A high-stakes contract clash has emerged in the beauty sector, with Coty Inc.’s Swiss subsidiary filing a lawsuit in U.K. commercial court against Gucci and its parent company Kering. The suit, lodged by HFC Prestige International Operations Switzerland Sàrl on October 20, names Gucci America Inc., Guccio Gucci SpA, and Kering SA as defendants. The case centers on the long-standing Gucci beauty and fragrance licensing relationship between Coty and Kering. It follows closely from Kering’s October 19 announcement that it would sell its beauty division to L’Oréal, a deal that includes a potential license to produce Gucci beauty products.
In addition to forming a strategic alliance and granting beauty licenses for Kering’s Balenciaga and Saint Laurent brands, the €4 billion ($4.66 billion) Kering-L’Oréal transaction includes a critical provision: L’Oréal will have the option to enter into an exclusive 50-year license to create, develop, and distribute Gucci beauty and fragrance products once Coty’s current agreement expires. Coty’s Gucci license, which is slated to expire in 2028, generates roughly $600 million in annual retail sales for the beauty giant.
Information about Coty’s complaint is currently sparse. However, a dive into the parties’ respective earnings calls over the past several weeks is telling …
> Kering: In a Q3 call on October 22 Kering’s management addressed the current state/future of the Gucci license, saying that in the deal “there is an option or the right to grant the Gucci license, of course, at the expiration of the license with the current terms and conditions we have with Coty.” Kering COO, Jean-Marc Duplaix, stated that “the plan is to wait for the expiration of the license. We will see if at the point there will be an opportunity to discuss with Coty.”
Since then, a spokesperson for Kering said, “With respect to the English court proceedings initiated by Coty in relation to the Gucci license, the Kering group categorically rejects the unfounded allegations advanced by the Coty group and will vigorously defend its rights.”
> Coty: In a quarterly call of its own on November 6, Coty CEO Sue Nabi refused to speak in detail about the litigation, except to say that Coty “will defend our rights until the last day, until the last hour of the contract.” She confirmed that “there is no change to Coty’s existing license [as a result of the Kering, L’Oréal deal], and our ability to operate the Gucci beauty license or contractual rights remain in place and continue as agreed.”
> L’Oréal: In its earnings call on October 21, L’Oréal spoke about the Kering deal, with CEO Nicolas Hieronimus affirming that the acquisition of Kering Beauty includes “the Creed niche fragrance brand, as well as the beauty and fragrances licenses of Balenciaga, Bottega Veneta, and, when available, Gucci.”
One analyst – and the media at large – commented on the potential fate of the Gucci license, saying, “Could you see a scenario where you could get a license before that date? In the meantime, if you can’t, what is the risk that the Gucci license, to some extent, could deteriorate between now and 2028?” Hieronimus said in response that “as far as the Gucci license, it belongs to Kering to comment on that.”
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