Charles Sternberg, Assistant Editor04.23.21
On April 23, Coty Inc. unveiled its long-term strategy, underpinned by six priorities for sustainable growth.
These initiatives build on Coty's actions over the past year that have accelerated its shift to sustainable and profitable growth—with greater cost controls and a more competitive market position.
In a presentation to investors, Coty chief executive officer, Sue Y. Nabi, outlined how the business is already delivering enhanced performance against these strategic priorities:
- Stabilization of Consumer Beauty make-up brands and Mass fragrances
- Acceleration of luxury fragrances and establishing Coty as a key player in Prestige make-up
- Building a Skincare portfolio across Prestige and Mass divisions
- Enhancing e-commerce and Direct-to-Consumer (DTC) capabilities
- Expanding in China through Prestige and select Consumer Beauty brands
- Establishing Coty as an industry leader in sustainability
“Coty is ideally positioned to accelerate sales and profit through our six strategic priorities, that will reposition and expand our portfolio to meet the great opportunities ahead,” Nabi commented. “Our performance will be supported by a purpose-led and highly focused portfolio: anchored in luxury with highly desirable brands and delivered through innovative omnichannel activations.”
She added, “Across our business, we are harnessing sustainability as the ultimate driver of innovation – enabling our brands to capitalize on growing consumer demand for outstanding beauty products that are clean and green. We intend to use this strategy to build Coty into a truly global beauty powerhouse.”
Strengthening Consumer Beauty and Mass Fragrances
Coty intends to strengthen the performance of its Consumer Beauty business by rejuvenating and repositioning several key brands, allowing it to capture new growth opportunities.
This involves plans to bolster CoverGirl, Sally Hansen, Rimmel, Max Factor, and adidas through a focus on brand equity, key trends, clear consumer targets, in-store execution, product innovation, and ensuring that each brand has a distinctive purpose.
A Fresh Approach for Covergirl
Coty expects to strengthen CoverGirl’s appeal to a broader U.S. consumer base. The objective will be to build on the brand’s heritage of pioneering key beauty trends – including clean makeup and makeup/skincare hybrid products – supported by new launches and innovative marketing.
CoverGirl, which this year celebrates its 60th anniversary, is already benefiting from this repositioning and is delivering improved sales.
To support this strategy, Coty will be unveiling a major new marketing campaign for CoverGirl ‘Simply Ageless’: the number one anti-aging foundation in the U.S. Targeting the growing demand for skincare-powered make-up.
Building a Comprehensive Skincare Portfolio
Coty intends to build its skincare portfolio across Mass and Prestige: capitalizing on key trends like regenerative medicine and creating products that are truly green, clean and sustainable.
Coty currently has three skincare brands, with a fourth brand, SKKN by Kim, launching in Fiscal Year 2022. Each brand occupies distinct positioning, price tiers, and geographic strengths.
Within its existing skincare portfolio, Coty is repositioning its brands for greater success. For example, Lancaster intends to transform from a regional UV protection brand to a leader in skincare enhancement and renewal.
Philosophy – which produces Purity, is expected to move from being a U.S.-centric wellbeing beauty brand to a leader in green, clean ‘ceutical’ skincare.
Accelerating Growth in Prestige and China
Coty intends to enhance the performance of its luxury business by accelerating its core Prestige fragrance business and capturing new opportunities in Prestige cosmetics and skincare.
By Fiscal Year 2025, Coty is targeting: skincare to increase from approximately 6% to over 10% of the revenue mix; Prestige cosmetics to increase from approximately 3% to a high-single digit percent of the revenue mix; and, lastly, China’s contribution to triple to over 10% of the revenue mix.
With Prestige fragrances, Prestige cosmetics, skincare and China operations delivering above-corporate margins, this targeted portfolio mix is expected to drive profitability and margin expansion.
Coty also expects to bring more fragrances to market and expand its presence in artisanal fragrances. The company claims it has no major Luxury licenses expiring based on their terms over the next five years.
Coty demonstrated the growth opportunity of Prestige through the success of Gucci Beauty. In the last nine months, Gucci cosmetics sell-out grew over 110% in the U.S. and by over 50% in Asia Pacific, while Gucci foundation sold more than 60,000 units in two months. Gucci Beauty has also seen outstanding success since opening the brand’s Tmall flagship.
Coty also noted the significant growth opportunity for leading artisanal fragrance brands in China, including Chloe, Tiffany & Co., and Bottega Veneta.
E-Commerce Fueling Luxury and Mass Growth
Coty plans to accelerate its e-commerce and Direct To Consumer (DTC) growth, through a transformed approach to its digital strategy.
In Q2 of 2021, the Company recorded 40% e-commerce sales growth driven by its Prestige and Mass businesses. Coty’s newly integrated digital approach is designed to build on this momentum and harness innovations, including social listening and social commerce.
Becoming an Industry Leader in Sustainability
Coty aims to create a more sustainable and inclusive world through its ‘Beauty That Lasts’ platform. The ‘Beauty That Lasts’ strategy is built on three key pillars: product, planet, and people.
To integrate sustainability within its product development process, Coty has announced its ‘Beauty That Lasts’ Index, a measure that sees Coty’s R&D division integrate robust sustainability criteria into the packaging and formula development of every new product.
Update: In June, Coty Redesigned CoverGirl Clean Pressed Powder Compact with 35% Less Plastic
Financial Guidance
Ahead of Coty’s Q3 2021 earnings announcement on May 10, 2021, the company reaffirmed its current financial guidance.
Coty anticipates an adjusted EBITDA of approximately $750 million for FY21, and remains on-track to end the financial year with net revenues between $4.5 billion and $4.6 billion.
