Coty, Inc. Business Information, Profile, and History

History of Coty, Inc.

Coty, Inc. is a century-old fragrance manufacturer that also produces cosmetics and other health and beauty aids. Founded by a Corsican who exploited his marketing knack to become, reputedly, the richest man in France, the company has experienced numerous changes in ownership and management over the years. Coty is now a subsidiary of Joh. A. Benckiser GmbH, a family-controlled German holding company. It is the world's leading manufacturer of mass-market fragrances and occasionally markets products of other manufacturers. Although New York-based, Coty registers the bulk of its sales in Western Europe.

Perfume and Cosmetics Pioneer: 1904--62

Born on the island of Corsica in 1875, François Spoturno was orphaned at an early age and reared by a grandmother. After leaving school he drifted to Marseille and then--in 1900&mdashø Paris, where he worked as a haberdashery salesman. Following a year's training in Grasse--birthplace of the perfume industry--he borrowed 10,000 francs from his grandmother in order to establish a makeshift laboratory in his small flat. Taking the name Coty from his mother's family name (Coti), he created his first perfume, La Rose Jacqueminot, in 1904 from concentrated flower oils rejected by others because of their novelty. By 1908 he was successful enough to establish a factory on the outskirts of Paris. Then he introduced face powder, packaging it with a powder puff in a round box.

Maison Coty owed its success to much more than its founder's training in and sensitivity to the materials from which commercial fragrances are derived. Coty catered to the rich and well-born--even the Russian czar and czarina, who commissioned fragrances for their daughters--yet sold small bottles within the price range of even the Paris shopgirl. He was the first to create a range of cosmetics in the same fragrance. Above all, Coty was a pioneer in every aspect of product design, including perfume bottles and cosmetics boxes. His close collaborator, René Lalique, created Art Nouveau crystal bottles that were works of art in themselves. Using red, black, and gold papers, Leon Bakst, set designer for the acclaimed Ballets Russes, designed the powder box which still serves for Coty's Air-Spun face powder. Coty was also quick to exploit foreign markets, opening a Moscow store and establishing a London subsidiary in 1910. Two years later he founded a New York branch in a Fifth Avenue building furnished with stained glass windows by Lalique. Other agencies of what later became Coty, S.A., were established in Buenos Aires, Johannesburg, Madrid, and Rio de Janeiro.

After American soldiers returning from World War I brought home Coty perfumes and face powder, the U.S. market was recognized as of paramount importance. In 1922 Coty, Inc. was formed, with laboratories and a large assembly plant established on Manhattan's West Side to avoid the heavy tariff on luxury goods. By 1929 the American company was assembling and selling 23 perfumes, plus powders, toilet soaps and waters, bath salts, brilliantines, hair and hand lotions, rouges, vanishing cream, shaving soap, and powder and rouge compacts. The firm was vigilant in forestalling pricecutting by retailers and achieved a 60 percent profit margin. Net income rose from $1.07 million in 1923 to $4.05 million in 1928. In that year Coty, S.A. had earnings of $1.64 million.

Coty, Inc. became a publicly traded company in 1925 and acquired a majority interest in the five European Coty companies in 1929. After Coty's death in 1934, his divorced wife, now Mme. Yvonne Cotnareanu, received a controlling interest in Coty, Inc. in lieu of the unpaid balance of an alimony settlement. Administration of the company remained in the hands of Benjamin E. Levy, who had become chairman of the board on its inception.

With the advent of the Great Depression, Coty, like other companies dependent on luxury goods, fell into difficulties. According to a later New York Times article, sales in the United States fell from $50 million in 1929 to $3.5 million in 1933. The author, Richard Rutter, wrote that management 'compounded its mounting problems by slashing prices in a desperate effort to gain a mass market ... a near-fatal move in a field in which prestige and the luxury symbol were vital.' Even so, Coty lost money on its American operations only in 1935. With World War II imminent, the foreign companies were folded into the newly created Panama-based Coty International Corp. in 1939. The ownership remained the same, however, and the two corporations had interlocking directorships.

