Currently the company has limited exposure in the region, having subsidiaries in Malaysia and China, together with a production facility in Suzhou, Eastern China, so in order to tap into the faster pace of growth in the region, further expansion could prove lucrative.
All eyes are on the M&A trail
Industry analysts took note last week when the company announced a $1 billion IPO setting in place funds that could be used to spell further investment to expand the business.
The news came just one week after the company had announced the acquisition of leading Southeast Asian distributor StarAsia, which is an established distributor of beauty products in Cambodia, Hong Kong, Indonesia, Malaysia, Singapore, Taiwan and Vietnam – a distribution footprint that includes a number of key markets for the company.
“The acquisition of StarAsia will provide us with an established distribution platform to sell our mass brands in key developing markets in the Southeast Asia region,” said Michele Scannavini, CEO of Coty, upon announcing the deal.
Coty eyeing next step to expand business
Coty is currently ranked as the world’s second biggest fragrance player, holding brands such as Calvin Klein, Adidas and Playboy.
It is also a significant player in the skin care market, where it has a considerable exposure to the mass market, in contrast to its fragrance portfolio which is more focused on the prestige market.
The company has been growing its revenues in double digit figures over the past couple of years, and in 2012 it posted a turnover of $4.6bn, and virtually doubled its profits to $535m, compared to the previous year.
Portfolio diversity and expansion into emerging markets
But to continue with its expansion, the company has been looking to diversify further in the cosmetics and personal care area, and has been on a major acquisition trail for some time now.
Last year the company made a failed hostile bid to acquire Avon Products. The company made a bid of $10.7bn for the business, which was flatly rejected by Avon executives who at the time said the business was not for sale.
Despite the deal falling through, Coty shareholders said that they would be happy to continue the search for other suitable acquisitions, with Berkshire Hathaway stating in an investor note that it would be willing to back a similar deal in the future.
As well as eyeing fast growth in the Asia Pacific market, Coty is also expected to target expansion into the Latin American market, where it has recently signed a joint venture for a major distribution deal in Brazil.