Coty doubles down on Kardashian, investing $200M in Kim at a $1B valuation
Snacks / Monday, June 29, 2020
No one keeps up with the Kardashians... as well as cosmetics giant Coty. In January, the beauty company bought 51% of Kylie Cosmetics for $600M. Now, almost-billionaire Kylie Jenner has an almost-billionaire sister to contend with:
- Unicorn Glow: Coty will dish out $200M for a 20% stake in Kim Kardashian's makeup brand KKW Beauty. The deal values KKW at a fresh-faced $1B.
- Instagram Glow: Coty shares soared 14% on the Insta-famous partnership — but they're still down a cakey 57% for the year.
Extreme Makeover: Kardashian Edition... Coty is a 116-year-old company that wants to appeal to the new generation (see: entire website in lowercase). But its biz is a little outdated:
- License model: Coty buys exclusive licenses to develop cosmetics for big beauty brands (like Hugo Boss perfumes and Gucci lipsticks), then gives them a wider market distribution.
- Acquisition model: Coty acquired Procter & Gamble's beauty business for $12.5B in 2016, gaining brands like Cover Girl and perfume licenses for brands like Burberry. But now...
Coty wants the "Instagram Model"... Sales of Coty's owned and licensed products have been declining. Meanwhile, it has to shell out big bucks for their marketing/distribution. Coty's Kardashian investments reduce some of that expensive grunt work, while tapping into a younger market:
- Influencer marketing: Kim K's 177M Insta followers are an instant audience for her brand. That's less marketing spend for Coty.
- Direct-to-consumer model: Most of KKW's sales are online, unlike Coty's 70+ other brands. This Direct-To-Consumer biz model cuts out the retail store middle man for more beautiful profits.