In the past week, beauty giant L'Oreal has been very active.
On October 20, the company announced a €4 billion (approximately CNY 33.2 billion) acquisition of Kering Group's beauty business, securing a 50-year beauty license for major brands including Gucci and Balenciaga. Following this, L'Oreal's CEO, Nicolas Hieronimus, made a clear signal during a media interview on October 21: the group is preparing to discuss potential collaborations with the Armani Group based on Mr. Armani's will.
Such a concentrated investment strategy reveals the ambition for counter-cyclical expansion. On one hand, L'Oreal is rapidly filling gaps in its high-end beauty portfolio through strategic acquisitions of other brands, particularly amidst a slowing growth landscape, where the infusion of super brands like Gucci and Armani is critically needed for new growth momentum. On the other hand, in a time of increasing market differentiation, L'Oreal aims to secure core luxury brand resources for the next 50 years, establishing licensing barriers.
This is not just about simple scale expansion, but a strategic positioning during an industry transformation period. On October 22, L'Oreal disclosed its sales performance for the first three quarters, reporting sales of €32.807 billion, with comparable and constant currency growth of 3.4%, and adjusted growth of 3.7%. Both the North America and mainland China markets continued to show recovery, leading to growth across L'Oreal’s various divisions and regions. The financial report highlighted that North Asia, after experiencing two years of stagnant growth, has seen a positive comparable increase of 0.5% in the first nine months.
Moving forward, L'Oreal's strategic positioning will shift from being a brand manager to that of an "ecosystem builder." With the collaboration with Kering, could this open up opportunities for a second growth curve?
Strengthening High-End Beauty Gaps As other beauty giants continue to cut back, L'Oreal has acquired three new brands this year, including the professional hair brand ColorWow and the skincare brand Medik8, thereby filling its niche in high-end salon hair care and professional skincare. Additionally, L'Oreal has taken a long-term minority stake in the luxury fragrance brand Amouage.
The major deal with Kering encompasses three key elements: the direct acquisition of the British high-end niche fragrance brand Creed, securing a 50-year beauty license for Gucci, Bottega Veneta, and Balenciaga, and jointly exploring new opportunities in the field of health and longevity science.
Once the existing business licenses between Kering and Coty expire, L'Oreal will also gain a 50-year exclusive license to develop and distribute perfumes and beauty products for Gucci.
During the financial report, Hieronimus stated that this collaboration with Kering aims to replicate the success pathway of "Armani Beauty," where the brand achieved over €500 million in sales just four years after partnering with L'Oreal.
He further pointed out that the integration of Creed island precisely fills L'Oreal's gap in the niche high-end fragrance market (priced above €200), which is currently the fastest-growing segment in the fragrance category, while L'Oreal's presence in this area has so far been limited to Aesop.
Currently, Creed's products hold two spots among the top twenty in sales of perfumes priced over CNY 1,000 on Tmall, with Bottega Veneta also making the list. Last October, the brand launched five new perfumes, each priced at $450 (about CNY 3,290), firmly establishing its luxury positioning.
According to analysis from Accenture, the average operating costs for leading international luxury brands are projected to increase by approximately 3.5% year-on-year in 2024. Meanwhile, policy changes coupled with macroeconomic fluctuations have presented higher challenges in supply chain and compliance sectors for companies. In light of slowing consumption growth, refined operations, localized talent organization capabilities, and data-driven experience management have emerged as key issues for enhancing profit margins and business resilience. As such, Kering's decision to partner with L'Oreal can also be seen as a proactive measure for self-rescue. However, in this competitive landscape, luxury brands need to excel in customer operations, which is a capability where L'Oreal shines most.
“Faced with the multiple challenges of industry pressure, consumption shifts, and rising operational costs, luxury brands need to refocus on brand strategy, reconstruct their capability system, and achieve a comprehensive upgrade from brand-driven to user-driven approaches,” asserted Song Lingjun, Director of Strategy and Consulting at Accenture Greater China, in an interview. In today's landscape where social media has become central to consumer decision-making, reliance solely on a standout product strategy has become increasingly ineffective. Luxury brands must systematically arrange their “content power + community power” by creating a high-frequency, personable, and resonant content ecosystem to ignite user interest and build brand trust.
Targeting Estée Lauder? This massive acquisition comes at a time when L'Oreal's performance is on the rise, with the much-watched North Asia region achieving its first positive growth after two years of stagnation. In the third quarter, the mainland China market showed single-digit growth, primarily driven by recovery in the premium cosmetics segment and the innovative star products of brands like Lancôme and Helena Rubinstein.
Simultaneously, the professional hair products department remarkably led with a growth rate of 7.4%, while the fragrance category continues to maintain strong growth momentum. The varied performance results across categories align with their acquisition strategy, which has been validated by another beauty giant, Estée Lauder.
In 2023, Estée Lauder spent $2.8 billion to acquire TOM FORD, a brand that has performed well since. Earlier, Estée Lauder's financial report for the fiscal year 2025 (ending June 2025) showed a year-on-year decline of 8% in organic net sales, while operational profit fell to a loss of $785 million. The company’s performance in the Chinese market also saw a year-on-year decline of 6%, with a continuing downward trend hard to reverse.
Despite these challenges, for the second half of fiscal 2025, brands like La Mer, TOM FORD, and Estée Lauder continue to drive growth in Estée Lauder Group's market share in mainland China.
As L'Oreal accelerates its luxury beauty layout, the competition among beauty giants has transcended product levels, entering all-encompassing competition in brand matrices, channel innovations, and digital transformations.
In 2024, Kering Group's revenue was €17.194 billion (approximately CNY 130.1 billion), a year-on-year decline of 12%; its net profit attributable to the group was €1.133 billion (approximately CNY 8.577 billion), down 62% year-on-year. Yet, its beauty business recorded notably positive results, with total beauty revenue reaching €323 million (approximately CNY 2.4 billion) in 2024, growing 421% year-on-year. Although this segment has been one of the few to achieve growth within the group, its relatively small scale means it still contributes minimally to overall performance.
Consumer industry investors have shared that lifestyle, situational, and demand changes pose considerable challenges for traditional giants. Many emerging startup brands feel that they are not invincible, as these brands often embody a younger image and are more adept at utilizing youthful visual languages and communication methods.
From these insights, the long-term growth and innovation capacities of brands will prove more essential than merely promoting standout products, which is a bottleneck that both L'Oreal and Estée Lauder need to break through.
From the performance view in the Chinese market, L'Oreal appears to be a step ahead. The key point of future interactions with the Kering business and maximizing commercial effects remains a topic of interest.
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