By  on February 24, 2006

NEW YORK — The consolidation-driven realignment of the U.S. fragrance industry has produced more tremors with a distribution deal between Puig USA and the Coty Prestige division of Coty Inc.

As of July 1, Coty will become the distributor of Puig's five main fragrance brands in the U.S. prestige market.

The deal does not affect the Barcelona-based firm's mass business, Puig Fragrance & Personal Care USA, or any of the other markets in the rest of the world.

Under the terms, Coty will do the selling and provide back-office and logistics support, according to the companies. After the transition, Puig will maintain a marketing squad housed in Coty headquarters.

The deal will hand five well-established fashion and lifestyle brands to Coty. These include Prada, which is a venture between Puig and the Milan fashion house; Carolina Herrera, with its six fragrance lines; Paco Rabanne; Nina Ricci, and a licensing agreement with Comme des Garçons.

Puig does not break out sales, but industry sources estimate that Puig does more than $50 million at wholesale in the U.S. with those brands.

In a telephone interview from Barcelona, Marc Puig, chief executive officer of Puig Beauty & Fashion Group, said the ongoing consolidation of department stores convinced him that the way to make headway in the U.S. was to strike a strategic alliance. Both he and Bernd Beetz, ceo of Coty Inc., described the resultant arrangement as a "win-win" combination.

Puig said Coty has achieved the number-one ranking on women's fragrance bars in U.S. department stores. The addition of Puig's fragrances will strengthen Coty's standing even more and that "will allow us to leverage the position and give us more weight."

That leverage, he added, will put Puig in a stronger position "and we will be able to promote our brands." He stressed that one of the main advantages is to allow Puig to market its brands more effectively. "We have been operating in this country for many years," Puig continued, "and we wanted to make sure we had the best solution to promote our brands." In addition, the move will help Puig utilize its resources.The Puig ceo acknowledged that the acquisition of May Department Stores Co. by Federated Department Stores Inc. triggered a hard look into the future. However, he maintains that consolidation is a fact of life in every consumer goods market. When asked if his American prestige business is now profitable, he replied, "We've been growing in the U.S. market." Since the U.S. is dominated by department stores, Puig added, "it is an expensive market to serve."

Beetz, who was reached in the Frankfurt airport just before boarding a plane to New York, described the alliance as a good fit. "We share the same values," he said. "We are both family-based companies that are privately held. We have reached a good platform in the U.S., particularly in the prestige market. We can really advance the portfolio."

In late January, Coty announced a reorganization resulting in the formation of the Coty Prestige division, which was aimed at improving the company's fortunes in specialty stores. The move was seen as a response to the department store consolidation.

A spokesman for Coty said the acquisition of the Puig brands will add diversity to Coty's fragrance assortment. With the last reorganization, the company "laid down a new organizational structure; now we are layering in some products."

Beetz noted that the addition of Prada to Coty Prestige's Vera Wang and Marc Jacobs brands will solidify the company's position in specialty stores and "give us a good rhythm." He also pointed out that the brand will inject a bit of Italian personality into the portfolio, which also will be enriched by the other brands.

With the acquisition of Calvin Klein's Euphoria and the launch of Sarah Jessica Parker's Lovely, Coty has two of its women's fragrances ranked in the top four on American fragrance bars in November and two ranked in the top three in December.

This deal will close a long chapter in Puig's U.S. history. The Spanish company has distributed prestige fragrance brands here for decades, dating back to Paco Rabanne in 1968.

The Puig ceo said he could not specify how many jobs would be eliminated, since the transition process has barely begun, even though it appears that the bulk of positions will be eliminated. Industry sources estimate that 80 jobs are at stake.When asked, Puig indicated that Martha Brady, the current president, will not be part of the remaining marketing team. Considering her career path and high seniority, Puig said, there will be no "appropriate" place for her on that squad. She will lead in the transition, he added, noting that Jordi Puig, a vice president and family cousin, will also help in the process.

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