MILAN — With memories of their 20th anniversary celebration still lingering, Stefano Gabbana and Domenico Dolce have another reason to celebrate.
The fashion duo has signed a new fragrance license with Procter & Gamble Prestige Products, ending drawn-out negotiations and nearly two years of speculation. The announcement by P&G in Milan Wednesday confirmed several reports by WWD, the last of which appeared Oct. 21.
According to industry sources, P&G beat other top-flight competitors, which reportedly included L’Oréal and Estée Lauder. While the terms of the deal were not disclosed, market sources said the price tag was at least 100 million euros up front, or $120 million, and a 10 percent royalty agreement.
“We want the Dolce & Gabbana fragrance house to become the [number]-three or -four player in the world. That’s the objective. It’s ambitious, but the platform is clearly there also because the strength of the fashion house is unprecedented,” said Hartwig Langer, president of P&G prestige products.
The production and distribution of Dolce & Gabbana’s fragrances will pass to P&G on July 1, ending the Italian brand’s historic 15-year license with Euroitalia. Riding the wave of Dolce & Gabbana’s fashion success, Euroitalia built a robust fragrance business for the fashion house with annual wholesale sales in excess of 200 million euros, or $240.8 million at current exchange, according to Dolce & Gabbana’s general affairs director, Cristiana Ruella.
While praising the family-run Euroitalia for having built the brand’s fragrance business, Ruella noted the manufacturer didn’t have the international reach required for further expansion.
Dolce & Gabbana’s fragrance lineup includes Dolce & Gabbana Parfum; Dolce & Gabbana Pour Homme; Light Blue, which often ranks in the top five bestsellers in the U.S.; Sicily, By Dolce & Gabbana men’s and women’s, and D&G Feminine and Masculine.
While Langer shied from giving a time frame for sales growth, Markus Strobel, general manager at P&G prestige products, is confident they will double the brand’s wholesale volume in the next five years. Plans include launching three new fragrances in the first two years and eventually developing a makeup line.
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On the retail front, the plan is to secure more exposure within strategic doors rather than increase the number of sales points.
“I think the current distribution looks fine and we will focus on the existing business because we feel there’s still space to grow,” said Langer. “But rather than increasing the number of doors, our focus is to secure more space within them to increase sales.”
Both parties said it was premature to disclose further details or discuss future advertising expenditures.
“We are at a very crucial point in the history of our company and today’s choices ensure the strength and solidity of Dolce & Gabbana’s future and of its brands in particular,” said Stefano Gabbana and Domenico Dolce in a statement. “We see in P&G a partner capable of supporting us in achieving our growth objectives both in business terms and in the brand’s consolidation: Nothing like a perfume can make a brand universally known and timeless.”
Dolce & Gabbana has had impressive sales momentum in the last few years. In September, the designers celebrated 20 years of doing business with a blockbuster runway show and capped it off with a blowout party, which Italy’s Prime Minister Silvio Berlusconi attended with his daughter, Barbara.
For the fiscal year ended March 31, Dolce & Gabbana’s consolidated revenue, which excludes that of licensees, totaled 686.4 million euros, or $826.5 million.
But while Dolce & Gabbana is a major luxury player, P&G is still carving its path — and that was one of the defining factors for the Italian fashion house in choosing the American consumer products giant.
“What we liked about P&G was the fact that it doesn’t feel it has arrived in the luxury goods market and that’s stimulating,” said Ruella in an interview at Dolce & Gabbana’s showroom with Langer. “P&G assures us growth from a quality standpoint, through a capillary worldwide distribution.”
Langer admitted it would be arrogant to say P&G knows all about the luxury market. “To a certain extent, it’s quite clear that Mr. Gabbana and Mr. Dolce really know a lot more about luxury than we do and that is something we are eager to absorb,” said Langer. “On the other hand, we know the fragrance consumer. Whether it’s luxury or mass, it’s really about fulfilling needs, desires and dreams, but in a holistic way.”
The licensing deal is in line with P&G Beauty Corp.’s strategy to strengthen its core business and focus on higher-growth and higher-margin businesses.
— With contributions from Courtney Colavita and Stephanie Epiro