Coty makes strong strategic move by improving African infrastructure


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Coty makes strong strategic move by improving African infrastructure

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Leading beauty company Coty has announced that it will form a new subsidiary in South Africa to direct, manage and operate operations on the continent.

The company has developed a partnership with AVI Ltd to secure local subsidiaries as exclusive manufacturers and distributers of Coty’s brands in the region.

This expansion of its African infrastructure bodes well for Coty, based on analysts' comments earlier this year about the company's potential for development in that region. CEO Michele Scannavini commented: “This enhanced operating agreement will allow us to dive growth in Africa.”

“We have been very happy with our partnership with Indigo ad look forward to working with AVI. Our 13 year history of successful collaboration is a positive sign of even better developments yet to come.”

Coty’s change of focus bodes well for business

Earlier in the month, market research firm Euromonitor called Coty’s strong Q4 performance for 2013 “better, but still not positive” ​and suggested that the company needed to develop a more focused strategy to deliver better performance.

Senior analyst Oru Mohiuddin made comments which fit in well with the company’s new enhanced operating structure, suggesting earlier this month that Coty expand into Africa in order to build a foothold in the region before other major cosmetics companies established themselves there.

She commented to “There is a wide space for the development of color cosmetics- African women are very fond of using them. They can then go and establish a very strong presence there before L’Oreal does.” ​The analyst also suggested that Coty should develop strong depth of expertise and R&D in a particular field in order to increase its ability to compete with other leading companies.

Enhancements to emerging market distribution

In a statement, the company said that the new development would allow them to “closely manage its business, give it more financial freedom to promote Coty mass brands sales growth and enable the beauty giant to increase its footprint in the region.”​  

AVI also stated that it was pleased that its "long relationship" ​with Coty had been extended. Earlier this year, the company also formed a partnership with major cosmetics distributer Frajo International in order to expand its distribution network in the developing market of Brazil.

The company also posted higher-than-expected profits in other emerging markets such as China in their Q4 results, which beat analysts’ expectations despite a slowdown in American and European markets.

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