Grey Resigns Coty Business, Citing Financial Differences

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WPP's Grey has resigned all of its Coty account over financial differences, a spokesman for the agency said in an e-mail, including Clairol, Wella and other fragrance brands it handled prior to their divestiture from Procter & Gamble Co. last year. The resignation includes CoverGirl, which Coty announced on Friday it had moved to Droga5 following a review.

Credit: CoverGirl

But according to Grey, the agency had already resigned that account and the rest of the Coty business as of Feb. 13. Grey declined to elaborate on the nature of the financial differences, but Coty is known as one of the harder bargainers in marketing, including insistence on 120-day payment terms.

In all, the brands moved from P&G to Coty had annual measured media spending in the U.S. alone of around $300 million, based on Kantar Media estimates, with CoverGirl being the biggest piece of that. It's unclear at this point where Clairol, Wella and the fragrance brands will move. A Coty spokeswoman declined to comment.

The move comes as Coty looks to regroup and refurbish brands after major sales losses across its portfolio, including brands acquired from P&G. The deal completed in October nearly doubled the company in sales. But Coty revenues, including the acquired brands based on comparison to their year-ago results while under P&G ownership, were down 4% to $2.3 billion last quarter. Sales in the Consumer Beauty business, home to CoverGirl and Clairol among others, dropped 13%.

On an investor conference call earlier this month, Coty CEO Camillo Pane called the results "clearly disappointing," blaming the big sales decline on some of the key brands being "orphaned in the previous large organization, the high competitive market pressure, and the changing market environment."

In response, he said Coty is revamping its product development and "communications process and programs." That will include a relaunch of CoverGirl and Max Factor during the next fiscal year, which begins July 1.

Coty has been adding new agencies to its roster of late, aside from the incoming P&G brands or anything involving Grey. Anomaly was named creative agency for Sally Hansen last year, and BETC was named to handle Rimmel. Coty also has been adding business for its own in-house digital agency, Beamly. And it launched a review earlier this year for Max Factor, which is sold outside the U.S., including incumbent Leo Burnett in addition to Anomaly, The&Partnership, and Adam and Eve DDB.

Grey's exit from Coty resolves one issue stemming from the fact that it also handles P&G's Pantene and other haircare business. That technically created a conflict under P&G agency rules, since the deal resulted in Grey handling haircare brands that moved to rival Coty.

A P&G spokeswoman said earlier this year that structures had been put in place to resolve any conflicts, though she declined to elaborate. But Grey resigning Coty renders the issue moot.

While it doesn't make up for the loss of Coty, Grey did last year pick up additional P&G haircare business amid the company's agency streamlining process, adding recently relaunched Herbal Essences, formely handled by Wieden & Kennedy.

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