Coty has emphasised the importance of improving the return on investment (ROI) of its marketing spend, as the beauty giant looks to fuel innovation.
Advertising and promotional spend represented 27% of sales during the second quarter of 2023 (ending 31 December 2022), up from 24% the previous quarter. However, this quarter’s figure is down from the same period last year, when marketing investment represented 30% of sales.
Going forward the company, which owns brands such as Max Factor and Rimmel, expects its marketing investment to remain in the high 20% of sales for the full year.
During the latest quarter, Coty focused its marketing spend on “key launches in prestige and consumer beauty, as well as whitespace opportunities”.
The business views improving the ROI of its marketing spend as a “daily focus”, chief financial officer Laurent Mercier told investors on a call today (8 February). This focus is particularly important given Coty’s goal to expand into new categories, he said. Growing its emerging skincare business is, for example, a key growth pillar for the business.
I’m incredibly pleased with the fast pace with which we have been able to turn around our consumer beauty market share.
Sue Nabi, Coty
Coty saw like-for-like sales in the quarter increase by 4%. However, on a reported basis, these figures represent a 3% decrease, driven by foreign exchange headwinds. These sales were ahead of expectations for the business, which reported high single digit growth in the prestige fragrance market and mid-single digit growth in the mass beauty market.
Chief executive Sue Nabi claimed “great advertising with the highest ROI” had been a key factor in helping to stabilise Coty’s consumer beauty business.
This business was hit by lockdown and consumers staying at home over the pandemic, meaning stabilising and growing the consumer beauty business has been a key strategic pillar for Coty. The beauty giant is now reporting a full year of market share gains for the first time since 2016.
“I’m incredibly pleased with the fast pace with which we have been able to turn around our consumer beauty market share, with many more exciting things to come,” Nabi said.
Effective marketing was crucial in helping achieve “stage one” of Coty’s consumer beauty plan, which involved “fixing the surface” of the business. Innovation, again supported by “excellent advertising”, is crucial to the next stage, Nabi added.
Referring to the most recent quarter, she highlighted the performance of the Max Factor brand and the relaunch of its 2000 Calorie mascara product. Following the introduction of new packaging and a marketing campaign, 2000 Calorie is now the number two mascara in the UK, Nabi reports.
Premiumisation trend continues
Coty does not expect to see a slowdown in demand for its consumer beauty products, even as the pressures of inflation sink in.
Nabi describes these products as ones designed to make people “look better and feel better” and said these are a “non-negotiable” for many consumers. Arguing the business offers consumers “great quality” products at an affordable price, the Coty CEO believes sales are unlikely to be curtailed by decreased spending.
“The limit is only in terms of ability to innovate, to tell new stories, to bring new brands and new technologies to continue to make the consumer interested in our category,” she said.
While Coty is confident it can continue to make market share gains within its consumer beauty business, the company has also seen no hold up in premiumisation trends, particularly in fragrance. The business is seeing more expensive eau de parfums gain market share against eau de toilette, while premium and ultra premium lines are growing up to two times the rate of the fragrance market.
Premiumisation is something Coty has reported post-pandemic across beauty, skincare and fragrance, a trend Nabi believes will only become more “radical” as time goes on.