Coty’s “fragrance effect” boosts FY22 growth despite exiting Russian operations

30 Aug 2022 --- Coty has released results for the fourth quarter of the fiscal year 2022 (FY22) to reflect a sales increase of 10% as reported and 16% on a like-for-like (LFL) basis, including over 150 basis points (bps) of negative impact from exiting its Russia business.

“The fragrance category continues to be a leading growth category in global beauty, with all key markets up double-digits versus last year and benefitting our portfolio,” a spokesperson from Coty tells PersonalCareInsights.

“We are seeing what we call a ‘fragrance effect,’ with consumers treating themselves to items which provide an emotional uplift without breaking the budget.”

Net revenue on a reported basis for FY22, ending 30 June, was US$5.30 billion, growing 15% compared to the prior year. FY22 adjusted operating income increased 41% to US$615.5 million, while the adjusted EBITDA totaled US$905.3 million.

According to the report, prestige fragrance sales delivered another quarter of growth of over 20% in Q4 and were ahead of the overall category. Nearly all brands in the segment showed double-digit growth, particularly from Hugo Boss, Burberry, Chloé, Calvin Klein and Gucci Beauty.

Complementing the 3% raise reported in consumer beauty revenue, Coty also gained a share in body care and mass fragrances, led by brands Bruno Banani, David Beckham and Monange.

Prestige fragrance sales delivered another quarter of growth of over 20% in Q4 and were ahead of the overall category.Gez Z led effects
Coty reports a 60% uptick in prestige fragrances versus pre-COVID-19 levels in the US.

“Historically, fragrance has been a big gifting category. However, what we are seeing now is consumers using fragrance as part of their daily routine as a mood booster,” the spokesperson states.

“In particular, during the last couple years, we have seen increased fragrance usage by Gen Z, men and Hispanic consumers.”

Coty also reported growth in their sixth strategic pillar – sustainability. Besides innovations, clean formulations, sustainable packaging and animal-friendly products contributed to this growth.

“We took upcycling to the next level through our partnership with LanzaTech by beginning to manufacture prestige fragrances utilizing carbon-capture-based ethanol,” says Sue Y. Nabi, Coty’s CEO.

Outlook for FY23
Entering the first quarter of 2023, Coty continues to see prestige fragrance market momentum globally, coupled with “strong demand growth particularly in Europe, global travel retail, Middle East, Africa and Brazil.”

“Coty is targeting FY23 adjusted EBITDA of $955 to 965 million based on current foreign exchange rates, relatively in-line with its medium-term growth target of 9 to 11%, adjusting for the impact of the Russia exit.”

Clean and sustainable beautyCoty is embedding sustainability at the heart of product innovation process, according to company spokesperson.
Launches such as CoverGirl Clean Fresh and Lash Blast Clean, Chloé Signature and Nomade Naturelle and Rimmel’s Kind & Free range were touted as “great successes” for Coty.

“We joined the EcoBeautyScore Consortium, along with other beauty companies, to co-develop an environmental impact assessment and scoring system for cosmetic products,” the spokesperson continues.

“We achieved the Cruelty-Free International (CFI) certification for our Brazilian nail brand, Risqué. We continue our push into clean and sustainable beauty by launching innovations with clean formulations, more sustainable packaging and animal friendly.”

Avoiding greenwashing
To avoid greenwashing, the spokesperson explains that sustainability is the ultimate driver of innovation. “We are embedding sustainability at the heart of our product innovation process. Any claims made on our products are thoroughly reviewed by our regulatory and legal teams and are backed up by science.”

“We also work with third-party certification bodies like CFI and the Cradle-to-Cradle Institute to certify some of our products.”

“Since 2017, our key extra-financial metrics are audited by a third party, and we share past insurance reports on our website or the UNGC Communication on Progress website. This includes metrics on employee training, gender data, safety or environment and GHG emissions data. All these elements are readily available in our Sustainability Report – information transparency is crucial to avoid greenwashing.”

By Radhika Sikaria

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