The acquisition deal, announced earlier this week by Estée Lauder, comes as no surprise since CFO Tracey Thomas Travis recently called mergers and acquisitions “a high priority” for the company.
Le Labo, known for mixing fragrances on-demand, providing incomparable service and the exclusivity of its scents, will be managed at Estée Lauder by John Demsey, the company’s group president, who currently oversees other well-known brands the company has taken over and developed including Bobbi Brown, MAC Cosmetics, and Smashbox.
The company’s merger and acquisition tactic is not one of absorbing the competition but instead of uniting, in a sense, with small companies that have big names and big potential. “As you know we don’t have a strategy of weak M&A partnership but rather it is about buying brands that we can develop over the years,” said CEO Fabrizio Freda.
Global potential
“One of the leading strengths of our Company is our ability to identify brands with unique positioning and nurture them to accelerate their momentum and realize their full growth potential,” said William P. Lauder, executive chairman of The Estée Lauder Companies, regarding the Le Labo acquisition.
It is, in part, Estée Lauder’s impressive history of fostering and globalizing pioneering brands that explains Le Labo’s willingness to join the company: “The Estée Lauder Companies not only understands and respects the core elements of our business, but also has the resources to help us continue to grow into a more fully expressed sensory lifestyle brand,” lLe Labo's founders Fabrice Penot and Eddie Roschi, said in a joint statement.
The fine fragrance segment
The luxury fragrance sector is a high-value market dependant on a particularly discerning customer base. This year’s track report from the NPD Group’s found that just 1% of women use fine fragrances exclusively. And, “understanding the dynamics behind the desired scent experiences of today’s female fragrance consumers, and their related purchase behaviours, is necessary for the business to evolve and grow as customers do,” said Karen Grant, NPD’s vice president, reflecting on the report.
Estée Lauder’s decision to acquire the young prestige fragrance brand (Le Labo was founded in 2006) appears in line with both the company’s aptitude for bolstering specialized brands and the fragrance market’s potential in the luxury segment.