Coty hails ‘fewer, bigger and better’ brand strategy for sales growth

Cosmetics business Coty hailed its “fewer, bigger and better” brand strategy as key to its return to sales growth, as it publishes better than expected fourth quarter results. 

Speaking on an earnings call today (26 August), CFO Laurent Mercier said the company will continue to “invest behind brands and launches with proven success and market share momentum”, highlighting popular brands including Marc Jacobs, CoverGirl and Sally Hansen.

Coty has been on a mission to cut debt and return to growth since 2019 when it missed revenue forecasts following the acquisition of Procter & Gamble’s beauty portfolio in 2016 for $12.5bn, which saw it pick up brands such as Hugo Boss and Gucci.

Mercier said the business had been able to “step up marketing investments behind all brands” through gross margin and cost reduction, which has also driven the bottom line. The company has also closed factories and outsourced its manufacturing in recent years.

“We have a multipronged multiyear gross margin attack plan in place while we also expect to benefit from positive channel, category and regional mix shifts. This will, in turn, allow us to continue reinvesting behind our brands and simultaneously deliver a strong profit expansion,” said Mercier.

The new positionings of our iconic cosmetic brands such as CoverGirl, Rimmel, Max Factor and Sally Hansen assures us that our portfolio of mass makeup is well-positioned and covers the key trends across core markets.

Sue Nabi, Coty

Marketing was not part of cost-cutting as the company made good on a pledge to increase marketing spend this quarter.

In H1 Coty allocated 20% of sales to advertising and consumer promotions, in the third quarter it spent 23% and in Q4 marketing spend increased to 26%.

“I want to emphasise that while we are investing behind our brands our philosophy remains ‘fewer, bigger and better’, which also means that we are very focused on the return on investment of these marketing investments,” added Mercier.

Brand repositioning pay off

Coty is also starting to see early results from repositioning a number of its mass beauty brands, including Rimmel and MaxFactor in the UK.

Rimmel’s repositioning was revealed at the end of June helping the brand achieve its highest market share in 10 consecutive months, according to Nielsen data, and hold on to its number one position in the UK makeup market.

Coty began the repositioning of Max Factor earlier this month.

Chief executive Sue Nabi highlighted CoverGirl – the largest brand in Coty’s consumer beauty portfolio – as another example of marketing success.

She said Coty “wasted no time” in repositioning the brand, which was communicated through a comprehensive campaign and disruptive marketing.

This resulted in CoverGirl products selling out in bricks and mortar stores at a rate of 24% – compared to the broader cosmetic category, which sold at a rate of 16% – giving the brand its highest brand share in five years.

“The new positionings of our iconic cosmetic brands such as CoverGirl, Rimmel, Max Factor and Sally Hansen assures us that our portfolio of mass makeup is well-positioned and covers the key trends across core markets,” said Nabi.

The repositioning of these key brands is being done to “reattract” lost consumers, particularly in key demographics such as millennials and Gen Z who are the “biggest consumers of makeup”.

Nabi believes this work will help the business on its “journey to transform Coty into a beauty powerhouse”. 

Coty’s mass consumer beauty brands such as Rimmel and CoverGirl make up 46% of revenue, while its premium division, which includes fragrance, skincare and beauty brands Gucci, Burberry and Marc Jacobs, accounted for 54%.

Despite Covid restrictions impacting multiple markets, sales for its prestige and mass brands showed “strong improvement”, up triple-digits and double-digits, respectively.

In July, the business appointed former Mac senior vice-president and North America general manager Constantin Sklavenitis, as chief prestige brands officer to drive its premium segment.

It a move Nabi labelled “integral” to the company’s growth in premium beauty.

Coty has reported a global revenue surge of 89.6% in Q4, with revenues totalling $4.63bn (£3.36bn) for the three months to 30 June 2021, surpassing its forecasted range of $4.5bn to $4.6bn.

In the EMEA, Q4 net revenues are up 123.4% compared to the year prior, reaching $471.4m. But full-year 2021 revenue in EMEA is down 5.4% to $2.1bn.