Procter & Gamble Positions Itself For The Boom In The Global Fragrance Market

by Trefis Team
-13.39%
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70.29
Trefis
PG
Procter & Gamble
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Procter & Gamble (NYSE: PG) is slowly positioning itself to take advantage of the growth in the global perfumes and fragrances market, which is slated to rise at an annual rate of 4.4% over the next three years to reach $26.5 billion by 2016 at market prices. [1] Procter & Gamble has recently entered into an array of licensing agreements with Stella McCartney and Alexander McQueen to manufacture and market new fragrances under their respective brands.

See our full analysis for Proctor & Gamble

Procter & Gamble markets fragrances and perfumes under P&G Prestige, which falls under its beauty division. The division accounted for over $20 billion in sales in 2012, about 25% of the company’s total revenues. Procter & Gamble’s beauty division represents products of iconic brands like SK-II®, Hugo Boss®, Dolce&Gabbana®, Gucci®, Lacoste®, James Bond 007® and Puma®, making it a major competitor in the world prestige beauty and fragrance market. Recently the company also forayed into the booming travel retail market with Dolce&Gabbana The Make Up, setting up its second retail outlet at the London Heathrow Terminal 5. [2]

License Agreements With Stella McCartney And Alexander McQueen

Procter & Gamble has entered into two separate licensing agreements, one with Stella McCartney which is effective from mid-September 2013, [3] and the second with Alexander McQueen which is effective immediately [4] to manufacture and sell designer fragrances.

Stella McCartney, a 50/50 joint venture partnership between Ms. Stella McCartney and Kering established in 2001, recently decided to discontinue its license agreement with Yves Saint Laurent Beauty which is a part of L’Oréal (PINK: LRLCY). The brand’s agreement with Procter & Gamble has been announced only few weeks after its decision to discontinue with L’Oréal and may hint towards Procter & Gamble’s focus to capture a part of the market held by L’Oréal. [5] L’Oréal currently owns about 14% of the global perfumes and fragrances market which is similar to that of Procter & Gamble.

Alexander McQueen, also a part of the Kering Group, operates in over 50 countries across the world and sells women’s and men’s ready-to-wear apparels and accessories. The company discontinued its two fragrance brands, Kingdom and My Queen, in 2008. With this agreement with Procter & Gamble, we expect Alexander McQueen to create a successful fragrance brand which complements its leadership in its other operating segments. We expect Procter & Gamble to expand its market share in perfumes and fragrances worldwide over the next year after it starts distributing these latest additions to its portfolio.

We currently have a $70 Trefis price estimate for Procter & Gamble.

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Notes:
  1. World Flavors & Fragrances to 2016, Freedonia Group, September 2012 []
  2. Procter & Gamble Expands Its Prestige Beauty Presence In The Travel Retail Market, Trefis, June 2013 []
  3. Procter & Gamble and Stella McCartney Announce Fragrance License Agreement, P&G Corporate Announcements, June 2013 []
  4. Procter & Gamble and Alexander McQueen Announce Fragrance License Agreement, Business Wire, June 2013 []
  5. YSL Beauté (L’Oréal Luxe) and Stella McCartney decide not to renew their license agreement, Press releases, L’Oréal Group []
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