Coty CEO Sue Y. Nabi said that its business in China, along with travel retail, represented “the next legs of outsize growth”.
Nabi was speaking at the Consumer Analyst Group of New York Conference (CAGNY) for the first time this year, where she and CFO Laurent Mercier detailed the firm’s financial goals and highlighted future growth opportunities.
She highlighted that Coty could benefit from a number of growth drivers in China, especially as the market was reopening after prolonged COVID-19 lockdowns.
Firstly, China’s beauty market still has ample room for growth, she said. “China's per capita beauty consumption is still less than half of mature markets like the US, Europe, Japan or Korea.”
Nabi also noted the rapidly increasing demand for prestige fragrances, of which Coty specialises, among Chinese consumers.
“Whilst China’s beauty market continues to be dominated by skin care demand for prestige fragrances has increased by over 60% versus three years ago,” she said.
According to Coty, prestige fragrances are now growing one and a half times faster than the prestige beauty sector itself.
“Fragrances are now over 10% of China's beauty market. Chinese consumers continue to gravitate towards the most premium fragrances even more than Western consumers So the fragrance of opportunity in China is as you see, immense,” said Nabi.
“Against this attractive market backdrop, our business in China is still relatively small at 4% of our revenues. However, we've been scaling our China business quickly and building our footprint in the market.”
During the second quarter (Q2) of Coty’s 2023 fiscal year, China recorded a double-digit decline in revenues, which the firm said was in line with its competitors.
Despite the difficult environment, the firm observed strong performances in its ultra-premium fragrance collections, such as Chloe’s Atelier des Fleurs and Burberry’s Signatures lines.
“Coty is already the number five prestige fragrance player in this country,” said Nabi.
“Our business here there is roughly 80% prestige and therefore very profitable, with gross margins roughly 70%. And with our highly desirable brand portfolio, we see significant opportunity ahead for Coty in China. Our ambition is therefore to more than double our China sales to over 600 million.”
Getting a piece of China’s skin care pie
In addition to the prestige fragrance category, the company is also working to accelerate its prestige skin care division, especially with the launch of Lancaster Ligne Princiere, following the debut of Orveda.
Nabi concluded: “We are a beauty powerhouse with a unique diversified business model. We have made significant strategic and financial progress in the last few years under the new leadership team… We have significant untapped potential ahead of us across markets, categories, price tiers, we have the people and know-how and the brands [to succeed].”