After investing in the high-end fragrance brands Documents Wenxian and To Summer, L'Oreal Group, which ended up as a VC, has set its sights on a high-end fragrance brand.
According to Bloomberg, L'Oréal Group is in talks to acquire a minority stake in Omani luxury fragrance brand Amouage, which is currently valued at more than 3 billion euros (about 23.5 billion yuan) in deal negotiations with brand owner SABCO Group.
If successful, it would be another major deal after L'Oréal acquired Aesop for US$2.5 billion (17.4 billion yuan) last year, or the largest investment in the beauty sector. Similar to Aesop, Amouage has attracted the attention of other investors.
At the end of last year, Amouage, which has been in China for three years, opened its first concept store in Shanghai, although it is not like the opening of the first stores of Aesop and Le Labo, but it has obviously attracted the attention of L'Oreal Group.
The battle for Amouage has begun, what is its charm, and what is the strategic layout behind L'Oréal Group's "olive branch"?
"The King's Gift", valued at 23.5 billion
"On the way to play perfume, you must avoid a perfume brand - Amouage. This is a popular phrase in the perfume world.
Since its inception, Amouage has had a set of storylines that are indispensable for high-end brands. Founded in 1983 by the Omani royal family, "Amouage" means "wave of emotion" in Arabic, the brand is based on the Arabic perfume culture, the main graphic elements are the sun, the pattern of roses and stars represents the rarest Omani rock rose in the world, and the dark wood represents the frankincense tree, which is the soul of Amouage's fragrance and the hallmark that distinguishes the brand from other fragrances.
Amouage redefines the art of Arabian perfumery, not only using the highest quality and most special ingredients from all over the world, but also concocted by world-renowned perfumers from Paris and New York.
To date, Amouage has more than 50 fragrances and bath collections, scented candles and fragrances, among which Amouage Gold, Jubilation, Epic, Dia and Interlude are well-received. According to the Amouage website, most perfumes are priced at 365 euros (about 2,861 yuan) per 100 ml.
Under the "halo", Amouage has performed steadily in recent years. According to public information, in 2023, the brand's retail sales will exceed 210 million US dollars (about 1.5 billion yuan), an increase of 24%, a record high. Regionally, Oman, the United Arab Emirates, the United States and China are the core markets, accounting for more than 40% of total revenue, becoming important engines for brand development.
In early 2021, with the help of S'Young International, Amouage entered the Chinese market and opened Tmall's overseas flagship store, followed by S'Young International's high-end beauty collection store - S'Young Tang Changsha Concept Store.
In view of the importance of independent stores for the sense of experience and the transmission of brand concepts, at the end of December 2023, on the occasion of the brand's 40th anniversary, Amouage opened its first concept store in China in Zhangyuan, Shanghai, officially starting its expansion plan in the Chinese market. At the same time, it has also opened official accounts on Weibo, WeChat, Xiaohongshu, Tmall, JD.com and other platforms to further tell Chinese consumers "who I am".
It is not difficult to see from Amouage's performance in the Chinese market that it has ambitions to further develop the Chinese market, which also means that Amouage will usher in further development in the Chinese market.
It is not difficult to understand that the brand owner SABCO Group will value the Amouage business at more than 3 billion euros (about 23.5 billion yuan).
Increasing the size of the Chinese market?
For L'Oréal, Amouage's huge prospects in the Chinese market are undoubtedly one of the attractions of the bid.
Combined with the 2023 "report card" released by L'Oréal Group, L'Oréal Group's shipments in the Chinese mainland market in 2023 will achieve a 5.4% growth and actual sales volume growth of 7.7%, significantly better than the market and exceeding expectations.
Clearly, L'Oréal's strong growth is also due to the Chinese market. From a series of measures taken by L'Oréal Group in the Chinese market in recent years, it is not difficult to see its intention to increase its intend to increase the Chinese market.
On the one hand, it has successively invested in two local high-end fragrance brands in China, Documents Wenxian and To Summer;
On the other hand, in April this year, its perfume brand Ou Long made a big comeback with a new brand image and products, and plans to open more than 10 boutiques/counters in the Chinese market in 2024, first reopening the Chinese market and then expanding to the North Asian market. And this is only a year after Oulong has been withdrawn from China's offline channels.
Whether it is the investment in Wenxian, Guanxia, or the renewal and reshaping of Oulong, it is one of the manifestations of L'Oréal Group's investment in China's high-end fragrance market.
