In 1904, Francois Coty made an astute observation. He noted, "Give a woman the best product you can, market it in the perfect bottle, beautiful in its simplicity yet impeccable in taste, ask a reasonable price for it, and you will witness the birth of a business the size of which the world has never seen." It was the same year that Coty launched its first perfume. At the end of the fiscal year in 2010, the company posted sales of $3.6 billion. The company now has offices in more than 30 countries, sells to about 90 markets around the world and has more than 8,000 employees.
The company is now a multinational behemoth and its path to growth has been carved with a very unique strategy.
As the upscale division of Coty Inc., Coty Prestige is responsible for 51 per cent of the entire company’s sales (as of year end 2010). Products are sold through selective channels — department and speciality stores such as perfumeries and duty free outlets. With a string of acquisitions over the last few years, it has grown to become one of the premier beauty and fragrance firms in the world.
Coty’s expansion has less been a result of organic growth as it has the outsourcing of business lines. Licensing agreements, joint ventures and acquisitions have all been key components of establishing the company as a world player. The decision to separate the high-end segment of Coty was a master stroke. The business model associated with the creation and marketing of high-end products is intrinsically distinct to that of faster moving mid-market goods. The division allowed for Coty Prestige to focus on building specific distribution channels such as the high street and duty free, while the US-based Coty Inc. developed mass-market retail avenues.
Around 2002, Coty Prestige was the eighth largest player in the global prestige fragrance market; in less than four years it had climbed to number three. This example of proficient resource allocation has proved more than fruitful. Underlying the aggressive corporate nature is an entrepreneurial spirit that tends to escape other large luxury goods organisations. Responsibility and decision making is not hampered by hierarchical structures, hence the firm has a young, fast-moving feel to it — churning out products and projects in record time while fostering a democratic contribution to the creative process.
One of Coty’s many mottos is that the company has "two areas of expertise: fragrance and beauty, and one focus: the future." Fragrances account for about 62 per cent of its global revenue (as of year end 2010); leaving colour cosmetics, skin and personal care to make up the rest. Fragrances are big business — a fact which is evident by the long list of celebrities queuing up to attach their name to a bottle. The Coty Prestige division alone has the likes of Jennifer Lopez, Gwen Stefani and Sarah Jessica Parker while Coty Inc. has an even longer list.
Sales are generally concentrated in Europe (57 per cent), followed by North America (32 per cent), Asia (7 per cent) and the rest of the world comes in at 4 per cent (figures reflective of 2010).
This may seem highly concentrated in developed markets, but one area that is helping provide inroads into these regions for Coty Prestige is travel retail and duty free. Hilde Van de Neede is the Director of Trade Operations and Public Relations Worldwide for Coty Prestige. She provides some insight into the ongoing expansion of the company.
"We are now one of the leading beauty companies in the world. Since the recent acquisition of Philosophy, the American skincare brand, we now have a complete offering. Before it was largely fragrances but now we are competing with much bigger beauty-care houses." Philosophy is a brand that approaches skincare from a scientific perspective — an innovative company that was one in a string of previous acquisitions by Coty. It was purchased from the Carlyle Group — one of the largest asset management firms in the world.
She continues, "We have a lot of great brands that are part of our portfolio such as Calvin Klein, Marc Jacobs and Chloe — Chloe still continues to be an amazing success. It has done very well in Asian markets. The interesting thing we’re doing for these travel retail channels is coming out with mini fragrance bottles; perfect for gift giving. In travel retail, Coty Prestige enjoyed double-digit growth last year — even with the ongoing economic issues. There is incredible potential in Asia. For those who had lower levels of disposable income, the products were still affordable enough and made the customer feel good."
Van de Neede reveals that certain brands did not suffer at all during the recession — these included Calvin Klein, Marc Jacobs and Chloe. She also expects that the upcoming Roberto Cavalli products are sure to do well, especially in regions such as the Middle East. "In the Middle East, oriental fragrances have a great appeal. The ultra-prestige products do very well. Cavalli will do very well — the appeal is not only in the fragrance but in the packaging and its ‘bling’ visuals."
"That’s the beauty of Coty Prestige," she says. "We can meet people’s preferences — even if they are constantly changing. The breadth of our product portfolio is so diverse and far reaching. We definitely have competition — it’s a tough industry and I don’t think we will ever be a monopoly. The difference is in the way Coty is run; in the risks that we take. We move very fast. We come up with new launches very quickly and people are empowered at every level to make decisions — I think that is the advantage we have over other companies."
According to Van de Neede, the length of the process from idea to launch is usually around 12 to 18 months. This depends on how luxurious the offering is. More prestigious products go through a far more rigorous approval process which can add anywhere from one to three months. This is an efficient turnover rate compared to industry benchmarks.
She proceeds, "We’re already looking at concepts for next fall. Sometimes we will postpone a launch if we feel it isn’t right — we go back and rethink. We had such a situation with the CK One fragrance line. Initially it was going to be CK Free. The thing with CK One was that there was so much recognition; we had a platform to build on. We had to go back and rethink it completely. I think it’s important we set ourselves tight deadlines but we are not afraid to say ‘instead of fall let’s do it in spring’ if it doesn’t seem right. I am not involved in the creative process for the fragrances but I am involved in the visual aspect of it. If something is done well and people give you good feedback — that is the most satisfying thing about my job."
Travel retail is a distinct marketplace — solely due to the fact that the pace of the shopping taking place is completely different. "The shopper does not have that much time. On average we have 30 to 60 seconds to grab their attention — if we don’t, they’ll move onto something else. We have to be very visible from the moment they walk into the shop. There is a good example of this with the Lola flower cap we made for our Marc Jacobs fragrance. We displayed visuals of huge flowers everywhere and the bottle cap itself was shaped as one. Many times the customer does not know what to buy until they see something powerful. This was developed specifically for travel retail — for it to stand out. Often ideas developed for travel retail are adapted elsewhere as well."
The three words that Coty Prestige attaches to itself are "faster, farther and freer." The slogan itself captures what differentiates the company from others. Van de Neede explains that the ‘faster’ aspect of it refers to the fact that the company brings launches to the market quickly.
"We are known for this," she says. "We are also fast in the sense that people have responsibilities and they decide quicker. ‘Farther’ because we are branching out into skincare and new markets, and ‘freer’ in the sense that we take more risks." Most of what Coty Prestige has gambled on thus far seems to have paid off; and there is the niggling feeling that it has less to do with luck, and more to do with the right strategy.