“The purchase of Bourjois falls in line with Coty’s core strategy of high-speed expansion through acquisitions and the integration of the brand adds a percentage point market value share to Coty’s Colour Cosmetics portfolio,” said Ildiko Szalai, senior analyst – beauty and personal care research, at Euromonitor International.
“However, the deal does not offer strong expansion into dynamic emerging markets or skin case categories. Over 55% of the brand’s sales is generated in Western Europe, where colour cosmetics category has a bleak outlook with less than 1% CAGR over the 2013-2018 period. Although a growing proportion of the brand’s sales is generated in the Middle East and Africa, the most attractive region for colour cosmetics up to 2018,” Szalai added.
Operation synergies for Coty
On the positive side, Szalai does believe that Coty could build strong operational synergies for Bourjois with the Rimmel and Astor brands, aiding further geographical expansion in the color cosmetic category.
Likewise, the acquisition of the brand also offers particular opportunities in the lip products category, where the company has a smaller market share than both the nail and eye make-up categories.
Bourjois is particularly strong in the lip category, thanks mainly to its eponymousRouge Edition Velvet Lipstick, which has become a must-have for many women shopping in the premium and mass market retail channels.
Financial world reacts positively
Analysts at B. Riley upgraded the company’s rating from ‘sell’ to ‘neutral’ yesterday, as share prices were up 1.53% on early morning trading today, to reach a value of $16.55 per share.
If the transaction is agreed to and fulfils regulatory hurdles, it will see Coty acquire Bourjois in exchange for 15 million Class A Coty shares, which has a current market value of $239.1m, ultimately giving Chanel a 4% stake in the Coty business.
Currently the Bourjois portfolio includes a comprehensive range of luxury colour cosmetic products that are sold in upper end retail channels in 50 countries worldwide, particularly in Western Europe, the Middle East and Asia-Pacific.