Why L’Oréal’s Deal With Kering Beauty Is a Category Game-changer
“It has implications for everyone,” one industry expert said.
Kering and L’Oréal have made it official: The two French giants announced that they are forming a long-term strategic partnership in beauty and wellness.
In a joint announcement, the companies said the binding agreement encompasses the acquisition of the House of Creed by L’Oréal, and gives L’Oréal the rights to enter into a 50-year exclusive license for the creation, development and distribution of fragrance and beauty products for Gucci, commencing after the expiration of Kering’s current license with Coty for that business.
Kering acquired Creed, the oldest existing high-end niche fragrance house, in June 2023 in a blockbuster deal thought to be in the high 2 billion euro range.
The partnership will also include 50-year exclusive licenses for Bottega Veneta and Balenciaga, which will start at the close of the transaction. These will join other designer fragrance brands already in the L’Oréal Luxe division, which includes Yves Saint Laurent (a Kering brand), Armani, Valentino, Prada, Miu Miu, Jacquemus, Mugler, Azzaro, Maison Margiela, Viktor & Rolf, Ralph Lauren, Diesel and Cacharel.
The 50/50 joint venture agreement is valued at 4 billion euros, payable in cash at the closing, which is expected to take place in the first half of 2026. L’Oréal will also pay royalties to Kering for the use of its licensed brands.
Beyond beauty, the companies said they are joining forces to explore business opportunities at the intersection of luxury, wellness and longevity.
“This strategic alliance marks a decisive step for Kering,” said chief executive officer Luca de Meo in a statement. “Joining forces with the global leader in beauty, we will accelerate the development of fragrance and cosmetics for our major houses, allowing them to achieve scale in this category and unlock their immense long-term potential.”
For his part L’Oréal CEO Nicolas Hieronimus said, “I am delighted to forge this long-term alliance with one of the world’s most prestigious, creative and visionary luxury groups. The addition of these brands significantly expands our reach into new, dynamic segments of luxury beauty. Through Creed, we will establish ourselves as one of the leading players in the fast-growing niche market.”
“This is a real game-changer. It is earth-shattering,” said an industry expert of the L’Oréal-Kering Beauty deal. “It has implications for everyone.”
For Kering, it will provide a much-needed injection of cash to reinvest in its struggling brands, and is a bold move by de Meo, who took the reins in September and has wasted no time in making changes. In addition to a deal for the beauty, industry sources indicate he is also looking to shed the company’s eyewear business. Both were key pillars of the strategy implemented by former CEO François-Henri Pinault, who seems to be abiding by his pledge to give de Meo free rein in executing his own vision even as Pinault remains company chairman.
“To build a beauty company takes a lot of time, and it’s very different from fashion, even though there are synergies on the brand side,” said Laurent Droin, a partner and investor in Felix Capital.
“For L’Oréal, it makes a lot of sense, because it’s a unique opportunity to acquire a real luxury beauty portfolio,” he added. “This makes sense for both parties.”
Many insiders predict the deal could reshape not only the market’s landscape, but also force some company and brand marriages that were not on the horizon otherwise.
A deal could be pivotal for midsize beauty brands held by private equity concerns, which had been banking on L’Oréal to acquire them as other major beauty groups struggle to find their footing.
With this deal, L’Oréal is significantly bolstering its position in perfumes — the beauty market’s largest category driver over the past six years, since the coronavirus pandemic began. Within that, niche fragrances are the strongest segment.
Overall, the worldwide fragrance market is highly fragmented and large — expected to generate sales of $62.11 billion this year, according to Statista. The category’s growth might be mitigating currently, but its outlook remains strong. This in part is due to fragrances’ expanding scope that is morphing, moving into new geographies such as Asia and the well-being sector with functional attributes.
Fashion fragrances, which sell particularly well in the West, are increasingly serving as launchpads for fashion-branded makeup, an increasingly hot category in the East.
Many industry analysts weren’t surprised that Kering is abandoning its efforts to build a beauty business on its own. “Kering spent 3 billion euros on Creed and they are selling everything for 4 billion — the value destruction is incredible,” said one insider. “It’s very tough for these firms to take beauty in-house. Burberry tried it a few years ago and Coty picked up the beauty business because they realized they couldn’t do it. Kering is the same.”
As it is, the deal will almost certainly have implications for the major players in the category, including Coty Inc., the Estée Lauder Cos., Puig and Interparfums.
“It puts more pressure on everyone,” Droin said.
The move comes at a time of great change in beauty. As first reported by WWD in June, Coty’s future remains uncertain as the company explores potential sell-offs of its luxury and consumer divisions, according to industry sources.
Coty’s Luxury division includes fragrance brands such as Gucci, Burberry, Jil Sander and Hugo Boss. If L’Oréal acquires Kering Beauty and Coty does look to divest its prestige fragrance holdings ultimately, it could intensify the scramble to take over those brands.
Meanwhile, the Estée Lauder Cos. is increasingly leaning into its perfume activity. Last week, its CEO Stéphane de La Faverie said fragrance is the future of the group, as it inaugurated La Maison des Parfums, a prospective innovation arm for perfume, in central Paris. That is meant to accelerate its fragrance business around the world.
Puig was in the running to acquire Kering Beauty. A Puig spokeswoman could not be reached for comment Sunday.
Already a number of fragrance licenses held by Puig — such as Valentino, Prada and Miu Miu — have migrated to L’Oréal.
Questions remain about another possible big L’Oréal acquisition. The company is among the three preferred bidders listed in the will of Giorgio Armani, who died on Sept. 4. After 12 months from the opening of the will and within 18 months at most, an initial 15 percent of his namesake company could be sold either to LVMH Moët Hennessy Louis Vuitton, EssilorLuxottica or L’Oréal.
