Coty Merges Beauty and Fragrance Divisions, Signals Potential Divestitures

Coty is making a move. The cosmetics giant, one of the largest groups in the sector, has announced that it will implement a “strategic review” of its business with the aim of strengthening its financial situation, based on an integration of its beauty and fragrance lines, and which may include “alliances, divestments and spin-offs”. According to the latest information, which has not been confirmed by the group, Coty has been studying its sale for months.

The first step will be to integrate “more closely” its beauty and fragrance businesses, with the aim of strengthening the second. The two divisions generate 69% of Coty’s total sales, the company said in a statement on Tuesday.

At the same time, the company intends to “continue to expand” its cosmetics and skin care business, increasing its presence in these categories that present “solid margin and global growth potential.“ In this regard, the company has appointed Gordon von Bretten, a member of the board of directors, as president of the consumer beauty division.

“Our goal is to achieve the full potential of our brands by focusing on the portfolio, elevating product excellence and driving productivity,“ von Bretten said.

Coty appoints Gordon von Bretten president of Consumer Beauty to lead business overhaul

Coty CEO Sue Nabi said the group is entering a new phase of “transformation” that will focus on “clarity and focus.“ The aim of integrating the divisions is to “unlock the full potential” of both, although she stressed that fragrances outperform the overall beauty market and “generate the lion’s share of revenue and profit”.

Coty’s cosmetics business brings in $1.2 billion a year and includes brands such as CoverGirl, Rimmel, Sally Hansen and Max Factor, as well as its Brazil business, which generates about $400 million in revenue.

In June of this year, a possible split between Coty’s luxury and mass consumer divisions surfaced to find a buyer for the cosmetics giant. At the time, the sale of the fragrance business was projected to be more of a strategic alliance or merger than an outright acquisition.

Brands such as Covergirl, Rimmel London or Max Factor are not going through their best moment. Net sales of this division fell 9% in the third fiscal quarter, and Coty would have tried to place this block in Asia, without success. The economic slowdown and the trade war between the United States and China are reportedly complicating the process.