Sarah Jessica Parker, Beyoncé, and Jennifer Lopez are just a few of the celebs to promote Coty. It is one of the world's leading makers of beauty products for men and women. Coty has turned heads since François Coty created his first perfume, La Rose Jacqueminot, in 1904. Its lineup now ranges from moderately priced scents sold globally by mass retailers to prestige fragrances and nail polishes found in department stores. Coty's brands include adidas, philosophy, Rimmel, and Sally Hansen. Its prestige perfume labels are led by Calvin Klein. The company's parent, German private investment firm Joh. A. Benckiser SE, bought Coty to steer its fragrance and cosmetics business. In mid-2012 Coty filed to go public.
It's speculated, however, that Coty plans to delay its IPO until at least 2013. With new CEO Michele Scannavini, who replaced Bernd Beetz in August, at the wheel and with rivals such as Estée Lauder currently lagging behind others in the S&P 500 Index, Coty is being cautious. By opening its doors to public ownership, the beauty products maker gives its parent company an opportunity to cash out and exit its investment. Stockholders (who also hold stakes in Jimmy Choo shoes and consumer goods maker Reckitt Benckiser) would sell all common stock in the offering; Coty would not receive any proceeds. Although the initial public offer (IPO) lists $700 million as the fund-raising target, Coty is speculated to seek up to $1 billion. The company is known for back-to-back revisions to its growth strategy while rallying as "the new emerging leader in beauty."
Coty divides its activities among three product segments: Fragrances; Color Cosmetics; and, Skin and Body Care. Fragrances are its main revenue engine and traditionally deliver more than half of all sales. Across the segments, Coty identifies "power brands;" its top 10 brands are leading sellers and have the strongest potential for further growth thanks to their presence in all major distribution channels in both prestige and mass markets. The vast remaining portfolio is recognized as "beauty brands," or mass-market products positioned to retain a mainstream following.
Coty manufactures more than two-thirds of its scents and other beauty products at 10 facilities dotting France, Monaco, Spain, the UK, China, and the US (Sanford, North Carolina). More than 30% of Coty's products are made to specification by third parties. The company's sales reach spans more than 130 countries and territories. Regionally, Europe, the Middle East, and Africa account for approximately half of all sales; on a countrywide basis, the US generates nearly 30% of sales.
The sweet smell of success has recently eluded Coty. Following a 65% slump in earnings in 2010 from the prior year, Coty's bottom line remained flat in 2011 weighted by heavy acquisition and related restructuring costs. Year-over-year revenues rose slightly in 2010, but jumped 17% the next year. More than half (9%) of the growth was attributable to Coty's acquisitions of OPI Products, philosophy, Dr. Scheller, and TJoy. Excluding their contribution, fragrances led most of the top line's rise, followed by color cosmetics, buoyed by the popularity of new product launches. Both segments also benefited from a larger geographic presence, particularly in Europe, the Middle East, and Africa.
Strategically, Coty is focused on making over its global power brand lineup through product innovation and diversification, acquisitions, and licensing agreements with high-dollar names. Flexed for growth in the cosmetics space, the top 10 brands are anticipated to generate roughly 70% of earnings in 2012. To this end, the "skilled acquirer" made an unsolicited takeover for Avon in spring 2012. The $10 billion offer for the larger rival, by revenue about double the size of Coty and Coty's biggest-ever transaction, was rejected as too low.
More successful, Coty acquired Chinese skincare products company TJoy for $346.2 million in early 2011. The deal gave Coty a foothold in China for distributing its products, as well as extended the beauty company's skincare offerings. A little more than a week earlier, Coty bought out German company Dr. Scheller Cosmetics, known for its makeup sold under the Manhattan name brand. The $53.9 million purchase, which included Scheller subsidiary DSC, furthers Coty's interest in building its color cosmetics portfolio and presence in the German market (accounting for 10% of sales in 2011). In a larger investment, Coty took over nail care specialist OPI for $948.8 million. A manufacturer of more than 200 colors of high-end nail polish, in addition to nail treatments and hand care products, OPI considerably enhances Coty's color cosmetics business. Coty also acquired philosophy, a prestige skincare and cosmetics business, from The Carlyle Group for $929.7 million in late 2010. The philosophy product line is sold by QVC, Sephora, Ulta, Nordstrom, among other major retailers.
Coty, meanwhile, has made the most of a number of licensing agreements. It holds a pact with the Italian design house Bottega Veneta, owned by PPR SA. Other high-profile agreements include fragrance partnerships with Beyoncé, Jennifer Lopez, and Lady Gaga. Brand names in Coty's prestige portfolio include Chopard, Davidoff, Jil Sander, and Vera Wang, to name just a few. – less
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