Dolce & Gabbana to take beauty business in-house

Three decades after it ushered its first fragrance into stores, Dolce & Gabbana is bringing its €476mn wholesale beauty business in-house, part of a plan to diversify its revenue streams beyond fashion amid a boom in high-end fragrance and cosmetics.

A new Dolce & Gabbana Beauty division will take over development, manufacturing and distribution of the brand’s fragrance and make-up products from Shiseido.

“We will be the first Italian fashion brand to manage the beauty category in-house,” Gianluca Toniolo, the new operating chief executive of Dolce & Gabbana Beauty and former managing director of global travel retail at LVMH, told the Financial Times.

Although luxury fashion brands have been part of the beauty market since Chanel introduced its first fragrance in 1921, they remain small players compared with sector leaders such as L’Oréal and Unilever.

Only a handful of fashion brands, including Chanel and Dior, manage the manufacturing and distribution of their beauty products. The vast majority license their names to third-party specialists.

Japanese cosmetics group Shiseido last year disclosed plans to terminate its licensing agreement with the Italian fashion house to focus on its prestige skincare business.

Taking a beauty business in-house can be costly and complex. Burberry briefly took ownership of its beauty business in 2013, shortly before the departure of then-CEO Angela Ahrendts, but reached a licensing deal with Coty in 2017.

Alfonso Dolce, Dolce & Gabbana’s chief executive and brother of co-founder Domenico Dolce, believes beauty can be a substantially larger business for the group.

The company forecasts annual beauty retail sales will grow by “more than €1bn” to €2.5bn in seven years, he said, generating about €1.25bn in annual wholesale revenue.

Dolce & Gabbana, whose roughly €1bn in revenues were down from €1.35bn in the year ending March 2019, is investing €300mn in the venture. The new company plans to hire 150 people by the end of the year, eventually building a global team of 350-500 people.

“It’s a very healthy and very exciting market they are going into,” said Larissa Jensen, beauty industry adviser at market research group NPD.

All big beauty categories grew in the US in 2021, but none faster than the $6.3bn fragrance industry, which was up 35 per cent 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 buyers spending more money . . . It’s the way consumers are treating themselves.”

She added that the more expensive products — larger bottles, highly concentrated eau de parfums, artisanal scents and products from designer brands — were performing best.

Toniolo said that made Dolce & Gabbana, which derives 95 per cent of beauty revenues from fragrance, well-primed for expansion.

The new company plans to introduce “very rare, Italian-quality” scents, with new launches costing about 50 per cent more than the Dolce & Gabbana fragrances currently on the market.

“We have to go at the very high end,” Toniolo said.

The company also plans to expand its range of colour cosmetics and enter into skin care, although Toniolo said it would avoid products such as anti-ageing because it was “not a technological company like Estée Lauder or Shiseido”.