The Dolce & Gabbana (D&G) license was managed by Beauté Prestige International, which is in charge of the global fragrance business under Shiseido Group EMEA.
The license termination, which is subject to specific closing conditions, would be effective for all activities and markets, with the exception of activities carried out from France, from December 31, 2021.
According to Shiseido, the license termination in France is under discussion to consider the option given by Dolce & Gabbana, and proper local information and consultation processes with employee representatives will occur in full alignment with French labour law.
In addition, Shiseido said both parties were currently discussing the potential to pursue the production and distribution of D&G beauty products on a worldwide scale for a minimum 12-month period.
This would come into force on January 1, 2022 for a 12-month period, renewable upon mutual agreement.
The effect of this partial termination on Shiseido’s consolidated financial results for the 2021 fiscal year ending December 31 is expected to cost the firm approximately JPY35bn (USD323m) of extraordinary loss, including impairment loss on trademark rights
This decision to terminate this licence is in line with the company’s medium-to-long-term strategy, dubbed internally as WIN 2023 and Beyond, which was developed in response to the COVID-19 pandemic and its impact on the business.
Under this strategy, Shiseido is shifting its priorities from business growth via sales expansion to a focus on profitability and cash flow.
The firm is aiming for an operating profit margin of 15% by 2023, largely by focusing more on its prestige skin care business.
In 2016, Shiseido beat out Coty, which was then undergoing a merger with Procter & Gamble (P&G), to ink a deal with the Italian fashion house to develop, manufacture and distribute the brand’s fragrance, make-up and skin care lines.
The signing of the license agreement was in line with the group’s 2020 vision, which aimed to accelerate global success for the conglomerate through organic growth and acquisitions.
The deal was particularly important to strengthening its fragrance category, which Shiseido said was of ‘special importance’ in Europe and the Americas beauty markets. Furthermore, it hoped to expand its brand portfolio in the global prestige category.
This news follows Shiseido’s February announcement of selling its low-cost personal care business to CVC Capital Partners in a deal worth 160 billion yen ($1.5bn) in order to concentrate on its high-end cosmetics business.
A chequered past
In 2018, D&G drew the ire of Chinese citizens for its #DGLovesChina campaign, which was meant to pay tribute to China and its people.
It featured a controversial video of a Chinese model appearing to have trouble eating Italian foods, such as pizza and cannoli, with chopsticks before a male narrator asks: “is it too huge for you?”
The situation escalated when private messages of D&G co-founder Stefano Gabbana, which showed derogatory comments about China, were made public.
The fashion brand has refuted the claims that Gabbana made the comments, insisting his account was hacked.
The D&G fashion show, originally scheduled to take place in Shanghai around the time, was later cancelled.
Furthermore, the calls for a boycott prompted top e-commerce firms including Tmall, JD.com, Xiaohongshu and Secco to stop carrying the brand.
It seems like D&G never recovered from the controversy and continues to struggle in one of the most important luxury markets.
Just last month, it shuttered three more stores in China after closing its Beijing flagship and Shanghai East Nanjing Road boutique in 2020.