Coty CFO: Ramping up marketing spend was ‘undoubtedly the right decision’
Increased marketing investment behind Coty’s key beauty brands has resulted in a “true turnaround of the business”, with revenue up 12% over the second quarter.
Coty says it is reaping the rewards of ramping up its marketing investment during the second quarter, with a focus on ROI driving activity across its key brands.
The beauty giant increased advertising and consumer promotions spend to 30% of sales in the second quarter, in a bid to support initiatives with “strong ROI” that fuel “sales growth acceleration”. By comparison, marketing spend represented 26% of sales in the first quarter.
Speaking on an investor call yesterday (8 February), Coty CFO Laurent Mercier said marketing investment was increased to “capitalise on the strong momentum” of key brands in both the prestige and consumer beauty segments, including the successful launches of the Gucci Flora Gorgeous Gardenia and Burberry Hero fragrances.
Mercier described the ramping up of marketing spend as “undoubtedly the right decision”.Evolution not revolution: How Rimmel and Max Factor are repositioning for growth
“The increase in A&CP [advertising and consumer promotions] continued to be driven by working media, which more than doubled year-on-year. Importantly, we also invested behind the highest ROI opportunities, while maintaining flexibility to reallocate investments as needed,” the Coty CFO explained.
Marketing spend was used to expand into “white space opportunities” such as prestige make-up and the Chinese market, where Coty grew at six times the market rate in the second quarter.
“We also invested behind our key consumer beauty brands, resulting in a true turnaround of the business. As we head into the second half, we fully intend to keep this momentum going with a high 20s percentage A&CP level,” said Mercier.
The CFO explained Coty’s continued cost-reduction programme is “another lever” enabling the business to fund marketing and raise profit growth.
Coty CEO Sue Nabi reported the company’s second quarter revenue rose by 12% on a like-for-like basis. For the first time in five years Coty grew market share on a global basis in the consumer beauty segment, signs of a turnaround in its mass market cosmetics brands CoverGirl, Rimmel, Sally Hansen and Max Factor.Coty to ramp up marketing to ‘capitalise on momentum’
The beauty giant notched up 21% like-for-like growth in its prestige category over the past six months, fuelled by the “tremendous success” of Gucci fragrances and make-up, as well as Burberry and Marc Jacobs products. In EMEA, sales rose by 14% on a like-for-like basis in the first half and 13% in the second quarter, with growth in all key markets as well as local travel retail.
Coty has been on a mission to cut debt and return to growth since 2019, when the business missed revenue forecasts. This followed the acquisition of Procter & Gamble’s beauty portfolio in 2016 for $12.5bn (£9.2bn), which saw the consumer goods company pick up brands such as Hugo Boss and Gucci.
In August last year, the business hailed its “fewer, bigger and better” brand strategy as key to its return to sales growth, as it published better than expected fourth quarter results.
“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,” Mercier said at the time.