Coty CEO Sue Nabi joins Yahoo Finance Live to discuss company earnings, rising consumer demand despite higher prices, value behind the market, and the outlook for Coty.
Video Transcript
JULIE HYMAN: Cosmetics giant Coty seeing fragrances drive its quarterly revenue, contributing to an earnings beat out this morning. The comeback as Coty sees consumer demand rising despite higher prices. Here to talk about the earnings is Sue Nabi, Coty CEO.
Sue, thank you so much for being here. Appreciate it. And as we look at these numbers, in particular, you guys did well in prestige, which is another way of saying luxury or the higher priced area of the market. What do you think is driving that, especially since there is so much talk of economic slowdown here?
SUE NABI: Good morning, Julie. Thank you so much for giving me the opportunity to say a few words about this, indeed, 11th quarter of results that are ahead of expectation in this case. The company is growing 15%. Our prestige division, indeed, is growing 16%. But also, our consumer beauty division is growing double digits.
And, indeed, when it comes to the prestige business, this is clearly driven by our fragrance business. Coty is one of the key leaders into this business. You showed a few seconds ago some of our key brands. And this fragrance index, as I love to call it, now since a few quarters is fully at pace.
So what is the fragrance index? In fact, people, mainly I would say Gen Zs, men, Hispanic community in the US are rediscovering this category since now two years and a half-- in fact, through social media, in fact. So this category is booming in the US.
It's 60% above the pre-pandemic levels. And now, this fragrance index is globalizing. You can see it happening now in Europe and also in China. So this phenomenon behind fragrances is globalizing.
So why is it globalizing? And why are people suddenly fond of fragrances? In fact, fragrances are items that are mood boosters, that they are feel good products, and escapism products.
So these are the three things we hear from consumers, but also from the Gen Zs of this word. They all tell us that fragrances, the one they use, and the one they talk about on social media, say things about who they are. So it's also becoming a self-expression tool.
At the end of the day, in this world of very visual economy on social media, you'll have eyewear. You'll have belts. You'll have sneakers. And you have fragrances that are part of this panoply for younger consumers.
BRAD SMITH: Yeah, fragrance is, indeed, escapism from bad scents, for sure, here, whether personal or for a friend or family member that you purchase them from. But ultimately here, thinking about one of the things that you mentioned about longer lasting and more premium products that your consumers are looking for-- what does that ultimately mean for your business? If you're seeing a customer kind of have a longer time span that they're able to tap into that premium product, even if they are paying just a little bit more for that, that means that that's less frequent purchases, or at least interactions, with Coty?
SUE NABI: No, in fact, it's exactly the opposite that's happening. What we are seeing is that consumers are, indeed, shopping higher end-- shopping, you know, eau de parfum versus eau de toilette. Eau de parfum is the more concentrated version eau de toilette.
Recently, one of our latest launches, which is called Burberry Hero, the eau de parfum has been bigger than eau de toilette. Traditionally, pre-pandemic, eau de toilette to us the big chunk of the business and eau de parfum was the small complement. In this case, it's exactly the opposite that's happening.
And in fact, what consumers are doing, that's spraying more, especially Gen Z, who use fragrances not on their skins. They use fragrances on their clothes and outfits. So they spray much more, and it's shortening the lifespan of the usage of the product. So that's what explains, in fact, this boom, both in volume and in value behind this market.
JULIE HYMAN: So what does all of this say about the health of your consumer? Is it that there's-- and we've sort of seen that there's something special about makeup and personal care and now, as we see, fragrance as well. So does it tell you something about the health of your consumer, or is it just that people like these little luxuries, as they're frequently referred to?
SUE NABI: I think you just summarized it very well. People like these little luxuries. At the end of the day, even in an environment where people are constrained, et cetera-- but what's happening is that this kind of little luxury is something people are not ready to give up on. So that's super, super important. And I believe that this category, and, moreover, the beauty category, is clearly one of the most resilient.
It's not just me who says this. Our retailers beat on prestige or in consumer beauty tell us exactly that beauty is the bright spot in this moment across the different price tiers. And you can understand easily why. If there is one category that makes you look better and feel better, it's the beauty category.
BRAD SMITH: Sue, there's so much focus right now on where the customer connections are created. And, of course, that's naturally a focus when you're trying to drive sales and really bring in a new generation of purchasers too. But I wonder, even as we've seen so many of the marketing dollars in this industry trickle in towards influencer marketing, when there is kind of reallocation or restructuring of costs, and that outsized usually hits marketing spends, how much of that kind of dries up from the influencer marketing well?
SUE NABI: So, in fact, the fragrance category is, in fact, one of the categories that is both still on the TV-- advertising fragrance on TV still stays one of the most powerful way to tell our story and to tell people that this is the fragrance they need to buy. And at the same time, you are also having millions of people online, mainly on TikTok, if you look at #perfumeTikTok, it's billions and billions of views.
And there, it's either consumers or influencers who get our products in their hands. And they tell the story their way. And it's really these two sides, I would say-- communication that's lifting and holding this fragrance index globally. Not just in the US, now in Europe, and it's also the same thing we are seeing in China. So both are necessary. Both do different jobs. And both are sustaining the growth of this fragrance category.
BRAD SMITH: You know, yeah, it's just fascinating because, I mean, I can't smell the fragrance through my phone. When we do get that feature, it will be amazing, no doubt. But at the end of the day, we've seen, of course, a lot of the kind of beauticians or the HMU, the hair and makeup artists, really do well on social.
So I guess that's where I was trying to really get a sense of where you're seeing a lot of the fragrance category either tap into or pull away from social media marketing. And if so, where else those dollars are going right now.
SUE NABI: I think for the younger generation, they love to hear about the fragrance or-- either if they go into a store or on social media. But what's the most important and what's happening on social media is that they hear others talking about the fragrance. And, in fact, what's happening today on social media and that's driving the growth of this category is that there is a kind of skinification, if I may say.
Let me explain to you. Skincare has been booming since many, many years because of all this facialists, dermatologists that educate people around ingredient-- retinol, organic acid, et cetera, et cetera, we are seeing something equivalent happening behind the fragrances. You hear influencers telling if you love vanilla, buy this fragrance.
If you love to look like this character from this Netflix latest show, you should buy this fragrance. If you love woody scents, if you love dark scents, these are the kind of scents that you can try, et cetera. So in a way, it's really education through ingredients that's happening.
The second element is about long lastingness. And you were referring to this in one of your previous questions. This is becoming the name of the game. Especially the young generation, they are obsessed with fragrances that last longer. And this says that this category, that used to be seen as an artistic category only, is becoming a performance category. And there, one of the reasons of our success at Coty is that we are one of the only company at this level and at this size who owns patents to make a fragrance more long lasting.
JULIE HYMAN: And, Sue, finally, I am curious what your signature fragrance is, and if there's sort of, like, a fragrance of the summer that you're expecting. We always talk about summer trends-- is there something that's hot right now?
SUE NABI: I do believe that vanilla is the next big thing. Vanilla is clearly the ingredient that is trending. Anything that's sweet is trending, which says a lot about what people are looking for.
They are looking to self indulge, to get into yummy, delicious scents. And vanilla is probably going to be the phenomenon of the summer and of the fall.
BRAD SMITH: I love that. All right, cool. I'm into it. I'm noting this down. I know what I need to buy now.
