Bart Becht spends his time whizzing from one market to the next — Brazil one day, Germany the next — meeting with retailers and possible players in his new organization, as he attempts to assemble the jigsaw puzzle that will be the future Coty Inc.
Not surprising, since he was recently asked what he does for relaxation and the 59-year-old executive mentioned seeing the new James Bond movie, “Spectre.”
This story first appeared in the December 16, 2015 issue of WWD. Subscribe Today.
Becht, chairman and interim chief executive officer of Coty Inc., has been riding a whirlwind of a project aimed at transforming Coty into a global beauty leader: a $12.5 billion landmark deal to buy 43 beauty brands from the struggling Procter & Gamble.
With a solid background in the consumer products industry, Becht then showed off another side of his deal-making chops by landing an even larger transaction: a $13.9 billion purchase of Keurig Green Mountain Inc., a company known for making single-serving coffee pods.
That deal was made by JAB Holding Co., a privately held German-based investment company of which Becht is chairman. JAB has a controlling stake in Coty as well as Jimmy Choo and a number of consumer product brands. The transaction is expected to close in the first quarter of 2016.
While the Keurig purchase may be Becht’s biggest dollar score of the year, he triggered an earthquake in the beauty world with the P&G deal, sending shockwaves through the pecking order of global beauty powers. When the P&G transaction is completed — expected in the second half of 2016 — an estimated $5.9 billion in 2014 sales from the P&G brands will swell Coty’s coffers, doubling the $4.5 billion business to roughly $10 billion, according to Becht. “We will become one of the largest cosmetics players in the world, behind L’Oréal and Estée Lauder,” he said. The move will not only double sales but also add 10,000 former P&G employees to join Coty’s existing 8,500-person staff. It’s like melding two armies.
Coty also recently agreed to buy some beauty brands from Brazil-based Hypermarcas for $1 billion. Those brands include leading Brazilian labels in hair care, hair color, nail, men’s and skin care, which produced annual revenues of $253.5 million in 2014.
A reimagined Coty Inc. will leapfrog up the global rankings from 12th place to fifth, according to company estimates. Once the deal is completed, Becht said Coty will hold the number-one position in fragrance, number-two in salon professional and number-three in color cosmetics.
The P&G brands will extend Coty’s reach into the salon professional segment and retail hair color, and will bolster its presence in fragrance and color cosmetics by adding brands such as Wella Professionals, Cover Girl and Max Factor color cosmetics and fragrance licenses including Hugo Boss and Gucci.
The deal will further shift Coty’s reliance away from fragrance, with that category soon accounting for 44 percent of sales (from the current 51 percent), color cosmetics representing 24 percent of revenues (from 30 percent), skin and body accounting for 8 percent (from 29 percent) and hair color making up 24 percent of sales.
Beyond these projections, questions have been raised about the amount of investment needed to accelerate the original Coty business and rejuvenate some of the laggard P&G brands.
“Their business has been underperforming, relative to the [beauty] category,” noted Stifel analyst Mark S. Astrachan. While not laying the blame at Coty’s door, he observed, “Coty has been overindexed in lower growth categories; fragrance is growing more slowly than makeup.”
Astrachan said Coty cannot get the kind of organic growth generated by an Estée Lauder, for instance, because it doesn’t have as many high-end brands. So there is a question of how much it will cost to rev up existing brands, especially those from P&G.
These presumably will be answered when the deal is closed. Becht has built a solid reputation on Wall Street for his operational skills, built over a decade of leading Reckitt Benckiser, a U.K.-based consumer goods conglomerate that was formed through merger, which he orchestrated, between the British-based Reckitt & Colman plc and the Dutch Benckiser in 1999. Becht was the company’s first ceo.
Becht said the company is in “reconstruction mode,” and he’s shifting Coty from a sell-in mentality to a sell-out, brand-building one, and he’ll continue to upgrade the company’s executive bench strength, eyeing external candidates as well. Coty went outside for presidents of each of the three new divisions: former L’Oréal veteran Edgar Huber to head up Coty Luxury, P&G’s Esi Eggleston Bracey for Coty Consumer Beauty and P&G’s Sylvie Moreau for Coty Professional Beauty — all effective when the deal closes.
(While waiting for his Coty Luxury post to kick in, Huber is serving as president of Global Markets, succeeding Jean Mortier, who retired.)
As for the big picture, Becht made clear some long-term goals.”We want to be a true leader and challenger in beauty,” he asserted, noting that success isn’t found on the balance sheet alone. “A true leader isn’t just somebody who basically creates good financial results, it is somebody who is in the marketplace and is recognized as a leader — and not just by competitors but also by consumers. It is a general recognition by the broader community that what we bring to the market are innovative, creative and breakthrough products, which are appreciated by consumers.”