It’s looking like deal time again for Coty Inc.
The business is said to be ready to sell 10 fragrance brands: David Beckham, Beyoncé, Enrique Iglesias, Katy Perry, Playboy, Guess, Nautica, Vera Wang, Stetson and Jovan, according to industry sources. In April, Coty sold the Jennifer Lopez fragrance license to Designer Parfums, which also has licenses for Porsche Design and Naomi Campbell.
Coty has publicly stated that it wants to exit 6 percent to 8 percent of its business after it closed the deal for 41 beauty brands from Procter & Gamble in October, but hasn’t specifically said what it was selling. Asked about the fragrance sale, a spokeswoman for Coty said that company doesn’t comment on M&A rumors.
Multiple financial sources said Coty has divided the fragrance licenses into groups for the sale process — celebrity fragrances, which includes Beckham, Beyoncé, Enrique, Katy Perry and Playboy, and designer fragrances, which includes Guess, Nautica, Vera Wang and Stetson. Jovan, which Coty owns, could possibly be sold separately, the sources said.
Financial sources valued the group in the hundreds of millions, though indicated all of the brands are suffering from slumping sales. Coty is handling the sale process internally, one source noted, and bids are due in mid-October.
“There’s the designer portfolio and the celebrity portfolio, and you can either buy the whole thing or you can buy the celebrity part or the designer part,” one financial source said.
Adding an additional layer of complication, nine of the 10 fragrances up for grabs are licensing deals, which means that once a potential buyer got through the Coty bidding process, they would still need to get the OK from the licensor to complete a transaction, sources said.
Financial sources indicated that the celebrity portion of the business is considered a particularly hard sell, as sales of most celebrity fragrances have slowed in recent years as consumer desire has shifted towards designer and artisanal scents.
One source noted the benefits of scale when buying fragrances, saying that acquiring the whole portfolio would allow the purchaser to make bigger manufacturing orders and get better pricing. But the buyer may need to replace the infrastructure that the brands have at Coty, sources said.
Sources named Revlon, former Coty chief executive officer Bernd Beetz, Interparfums and PDC as potential bidders. Revlon declined to comment, Beetz could not be reached for comment, Interparfums said it does not comment on speculation and PDC declined to comment.
For Coty, the sale would come as part of the plan to divest a portion of its business following the P&G deal.
“With the acquisition, we will have substantially too many brands in the portfolio so there will be some brands [that] will be divested within that portfolio,” Coty chairman Bart Becht said at the time the P&G beauty acquisition closed. “It will be in particular the bottom end of the fragrance portfolio — some of the smaller brands we’ll be looking at divesting out of the portfolio.” After the company released its financial results in August, Coty chief financial officer Patrice de Talhouët said the divestment process should be complete by the end of fiscal 2018.
The beauty company took on a handful of new fragrance licenses, including Hugo Boss and Gucci, as part of the P&G transaction.
Coty fragrances were spark plugs in the late Nineties through the mid-Aughts, guaranteeing slam dunk launches to the mass market. The company would pump big dollars into debuts — sometimes as much as half of the expected total volume — especially behind the Stetson and Vanilla Fields franchises. Stetson clocked in at sales of at least $100 million at its height, including a host of flankers. Vanilla Fields’ sales exceeded $60 million in 1994 and spawned a herd of vanilla-based competitors.
The mass fragrance business started evaporating as more designer fragrances wafted into mass doors — that opened the door for celebrity scents, beginning with the coming of Jennifer Lopez in 2002. Eventually, that category also dried up and some chains even ponder whether the category is worth stocking on a day-to-day basis. Mass market fragrance posted declines in both men’s (3.8 percent) and women’s (7 percent) in the 12-week period ended August 13, according to IRI data.