One of the world’s biggest beauty companies is reportedly mulling a sale of itself.
Earlier in June, WWD reported that Coty was considering divesting its consumer and prestige divisions, inclusive of some of beauty’s best-known brands like CoverGirl as well as Chloé and Hugo Boss perfumes. The announcement spiked Coty’s share price 13 percent to $5; divesting both arms would essentially end its more than 120-year run as a company. Coty declined to comment on the report.
Despite its size and stable of well-known names, in recent years, the American conglomerate has struggled to keep up with its competitors. Within the portfolio of its biggest shareholder, JAB Holdings, Coty is the worst-performing asset, and cut its outlook four times in the last fiscal year, with more revenue declines projected.
Coty has tried to improve its standing. Since its current CEO Sue Nabi arrived in 2020, the company has trimmed the fat, spinning off non-core brands such as the professional lines Wella and OPI. But it still lags its external peers like L’Oréal and E.l.f Beauty, and in May, it also sold Skkn by Kim, the prestige skincare brand back to its founder, the multi-hyphenate reality star Kim Kardashian and her apparel company Skims after the brand failed to make a splash with shoppers.
Its core businesses, fragrance and drugstore makeup, are also under pressure. While fragrance is the industry’s fastest-growing category and Coty makes some of the world’s most recognisable scents, the fiercely competitive sector is filled with new challengers. Efforts to drive buzz like trendy body mists for Calvin Klein and resuscitation of Marc Jacobs Beauty are a drop in the ocean in a market dominated by niche players and TikTok virality. Its drugstore brands have also underperformed.
“Pretty much everything in mass has not worked… I give them plenty of credit for being creative and trying things,” said Lauren Lieberman, a managing director at Barclays consumer practice, citing efforts to reinvigorate CoverGirl. She also noted the muted revival of Philosophy, the skincare and bath and body line that was a huge hit in the aughts, as well as the sun care line Lancaster.
With the retirement of JAB Holdings’ longtime chairman Peter Harf in April, new leadership will likely be up for some fresh thinking.
If Coty attempts to court buyers, prospective bidders are slim and would likely fall into a few select categories. The Business of Beauty breaks down who might be interested — and why — below.
The Crown Jewels
Prestige fragrance remains Coty’s hottest property. It holds long-term licences for the likes of Chloé, Gucci, Hugo Boss and Calvin Klein, some of the most famous fashion houses in the world. Hugo Boss is understood to be the company’s biggest brand, comprising some 10 percent or around $585 million in sales, followed by Gucci and Burberry at around 9 percent and 7 percent of total company sales.
These are desirable assets, even with intense competition from nascent indies. These fashion house fragrances are widely distributed, well-known and have built-in prestige and momentum. A fragrance licencing specialist like Interparfums, which makes perfumes for Lacoste and Anna Sui, could theoretically be interested. Since 2022, it has revived DKNY and brought fresh appeal to the line after LVMH offloaded it to G-III Group, a fashion portfolio firm. Spanish conglomerate Puig could also be a contender; while it has decreased its reliance on licensing, instead shifting to owning brands outright after snapping up the likes of Byredo and Charlotte Tilbury, it deftly manages similar fashion house fragrance brands like Carolina Herrera and Jean-Paul Gaultier and could help inject fresh energy into the brands.
Fashion licensing firms like Tapestry, PVH Corp or Capri might also be interested in diversifying their holdings and adding beauty to the mix, especially for proven lines like Burberry and Calvin Klein, the latter of which PVH owns the fashion business.
The luxury brands’ parent companies might also want to bring their beauty offerings back in-house. Gucci owner Kering has made no secret of its tepid feelings towards the Gucci beauty brand under Coty’s ownership, which expires in 2028, and Kering now has an in-house beauty division boasting Creed. LVMH, which owns Marc Jacobs, has proven expertise in beauty, managing beauty offerings from the likes of Dior and Guerlain.
“The fact that Coty has lasted [as a company] so long is because fragrance is such a great business,” said Lieberman. But more recently companies like LVMH and Kering are starting their own beauty arms or otherwise consolidating their efforts.
Lieberman said other firms like Puig or fashion licensing houses could all be logical bidders, but that the rub is that Coty’s ability to sell off these licences isn’t clear-cut. Depending on the nature of the original agreements signed, they may or may not be able to transfer ownership to a new firm.
Mass Appeal
Coty’s assortment of mass brands like Rimmel and CoverGirl have name recognition, but growth has stagnated as they’ve ceded market share to faster-moving indies like E.l.f Beauty and Kiko Milano. Sally Hansen is the US’s largest mass nail care brand with a 38 percent market share according to Nielsen IQ data, though its sales have also declined as consumers prioritise longer-lasting treatments. While Coty’s mass brands often rank in the top 10, the drugstore channel in the US has become less lucrative overall, with poorer brand choice and in-store experience failing to compete with Amazon and increasingly, TikTok Shop.
A strategic buyer would be unlikely to want to take on such a penetrated brand with low growth headroom, but private equity might be up for taking on the challenge, especially if they see international opportunities for the brands. Such carve-outs are not uncommon in beauty, but often focus on prestige brands: private equity firm Advent created Orveon in 2022 to buy BareMinerals, Buxom and Laura Mercier from Shiseido, while Coty spun off some of its professional brands, including Wella Company to private equity firm KKR in 2020.
Coty also owns some personal care lines based in Brazil, such as Bozzano, Monange, Paixao and Risque, which could be of interest to a domestic player such as erstwhile Aesop and Avon owner Natura with its home court advantage.
Whatever path it charts forward, recalibration is likely needed at Coty. And buyer beware — even beauty’s best-known brands are struggling to deliver meaningful growth in such a competitive landscape.
“[Coty’s] brands should be relevant, but it’s crowded out there,” said Lieberman.
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