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.  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.
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. 
- P&G 2016Q3 Earnings Review
- Here’s What to Expect From P&G’s Q3 Earnings
- Procter & Gamble’s Q2 Organic Sales Growth Returns to Positive Territory on Pricing; Profits Jump on Productivity Improvements
- Innovation May Well Have Driven P&G’s Organic Growth Back to Positive Territory in Q2
- Here’s Why Procter & Gamble Should Not Break Up
- Here Are Ralph Lauren’s Key Growth Drivers
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,  and the second with Alexander McQueen which is effective immediately  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.  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.Notes:
- World Flavors & Fragrances to 2016, Freedonia Group, September 2012 [↩]
- Procter & Gamble Expands Its Prestige Beauty Presence In The Travel Retail Market, Trefis, June 2013 [↩]
- Procter & Gamble and Stella McCartney Announce Fragrance License Agreement, P&G Corporate Announcements, June 2013 [↩]
- Procter & Gamble and Alexander McQueen Announce Fragrance License Agreement, Business Wire, June 2013 [↩]
- YSL Beauté (L’Oréal Luxe) and Stella McCartney decide not to renew their license agreement, Press releases, L’Oréal Group [↩]