P&G Makes It Official With Beauty Divestiture to Coty
With the deal, which includes 43 brands in all, P&G's plan launched last year to shed 100 brands and around 15% of its business is "substantially completed," said Chief Financial Officer Jon Moeller in a conference call this morning. When it's complete, P&G will have divested or merged 93 of the 100 brands, 95% of the targeted sales and all of the profit for brands expected to be eliminated.
In all, the brands involved in the divestiture to Coty had 2014 U.S. measured media spending of around $300 million, according to Kantar Media, almost all handled by WPP's Grey. Whatever agency ends up with the business at Coty stands to take on a tough customer. Coty is asking for 150-day payment terms for participants in its current global media review launched in April, a process that takes on far greater weight now.
The beauty brands in the deal, widely reported last month, had $5.9 billion in sales for the 2013-2014 fiscal year, Mr. Moeller said. But a person familiar with the matter said sales were expected to drop to $5.2 billion for the just-concluded fiscal year due mainly to double-digit declines in the prestige fragrance and salon haircare businesses.
As such, the divestiture would cut a significant drag on P&G's beauty business, whose organic sales fell 3% in the quarter ended March 30. It represents nearly a third of P&G's $16 billion-plus beauty, hair and personal care business, and will more than double Coty's sales of $4.6 billion last year.
"What we lose in the process are 60% of the brands and all of the complexity they create while retaining 85% of sales and 95% of the before-tax profit," Mr. Moeller said of the overall brand culling plan.
The deal already has led to Coty Chairman Bart Becht, former CEO of RB (Reckitt Benckiser) staying on as interim CEO to help steer transformation of the company. Elio Leoni Sceti, who had signed on to become CEO of Coty, opted last month not to take the position when his ascension to full CEO duties were delayed due to the consolidation of the businesses, and he took a $1.8 million severance package.