue streams beyond fashion couldn't be better. According to the Bain Altagamma 2021 luxury study, the global luxury beauty industry is showing strong growth and is projected to be worth $69 billion by 2025. The NPD Group reported the US prestige beauty industry generated $22 billion in 2021, representing a 30% increase in dollar sales versus 2020, with the fragrance category witnessing a 49% increase.

Dolce & Gabbana Beauty will be based in Milan under the leadership of Alfonso Dolce, President and CEO of Dolce & Gabbana, and Gianluca Toniolo, who joins Dolce & Gabbana Beauty as operating CEO from LVMH. The fashion house will invest $500 million through self-financing and "support from the banking system." The business has set about building a team of 130-150 people in Italy by March 2023 and an additional 100-120 internationally.

The company forecasts annual beauty retail sales will grow by "more than €1bn" to €2.5bn in seven years, generating about €1.25bn in annual wholesale revenue. The brand launched its first fragrance in 1992, and currently the category represents 95% of beauty revenue; however, the company has plans to expand its range of color cosmetics and expand into skincare.