By and  on October 9, 2006

NEW YORK — Coty Inc. has served notice that it intends to double in size by 2010 to sales of more than $5 billion, which would rank it among the world's top five players.

And that isn't an idle threat. In the last five years, since Bernd Beetz took the helm as chief executive officer, the company has already doubled its sales.

Upon Beetz's arrival from Parfums Christian Dior in 2001, Coty had sales of $1.4 billion and a portfolio of 24 brands. Today, its revenues are $2.9 billion, driven by 40 brands including a bevy of celebrity fragrances —and industry sources indicate there are more to come. While the company declined to comment, Coty is said to be working with actress Lindsay Lohan and singer Gwen Stefani on new fragrance brands.

And when it comes to the future, Beetz isn't ruling anything out: He's made a point of turning conventional wisdom on its ear since arriving at Coty.

At a press conference Friday morning, Beetz made it clear Coty will lean more heavily on color cosmetics and skin care to grow its business. "We were number 31 in size in 2001 and we are number eight now," said Beetz, referring to total beauty business, including skin care and color cosmetics. He noted the company's credo is innovate or die. "We believe we will be number five worldwide by 2010."

Several in the investment community — who noted that celebrity fragrances have been detrimental to the economics of the category — approved of Coty's plans to shift its focus to more profitable businesses. Fragrance currently drives 65 percent of the company's sales, with color cosmetics and skin care accounting for 17 percent and 4 percent, respectively.

Beetz said skin care offers major growth potential, particularly in dermatological and organic products. The company also has widened the scope of its Lancaster skin care brand beyond Europe, and introduced the skin care brand to select Bath & Body Works stores in the U.S. Coty plans to open four Lancaster counters in China, and named skin care as a way to significantly increase its size in Asia.

"Prestige skin care could be an opportunity for Coty," said Alexander Panos, managing director of TSG Consumer Partners. "It can be a linchpin business for any top beauty player because it offers high margins." Panos added that a move into other channels, such as television retailing, Internet and specialty stores, also could bolster growth.Beetz said the firm has created a strong platform for color cosmetics and that its Rimmel London brand ranks number two in Europe, and continues to expand its reach in the U.S. mass market. Last week, the company launched the edgy, value-priced offering, fronted by model Kate Moss, in Japan. The company has identified Rimmel London, as well its Calvin Klein and Adidas brands, as properties expected to hit the $1 billion mark in coming years.

Coty's bold growth plan also leaves room for more acquisitions, and some have speculated the firm may be in talks to acquire Revlon or Elizabeth Arden. Beetz did not directly address the rumors, but declared, "We have a very clear strategy for each category."

The ceo added that Coty is "very open" to acquisitions, and that businesses of the magnitude of Unilever's fragrance portfolio would be ideal. Referring to the Unilever deal, which cost Coty $800 million, Beetz commented, "Technically, it was an acquisition, but it was actually a merger," adding that Coty has retained much of the brands' talent pool to help the company "stay at the forefront."

Certainly, Beetz has been no stranger to large brand acquisitions since joining Coty. In addition to last year's Unilever deal, in May 2003 Coty acquired a large share of the American Designer Fragrances division of LVMH Moët Hennessy Louis Vuitton, including the Marc Jacobs and Kenneth Cole fragrance licenses, for an estimated $50 million. In February, Coty also signed a strategic alliance with Puig USA to distribute its top prestige scents in North America, including Prada and Carolina Herrera.

There also has been intermittent speculation that Coty harbors ambitions to one day do an initial public offering, talk that was reinforced by the press conference itself — the first on the state of the business by Beetz since joining Coty. However, a Coty spokeswoman denied that Coty is considering an IPO, noting the purpose of the press conference was to "be transparent" in growth intentions.

The event also served as a platform for an announcement of a charitable partnership with DKMS, the world's largest private blood marrow donor foundation. The acronym stands for "Deusche Knochenmarkspenderdatei," or German Bone Marrow Donor Center. The cause is close to the company's heart, as Coty chairman Peter Harf lost his wife to leukemia.In total, 50 percent of the company's sales are done in Europe and 33 percent in the Americas, 4 percent in Asia and 13 percent in the rest of the world. "In the last five years, our strategy has been to grow our business in the U.S. and to revitalize our European business, both of which we have done," said Beetz. "Next, we're going to do that with Asia."

He expects Asia to account for 15 percent of company sales in 2010.

"In the last five years, we have generated growth out of stable and sluggish markets, including the U.S. and Europe," said Beetz. "If we get our act together, we can do the same in Asia."

The ceo's most indelible mark thus far has been his fervent devotion to celebrity fragrances. Star-powered scents were popular in the Eighties, but when Coty signed Jennifer Lopez in 2002, the genre had all but died out. The move raised eyebrows across the industry, but the subsequent launch of Lopez's first fragrance, Glow by JLO, proved the naysayers wrong: It garnered $80 million in first-year sales and inspired Hollywood heavyweights and beauty firms to follow suit. In remarking about the brand's unexpected longevity, Beetz said Friday that Lopez's fragrance franchise — which includes Glow by JLO, Still Jennifer Lopez and a bevy of flankers — is projected to generate a cumulative $1 billion in retail sales by the time the brand celebrates its fifth anniversary next September. A new flanker for Glow, called Glow After Dark by JLO, will be launched for holiday in the U.S. and in January elsewhere.

Several other stars in the Coty stable have also proven to be winners. Sarah Jessica Parker's fragrance brand, Lovely Sarah Jessica Parker, has been a growth engine for the company, with $60 million in sales worldwide in 2006, as has David Beckham's fragrance lineup, which has done $50 million in sales in Europe in the same period of time. Kimora Lee Simmons, Russell Simmons, Céline Dion and Shania Twain also have hit fragrances with Coty, and last week, the beauty firm disclosed plans to feature rocker Jon Bon Jovi in ads for its Kenneth Cole fragrance brand."Five years ago, nobody could have imagined the kind of success" Coty would have with Jennifer Lopez, not to mention other celebrity brands, said Beetz. But he had the last laugh: "The whole industry converted to the belief of the celebrity [fragrance] category," he said.

But Coty's acquisition of Unilever Cosmetics International's designer fragrance brands — including Calvin Klein, Vera Wang, Chloé and Cerruti — is what grew the company's 2006 sales by 38 percent. The Calvin Klein fragrance brand is the company's largest business at $610 million, up 16 percent from the prior year, noted Michele Scannavini, president of Coty Prestige worldwide. He added the firm was planning a major initiative to drive the brand's CK franchise in spring 2007.

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