Reaping rewards: Lancaster sees double-digit growth on the back of China expansion
The repositioning of the Monegasque brand as a prestige skin care brand has been a point of focus for Coty. Lancaster has been especially successful in China, where it first launched on Hainan Island before rolling out in the wider market.
According to Coty, the momentum Lancaster generated in Hainan and the wider China market fuelled its double-digit growth in its 2022 fiscal year.
“This channel is now fully benefiting from the repositioning of Lancaster from a sun care to a skin care brand, that started first in Hainan, but that's currently spread into Mainland China at Sephora as an exclusive partnership. And we've seen that this brand has been posting double-digit growth in fiscal '22, which overall also had to do a lot with travel retail performance,” Sue Y. Nabi, CEO of Coty during the firm’s fourth quarter (Q4) earnings conference.
The brand’s growing popularity is evident among retail rankings as well. Lancaster is now the second-most popular exclusive brand in Sephora China and is the number three niche skin care brand with key Hainan retailers.
Skin care, under-tapped
Nabi said Lancaster was Coty’s first time operating a “full skin care line” in China and skin care remains an area of untapped potential for the company.
The firm revealed that it would be hosting an investor event in September, which would focus exclusively on its skin care business, underscoring the importance of the category to its business strategy.
Furthermore, skin care is a crucial category in China, a market of extreme importance to Coty’s future growth.
“China is so small for Coty that anything we do, just doing the right things is a potential upside for the whole business there and therefore for the company,” said Nabi.
Like its competitors, Coty was impacted by the COVID-19 lockdowns and restrictions that disrupted daily life in China. This weighed down the firm’s performance in the wider Asia Pacific region, which only grew by 2% to USD141.1m in Q4.
For the full year, Asia Pacific recorded net revenues of USD658.3m, a 14% growth from nearly every other Asian market, including APAC travel retail, offsetting the temporary weakness in China.
Since then, the company has seen a recovery in China. “What we are seeing now two months into the first quarter of fiscal '23, at least for Coty is that the spike in our sales is back to, I would say, levels that are not the same as the ones we had beginning of calendar '22, but very, very strong double-digit level,” said Nabi.
Opportunities in make-up too
While skin care represents significant opportunities, the recovery of the colour cosmetics category post-pandemic, is driving the growth of Coty’s prestige make-up business.
Coty’s prestige make-up sales grew over 70% in FY22. The category accounts for over 40% of sales for travel retail APAC. Additionally, make-up also makes up approximately half of Burberry brand sale in China.