Levy retired in 1940 and was succeeded as chairman by Grover Whalen, a civic booster and promoter who was finishing his stint as president of the body that organized and ran the New York World's Fair of 1939--40. In his role as the company's public face, Whalen established the Coty American Fashion Critics' Award, an annual presentation that kept its name before the public for 40 years. Administration was in the hands of Coty's president, Herman L. Brooks, from 1938 to 1946, when Mme. Cotnareanu, who spent the war years in the United States before returning to Paris, replaced him with her brother-in-law Philippe Cotnareanu.

Cotnareanu, who changed his name to Philip Cortney, secured bank financing to keep Coty going and, in one of his first decisions, raised prices for the entire line. In spite of a long-range program to double the company's retail business, he cut off drugstores carrying Coty products if they would not agree to provide display space of at least 16 feet in length for exclusive stocking of these goods. Production lines were automated, packaging restyled, and new lines of goods added periodically, including, in 1955, a new toilet-goods line for men named 'Preferred Stock.' Research laboratories were established in Morris Plains, New Jersey, and overseas.

In 1946, Coty's first postwar year, sales nearly doubled from the 1941 total, to $19.1 million, and net profit reached $1.24 million. The company lost money in 1947, however, and although it returned to profitability, sales stagnated. Fiscal 1955 (the year ended June 30, 1955) was Coty's best postwar year, with net income of $1.61 million on sales of $22.76 million. The firm lost money in fiscal 1957 and 1958, with management blaming the results on the high cost of advertising, which rose from seven to 16 percent of sales in this period. Moreover, firms like Revlon, Inc., which reaped huge publicity from its sponsorship of television's The $64,000 Question, seemed to be getting better results for the money. In fiscal 1962, Coty had net income of only $386,985 on sales of $25.46 million. Coty International had a profit of $319,331 on sales of $7.38 million.

Pfizer Subsidiary: 1963--92

Coty and Coty International were sold in 1963 to Chas. Pfizer & Co. for about $26 million and became divisions in the pharmaceuticals company's consumer products group. In 1965 Coty introduced Imprevu, its first new perfume in 25 years. This became the leading Coty fragrance by the end of 1968. Introduced in 1967, Coty Originals offered a comprehensive collection of newly designed makeup products at popular prices. Coty then added a high-priced, prestigious Dina Merrill line. In 1969 the division introduced the Bacchus line, a full collection of men's grooming aids, including aftershave lotion and cologne.

Coty and Coty International were united in 1973. Among the new products introduced in the early 1970s were the Styx, Sweet Earth, and Wild Musk fragrances and the Equatone beauty-treatment line. The production facility was moved from New York City to Sanford, North Carolina, at this time. Coty products were being marketed to franchised accounts, including distributors, independent drugstores, mass merchandisers, and department stores. Results were not meeting expectations, however, for the subsidiary was reported to be on the block in 1974 for possibly as little as $20 million--less than Pfizer had paid a decade earlier.

The battle for display space remained intense, but in 1984 Coty won a promotional award for its point-of-purchase Image Awareness campaign in 11,000 drug and mass-merchandise stores. Departing from tradition, the campaign included posters, buttons, and aprons involving a whole store as well as a selection of traditional point-of-purchase materials, such as booklets, fragrance testers, and test cards within the cosmetics department. In 1985 Coty followed up with a similar Ingenious Solutions campaign. A specially designed consumer 'colorkit' was provided for each of four fragrances--Nuance, Emeraude, Wild Musk, and Sophia. Each was graphically associated with an exotic locale.

Stetson, a highly successful men's scent, was introduced in 1981, and Lady Stetson was added in 1986.With more than $100 million a year in women's fragrance sales, Coty, in 1988, ranked second only to Revlon in this $3-billion-plus category. Besides the preceding, Coty's brands included L'Aimant, Lady Stetson, and Sand & Sable. Its cosmetics and treatment products included Air Spun face powder, Coty '24,' Overnight Success, and Sheer To Stay lipsticks, Sweet Earth face-care-treatment products, and Thick `N Healthy mascara. The men's fragrance line included Stetson, Iron, and Musk for Men. Coty ranked first in mass-market men's fragrance sales in 1991, with a 22.6 percent share, and first in women's, with 16.4 percent.

