Japanese cosmetics and personal care giant, Shiseido Company Limited, announced it is partially terminating its global license agreement with Italian luxury fashion label Dolce & Gabbana (D&G). The license agreement would cease with effect from December 31st, 2021 for all product categories, activities and markets, except France.

Under the agreement, Shiseido had been developing, producing, marketing, and distributing D&G’s make-up, skincare, and perfume products since October 2016, utilising considerable resources. However, the D&G brand failed to make a mark in the booming beauty and grooming market in mainland China, and the cost structure of the agreement undercut Shiseido’s toplines. To add to its woes, D&G got mired in controversy in 2018, as its #DGLovesChina advertisement was deemed derogatory to the Chinese people, thereby sparking public outcry and boycott of its products.

The brand took a further hit as the COVID-19 pandemic grounded people at their homes, and shuttered beauty retailers for a prolonged period, thereby derailing demand for luxury beauty and grooming products. Accordingly, 12% of Chinese respondents in a GlobalData 2020 COVID-19 survey said they had stopped buying beauty and grooming products as it was beyond their shopping budget, while another 53% said they were buying products in the low-to-medium price range*.

Shiseido estimates the license termination will translate into an extraordinary loss of JPY35 billion (US$323 million) in its FY2021 results ending December 31st, 2021. The move is a part of Shiseido’s “WIN 2023 and Beyond” strategy to turnaround its business by exiting mass market segments to focus on its high-margin prestige skincare segment. Accordingly, the Japanese beauty MNC divested its low-revenue personal care segment to CVC Capital Partners for JPY160 billion (US$1.5 billion) in February 2021. In May 2021, the company also announced the sale of its North American make-up brands Bare Minerals, Buxom, and Laura Mercier.

Beauté Prestige International S.A.S., the Paris-based subsidiary of Shiseido, which manages Shiseido Group EMEA’s (Europe, Middle East and Africa) global fragrance division, and the D&G license will retain the D&G license for the French market, and will continue worldwide manufacturing and distribution of D&G products until January 1st, 2022.

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By GlobalData