Coty scents growth potential in Unilever Cosmetics

Finally, after two-and-half years, Unilever has sold its cosmetics and fragrance arm Unilever Cosmetics International to Coty, the company credited with establishing the modern perfume sector, for $800m (£437m).

For both companies, the deal is heaven sent. Unilever had wanted to hive off UCI as part of its “path to growth” strategy. A Unilever spokesman says UCI “was not a comfortable fit for a mass-market brand that wants to focus on its two core divisions of household goods and personal care”, and according to analysts it got a good price for UCI. For Coty, it brings some much-needed cachet: the bulk of Coty’s perfume brands sit in the “masstige” (prestige mass market) and mass-market segments. By snapping up the UCI portfolio it gains the licences to Calvin Klein, Cerruti, Chloé, Lagerfeld and Vera Wang fragrances – and these brands will provide Coty with the prestige that it has so far lacked.

Coty chief executive Bernd Beetz claims: “We will have some true ‘blockbusters’ in the Coty family… For us it is a deal that transforms the company.”

The UCI brands will come under the umbrella of Coty’s Lancaster Group Worldwide prestige division, which accounts for 40 per cent of Coty’s sales and has ambitious expansion plans. In the UK, UCI’s 25 staff will transfer to Lancaster, which is looking beyond its domestic US market for growth, and plans to focus on Europe, its biggest market, and Asia. Coty is already one of the world’s largest beauty companies, operating in 29 countries with sales of $1.95bn (£1bn) last year, and since Beetz joined in March 2001, he has been pivotal to Coty’s aggressive expansion and acquisition trail.

Yet, some observers argue that Beetz has become obsessed with celebrity endorsements, which in an overcrowded and cyclical sector can only ever achieve short-term growth. In 2002 Coty launched J-Lo’s Glow fragrance and Lancaster’s portfolio also includes celebrity lines Marc Jacobs, Baby Phat and Sarah Jessica Parker. With Calvin Klein and Chloé in its stable, it will have a little more gravitas.

“Coty’s strength lies in marketing,” says Interbrand director of strategy Ian Elwood. “And with the perfume sector it’s 99 per cent about the brand and one per cent about the liquid. Yes, celebrity-endorsed brands have short-term potential – Jennifer Lopez may not have the kudos she does now in five years’ time, but in the short term her fragrances will achieve growth. Now with the UCI brands, Beetz can balance his portfolio with short-term ‘shooting stars’ with established classic brands.”

Pearlfisher creative partner Jonathan Ford agrees. With brands like Calvin Klein under its umbrella, Coty will be able to achieve long-term sales growth and stability. “Coty has vast experience in this sector; something that Unilever lacked. Coty can use its knowledge of the market alongside its distribution channels to squeeze further growth from brands such as Chloé and CK,” he adds.

The move towards prestige brands is a change of tack for Coty, but it would seem that Beetz is steering the company on the right course with his two-pronged approach. Celebrity fragrances can re-engage consumers and it is an area where Coty continues to be active; brands such as the David Beckham fragrance, due to be launched later this year, are expected to work especially well in Asia, the sector’s fastest-growing market. Yet by snapping up UCI’s brands, Coty has bought cachet and with it brand longevity.


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