Smells like opportunity: Coty counting on Gen Zs to drive fragrance growth in China

Coty CEO Sue Y. Nabi estimated that the fragrance category in China accounted for 15% to 16% of the market. Far below skin care, which was 70%. However, fragrance was the fastest-growing category.

“China today, in the country, you have only 2% of people using fragrances on a daily basis. So, you can imagine moving just this 2% to 10% on the number of people who are able to buy and use fragrances. It would be huge, I would say – a huge jump in terms of fragrance consumption,” ​said Nabi during the firm’s latest third-quarter earnings conference.

She anticipated that this consumption rush would be driven by younger beauty consumers, specifically the Gen Z.

However, Coty does face stiff competition in the Chinese market from its fellow multinationals, as well as independent brands and local players. Despite this, Nabi expressed her confidence in Coty’s wide fragrance portfolio and its ability to meet the multifaceted desires of the Gen Zs.

“We are not seeing anything in the competition today that's telling us that there are things that we are missing in Coty’s portfolio… So at the end of the day, if the competition is investing [in China], that's fine, because at the end of the day, we need to be altogether investing on this very, very promising market to grow the market and this will benefit all of us.”​

On track to meet targets

Growing its presence in China’s promising fragrance market is an imperative task for Coty, which has set a target to triple China’s contribution to over 10% of the revenue mix by 2025.

While there are many uncertainties surrounding the Chinese market, including issues relating to the COVID-19 lockdowns.

“I do believe that consumers are going to be in a very positive mood, they're going to come back to life… So, there is a hunger for life, that probably is going to continue to be a hunger for everything that’s beauty consumption,” ​said Nabi.

She also addressed worries that inflation would affect the consumers’ desire to spend, noting that the firm’s consumer division was robust.

“There are some categories that may slow down, and if there are some consumers that may be pressurised, because this, because of this inflation of the prices, the good news at Coty is that we do have a division that's stronger than ever, which is our consumer division. Our brands are cooler than ever, they're doing the right things, they're launching the right products that are much more profitable than versus the past.”​

As such, Nabi commented that the firm was well on track to meet its fiscal 2025 targets.

“We are continuing to up the ante in terms of expertise, in terms of capabilities, in terms of the brands that we are intending to launch. So, at the moment, I don't see anything from the Coty point of view, the Coty ability to implement the things we are working behind that will jeopardise our fiscal 2025 target.”​