Coty Inc. chairman Bart Becht continues to beef up the beauty firm’s consumer products management bench.
This story first appeared in the April 21, 2015 issue of WWD. Subscribe Today.
On Monday, the company revealed that Elio Leoni Sceti will take the chief executive officer reins on July 1, filling a post that Becht had assumed on an interim basis last fall. Becht will remain chairman.
Sceti joins from the Iglo Group, Europe’s leading branded frozen foods company, where he currently is ceo. His background includes global brand building at consumer-oriented companies ranging from EMI Music and Procter & Gamble, as well as various marketing and senior leadership roles at Reckitt Benckiser, which Becht headed as ceo since he merged the company in 1999. He retired from Reckitt Benckiser in 2011 and became chairman of Coty that same year.
Coty’s stock rose 0.5 percent to $25.20 in trading on the New York Stock Exchange Monday following the news of Sceti’s appointment. Wall Street analysts viewed this as another step in Becht’s drive to build his management team with proven, familiar consumer goods talent.
Becht took over the ceo spot at the end of last September when Michele Scannavini left the company. Last week, Camillo Pane, most recently senior vice president and global category officer, consumer health, at Reckitt Benckiser, joined Coty as executive vice president of category development. He succeeded Renato Semerari, president of Coty’s categories and innovation department. Like Sceti, he is starting in July and both men had worked with Becht.
“He’s getting the band back together,” said one Wall Street analyst.
Becht stated, “Elio’s significant experience and proven track record in building successful, global brands will be a tremendous asset to Coty as it continues to enhance its position in the global beauty industry. I have known Elio on a professional level for many years, dating back to our days together at RB, and I firmly believe he is the right leader to oversee the next stage of Coty’s development.”
A research note, written by Mark S. Astrachan at Stifel, said, “We believe Mr. Sceti’s hiring and background are consistent with Coty’s focus on reinvestment of cost efficiencies and cash conversion. Mr. Sceti and Mr. Becht are likely to have a strong working relationship, having worked together at Reckitt Benckiser for more than a decade.”
Then the note touched on a theory making the rounds on Wall Street, reportedly advanced by private equity groups. “Relatedly, we think Sceti’s hiring is unlikely to impact a potential acquisition of one or more of Procter & Gamble’s beauty segments, which is/are likely to be of interest to Coty, particularly given continuity at the chairman position,” Astrachan wrote.
Under this theory, Coty could buy P&G’s prestige fragrance and beauty licenses — Gucci, Dolce & Gabbana, Hugo Boss and Lacoste — plus CoverGirl and Max Factor for stock in a tax-free merger or spin off. No one contacted Monday could say they had knowledge of Coty making a move toward a merger, but there is a general feeling that Coty would likely be interested. A spokeswoman at Coty had no comment.
At least one analyst, Javier Escalante of Consumer Edge Research, questioned Sceti’s value since he lacks beauty industry know-how. “[Sceti] doesn’t make Coty’s executive bench stronger in industry knowledge, which is key to turn around a company whose like-for-like sales have contracted 1 percent since it went public in mid-2013,” he wrote in a note. He also questioned Coty’s worth in possibly making a deal with P&G.
He cited “Coty’s need to upgrade a portfolio slanted to inferior celebrity fragrances. Mr. Becht stated that 30 percent of sales in non-core brands aren’t divestible. While merging some of P&G’s beauty brands is clearly good for Coty shareholders, hence the outperformance of the shares, we don’t think it is good for P&G shareholders. There is a vast difference in the quality of the potential businesses being divested Wella, prestige fragrances, CoverGirl, SK-II — and the structurally inferior nature of Coty’s portfolio and patchy geographic presence recall China’s TJoy, Brazil’s Avon reps?”
Beauty industry analyst Allan Mottus agreed with Escalante’s dim view of Sceti’s lack of industry knowledge. He cited Coty’s missteps on overpaying for acquisitions like Philosophy and OPI and its launch of expensive fragrance projects “such as for Lady Gaga and Madonna that failed miserably. I don’t know how and why an executive from household products, foods and entertainment can be expected to rectify these problems,” he declared.
Others had a mellower view, such as a retailer who formerly worked in the drugstore industry. “At first this could seem like a misfit,” the retailer said, speaking not for attribution. “But if you dig deeper, Sceti might have the type of business experience that can help Coty reinvigorate, especially in the somewhat more rigid mass market channel. Plus he’s got a great international background and can work with the celebrity names associated with fragrances. I think he can improve their image for making acquisitions down the road, too. He is results-minded.”