Coty said it recorded double-digit sales growth in China in the second quarter, driven by its growing presence in luxury make-up, skin care, travel retail, and the rising interest in fragrance.
“Our Q2 prestige sell-out grew over 30% which is six times the growth rate of the prestige beauty market, while in overall calendar 2021, our prestige sell-out was four times faster than the market,” said Coty CEO Sue Nabi.
Its strong performance in China drove its Asia Pacific business up by 16% to net revenues of U$196.2m in the second quarter. Overall, the region grew by 22% in the first half.
“We continue to make strong progress on this fifth strategic pillar. Following a very strong Q1, we maintained strong double-digit sales growth in Q2, even as the resurgence of COVID in parts of the country led to slowing beauty sales broadly,” said Nabi during the firm’s latest second-quarter earnings call.
As part of its expansion plans, the company has been rapidly growing its retail footprint and homing in on differentiated and locally relevant packaging and communication.
Nabi highlighted Gucci and its make-up range, which had a particularly strong showing over the last quarter.
“In China, Gucci remains a highly desired brand… Our strong activations have driven our Gucci make-up sales in China to triple year-on-year. In fact, as we advance our strategy of building Gucci into a truly two axis brand, Gucci make-up sales in China now exceed Gucci fragrance sales.”
The success of Gucci in China was also evident online, as it quickly rose through the ranks to become one of the most popular beauty brands on Alibaba-owned e-commerce platform, Tmall.
“I'm proud to say that only 10 months after launching the brand on Tmall, Gucci reached the number 10th spot on Tmall in December,” said Nabi
Furthermore, Coty’s Tmall revenues in the quarter grew over three times year-on-year. Nabi said that the firm’s recent success gave her “strong confidence” that the company was on its way to meet its targets in China.
“As a result of this momentum, prestige make-up grew from less than 3% of our total sales in the first half to over 4% of our sales in the first half of 2022 and we continue to target approximately 10% penetration by fiscal 2025,” said Nabi.
Lancaster drives skin care growth
In addition to make-up, the company also sees growth potential in China’s skin care and fragrance markets.
With the shift in consumer spending to skin care, Coty has been building up its skin care business with Lancaster’s business in China as the lynch pin to its skin care initiatives.
“As you know our strategy to turn Lancaster into a scientific skin care brand excelling in repair and protection, its focus first on Hainan and Mainland China,” said Nabi.
“We have been actively opening Lancaster counters and focus on Hainan with beautiful fixtures such as the one you see here. We hosted VIP events with leading dermatologists, celebrities, and key opinion leaders… And we are seeing these efforts translate to sell out.”
According to Nabi, Lancaster's monthly Hainan have nearly doubled as of December since unveiling its initial three doors in May last year.
“This confirms our view that with the right support and activation the Lancaster brand equity and product trends truly resonate with Chinese consumers,” she said.
To further drive growth, the company aims to accelerate its luxury fragrance business in China, which is growing rapidly.
“The fragrance growth is being driven by Chinese consumers truly discovering the fragrance category, which is often viewed as an extension of luxury fashion,” said Nabi.
“We see the fragrance momentum in China continuing for many years to come given the incredibly
low fragrance penetration in the market and see a clear path for China to move from the
number five fragrance market today to the second market in the next few years.”
Globally, Coty has reported higher earnings and revenues on growth across all regions and channels. Its net revenues increased 12% to U$1.58bn. Adjusted operating income increased to U$236.3m, up from U$203m in the previous year.
