Coty counts on Gen Z to drive fragrance growth in China

Coty CEO Sue Y. Nabi estimated that the fragrance category in China accounts for 15-16% of the market. Well below skincare, which was 70%. However, perfume was the fastest growing category.

“China today, in the country, you only have 2% of people who use perfumes on a daily basis. So you can imagine moving only that 2% to 10% on the number of people who are able to buy and sell. ‘using perfumes. That would be huge, I would say – a huge leap in terms of perfume consumption,’ Nabi said at the company’s latest third-quarter earnings call.

She predicted that this consumer rush would be driven by younger beauty consumers, especially Gen Z.

However, Coty faces fierce competition in the Chinese market from its multinational colleagues, as well as independent brands and local players. Despite this, Nabi expressed confidence in Coty’s broad fragrance portfolio and its ability to meet the multifaceted desires of Gen Z.

“We don’t see anything in the competition today that tells us we’re missing things in the Coty portfolio…So ultimately if the competition is investing [in China]that’s good, because at the end of the day, we all have to invest together in this very, very promising market to develop the market and that will benefit all of us.

On track to meet targets

Increasing its presence in China’s promising fragrance market is an imperative task for Coty, which has set a goal of tripling China’s contribution to more than 10% of the revenue mix by 2025.

Although there are many uncertainties surrounding the Chinese market, including issues related to COVID-19 lockdowns.

“I believe consumers are going to be in a very positive mood, they’re going to come back to life… So there’s a hunger for life, which will probably continue to be a hunger for all things beauty consumption” , Nabi said.

She also referred to fears that inflation could affect consumers’ desire to spend, noting that the company’s consumer division was robust.

“There are categories that can slow down, and if there are consumers that can be under pressure, because that, because of this price inflation, the good news at Coty is that we have a division stronger than ever, which is our consumer division. Our brands are cooler than ever, they’re doing the right things, they’re launching the right products that are much more profitable than in the past.”

As such, Nabi said the company is on track to meet its fiscal 2025 targets.

“We continue to move upmarket in terms of expertise, in terms of capabilities, in terms of the brands we intend to launch. So right now I don’t see anything from Coty’s perspective, Coty’s ability to implement the things that we’re working on that will jeopardize our fiscal year 2025 goal.”

Donovan B. Sanford