During the firm’s 2024 earnings conference, Coty chief executive Sue Nabi said China was likely to continue experiencing negative growth in the short-term.
“Now, what we are seeing now at the moment is that the negative growth trends, specifically in skin care in China will continue probably in the coming quarters,” she said.
Currently, Coty's business in China remains small, contributing approximately 3% of fiscal 2024 revenues. Its small presence has protected its performance given the current pressure in the market.
However, China remains a hugely important market for the company in the long-term.
“Clearly, we believe that fundamentally, China is or will be one of the biggest, if not the biggest beauty market in the mid to the long-term. So, this is really something structural and this really has to do a lot with prestige market, I would say that is going to continue to grow because this is culturally rooted in this country,” said Nabi.
She said that Coty is preparing for the anticipated resurgence of skin care growth in China, beginning with its Lancaster brand.
The company has successfully launched a Lancaster flagship and its ultra-premium Ligne Princiere line in May last year.
“Lancaster has been doing a fantastic relaunch in China and we have seen great results. Lancaster is the fastest-growing skin care brand in both the June quarter, almost doubling the size of the brand and also in calendar 2024, with triple-digit growth, gaining four points of market share in year-to-date calendar year 2024.”
According to Nabi, June was a very strong month for Lancaster. In Sephora, it ranked number four behind brands such as Drunk Elephant and Tatcha. It also ranked number eight on Douyin, China’s TikTok counterpart.
Nabi believes consumers are responding strongly to the brand’s focus on sun protection and photo-ageing.
“It's all about photo protection and photo ageing is clearly strongly resonating in China,” she said.
Lancaster is the beginning of the firm journey to build up its skin care portfolio in China.
“We are readying our brands, Lancaster and also Orveda, for when the skin care market will be back on track, and we believe this will happen at one moment or another,” said Nabi.
Fragrance growth continues
While skin care has been down, the fragrance category has continued to be a booming category for Coty.
“Prestige fragrances is really the bright spot in this country… So we are playing with a leg of prestige fragrances, which are really doing better than any other category and the adoption curve of Chinese consumers in terms of premium, entry premium or niche fragrances is continuing to be at play, and we have the right brands. Recently, Burberry, Chloe, and Calvin Klein has been doing great in this market,” said Nabi.
She added that the firm was reallocating resources and investments to focus on markets showing growth potential, and China’s prestige fragrance market was one of them.
“And so of course, there is growth behind prestige fragrances in China, so we are investing over there.”