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Thursday, May 19, 2022

Coty Buys a Piece of the Kardashian Brand

 Kim Kardashian West’s Woodland Hills cosmetics company KKW Beauty Inc. achieved a valuation of $1 billion this June when the model and reality television star sold a 20 percent stake for $200 million.The buyer was Coty Inc., a New York beauty conglomerate that has grown exponentially by way of acquisitions. It has more than 70 subsidiaries including CoverGirl, Clairol and Rimmel.Kardashian West, who lives in Calabasas part time with her husband Kanye West, founded KKW in 2017. It sells branded lines of makeup for the face and body, fragrances and cosmetic tools. Kardashian West remains a majority shareholder and has continued to be an active participant in both product development and marketing following the transaction.

In a statement announcing the deal, Coty’s former Chief Executive Peter Harf called Kardashian West “a true modern day global icon.” “This influence, combined with Coty’s leadership and deep expertise in prestige beauty will allow us to achieve the full potential of her brands,” he said.Added Kardashian West: “This relationship will allow me to focus on the creative elements that I’m so passionate about while benefiting from the incredible resources of Coty, and launching my products around the world.”Coty is clearly bullish on the Kardashian family’s business ventures. Its investment in KKW came just months after it purchased a 51 percent stake in Kylie Jenner’s Kylie Cosmetics company, including skincare line Kylie Skin, last November for $600 million, an amount some analysts thought was wildly overinflated. Jenner is Kardashian West’s half-sister.

Kylie Cosmetics is headquartered in Oxnard.In a conference call following the Kylie Cosmetics deal, Coty’s Chief Financial Officer Pierre-André Terisse said the celebrity founder’s “strong brand equity” and “unparalleled social media reach among Generation Z consumers” were attractive assets to Coty.

“On social media, Kylie has over 270 million followers,” Terisse said. “With a single post, she’s able to reach more than double the number of people who watch the Super Bowl every year.”Kardashian West, who has nearly 200 million followers on Instagram and another 68 million on Twitter, has a similarly extensive digital marketing reach.

Terisse added the family’s popularity with shoppers in their teens and twenties will help Coty tap into a new consumer base: “Exposure to much younger consumers is something currently lacking in Coty’s portfolio.”‘Lot of data’In that sense, Coty’s acquisition isn’t just an investment in KKW, but in the Kardashian name brand and Kardashian West’s own ability to stay relevant as an influencer and to continue to drive sales for years to come.In an earnings call Aug. 27, analysts asked Terisse and Coty Chief Executive Sue Nabi about the long-term sustainability of influencer-led beauty businesses.Nabi responded that she’s intrigued by the possibilities they offer, especially in terms of consumer data.

“All these personality brands have, as you know it, hundreds of millions of followers on social media,” Nabi said. “These followers are consumers who are very engaged with the brands (and) who offer their feedback. They are going to directly or indirectly provide a lot of data points, which will allow us to strengthen, adjust and create the best products possible precisely for them.”Nabi added the KKW and Kylie deals are part of an effort by Coty to strengthen their skincare segment.“Skincare products, as you know, they see much stronger loyalty than other beauty products such as fragrances, for example. And in addition, both Kylie and Kim will play in one of the fastest-growing areas of skincare, which is the mid-range, of course, and the entry prestige areas. I would say that people will first buy because they love and trust Kim and Kylie, and they will repurchase because they love our products.”KKW Beauty doesn’t currently sell skincare products such as cleansers, scrubs and moisturizers, but it looks like that will change soon. In August, Kardashian’s team officially filed a trademark for “KKW Skin.” Nothing has materialized yet, and it’s unclear whether Coty would have a stake in a KKW Skin entity.Coty currently sees a majority of its annual revenue come not from color cosmetics but from fragrances – about 56 percent, according to its latest filing with the Securities and Exchange Commission. The company holds the licensing rights for dozens of designer perfume and cologne brands, including Gucci, Burberry, Balenciaga, Alexander McQueen and Calvin Klein.Expanding its skincare portfolio would help the company tap into a trend within the beauty industry towards clinical products that make sure skin stays healthy and good-looking.

– Andrew Foerch

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