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Nov 18, 2013
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No easy money in skin care for fashion brands

Nov 18, 2013

PARIS, France - Burberry is the latest luxury brand to eye the 28-billion-euro global skin care market but despite potentially rich pickings in Asia it faces an uphill struggle to win customer trust in a crowded market.

Burberry beauty

Burberry said last week it aimed to become one of the top ten beauty brands in the world, hoping to match arch-rivals such as Chanel and Christian Dior, designer fashion labels that grew into big players in cosmetics.

Dior and Chanel took decades to build a beauty business which includes skin care, perfume and make-up, and have ploughed tens of millions of euros into research and development.

Meanwhile, a parade of other luxury groups have tried and failed to launch skin creams, showing how tough it is to leap into a market with different expectations and brand values.

"Perfume is the first step in the beauty world for a fashion brand. Then it can go into make-up," said Jean Mortier, President of Coty Prestige, the luxury division of Coty which makes perfume for fashion brands such as Marc Jacobs, Chloe and fragrance and make-up for Calvin Klein.

"However, not all fashion brands can go into skin care."

Burberry Chief Executive Angela Ahrendts said that, unlike Dior and Chanel, the brand would not create its own research lab but instead work with existing "supply chain pros". Burberry would take time to develop its skin care line and any launch would not be for at least the next 12 months.

Burberry, which brought its perfume business in-house six months ago, has acknowledged operating profit from the beauty unit this year would be 10 million pounds, below an earlier 25-million-pound forecast on 140 million pounds of sales, partly down to higher-than-expected investments.

It has a long way to go to compete with Dior, which started selling perfume in 1947 with Miss Dior and skin care 40 years ago with Hydra Dior. Dior now makes an estimated 1.8 billion euros annual sales from beauty products - more than the 1.3 billion euros it makes from clothing and accessories.


For fashion houses, getting into skin care is more challenging than launching fragrances and make-up.

It's one thing for a brand like Burberry, originally known for its expensive raincoats, to entice customers with a stylish scent. It's another thing to persuade them that it understands the science of skin.

"Fragrance is about getting access to the world of the designer - 'I may not be able to afford his dresses but I can afford his perfume'," said Veronique Gabai-Pinsky, head of designer fragrance at The Estee Lauder Companies.

"It has an emotional appeal, while skin care is about performance and results."

Successful skin care products usually require major investment in research, as opposed to perfume and make-up where the bulk of investment is centred on marketing.

The skin care market is already crowded. Industry leaders like Estee Lauder's Clinique, L'Oréal's Lancome and family-owned Clarins have been in the business for decades.

Meanwhile, the industry is full of luxury brands that failed to crack the market.

British designer Stella McCartney launched an organic skin care line called CARE in 2007 only to discontinue it four years later. Roman jeweller Bulgari put out an anti-ageing line called Secret de Gemmes that was taken off the market before the brand was acquired by luxury group LVMH in 2011.

Older examples include Prada in 2000 with its single doses that came and went, and Donna Karan, another LVMH brand, that created a line in the 1990s with celebrity Dermatologist Pat Wexler that never really took off.

Other big fashion brands such as Marc Jacobs, part of LVMH, or New York-listed Michael Kors, which both launched make-up lines this year, have no plans to get into skin care.

Miu Miu, part of Prada, which signed a partnership with Coty last month to launch a perfume in 2015, is also not in a hurry to invest in face creams.

"Since both Prada and Miu Miu are brands with strong potential in the fragrance sector, we would prefer to go ahead gradually and remain focused on perfume for now," a Prada spokesman said.

Coty launched a Chloe skin care line last spring in Japan, where the fragrance is a best-seller, but is still weighing options about a wider roll-out.


It is still easy to see why Burberry is attracted by the skin care market, particularly in light of the popularity of its perfume brand in Asia. Burberry is the No.3 perfume brand in China in terms of market share behind Chanel and Dior, according to market data company Beaute Research.

The Asia-Pacific region represents nearly 60 percent of the global premium skin care market and the Chinese market alone is set to nearly double by 2017 to reach 6 billion euros, according to data from Euromonitor.

Skin care is particularly important in Asian markets that have more deeply-entrenched traditions of face treatment rituals than in Europe, as opposed to perfume which is still more popular in Europe than in Asia.

Yves Saint Laurent's beauty business, owned by L'Oréal since 2008, launched an anti-ageing product last year which has had an encouraging start.

The skin care line now makes up 8 percent of the brand's global beauty sales, which include perfume and make-up, according to Stephan Bezy, head of Yves Saint Laurent beauty products at L'Oréal. The line now represents 40 percent of the brand's beauty sales in Japan, where it was first launched.

"If you want to be a top player in the beauty market, you have to be successful in three categories - make-up, perfume and skin care," Bezy said.

Renzo Rosso, founder and owner of the Diesel brand best known for its stonewashed jeans, said he would also like to launch a skin care line, but L'Oréal, which owns the licence for Diesel perfume, is not keen on the idea.

"L'Oréal do not want to invest in that project for now. They keep on postponing," Rosso told Reuters in an interview.

L'Oréal, which declined to comment on the issue, may be right to be cautious.

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