Puig, the family-owned Spanish conglomerate behind Carolina Herrera and Paco Rabanne, aims to double its sales to €3bn two years earlier than previously planned as the group continues its push beyond fragrance and fashion.
The accelerated revenue goal comes as Marc Puig, chairman and chief executive of the privately held company, told the Financial Times that the family would not hand over control to a fourth generation. “They will take their role on the governing body, but not be in the management team,” he said.
Mr Puig, 58, said the group had been hit “significantly” harder by the pandemic than its competitors, with sales falling roughly a quarter to €1.5bn this year. But the group aimed to bounce back as it expands the British make-up and skincare brand Charlotte Tilbury, which it bought in June, and targets €1bn revenues for Paco Rabanne.
The group’s fragrance-heavy portfolio lacked sufficient exposure, he said, to “categories that are growing in Asia and growing through digital” — two areas that eased the coronavirus-led contraction for the luxury goods sector this year and will continue to drive growth through 2025, analysts say.“Make-up and skincare have benefited a lot more from those waves than fragrance”, Mr Puig said, citing the growing importance of social media, the difficulties of selling perfume online and the lack of a fragrance tradition among Chinese women. “Make-up and skincare are visual categories. Fragrance is not.”
The group sought to tap those growth areas by securing the beauty license for Christian Louboutin in 2018 and taking a majority stake in British make-up and skincare brand Charlotte Tilbury at a reported valuation of $1bn in June.
The company had been drawn to Charlotte Tilbury because of its success in both cosmetics and skincare: “It’s not easy for a make-up brand to extend to other beauty categories,” Mr Puig said, pointing to the possibility of extending into fragrance. It was also important that its namesake founder, a celebrity make-up artist with 3.8m Instagram followers, would stay involved as chairman and president.Charlotte Tilbury generated revenues of £229m in 2019, the FT reported earlier this year. Mr Puig believes Charlotte Tilbury can exceed sales of €500m by 2025 and sees “tremendous potential” for expansion in the US, Middle East, Asia and in travel retail (the brand has only one location, in Heathrow).Mr Puig declined to comment on the valuation and acquisition price. “It didn’t come cheap,” he said. “We had cash; now we have debt.” Despite a challenging year, Mr Puig is confident that the group’s overall performance will be “back to normal” in the second half of next year. The company is targeting revenues of more than €4bn by 2025, by which point it expects Paco Rabanne and Carolina Herrera to each generate revenues of almost €1bn annually. Puig had previously targeted hitting €3bn revenues by 2025.
To help it reach those numbers, the company has reorganised into three divisions: beauty and fashion, Charlotte Tilbury, and derma (dermo-cosmetics products sold in pharmacies, of which Puig is now the third-largest player in Europe).
Since becoming the third-generation of the family to lead the group in 2004, Mr Puig has trimmed debt and honed the company’s focus on high fashion and fragrance, increasing its market share in the prestige fragrance category from 3 per cent to “breaching nearly 10 per cent” this year, he said. Sales have climbed from €790m in 2004 to €2bn last year, while profits have risen from €1m to €226m.“Fifteen years ago, we were going through some difficulties. We decided on a very narrow, focused strategy [around] fashion and fragrance,” Mr Puig recalled.
Now, things will be a little different. “We decided in the family that the fourth generation will not work in the company,” he said.
“We believe, when companies get to a certain size, the ability to attract talent and choose leadership from a larger pool than a handful of individuals from a family makes it more likely that you can find the best leadership.”
The strategy stands in contrast to Europe’s other luxury groups, such as LVMH and Prada, which have installed family members in key management roles.
When asked if Puig planned to make additional acquisitions in the near future, Mr Puig said: “With other opportunities, we’ll see. So far our plate is full.“We can only grow as fast as we are able to generate resources. In 2020 we did not generate much.”