The two companies had spent months earlier on this year trying to negotiate a new contracting license agreement, but the negotiations broke down, with Burberry declaring that it would not renew its current contract, which ends on 31 December, 2012.
However, the two companies have confirmed that they have signed the transitional agreement, after Burberry has struggled to find a new contract manufacturer to take over the lucrative licensing agreement to produce its extensive range of high-end fragrances and personal care items.
Under the terms of the new contract, Inter Parfums will continue to operate the contract license for the Burberry brand until March 31, 2013, while simultaneously reaffirming the exit payment for the existing contract at the end of this year.
Production looks set to go in-house
Following the failure to renew the contract with Inter Parfums, Burberry had been in negotiations with Beauté Prestige International, but those negotiations were said to have ended last month, according to industry sources.
It now looks increasingly likely that Burberry will take the fragrance and cosmetics production in-house, which would also explain the additional three months ramp up period that will be necessary to arrange such an under taking.
Inter Parfums is headquartered in France, but also operates a significant part of its business from its New York-based division, which serves the North American market.
At the end of July Burberry confirmed that it was buying back the rights to the agreement for €181m ($220m), a sum that could enable Inter Parfums to reinvest in new business, but one that could impact its financials significantly in the short- to mid-term given that the sales make up approximately 60 per cent of its annual revenues.
Burberry brand portfolio goes beyond fragrances
The current licensing agreement stipulates that Inter Parfums is under contract to manufacture and market Burberry range of fragrances and beauty products worldwide as a part of its prestige brands portfolio.
The licensing was first agreed in 1995 with the Burberry fragrance, and was then extended to include seven other product lines, including Burberry Weekend, Burberry Brit and most recently Burberry Body, which was added to the portfolio in 2011.
The line-up includes male-and female-dedicated products, that touch on beauty and fragrance categories as diverse as body spray, bath and shower gel, shampoo and deodorant.