Dolce & Gabbana handles beauty in-house
Three decades after bringing its first fragrance to stores, Dolce & Gabbana is integrating its 476 million euro wholesale beauty business, as part of a plan to diversify its revenue streams beyond the fashion in a context of booming high-end perfumes and cosmetics.
A new Dolce & Gabbana Beauty division will take over the development, manufacturing and distribution of Shiseido’s branded fragrances and makeup products.
“We will be the first Italian fashion brand to manage the beauty category internally,” Gianluca Toniolo, the new chief operating officer of Dolce & Gabbana Beauty and former chief executive of travel retail at LVMH, told the Financial Times.
Although luxury fashion brands have been part of the beauty market since Chanel launched its first perfume in 1921, they remain small players compared to industry leaders such as L’Oreal and Unilever.
Only a handful of fashion brands, including Chanel and Dior, manage the manufacture and distribution of their beauty products. The vast majority license their names to third-party specialists.
Japanese cosmetics group Shiseido announced plans last year to end its licensing deal with the Italian fashion house to focus on its prestige skincare business.
Taking a beauty business in-house can be expensive and complex. Burberry briefly took ownership of its beauty business in 2013, shortly before the departure of then-CEO Angela Ahrendts, but struck a licensing deal with Coty in 2017.
Alfonso Dolce, managing director of Dolce & Gabbana and brother of co-founder Domenico Dolce, believes beauty can be a much bigger business for the group.
The company expects annual retail sales of beauty products to grow by “more than 1 billion euros” to 2.5 billion euros in seven years, it said, generating about 1.25 billion euros in annual wholesale revenue.
Dolce & Gabbana, whose revenue of around 1 billion euros was down from 1.35 billion euros in the year ending March 2019, is investing 300 million euros in the business. The new company plans to hire 150 people by the end of the year, eventually building a global team of 350 to 500 people.
“It’s a very healthy and very exciting market they’re getting into,” said Larissa Jensen, beauty industry advisor at market research group NPD.
All major beauty categories grew in the United States in 2021, but none faster than the $6.3 billion fragrance industry, which grew 35% from pre-pandemic levels.
“For the first time in [recent] history, the fragrance category is now the same size as skincare,” Jensen said. “There are more shoppers spending more money. . . That’s how consumers treat each other.
She added that the more expensive products – larger, highly concentrated bottles perfumeartisanal fragrances and designer brand products — were the top performers.
Toniolo said Dolce & Gabbana, which derives 95% of beauty revenue from fragrances, was well prepared for the expansion.
The new company plans to introduce “very rare, Italian quality” fragrances, with new launches costing around 50% more than Dolce & Gabbana fragrances currently on the market.
“We have to go to the very top of the range,” Toniolo said.
The company also plans to expand its line of color cosmetics and move into skincare, although Toniolo said it would steer clear of products such as anti-aging because it’s “not a business technology like Estée Lauder or Shiseido”.