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Coty’s R&D Widens Scope

Coty Inc.'s research and development facility here is a brick-and-mortar reminder of the firm's hyper growth.

Morris Plains, N.J. — Coty Inc.’s research and development facility here is a brick-and-mortar reminder of the firm’s hyper growth.

Over the last five years, Coty has evolved from a $1.3 billion fragrance house in 2003 to a $4 billion beauty company this year.

During a recent visit to Coty’s R&D labs here, a construction crew worked to finish several new labs, and staff huddled in a newly painted conference room.

Ralph Macchio, Coty’s chief scientific officer and senior vice president, R&D, said when he joined Coty 16 years ago the firm’s U.S. R&D arm consisted of fewer than 20 people housed in a 15,000-square-foot building. Today, there are 115 employees working in two facilities totaling 70,000 square feet. Coty’s global R&D force is 217 people strong, and additional locations include Monaco; Granollers, Spain, and Plainview, N.Y. (which it acquired through its Del Laboratories buy).

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Macchio noted that the current construction marks the facility’s second expansion in two years, and that since 1993 there have been a total of seven expansions.

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During a half-decade span, Coty acquired the Marc Jacobs and Kenneth Cole fragrance licenses from LVMH Moët Hennessy Louis Vuitton for an estimated $50 million; Unilever Cosmetics International’s designer fragrance brands — including Calvin Klein, Vera Wang, Chloé and Cerruti — for an estimated $800 million, and in December, Del Labs, best known for its Sally Hansen brand, for an estimated $800 million. The DLI acquisition pushed the firm’s revenues past the $4 billion mark, according to Coty, closer to its goal of reaching $5 billion by 2010.

New acquisitions have moved Coty — a company that’s core strength is fragrance — deeper into additional beauty categories, including color cosmetics with Sally Hansen Natural Beauty, NYC New York Color and its Rimmel brand, and to a lesser extent, skin care.

For instance, Macchio said the Del Labs acquisition has added depilatories (a chemical used to remove unwanted hair), waxes and bleaches to the fold, and required Coty to outfit its labs for these new categories. He added, given Coty’s heritage is fragrance, one of the first orders of business on the depilatories front is to improve their smell.

Improvements to the facility have been constant. A few years ago Coty built a new nail polish lab with a shockproof floor. The lab, which has shelves lined with a rainbow of lacquers, will also handle the influx of nail polish formulas, treatments and hues that Del’s Sally Hansen brand brings. Macchio noted Sally Hansen has about a 50 percent share of the mass market nail polish category.

In its fragrance laboratory, Coty relies on trained noses, or fragrance experts, who can break down a scent formula to its ingredient list. The difficult exercise ensures the quality of the formula created by the outside fragrance houses, said Macchio.

The R&D facility here is also outfitted with a consumer testing institute, which the firm opened in May 2007. The center, adjacent to the R&D building, is currently testing cell regeneration products. It also has a working sauna, where Coty tests sweatproof claims on competitors’ antiperspirant deodorants and on its own personal care brands, like Adidas.

Back in the deodorant lab, where the technologies are created, a scientist demonstrated Adidas’ new Dry Max moisture-absorbing technology. When the Dry Max formula was poured into a beaker of water, it instantly turned into a gel, which stayed solidly in place when the beaker was flipped over. Adidas deodorants with Dry Max technology will be introduced next year.

Macchio stressed each product born out of the labs must adhere to regulatory and environmental regulations, which vary by market, and in his view have become increasingly complex.

“As a company we’ve tried to make more global products, so we test in many markets,” said Macchio. “Coty’s growth has changed the game plan.”