In this interview, Coty senior vice president, global travel retail Guilhem Souche discusses the factors that have led to Coty Travel Retail’s +30 percent sales growth in Q4, the ongoing diversification of the Coty portfolio and elevating the shopping experience with retailtainment and digitalisation.
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Travel retail played a starring role as Coty posted a +16 percent year-on-year rise in reported sales (+17 percent like-for-like) in its fourth quarter of 2023, which ended 30 June. Travel retail sales grew +30 percent like-for-like and now contributes 8 percent of Coty’s total business.
Coty said this was the twelfth consecutive quarter its results have been in-line to ahead of expectations. According to the company, this performance is consistent to its travel retail penetration in 2019, even if international travel is still below COVID levels.
That performance came despite well-documented inventory issues in the key Hainan duty free market, which have affected most leading beauty brands including The Estée Lauder Companies, L’Oréal and Shiseido. For Coty though, the impact has been minimal, says Souche.
He says: “Our last quarter performance is evidence that travel retail is booming for Coty, so we didn’t feel the same impact as others in the industry. China is still quite a new dynamic market for us.”
A diversified portfolio
In recent years, Coty has invested heavily in diversifying its portfolio, boosting the critical skincare sector and broadening established brands such as Gucci and Burberry to include makeup and skincare. “Last year we were talking about adding notes to the Coty symphony,” Souche recalls.
“Thanks to these efforts, this year we are in a very good position with brands that touch all segments – not just in fragrances, but also in makeup and skincare and across all geographies.”
Part of this is creating a more varied fragrance portfolio and the so-called ‘skinification of beauty’. Souche explains: “In terms of fragrances, the customer mix is evolving very fast. We need to be flexible and to have the right offer to attract a very diverse range of customers. Our strategy is not to favour just one category, but to cover the whole spectrum and attract new customers. We also want to premiumise, as some customers are looking for the most sophisticated scents.
“Our collections are moving very fast to address these demands. Chloe Atelier des Fleurs is really getting a full retail expression and has become almost ‘a brand within a brand’. The same goes for Gucci Alchemist’s Garden and Burberry Signature.
The skinification of beauty will only ramp up,” he adds. “We are developing our skincare portfolio as part of a strategic shift that we started last year, with Lancaster and Orveda leading the way. In terms of skinification, we are incorporating more and more skincare ingredients into our colour cosmetics products. This is not simply a trend but a core pillar of our approach. Our consumers are looking for this as a must-have and not just an add on.”
As noted, Coty has mounted a big push in evolving Lancaster from a suncare brand into a full-fledged skincare proposition. The brand launched the travel retail-exclusive, super-premium range Ligne Princière, which pays homage to Lancaster’s royal roots in the principality of Monaco.
Orveda, Coty’s ultra-premium skincare brand, is another key focus. The brand was co-founded by Coty CEO Sue Nabi and Nicolas Vu in 2014 with the aim of ‘reinventing high-end skincare’.
Burberry Goddess: A heavenly launch
These efforts to elevate the shopping experience were best exemplified in the recent Burberry Goddess pre-launch. The pop-up campaign, with its disruptive in-store activations and high-profile market positioning, is setting new sales records across key markets.
The fragrance was exclusively available in global travel retail from 1 July prior to its global roll-out in August.
The pre-launch helped propel Burberry Goddess to become a top three fragrance at leading airports. It also created a strong halo effect and drove sales for the Burberry Hero male fragrance and Her fragrances.
Coty CEO Sue Nabi singled out the Burberry Goddess launch as a ‘five-star launch’ during Coty’s recent earnings call, underlining the power of what an effective blockbuster pop-up campaign can achieve when implemented with the right amount of retailtainment and digitalisation.
Souche says: “The Burberry Goddess pop-up campaign brought a lot of pride to the whole channel and the feedback we got from stores and retailers was very positive. All our partners were very excited to be the first channel to launch a major new fragrance from a brand like Burberry.”
The Burberry Goddess launch also drives Coty’s ambition to create a strong Sense of Place in each brand’s home country. Souche explains: “We created an amazing launch for Burberry Goddess in Heathrow, a beautiful takeover for Gucci Flora in Malpensa, and created a multi-category animation for Boss in Germany.
“For Boss, we created synergies with the fashion house and the airport authority to offer a multi-category pop-up in the brand’s home country.”
During its FY23 earnings call, Coty had predicted its core like-for-like (LFL) sales would grow by +8-10 percent in the first half of FY24. The company is now expecting core LFL sales growth in the first half of FY24 at +10-12 percent, driven by strong success across the portfolio, including Burberry Goddess.
