Coty Diversifies Its Cosmetics Portfolio; Is OPI Acquisition Far Behind?

Known widely for its trend-setting role in the fragrance arena, Coty Inc. may be looking to grow its presence in the larger personal-care sector judging by the company's recent moves in color cosmetics and its rumored interest in nail polish brand OPI Products Inc.

Coty's Nov. 12 acquisition of German cosmetics firm Dr. Scheller Cosmetics AG from Russia-based Kalina “paves the way for Coty to achieve its goal of becoming a $7 billion beauty company by 2015,” it says.

Additionally, Coty is reportedly close to a deal to acquire OPI. The North Hollywood, Calif.-based nail color brand could fetch up to $1 billion, according to reports. Neither company responded to requests for comment.

With the addition of OPI, Coty would dominate U.S. nail polish. Already its Sally Hansen and N.Y.C. brands command 48% of the market, according to Euromonitor.

Coty last upgraded its nail-care portfolio when it purchased Del Labs’ beauty line in 2007, which gave it the Sally Hansen, N.Y.C. New York Color and La Cross brands (Also see "Newly Acquired Sally Hansen Marketer Is A “Natural Extension,” Coty Says" - HBW Insight, 17 Dec, 2007.).

With the addition of OPI, Coty would dominate the U.S. nail polish market. Combined, Sally Hansen and N.Y.C. command 48% of the market, according to market research firm Euromonitor. OPI currently holds approximately 6%.

OPI rival essie cosmetics was acquired by L’Oreal in April, giving the cosmetics giant a stake in the premium nail polish market (Also see "L'Oreal Penetrates High-Fashion Nail Polish Market With Essie Acquisition" - HBW Insight, 26 Apr, 2010.).

Nail polish has been a bright spot in a dim economy. Sales in the segment rose 11% in 2009, with women opting for home manicures and pedicures rather than salon visits, according to Euromonitor (Also see "Designers, "Mad Men" Couldn't Help Lipstick In 2009 - Euromonitor Report" - HBW Insight, 5 Jul, 2010.).

The U.S. market for nail polish is valued at $462.9 million, while the global market tops $3 billion, Euromonitor says.

Overall, Coty reports annual sales of nearly $4 billion, and its products reach 90 global markets, according to the firm. Color cosmetics currently account for 25% of the company's overall portfolio.

The acquisition of Dr. Scheller will raise Coty’s 7% share of the color cosmetics pot in Germany to 17%, making it the second-largest player in that market.

Dr. Scheller boasts Germany’s top makeup brand, Manhattan, and anti-acne brand, Manhattan Clearface. Coty plans to use Dr. Scheller’s distribution channels for its own color brands in the country, including Astor, Rimmel and Esprit cosmetics.

Dr. Scheller’s “well established brand, high-quality products, market presence and loyal consumers will complement and add value to Coty’s existing offerings,” according to Coty CEO Bernd Beetz.

Financial terms of the Dr. Scheller deal were not disclosed.

Coming: Calvin Klein Cosmetics, Lady Gaga Scent

In October, Coty announced a collaboration with Calvin Klein Inc. to develop and market a line of color cosmetics. “We feel strongly that this introduction will further strengthen both Coty’s and Calvin Klein’s dynamic positioning within the beauty arena,” Beetz says.

Coty already handles fragrance duties for the fashion brand, including for the iconic ck one scent.

As “Coty has done an excellent job of growing our fragrance business,” says Calvin Klein President and CEO Tom Murry, there are synergies in putting its color cosmetics business in Coty's hands as well.

Meanwhile, Coty continues to expand its own fragrance portfolio. The firm announced Nov. 11 that it will develop a signature fragrance with pop artist Lady Gaga.

“A force like no other, Lady Gaga is explosive, provocative and sexy – three traits which pave the way for an extraordinary fragrance experience for consumers,” Beetz says.

As “music’s biggest breakout star of the decade,” Lady Gaga has sold more than 13 million copies of her album "The Fame" and more than 50 million singles. The fragrance partnership will “allow Lady Gaga to intimately connect with her fans on a global scale,” Coty says.

The scent is expected to launch in spring 2012 with global distribution.

Steve Mormoris, senior VP of global marketing for Coty Beauty, says marketing of the fragrance “will be unprecedented and groundbreaking.”

“We are working toward distilling the brilliance of Lady Gaga into a fragrance that delivers a breathtaking olfactory experience and a timeless, enduring packaging design that is part of Lady Gaga’s overall artistic sensibility,” he says.

By Lauren Nardella