Ambitious Coty Growth Plans May Require Acquisition

by Christine Bittar, Oct 19, 2006, 5:00 AM

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Coty CEO Bernd Beetz's ambition to double the beauty company's revenues and achieve global sales of more than $5 billion by 2010 is likely to require an acquisition.

That's the opinion of Raymond Nadeau, past vice president of new ideas for Coty and author of the book Living Brands, which is due out from McGraw-Hill on Nov. 1. It's hard to see how Coty could grow so quickly into a top-five beauty company "organically," says Nadeau, who still consults to the company.

In his remarks earlier this month, Beetz said he sees most of the growth potential coming from color cosmetics and skin care, but at the present time most of Coty's global revenues come from fragrance. While Coty's color cosmetics brand Rimmel is the No. 2 color brand in Europe, Coty has seen much of its recent growth from celebrity-licensed fragrances. Most notable is Coty's license with singer/entertainer Jennifer Lopez on Still, and her first fragrance, Glow by JLo, which brought in $80 million in sales its first year.

Coty's other licensed fragrances include Sarah Jessica Parker's Lovely, Celine Dion Parfums, Shania Twain's Shania by Stetson, and David Beckham's Instinct for men.

While more licensed brands are forthcoming, Nadeau (who was responsible for many of Coty's current licenses), says at this point it could be dangerous for the company to rely heavily on licenses, since he believes their time may have peaked. Where celebrities are concerned, he says, he'd rather see Coty and other companies shift to endorsements or licenses with "abbreviated life cycles."

Because of the aging population and the category's higher profit margins, Nadeau's bet is on skin care, with a possible acquisition by Coty in that area--possibly abroad.

Indeed, Beetz said skin care offers the best growth potential for Coty, and he's looking to expand that market, especially in Asia. Coty's Lancaster skin care brand was restricted to Europe, but the company recently introduced the brand in some Bath & Body Works stores in the U.S., and also plans to introduce it in China.

Of Coty's total $2.9 billion in revenue, the privately held company says half its sales come from Europe, a third from North and South America, 4 percent from Asia, and 13 percent from the rest of the world. Beetz said by 2010 he expects Asia to account for 15 percent of the company's sales.

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