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NEW YORK — In certain beauty circles, Eric Thoreux is referred to as Coty’s Renaissance man. And the title may just fit the bill: As soon as Thoreux joined the beauty company 10 years ago from Procter & Gamble, he aimed to disassemble its existing workforce to institute a corporate strategy that would be far different from how Coty had ever operated.
Back then, Coty was called Benckiser Beauty, with Coty operating as a division of that company comprising a collection of recently acquired beauty brands with, at most, regional distribution. The company’s strength lay mainly in capturing a trend and translating it into a fragrance. Vanilla Fields, which became one of the successful fragrances of the Nineties, showed how well a trend could be captured in a bottle.
Thoreux’s plan aimed to switch the division’s habit of thinking in this way, and instead build big, strong global brands. He aimed to build teams across the country that would result in long-term brands with clear equities. He wanted these brands to help build their respective categories. He also wanted to inspire the impulse of employees to enter new categories, such as specialty bath, color cosmetics and deodorants and antiperspirants. In inspiring this creativity, he hoped risk-taking and entrepreneurship skills would emerge, giving Coty a competitive edge in understanding lifestyle trends and in partnering with celebrities at the right time.
“Employees were used to working and focusing only on concepts. That had to shift to brand-building,” Thoreux said.
The strategy was a four-year undertaking, and in some cases is still being realized. The refocus included streamlining 15 color cosmetics brands down to three. Rimmel cosmetics, now one of Coty’s top four brands, is still replacing older, smaller lines as it now enters new markets, such as the Netherlands.
Thoreux’s plan affected the entire company’s makeup. Take Coty’s product categories and percentage of sales, for example. Five years ago, approximately 85 percent of Coty North America’s sales were generated from fragrances. Today about 55 percent of sales come from fragrances, while 30 percent is generated by specialty bath and toiletries and 15 percent by color cosmetics.
“We are not just juice in a glass bottle. We have aromatherapy, color cosmetics, specialty bath and antiperspirant and deodorant categories. That’s a different paradigm,” Thoreux said.
As president of Coty Beauty Americas, one of Coty’s three divisions, Thoreux is responsible for 27 percent of the company’s sales and a little more than 30 percent of its profits. As his title suggests, the division’s sales are 80 percent derived in the U.S., with 10 percent coming from Latin America and 10 percent from Canada.
Thoreux’s “think big” plan has also produced big brand results. Today, Coty makes six brands that ring up some $100 million each in retail sales. And approximately 53 percent of Coty’s business is generated through four global brands: Rimmel, Celine Dion, Adidas and Healing Garden.
“We have really shifted the business into one that’s much more balanced,” said Thoreux.
Some of his successes are tied into perfect timing with the group’s four global brands. For instance, when Coty expanded Rimmel from Europe to Wal-Mart in 2000, Neutrogena and Olay had entered the cosmetics category with relatively premium-priced cosmetics lines. Rimmel, however, represented a point of difference with a moderate price point.
Today’s retail landscape indeed reflects Thoreux’s plan, seeing that beauty is now a true cross-category business dominated by big transversal brands. Coty reflects this, too. Rimmel operates as a cosmetics and fragrance line. And Adidas is in the fragrance, deodorant, antiperspirant and bath categories.
“We have now what I call big mega-brands, very clear equities which we will build on to operate in different categories,” Thoreux said.
And perhaps he is a soothsayer. Coty’s change in direction, which brought it from being a business that was focused on fragrance to one that acknowledged and participated in other beauty categories, happened just as the fragrance market began to show signs of mortality.
Three tipping points signaled to Thoreux that the fragrance boom was nearing an end. The first event was the emergence of specialty retail outlets, which spearheaded new ways of experiencing fragrance. Body mists, for example, created a new, lower price point and a cheaper way for women to use fragrance.
The second event that affected the fragrance industry, Thoreux said, was the broadening of prestige brands’ distribution.
The third, he said, which has occurred in the past 18 months, shows prestige brands destroying value in the category by launching small sizes of fragrance in broad distribution at very discounted prices. Many, which are sold for between $10 and $12, Thoreux said, are sold at even lower prices than mass products.
“Discounted prestige brands in reality has been destroying the market and has resulted in a reduction of dollars. The market has not been declining in units,” Thoreux said.
In each case, Coty reacted. In response to the popularity of body mists, Coty created Calgon and Healing Garden, a business that now generates millions of dollars and where the brands lead both the specialty and commodity bath categories in sales and market share.
And when Thoreux noticed the broadening of prestige brands, he called for Coty to use brands such as Adidas as a way to penetrate the market.
Coty’s answer to the value equation was threefold. The first was to create brands like Celine Dion, which would dominate the category at prices consistent with the brand’s positioning. A 0.5-oz. bottle of Celine Dion was priced at $18 to $20, and successfully competed against prestige brands priced below $15.
Launching Celine in second-tier department stores and then to the mass arena also brought value and excitement to the brand. The unconventional strategy worked, he said, in that he solicited a ripe new avenue of business that backed up the brand so successfully that mass retailers, the next channel to receive the fragrance, became competitive in trying to outdo the stores that launched it. “It inspired mass retailers to do well. Like Walgreens, which put together a beauty sales team, a cosmetician, training and banners to sell the fragrance. When Coty chooses to launch an item with one specific retailer, they tend to launch in an inspirational way.”
And third, Coty has supported its brands with increased advertising and marketing budgets.
“We have doubled our media spending in the past three years, which shows we are here to build long-term brands and to bring value to the retailer.” Thoreux is also a believer in investing in new media, such as the Internet and events that connect the emotions of a brand to a consumer.
Technology, the key to what drives many of beauty’s categories, is limited in the fragrance world, Thoreux explained. But launching a product and making it easy to afford can make up for that. “I think it’s the type of brand you are proposing and how you launch it that can bring more excitement,” he said.
That’s not to say Coty won’t be competitive in a price war.
“Many of our mass brands have been reacting to new market conditions through adjusting our price on the smaller stockkeeping units to bring an opening price point, such as with Adidas. We are also reducing the price of Ici. Jovan has just launched Jovan Heat, which is below $10, and then there’s Healing Garden’s In Bloom, which is launching now and is 25 percent cheaper than Healing Garden Waters, which launched three years ago. We are reacting to the price war on our mass brands, but at the same time we are adding media to really stimulate the market,” Thoreux said.
Coty has plans in the next 12 months to launch two or three new licenses designed to be as premium as Celine in an effort to drive category growth again.
“Celine has proven that with the right brand, you can ask for the right price to make the category grow,” Thoreux said.
With lower prices and increased ad spending, it appears there’s an opportunity for Coty to stumble. But cost savings, Thoreux said, has been one of his group’s main objectives as well.
“We have been working very hard on optimizing our fixed-cost structure, our cost of goods and marketing spending, like cost of displays and other nongross building spending, in order to reallocate money to more media,” Thoreux said. “It’s a tightening of all the costs, to be able to rechannel the money where it is right.”
Coty has been growing market share, according to Information Resources Inc. data, which show that for the recent period, brand sales were up 9.6 percent when the universe was down 1.7 percent — and that the company gained a 2.2 percent dollar market share for the time period.
Sales were up 5 percent for the first half of the year, Thoreux said, and the team is ready for the balance of the year, armed with products such as Jovan Heat, Healing Garden In Bloom, Celine Dion Notes and a strong Christmas program in specialty bath that looks to be competitive with low-priced imports.
But Thoreux realizes that not every celebrity license and partnership will ring in sales. “There needs to be a true quality connection. Just because there is a high awareness of a celebrity does not mean the product will sell.”