Coty Inc. has released details of a new four-year restructuring initiative called Turnaround Plan, which the cosmetics company said is designed to drive substantial improvement in its Consumer Beauty division, while also further optimizing its Luxury and Professional Beauty arm. The company acknowledged its merger with Procter & Gamble was more complex than originally envisioned and that there was an “underestimation of the negative trends of the acquired business.”
As part of the plan, Coty will ramp up brand-building initiatives, introduce a new organizational structure and move its headquarters from New York to Amsterdam. To implement the turnaround, Coty expects to incur one-time cash costs of approximately $600 million spread over fiscal years 2020 to 2023, in addition to approximately $160 million connected to previous programs. With the completion of the plan, the company expects a writedown of approximately $3 billion, noting that it has agreed with its banks to amend its credit agreement, which will allow for the operational flexibility needed to reach its medium-term goals.
The Turnaround Plan will focus on three strategic pillars: rediscover growth, regain operational leadership and build a culture of pride and performance.
“Rediscover growth” is focused on investing in brand building efforts behind priority brand-country combinations; improving shelf productivity with simplified product ranges; driving better mix management through improved portfolio structure, optimized promotional tactics and support of higher margin pillars; and, building an innovation pipeline to support expansion of category coverage, up-trading and margin accretion.
“Regain operational leadership” involves improving portfolio structure and optimizing assortment, including improving the cost of goods sold; reducing inventory; and, lowering fixed costs with a leaner organizational structure focused on regional commercial teams in Europe, Middle East & Africa (EMEA), Americas & Asia Pacific, and brand marketing units for Luxury and Consumer Beauty. Professional Beauty will remain a distinct business unit due to its unique salon channel focus.
In connection with this new organization, the following changes to Coty’s Executive Committee will be effective by January 1, 2020:
- Edgar Huber, currently President of Coty Luxury, will be appointed President of Americas & Asia Pacific
- Gianni Pieraccioni, currently Chief Operating Officer, Consumer Beauty, will be appointed President of EMEA
- Fiona Hughes, currently Chief Marketing Officer, Consumer Beauty, will be appointed President of Consumer Beauty Brands
- Simona Cattaneo, currently Chief Marketing Officer, Coty Luxury, will be appointed President of Luxury Brands
All other members of the Executive Committee will remain in their current roles:
- Pierre Laubies, Chief Executive Officer
- Sophie Hanrot, Chief Human Resources Officer
- Greer McMullen, Chief Legal Officer
- Sylvie Moreau, President of Professional Beauty
- Daniel Ramos, Chief Scientific Officer
- Pierre-André Terisse, Chief Financial Officer
- Luc Volatier, Chief Global Supply Officer.
The “Build a culture of pride and performance” pillar will look to create a culture that balances discipline and creativity as well as fosters team spirit and engagement. To achieve this, as well as reduce geographic fragmentation and costs, Coty intends to create a centralized management headquarters in Amsterdam where most of Coty’s executive team and corporate functions are expected to be based. The company says Amsterdam was selected because it is a cost-efficient and tax stable location, conveniently located to Coty’s main markets and has a strong base of FMCG talent.
The new organization design is expected to be in effect by January 1, 2020. The full structure implementation and consolidation of management headquarters are expected to be completed by July 1, 2020, subject to legal processes where required by local regulations.