Marc Jacobs returns to the world of colour cosmetics
Another significant development for Coty in recent months is the expansion of its licensing agreement with Marc Jacobs. The expanded agreement includes the relaunch of the brand’s makeup line, Marc Jacobs Beauty.
Commenting on the renewed partnership, Souche says: “We are very happy about this extension because it reinforces the fact that we are the go-to partner for fashion houses. Fashion brands come to us if they want to make a mark in the beauty world.
“We’ve had a very long and fruitful partnership with Marc Jacobs in fragrances, with Daisy Marc Jacobs and Perfect Marc Jacobs both being in the top ten female fragrances globally. We are very excited to replicate this success in the makeup category.
“The revival of Marc Jacobs’ cosmetic portfolio is eagerly anticipated by our partners and customers, who have been campaigning for its return. This agreement reinforces Coty’s position as a go-to partner for global fashion houses and brands that share our ambition of creating leading beauty portfolios.”
Enhancing the shopping experience
Armed with a healthy and diverse portfolio, the focus now, according to Souche, is to enhance the overall travel retail shopping experience. “What differentiates us is the attention we pay to retailtainment,” he explains. “We’re always thinking about what we can do different in travel retail from the domestic market. Our team is working very hard to enhance our retailtainment offer to transform travellers into engaged customers.
“We need to have the right spaces and the right brand expression. We are offering more storytelling, enhanced services, and a wider product offer. This is true for both our permanent boutiques and shop-in-shops, but also for our pop-ups and activations.
“Training is an important aspect of that,” Souche adds. “We need Beauty Advisors who are engaging, show empathy and are professional with customers. We have an online training tool called ‘We Live Beauty’ to help upskill our Beauty Advisors. Coming out of COVID, we have many new people entering the field and so this tool is a very efficient way to train all our new Beauty Advisors in the Coty way.”
The go-to partners of digitalisation
Digitalisation is another key priority as Coty continues its efforts to attract and engage with the next generation of beauty shoppers. “We want to be pioneers in digitalisation,” Souche explains.
“The ‘Fly With Me’ animation, which debuted in Singapore Changi Airport in April 2023, was the first time that we introduced this partnership to international customers outside of China, and is a great example of our ambition in terms of digitalisation. Gen Z consumers are digital natives so it is important to reach them even before their arrival to the airport.
“We started with Asia because these types of omnichannel payment platforms are more commonly used there, but it’s something we are discussing with our partners in EMEA too. We want to position ourselves as the go-to partner for any digital projects.”
Beauty that lasts
In recent months, Coty expanded the portfolio of its sustainable and refillable products. It also accelerated its Environmental, Social & Governance (ESG) roadmap by expanding its sustainability office. “When Sue Nabi arrived as CEO, she defined our sustainability platform ‘Beauty that Lasts’,” explains Souche.
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“This is all about respecting the beauty of our planet, beauty of our products, and beauty of our people. This thinking is anchored as early as the product development stage. For example, Lancaster Skin Sensitive is certified Cradle to Cradle and ocean-friendly, and we are communicating this strongly both in stores and on the products.
“Our partnership with LanzaTech developed ethanol that is captured from industrial emissions and that is a major action in terms of sustainability, since we are using a lot of ethanol as a fragrance leader. Burberry Goddess is refillable and Chloé has launched three scents for Atelier Des Fleurs that are vegan and made with 100% natural-origin ingredients and naturally derived alcohol. This is very important for Gen Z because it does make an impact on their final purchase decision.”
Looking ahead, Souche says: “The priorities for travel retail are very consistent with the priorities of the Group. We want to keep building a strong fragrance portfolio and to keep accelerating in skincare, with travel retail spearheading this acceleration. We want to keep building our makeup offer with Burberry, Kylie Cosmetics and Gucci Makeup already bringing in great results across all geographies and with Marc Jacobs to come.
“Premiumisation and digitalisation are also priorities,” he adds. “We want to win in digital and be the go-to partner for digital across all airports and retailers. We also want to progress our sustainable commitments from formulas to product development and packaging.”
A customer-centric approach, according to Souche, is key to bringing this all together. He says: “The challenge is to make all of this happen in a way that is relevant to travel retail. How do we do that? By always keeping the customer at the centre of everything we do.”
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It certainly has been a busy year for Coty. As the beauty giant enters 2024, its 120th anniversary, amid a robust beauty category, strong momentum across its core categories, a strong innovation pipeline and early wins in key white spaces, it seems that its increased outlook of like-for-like sales growth is more than achievable.
(Source: The Moodie Davitt Report)