At Hermès, a $67 Lipstick Could Hint at Big Ambitions

(Bloomberg) -- Hermes International unveiled its first products from a new beauty division, adding $67 lipsticks to a brand better known for $9,000-plus Birkin bags and $400 silk scarves.

By expanding its offer in cosmetics, Hermes is testing the waters of a category that has long driven sales and profit for rivals like LVMH’s Christian Dior and Chanel. Hermes, which says it’s committed to developing beauty products in-house as much as possible, plans to add new categories of makeup every six months.

The lipsticks -- whose brushed metal cases recall the hardware on Hermes bags -- will be sold only in the brand’s own stores and selected retail outlets.

“They’re doing this very cautiously so it has no risk to dilute the brand,” said Mario Ortelli, a London-based luxury consultant.

As a latecomer in the luxury cosmetics arena, Hermes has plenty of catching up to do. Chanel’s beauty range, which founder Coco Chanel launched in 1924, racks up an estimated 4 billion euros ($4.4 billion) in annual sales. That compares with just 312 million euros at Hermes, whose beauty counters have been limited to perfumes and soap.

After the soft launch, Hermes is hoping adding makeup and skincare will eventually boost its perfume unit, which currently makes up just 5% of the brand’s roughly 6 billion euros in annual sales. The permanent collection of the new lipstick will offer two-dozen shades, and cases can be recharged.

‘Three-Dimensional’

“It’s very important for a house of perfumes to be three-dimensional,” Chief Executive Officer Axel Dumas told investors last year when first announcing the project. Makeup, skincare, and perfume drive sales in different regions of the world, so “you need to have all three.”

The color cosmetics market is expected to grow more than 6%, to $77.5 billion this year, according to data from Euromonitor.

While Hermes has been careful to limit expectations for the new products’ immediate impact on sales, it has remained coy about makeup’s long-term prospects. A June report simply said the division “has some nice surprises in store.”

Hermes shares rose 0.6% early Thursday in Paris.

“In five years, will this have a material impact like for Chanel or Dior? No. In 50 years, maybe,” Ortelli said. “When the Hermes family launches a new product line they certainly have the very long-term view in mind.”

To contact the reporter on this story: Robert Williams in Paris at rwilliams323@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, John Lauerman

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