On Sept. 12, L’Oréal said in a statement: “We will study, with great consideration, this opportunity building on our long-shared history.”
Giorgio Armani and L’Oréal have had a long-standing fragrance and beauty license, which was renewed in March 2018 to run through 2050. Fragrance and eyewear represent a significant portion of Armani’s global revenues.
On the M&A front, L’Oréal had been cherry-picking brands to acquire on an individual basis, most recently including Color Wow and Medik8. It also won the fragrance license of and acquired a minority stake in Jacquemus. In 2023, L’Oréal took over Aesop in a major deal.
Industry sources believe the partnership could trigger concern among private equity executives.
“L’Oréal made a clear choice between acquiring a pre-backed indie brand and a big acquisition like this,” said one industry expert. “They are on a tear at a time when everyone else is asking: ‘Should we buy Makeup by Mario or what’s happening with Glow Recipe?’” this person continued, referring to two buzzy indie brands that are said to be pursuing sales. “L’Oréal sees the entire market, from mass to high-end.”
Some niche perfume brands owned by PE players are reaching or have recently reached critical mass, whereby they could be ripe for a sale soon. Industry sources named as examples Parfums de Marly and Initio Parfums Privés, held by Advent International, and Kayali, the perfume brand earlier this year that was bought from parent company Huda Beauty by Mona Kattan and General Atlantic.
Kering began taking its fashion and jewelry-related beauty activities back in-house in early February 2023, when it announced the appointment of Raffaella Cornaggia as CEO of Kering Beauty.
There were great expectations. Luxury goods companies have been taking back full control of the brands they own in a bid to obtain greater consistency, synergies and power.
Since the birth of Kering Beauty, beside acquiring Creed, the division has focused on relaunching Bottega Veneta and Balenciaga fragrances with perfume collections. Balenciaga fragrances also have an individual store. Those businesses remain small.
In June 2024, Kering took a minority stake in niche perfume brand Matière Première.
Two jewels in Kering’s crown are Gucci and Yves Saint Laurent. The Gucci fragrance license, expected to expire in 2028, brings in a sizeable income. One industry source estimated it generates $1.1 billion in net sales annually.
It is understood that under terms of Coty’s contract, should Kering wish to break it prior to 2028, Kering would have to pay Coty the expected annual revenues each of the remaining years.
“For L’Oréal, the timing will be perfect — by 2028, they will have integrated the Kering brands and blown out Creed and it will be easy for them to absorb Gucci,” said one source, “and this way Kering doesn’t have to write Coty a big check to buy out the contract.”
Kering has been dragged down by steep declines at its once star brand Gucci and a bulging debt load. At June 30, net debt amounted to 9.5 billion euros.
The group recently named a new designer at Gucci, Demna, who moved over from Balenciaga, where Pierpaolo Piccioli stepped in, and has been closing stores, selling real estate and reducing headcount after a dismal start to this year that saw group net profit plummet 46 percent in the first half.
To help reduce the debt ratio, Artémis, the Pinault family’s holding company that owns 42.3 percent of Kering, would keep its options open about selling its 29 percent stake in German sporting goods firm Puma. Industry sources say that Kering is also considering spinning off its eyewear division, among other divestitures.
A Kering spokeswoman could not be reached for comment on Sunday.
In 2016, Kering took back its eyewear business from Safilo Group SpA and grew the entry-level category in-house. Industry experts said that gave Kering the confidence to make a similar move in beauty.
During recent analyst meetings, Kering had been touting eyewear and beauty as solid revenue earners at a time when fashion has been highly cyclical. But big change is afoot under de Meo.
“We will initially focus our efforts on the most effective levers to improve the quality of our capital allocation and generate a tangible operational rebound,” he said on Sept. 9. “We will have to continue to reduce our debt, cut our costs and, where necessary, rationalize, reorganize and reposition some of our brands.”
A day later, Kering and Mayhoola jointly announced that the current ownership structure of the Valentino house will not change before 2028 at the earliest, marking an amendment to their shareholders’ agreement inked at the time of Kering’s acquisition of a stake in Valentino in 2023.
As per the original deal, when Kering bought a 30 percent stake in Valentino for 1.7 billion euros in cash, the French group had an option to buy 100 percent of Valentino’s capital by 2028. Mayhoola could become a shareholder in Kering, with the purchase price linked to the Italian fashion brand’s performance.
“This was already a signal, when Kering said they would not exert their right-to-buy option,” said Karine Ohana, managing partner of independent investment bank Ohana & Co.
In the first half of this year, Kering Beauty’s sales were 150 million euros, up 9 percent on a reported and comparable basis. In the second quarter of 2025, the division’s sales rose 12 percent in like-for-like terms, driven especially by Creed women’s fragrances’ strong performance, Kering said.
In 2022, the year before Creed’s acquisition, the brand generated revenues of around 250 million euros with a high EBITDA margin. Opportunities for brand development included the Asia-Pacific region, where it had limited exposure; travel retail, where it had little to no presence, and women’s scents, which could be expanded.
The Creed deal came after Kering was in the chase to acquire Tom Ford International, which eventually was bought by that company’s existing beauty licensee, the Estée Lauder Cos., for $2.3 billion. Kering was also reportedly interested in acquiring luxury brand Byredo, which was snapped up by Puig, for an estimated 1 billion euros.
“Maybe Creed was too big an acquisition for Kering,” another industry source said. “If they had started smaller it might have been better, but clearly putting 3.5 billion euros in one asset puts so much pressure on people and the beauty division.”
The multiple paid for the brand was extremely high, especially for a non-native beauty-player to pay.
“Once you have that kind of money invested in your business, you need to deliver,” the source continued. “It was a big bet to start with Creed. They should have built it more steadily on the long run without too much investment.”
