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Coty Inc. is throwing in the towel on the mass market specialty bath business, a category it carved out a decade ago with The Healing Garden.
The beauty firm plans to sell The Healing Garden and its Calgon brand to Ascendia Brands Inc., a Hamilton, N.J., health and beauty products company formerly known as Lander Co. The closing price will be $125 million.
The terms of the agreement include an earn-out provision that could require Ascendia to pay Coty up to another $15 million in cash, and to issue up to another $5 million in subordinated debt in July 2009. Ascendia did not give details of the provision.
Ascendia expects the acquisition to nearly double its annual revenue, to about $200 million. The deal adds two nationally advertised names to Ascendia’s portfolio of bath brands, which includes Lander, Lander Essentials, Lander Kids and Mr. Bubble.
Coty’s decision to divest itself of the specialty bath brands follows its recently announced plan to become a $5 billion beauty firm by 2010, a bid that the firm has said will be powered by global brands. The Healing Garden and Calgon were sold principally in North America, noted Eric Thoreux, president of Coty Beauty Americas.
“We really developed these brands eight years ago,” said Thoreux. “Since then, our portfolio has developed a lot. We have a robust fragrance and color [cosmetics] business with Rimmel being one of the fastest-growing brands. Fragrance and color are clearly our two pillars, so we will allocate our resources behind them.”
Coty’s exit from specialty bath comes at a turbulent time for the business. Sales in the category fell 5.3 percent, to $224 million, in the 52-week period ended Dec. 31 in food, drug and mass channels, according to Information Resources Inc. During the same period, The Healing Garden sales were down 13.7 percent, to $30.3 million, and Calgon sales slid 12.3 percent, to $29.6 million. All figures exclude Wal-Mart sales.
Mass market retailers have increasingly added less expensive offerings, mostly from Asia, to the mix. Target took a slightly different tactic last spring to create its new bath and body department. The retailer ousted national specialty bath brands, including The Healing Garden, to make room for exclusive lines from abroad.
Both The Healing Garden and Calgon have attempted to revive sales growth despite the changing dynamics of the category. In 2005, The Healing Garden, building on its aromatherapy heritage, introduced an organic bath and body collection called Organic Wild Honey, and hired eco-conscious singer Jewel to front the line. The natural offering attempted to thwart imported knock-offs by adhering to the California Organics Products Act.
Last year, the company moved outside the specialty bath category with an organic facial skin care range called Skin Organics. At the time of the launch, a Coty executive, who has since left the company, noted that the skin care line was a bid to generate healthy year-over-year gains in a fluctuating category.
Coty also tried to update Calgon’s ubiquitous “Take Me Away” tag line with an advertising campaign and introductions that tapped into the gourmet trend.
Ascendia said the brands would bolster its strategy of expanding its “premium value offerings” in the specialty bath category.