Cyril Chapuy, President of L'Oréal's Luxury Division, said publicly: "For structural reasons, the fragrance market has been very active over the past three years. First of all, in North Asia, especially in China, the penetration of fragrances among the younger generation has indeed exploded. Secondly, the fragrance market is becoming more premium, and our luxury cosmetics division's Armani, Prada and other licensed collaborations are the fastest part of the growing market. ”
As he put it, the "olfactory economy" is beginning to rise in China. According to the "2023 Online Perfume Consumption Trend Insights", the sales of China's perfume market in the past three years have shown a growth trend that far exceeds that of the world, and it is expected that the size of China's perfume market will enter 37.1 billion in 2026.
There is no doubt that Amouage certainly has opportunities in the unsaturated Chinese fragrance market, but it is uncertain whether the deal will be completed and the details of the potential deal could change. However, no matter who Amouage is, it can be predicted that the Chinese market will be the direction of its next key layout, which will further affect the brand structure and performance of the giants in the Chinese market.
In this context, L'Oréal's intention to acquire Amouage is nothing more than twofold: to expand the high-end fragrance portfolio and further expand the Chinese market. This is also L'Oréal's continued optimism on China's high-end fragrance market and its efforts to stabilize China as its largest overseas incremental market.
A new war has been waged in the perfume market
L'Oréal's battle for Amouage is just a microcosm of the beauty giant's seizure of the perfume market.
For example, in 2023, the sales of L'Oréal Group's high-end cosmetics segment increased by 4.5% year-on-year, of which the sales of perfume category increased by 17% year-on-year, the net sales of Estee Lauder's fragrance business increased by 14% despite a 50% decline in net profit, and the revenue of Shiseido Shiseido, the main brand of Shiseido Group, fell and the growth rate of perfume increased by more than 21%.
Based on this, including the "dark horse" brand of the perfume track has become a routine operation for beauty giants to expand their perfume camp.
For example, in the bidding competition between the high-end perfume brand Byredo and the high-end skin care brand Aesop, L'Oreal Group has appeared, but Byredo finally belongs to Puig, and Aesop was purchased by L'Oreal Group for about 17.4 billion yuan, the latter mainly focuses on perfume and fragrance as its core competitiveness.
In another example, Kering acquired the perfume brand Creed, and the Estée Lauder Group invested in the local perfume brand melt season.
Looking at the perfume brands of the beauty giant "Xiangzhong", we can get a glimpse of several similarities:
1. Distinctive brand genes to form differentiated competitiveness;
Marco Parsiegla, CEO of Amouage, has publicly stated that the brand aims to appeal to the next generation of perfume lovers, and its core audience is professional consumers and connoisseurs who buy six bottles of perfume products every year.
This also means that Amouage's target audience does not overlap with other L'Oréal fragrance brands. If you join the L'Oréal group, Amouage's Middle Eastern characteristics and Documents, To Summer's oriental tonality, and L'Oréal's existing big-name fragrances will undoubtedly form a mismatch competition.
In short, L'Oréal will build a comprehensive and three-dimensional portfolio of fragrance brands, including high-end commercial fragrances, niche salon fragrances and luxury fragrances, with distinct personalities that complement each other and meet diverse consumer needs.
2. Capture consumer needs and create personalized products;
Since its acquisition by The Estée Lauder Companies in 2014, Le Labo has grown into one of its most impressive fragrances, and after entering China last year, it quickly emerged from the fierce fragrance scene. The root of this is that Le Labo, which advocates the slow perfume process, focuses on "on-site perfume blending", where perfumers will select the right fragrance according to the user's needs and create a unique and personal fragrance through on-site production.
Finally, pay equal attention to R&D and content, and pursue product quality.
For example, many of Aesop's products focus on the concept of rhythmic skincare, which follows the light and dark cycle of day and night for effective and streamlined skincare on a 24-hour cycle to meet the needs of different skin conditions.
In addition to "storytelling", "research and development" has injected new vitality into the perfume track. For example, Estée Lauder has publicly announced that it will unveil a new Parisian fragrance studio at the end of 2024, whose core mission is fragrance innovation and process optimization, accelerating the strategic development of the Estée Lauder Group in the field of high-end and luxury fragrances.
As the world's second largest consumer market, China's perfume market has great potential for development. The above-mentioned beauty giants' high-end perfume layout path may be able to point out the direction for Chinese perfume brands to move towards the high-end market.
(Note: The pictures in the article are all from Amouage's official Weibo)
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