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Coty Streamlines as Part of Transformation

The company completely reorganizes from top to bottom.

Coty Inc. has begun to implement a massive reorganization aimed at transforming the global beauty player by reinforcing its growth track and strengthening its leadership capability.

The company, which has 10,000 employees, is in the process of dramatically changing from a business model consisting of two separate end-to-end divisions — based on the distribution channels of mass and prestige — to a more integrated and holistic alignment focusing on product categories and geographic regions, while maintaining the prestige and mass differentiation in brand building and product development. “This will be a simpler organization,” said Michele Scannavini, chief executive officer of Coty Inc., adding that the new structure will be “more rational, more integrated, more efficient and will eliminate redundancy.”

Previously, Coty, which chalked up sales of $4.6 billion at the end of the fiscal year on June 30, 2013, largely consisted of the select market division of Coty Prestige and the mass market oriented Coty Beauty. The company has 40 brands and the sales mix includes 54 percent fragrance, 15 percent skin and body care and 31 percent color cosmetics. A total of 74 percent of the sales were generated in the developed world and the remaining 26 percent in emerging markets, according to the company.

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Catherine Walsh, Coty’s chief communications officer, said one of the many goals of the reorganization is to nudge sales from the emerging market closer to one third of the total.

Under the new plan, the Coty Prestige and Coty Beauty alignment will be scrapped and replaced with a more vertical, integrated model consisting of Categories and Innovation on one hand and Global Markets on the other. Scannavini said the Categories and Innovation division will house marketing, research and development and digital consumer insight, as well as the brands. He added that the division will provide innovation for the product categories, describing it as “the engine” for brand development. The company maintains that the new structure will provide a “more holistic view of consumer evolution and growth opportunities by product category, resulting in a sharper innovation approach.”

Renato Semerari, previously president of mass market Coty Beauty, will lead the Categories and Innovation division as president. One of his tasks will be to synchronize the marketing and R&D efforts. He will report to Scannavini.

The company’s brands will be housed in four product categories. The fragrance category — including mass and class brands — will be headed by Steve Mormoris as chief marketing officer. He previously was in charge of American fragrance marketing at Coty Prestige.

Johanna Businelli is the chief marketing officer of the color cosmetics category, which she previously managed.

Jill Scalamandre will continue managing skin care as the chief marketing officer of that category. The fourth category is body care, where Jurgen Scharfenstein is the chief marketing officer. He was the senior vice president of Adidas and lifestyle fragrance marketing. All the chief marketing officers will report to Semerari.

The Global Markets division will be headed by Jean Mortier, who previously was president of Coty Prestige and will continue to report to Scannavini. This division will consist of four regions, all headed by senior vice presidents. Marc Rey, who was regional vice president of Coty Prestige North America and president of Coty Prestige USA, will continue as president of Coty USA as well as senior vice president of North America. Europe will be headed by Stéphane Tsassis, who was senior vice president, commercial, of Coty Beauty. Peggy Elsrode, who was senior vice president, commercial, for Coty Prestige, will head Asia Pacific, Middle East and Africa. Manlio Pizzorni, who was regional vice president of Coty Prestige for West/South Europe and the Middle East, will be in charge of Latin America in the new division.

Scannavini added that each region will have its own back-office support in locations where they are headquartered: New York for North America, Geneva for Europe, Singapore for Asia Pacific and Brazil for Latin America. The goal of the new division is to steer the business according to local, specific consumer and retailer needs.

Françoise Mariez, senior vice president of marketing at Coty Prestige, is leaving the company to pursue new projects, according to Walsh. Ralph Macchio, Coty’s chief scientific officer and senior vice president of global research and development, has said he will retire in the second half of the 2015 fiscal year. But before leaving, he is expected to help Semerari build the category and innovation organization by installing R&D teams. Scannavini paid tribute to both Mariez and Macchio for their “fantastic contribution” in helping to build Coty over the last 20 years. As another aspect of the new structure, Walsh continues as head of corporate communication and in that capacity she will still report to Scannavini. She will continue to handle external communications and public relations as well as oversee the newly created Center for Digital Competency. That unit will work with the marketing team while reporting to Walsh in an integrated alignment.

Speaking of the category alignment, Scannavini noted, “Now we have a more objective understanding of where growth opportunities are.” He added that the company is not compromising on recognizing the specific needs of the individual brands. He talked about accentuating “specificity” in maintaining teams with specific skills to develop prestige and mass brands according to their individual DNA and market positioning. At the same time, however, the structure will allow Coty to more accurately gauge what kind of support each brand needs and reinvest profits and savings. Coty said the new structure is expected to improve coordination and resource allocation between markets and channels. It will “allow us to get a deeper focus and understanding of the category,” Walsh said. As a result, “you will get a sharper understanding of how to talk to and service the consumer.”

Scannavini declared, “We have come up with an organization to fuel our growth.” He added that the new blueprint, which was presented to the 50- to 60-member leadership team on Tuesday, “will make our organization simpler and more efficient.” He predicted it will take six months to a year to fully execute.

Scannavini said he cannot make predictions at this time as to how much the plan will save and how much it will require for implementation. “My objective is to be more explicit on the earnings call at the end of August,” he said.