Coty's Strategic Pricing: Unveiling untapped potential for increased profitability

Coty is maintaining a consistent and meticulous approach to implementing price increases while ensuring that consumer demand remains steady.

The company, which owns popular beauty brands such as Rimmel, Max Factor, and Sally Hansen, has successfully introduced fragrances and beauty products through collaborations with reputable fashion houses such as Marc Jacobs and Burberry.

In order to counter the effects of inflation, Coty implemented measures to raise prices during its fiscal year 2023, which ended on June 30th. During a recent conversation with investors on August 22nd, Laurent Mercier, the chief financial officer of Coty, expressed satisfaction with the success of these measures in garnering support from both retailers and consumers over the past year.

Mercier stated that increasing prices will continue to be a strategy employed by the company in its fiscal year 2024. He emphasized that inflation is expected to remain a significant contributing factor, particularly in the first half of the year.

The company's approach to implementing price increases will remain systematic, as stated by Mercier.

"We possess a substantial amount of data... we are well aware of the specific areas where price hikes can be implemented without encountering any resistance," he remarked.

The price increases will be implemented on a brand-specific, segment-specific, and market-specific basis, according to him.

Highlighting the robustness of the beauty sector, CEO Sue Nabi stated that it was the sole consumer packaged goods category in the US to experience volume growth over the past six months.

Coty recorded low-single digit volume growth in both its fourth quarter and its 2023 fiscal year, with a 5% sales increase amounting to $5.55bn (£4.36bn). Additionally, prices rose by 10% during this period. Despite this, Coty assures that consumer demand in its category is still strong. CFO Mercier emphasizes that the company is implementing price increases alongside efforts to generate value for both retailers and consumers.

Coty is driving demand by combining innovative and desirable launches with meaningful storytelling. The company developed the 'Twist Up' mascara technology, which was launched under the Max Factor brand in the UK. The new 'Lash Wow' product, utilizing this technology, has become the brand's top-selling mascara. Coty continues to invest the majority of its marketing spend in key innovations for both its prestige and consumer categories, as well as in white space opportunities.

Advertising and consumer promotion spending accounted for 27% of the total sales for the entire year, showing a slight decrease from the previous year's figure of 28%. In February, Mercier emphasized the continual improvement of Coty's return on investment for its marketing expenses to investors.

‘Go-to partner’

As well its own brands, Coty works closely with a number of fashion houses on branded skincare, fragrance and makeup products.

Coty recently announced the expansion of its collaboration with Marc Jacobs to include the development of a makeup line. In addition, the company has renewed and expanded licenses with Hugo Boss, Davidoff, and Jil Sander. These actions have strengthened Coty's position as the preferred partner for fashion brands. Naby encouraged other fashion brands to consider collaborating with Coty due to their exceptional expertise in areas such as marketing and research and development.