Kering creates in-house beauty unit in effort to widen customer base

French luxury group Kering has announced it will create an in-house beauty division to develop cosmetics and perfumes for its fashion brands including Bottega Veneta and Alexander McQueen.

The new division will be “strategically important” as part of the group’s efforts to build “a new area of expertise”, said group managing director Jean-François Palus.

However it will not be able to develop product lines for Gucci, Kering’s crown jewel brand, or Yves Saint Laurent, the French fashion house, because Coty has the beauty licence for Gucci until at least 2028, while YSL cosmetic products are produced by L’Oréal.

Rafaella Cornaggia has joined from US-based cosmetics brand Estée Lauder to lead the new division at Kering. She previously worked at L’Oréal and Chanel.

It will focus on developing products for Kering brands including Bottega Veneta, Balenciaga, Alexander McQueen, Pomellato and Qeelin.

Thomas Chauvet, analyst at Citigroup, said that it made “perfect sense to internalise the beauty business, as [Kering] has done in eyewear in the last seven years”.

He added that the group wanted to take back beauty licences, the bulk of which were with Coty. “The most attractive [licence] to internalise is Gucci,” he added. Citi estimates the Gucci licence is currently worth about $500mn a year in sales for Coty.

Beauty is big business internationally, and can help luxury brands widen their customer appeal with products that are cheaper than clothes, shoes and bags. LVMH generated €7.7bn in revenues from cosmetics and perfume last year, from a total of €79.2bn.

Kering had a beauty business until the mid-2000s under its YSL Beauté brand, but it remained small and was sold to L’Oréal for €1.15bn in 2008.

Kering is one of the world’s biggest luxury groups worth €73.3bn, but it is dwarfed by LVMH, which is valued at €408bn.

Kering, which is controlled by the billionaire Pinault family, has increased revenues more slowly than its rivals and is heavily dependent on Gucci, which brings in more than half of annual revenues and three-quarters of operating profits.

Last week, Kering named Italian designer Sabato de Sarno as Gucci’s new creative director.