Burberry and Inter Parfums have announced that after months of negotiations, the two companies will not renew their fragrance and cosmetics licensing agreement.
The companies said that they had been unable to agree on final terms and an operating model for the licensing renewal, which means that it will be terminated on December 31, 2012.
Burberry is buying back the rights to the agreement for €181m ($220m), a sum that will enable Inter Parfums to reinvest in new business, but one that could impact its financials significantly in the short- to mid-term.
New license agreements and brand extensions
Likewise, the company has indicated that it is likely to invest in its existing brand portfolio, which should lead to brand extensions and a raft of new products in the course of the next year.
The company says that it now has a total equity of approximately €330m to invest in new licensing agreement, giving it ‘significant borrowing capacity’.
"Given our many strengths, we are confident in our outlook as we enter a new phase in our history. Based on current growth rates for all of our portfolio's brands, our preliminary full-year sales target for 2013 may reach approximately $400 million at current exchange rates," said Inter Parfums CEO Jean Madar.
Burberry has been the driving force behind Inter Parfums growth
Over the past few years Burberry has proved to be the driving force behind Inter Parfums considerable growth rate, driven by brand extensions beyond male fragrance, into the women’s category, together with a range of bath and body products.
As a result, the company’s annual turnover grew by 34 percent to $615m in 2011, with Burberry sales attributing to approximately 60 percent of this total, with consumers the world over seduced by the iconic British clothing and accessories brand.
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 agreement began in 1995 with the Burberry fragrance, and has since been 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.