Burberry inks major beauty deal with Coty, targets global growth

By

Sandra Halliday

Published
Apr 3, 2017

Last October Burberry signalled tough times for its beauty business when it delivered it first-half results and on Monday, a week ahead of the release of its full-year figures, it announced a major move to boost the £203 million business.

The UK luxury giant is linking up with one of beauty’s biggest names to drive fragrance, skincare and cosmetics sales forward. It has signed a long-term strategic partnership with US-based Coty for which Coty will pay £130 million.

The two companies said that the deal “combines Burberry’s British heritage of innovation, craftsmanship and design with Coty’s expertise and leadership in luxury beauty products.” Under the agreement, Coty will develop, manufacture and distribute the full range of Burberry Beauty products globally.

Coty is one of the biggest names in the global beauty industry and has a reach that few can rival. And Burberry, which was a relative latecomer to the designer label beauty sector, needs that kind of help. The firm said in last October’s results that Beauty’s “underlying wholesale revenue declined by approaching 20%, reflecting cautious ordering and strategic brand control including the rationalisation of distribution in key markets.”

But with the Burberry brand as a whole recovering from the luxury downturn and recent beauty launches such as the My Burberry and Mr Burberry scents performing well (with market share gains in key countries), there is clearly a promising foundation on which to build.

Coty said Monday that Burberry fits “perfectly” with its existing luxury portfolio and that it will take the brand “to the next level”.

The company’s existing successful licenses include Calvin Klein, Marc Jacobs, Hugo Boss, Alexander McQueen, Balenciaga and Gucci while its experience in colour cosmetics includes both prestige ranges like Lancaster as well as some of the biggest names in the mass-market such as  Covergirl, Max Factor and Rimmel.

Current Burberry CEO and creative chief Christopher Bailey said of the tie-up that “working with a global partner of Coty’s scale and expertise will help drive the next phase of Burberry Beauty’s development and position this business for growth.”

The Burberry Beauty business will be managed within Coty’s Luxury division, which has its HQ in Paris. But it is clear that the partnership between the two firms is exactly that rather than a simple farming-out of the beauty business,. Burberry, which has carefully orchestrated its image in recent years to powerful effect, remains in creative control of the beauty offer.

The two said they will “work in partnership on delivering best-in-class creative executions and leverage Coty’s global capabilities in beauty strategy, innovation, supply-chain and go-to-market.”

The deal is expected to close towards the end of this year with the agreement due to start in October, at which point Coty will buy from Burberry approximately £50 million of inventory.