Beauty: Luxury’s ugly battleground


Sometimes, luxury can get ugly. High-end designers are shaking up the beauty market with make-up and nail offerings set to be the next big brand battleground.

Gucci debuted its hotly anticipated cosmetics collection with skin foundation at the center at Milan Fashion Week. The line, designed in-house by Frida Giannini and produced by Procter and Gamble, was an extension of Gucci's successful fragrance foray.

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Christian Louboutin, famous for its red-soled shoes that can sell in excess of $1,400, also launched a nail polish line in August.

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Big designers often use their cosmetics on models during major catwalk shows, and the bet on beauty helps brands keep design-hungry consumers in their ecosystem.

"The brands are so strong and they put so much effort into building the brand's continuous story and consumers feel they want to belong to that," June Jensen, U.K. beauty director for the NPD Group, told CNBC by phone.

"I think if you look at what is happening now I would be surprised if more designers didn't jump into the market."


The U.S. prestige beauty sales - high-end products sold in department stores - hit $2.2 billion in the year up to November 2013, a rapid 23 percent rise from the same period the year before, according to the NPD Group. Make-up is one of the most popular areas showing 25 percent growth in that period.

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In the U.K. the prestige make-up market was £264 million ($427 million) in the first half of 2014, with make-up showing a 12 percent rise from the year before. But the nail category is dominant and accounts for half of the industry's sales in Britain.

Analysts said cosmetics are "aspirational" and buying a $50 bottle of nail polish is attractive to a consumer who wants a luxury brand, but can't afford the $1,000 handbag.

"Aspirational luxury is a very strong market largely because you get to own a piece of the brand at an affordable price point," Rahul Sharma, founder of Neev Capital, told CNBC by phone.

"You can't afford the handbag but you can buy a lipstick."

Brands have 'suffered'

Although designers like Christian Dior and Chanel have been in the beauty game for a while, it is these newer players such as Marc Jacobs and Michael Kors creating waves in the industry, analysts said. Jensen said in a research note that Gucci's entry into the cosmetic space "raises the fashion stakes in the world of make-up".

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Many designers don't have the expertise to make beauty products so team up with industry experts. Marc Jacobs teamed up with LVMH's Sephora Unit, while Gucci partnered with Procter and Gamble. Some analysts said that entering the beauty market as a designer carried a lot of risks and finding the right company to work with is key.

"It is a much more difficult proposition, you need a lot of investment and need to create a lot of products in one go," Vivienne Rudd, director of innovation and insight for beauty and personal care at Mintel, told CNBC by phone.

"It is not the most straightforward business and some brands have suffered because they have got some components wrong."

- By CNBC's Arjun Kharpal