Benckiser's Coty: 1992--99

Coty was purchased in 1992 by Benckiser Consumer Products, the U.S. arm of a family-owned German household-products giant named Joh. A. Benckiser GmbH. That fall Coty introduced Gravity, a new upscale men's fragrance, and Truly Lace, a new bath-and-body-fragrance collection. Vanilla Fields, a women's fragrance that proved hugely successful, was introduced soon after. In 1993 Benckiser merged into Coty its Quintessence Inc. unit, which it had acquired the previous year. Founded in Chicago by Bernard Mitchell in 1968 as Jovan, Inc., this company had struck it big in 1972 with Jovan Musk Oil. The company was sold to the Beecham Group in 1979 and, in 1988, to its managers in a leveraged buyout, when it became Quintessence.

Coty, Inc. grew into a $1.5-billion-a-year company in 1996, when Benckiser made its Lancaster Group a Coty division. (The existing Coty, renamed Coty Beauty, became the other division.) Lancaster, founded in Monaco in 1946 and acquired from SmithKline Beecham plc in 1990, consisted of the cosmetics brand of that name and an Isabella Rossellini line, and a number of designer and prestige fragrances, including Davidoff, Jil Sander, and VivienneWestwood.

The consolidated Coty was now the global leader in mass-market fragrance sales.

Lancaster also introduced to Europe, in 1996, the leading Chinese cosmetics brand, named Yue-Sai for its developer, Yue-Sai Kan. In addition, it acquired a hip London-based cosmetics line, Rimmel. Coty Beauty's own line of color cosmetics was Margaret Astor.

The hot new introductions of 1997 were The Healing Garden, a line of four herbal-based 'aromatherapy' fragrances that quickly developed into a collection of 34 stockkeeping units, and its first fragrance bath-and-body line, Calgon Body Mists. Like the company's traditional fragrance brands, these products were merchandised as mini-departments within a store. Calgon quickly moved into first place and Healing Garden third among mass-market women's fragrances in the United States.

In 1998 Coty added a five-item Minitherapy for Feet line as an extension of the aromatherapy concept, and Isabella Rossellini launched a new cosmetics collection called Manifesto. During the year 45 percent of the company's sales were in mass fragrances, 24 percent in mass cosmetics, and 31 percent in prestige-market beauty products. Fifty-five percent of sales volume came from Western Europe and 30 percent from North America. Lancaster represented 75 percent of the company's European sales. In North America, Calgon, Healing Garden, and Vanilla Fields ranked second, third, and fourth, respectively, among women's fragrances. Stetson, Aspen, and Preferred Stock ranked first, fourth, and fifth among men's fragrances.

In 1999 Coty introduced Adidas Moves, a men's fragrance, to the United States and was planning to add its line of soaps as well. It also introduced Jovan Body Splash and a Dulce Vanilla fragrance, and it brought the Rimmel makeup line to the United States. The Lancaster Group's U.S. division introduced an Aromatopia line of 37 bath and body products in collaboration with May Department Stores Co., which took a one-year exclusive on the collection, to be sold in all 410 of its stores. For 2000, Coty was planning to introduce a new mass-market perfume, Esprit, in 44 countries under a licensing agreement with apparel marketer Esprit de Corp. Also planned for 2000 were line extensions of Aspen and Adidas. In all, Coty was marketing 44 scents.

Principal Divisions: Coty Beauty; Lancaster Group.

Principal Competitors: L'Oreal S.A.; Procter & Gamble Co.; Revlon, Inc.; Unilever N.V.

Chronology

• Key Dates:

• 1904: François Coty creates his first perfume.
• 1922: Coty, Inc. is founded in New York City.
• 1939: The five foreign Coty companies are reorganized in Coty International Corp.
• 1963: Coty and Coty International are sold to Chas. Pfizer & Co.
• 1992: Coty is sold to Joh. A. Benckiser GmbH, a German company.
• 1996: Addition of Benckiser's Lancaster Group makes Coty the global leader in production and sales of mass-market fragrances.