Coty Inc. wants a bigger piece of the estimated $8 billion Russian beauty market.
The New York-based company has established its own subsidiary in Moscow, taking another large step in the company’s quest to enhance its position as one of the global beauty leaders.
With this latest move, Coty established itself in Russia with a single stroke. Chief executive officer Bernd Beetz indicated he expects to reap rewards from his new direct market involvement.
Citing the importance of Russia as a market for perfumes and cosmetics, Beetz said in an interview Wednesday, “Our market share was much below what we usually do in the rest of the world. Our brands are underpenetrated. We see a lot of upside for our brands.”
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Neither Beetz nor any other Coty executive would discuss sales projections. But one market analyst speculated the company could eventually gain “a couple of share points in growth.”
More than a decade ago, Coty flirted with owning its own subsidiary in Russia, opening its own Moscow office in 1997. But after six months, the Russian economy collapsed in a market meltdown that left Coty in an untenable position. The company then switched to distributors. By returning with its own subsidiary, Coty joins the ranks of practically all its main competitors, each with a significant presence on the Russian market.
The company generates almost $4 billion in net wholesale volume with distribution in 90 markets worldwide. Coty said it does 66 percent of its global sales volume outside of the U.S. Euromonitor, the global consumer sales tracking firm, has rated Coty with a 2.9 worldwide market share in 2008.
Some Coty products have been on the Russian market, but they have been handled by two local distributors. In this move, Coty acquired one of the distributors, Beauty & Co., complete with staff and a Moscow office.
Roman Terekhov, who was general manager and commercial director of Beauty & Co., became general director of the new Coty subsidiary. He is responsible for day-to-day operations in Russia and oversees a staff of 60 people. The office is located at 69, Sadovnicheskaya Emb.
“Roman’s extensive industry knowledge, especially of the Russian market, and extensive business experience makes him an outstanding addition to the Coty family,” Beetz said.
The company said the new subsidiary will immediately “manage the marketing, sales and distribution of select Coty products.” The brands now in circulation in Russia come from different divisions, including the upscale Coty Prestige and the mass market oriented Coty Beauty. The names now in circulation include Rimmel color cosmetics, Adidas personal care products, Lancaster skin and sun care products and Calvin Klein, Céline Dion, Cerruti, Chloé, Chopard, David Beckham, Davidoff, Esprit, Jil Sander and Marc Jacobs fragrances.
Although there are now big-name products on the Russian distribution list, Coty, which prides itself on having revived the celebrity fragrance genre, has a stable of marquee labels in reserve that have not made their market debut. Beetz suggested that more of his labels will arrive in the near future. But he refrained from naming names. Beetz said the brands now in distribution, largely reflected the “awareness level of the Russian consumer.”
Some of the others not yet on the market include the sizable Jennifer Lopez and Sarah Jessica Parker franchises; Gwen Stefani, whose Harajuku Lovers won a FiFi award this year; Tim McGraw, also a winner at the FiFi’s; his wife Faith Hill; Kylie Minogue; Halle Berry; Vera Wang; Vivienne Westwood, and a score of others.
During the interview, Beetz spoke of “new opportunities which we are going to pursue.” He added, “There are going to be major opportunities to increase distribution. The number of doors will go up, and the penetration of market will increase.”
For Coty Prestige, there will be an increase in the number of department store doors and perfumeries. For the mass-oriented Coty Beauty, there will be further development in the broader market. Each division has its own sales force.