Last month, LVMH announced it had taken a majority stake in high-end fragrance brand Maison Francis Kurkdjian. BW Confidential talks to president and co-founder Marc Chaya about the reasoning behind the deal and the future of the brand
What will change under the new ownership structure?
The alliance with LVMH will allow us to anchor our long-term vision in a very competitive environment and take the maison to the next level with the help of a partner that understands creativity and luxury. The group can help [us] accelerate by sharing best practices and by offering us local infrastructure, so it’s a fabulous growth opportunity.
We are growing very fast; we’re recruiting constantly. Francis and I will remain at the helm of the company over the long term. The LVMH group offers a decentralized approach, and celebrates entrepreneurship and independence of its maisons, and this is something that resonates with Francis and myself.
Could you have remained independent?
We were highly profitable and cash-generating, so [the deal] was not because of financial necessity. The industry is consolidating and now there is a clear segment called luxury, high-end fragrance, and this segment is narrowing down. We worked very hard to exist in this segment and we wanted to make sure we could sustain this success and our vision over the long term. With industry consolidation, we had to think of the right partner that would help us implement our vision in the long term. A lot of our competitors have also taken the strategic decision to join bigger groups.
Are you concerned about losing your creative independence and the tough financial targets involved in being part of a large group?
[Before we founded Maison Francis Kurkdjian] I was a partner with Ernst & Young. Our company was already highly profitable. Finance for me is a necessity; it’s not something I see as a threat. We are in line with the financial culture of excellence of the group, and we already had this culture; we are not worried at all.
What are your priorities in terms of expansion?
We are already growing at a very strong pace. We posted over 50% growth last year, and [growth] has been consistent since the maison was founded. We are in 42 countries, with over 400 doors. We have a strong position in the US and this will be strengthened further. With the help of the group, we might re-center some markets where growth hasn’t met our expectations. We might decide in some markets, for example Russia, to bring back our operations in-house. We might penetrate new markets where we are not currently present—the biggest of which is China. But this is not going to happen overnight. In Russia we will integrate changes in the coming months. In other markets we have our own teams, and our own subsidiary in the US, and this will continue. We don’t expect any change in [any other of] our bigger markets.
How will your distribution strategy change?
Our market is mainly wholesale at this stage, and we still have a lot of low-hanging fruit in wholesale. We are growing in existing channels. Sometimes you can multiply your sales by four through existing channels instead of diluting your efforts by trying to target several channels at the same time for much less profitable growth. You will also see targeted retail development, but in the same spirit as what we have done so far. The company is seven and a half years old now, and we already have 10 stores, two in Paris and others that we opened through local partners, in Dubai, in Taiwan, where standalones do better than multibrand and department stores. Our Paris boutiques are profitable and still growing. Of course in retail you can control your image better and you can speak to your customer the way you want to. However, wholesale also has its advantages, as being in a department store gives you foot traffic. It’s all about the balance of having retail locations in key cities, and in others wholesale. In the future online is my priority. Online for us has been and will remain a very important [channel].
What is the recipe for selling fragrance online successfully?
I don’t think it’s difficult. Our number-one door in the US is Neiman Marcus online, and it’s almost three times bigger than the biggest retail door. Our own website has shown growth of over 100% year-on-year for the past three years, and it’s growing over 60% this year [so far]. Replenishment happens online. People see [a product] in a store, but order it online. Some customers like to go into a store, sit and learn about the scents, leave with samples then buy online. Others will go and buy their perfume in-store on the spot. It’s all about offering your customers the ability to decide when and where they want to buy. Today, almost 50% of our customer communication happens through Facebook and Instagram. How do you see the M&A outlook for smaller fragrance brands? We’ve seen a lot of consolidation recently. Most of the key players that were independent are now part of bigger groups. It’s harder now for newer players to crack the market, because the barriers to entry are becoming tougher. M&A will continue to play out, but maybe not at the pace we’ve seen recently. You might still see some consolidation, but the number of targets is more limited now.
How should the fragrance market aim to move forward?
There is still room for growth. If you stop thinking about growth, it is the end of your company. You should always target growth, because even if there is no growth there are still market shares that are held by competitors. The more the market is competitive, the more the value proposition is interesting, because it pushes companies to go towards more creativity and differentiation. When the market is booming, it is when sometimes people go towards easiness. Successful companies are those that are able to stay on top of their market.
SNAPSHOT: Maison Francis Kurkdjian
N° of doors: 400+
Sales split by region: US: 40%; Western Europe and Middle East: 40%; Rest of world (Asia & Eastern Europe): 20%