Coty Weighs Options for Makeup Division as Market Challenges Mount

NEW YORK, Oct. 3, 2025 – Coty announced on Tuesday that it is conducting a strategic review of its mass-market Consumer Beauty division, which could lead to a sale or spinoff. The move is part of a broader effort to reduce debt, stabilize shrinking cash flow, and focus on more profitable fragrances.

The division includes familiar names like CoverGirl and Rimmel, generating around $1.2 billion in annual revenues. Yet, Reuters reports, these brands have been steadily losing ground to competitors that are faster at innovating and offer more attractive price points. Analysts describe the business as a “tough asset to sell” and warn that the proceeds may be lower than expected, complicating Coty’s broader growth plans.

Who Could Buy Coty’s Consumer Beauty Brands

Analysts say the biggest hurdle for potential buyers is brand perception. “It’s hard for these brands because they don’t look new to today’s consumers. And newness is important, especially in colour cosmetics,” Morningstar analyst Dan Su told Reuters.

Private Equity Interest: Buyout firms may see opportunities where traditional buyers hesitate. Private equity firm KKR, for instance, acquired a majority stake in Coty’s professional haircare business, Wella, in 2020. Michael Ashley Schulman of Running Point Capital Advisors told Reuters he expects any sale of the makeup division to be piecemeal rather than a single transaction, possibly involving firms such as Permira and L Catterton.

Competitor Moves: Smaller, fast-growing brands continue to attract high-profile deals. Elf Beauty acquired Hailey Bieber’s Rhode line for $1 billion, while L’Oreal picked up Medik8 for a similar sum. These transactions illustrate how nimble, digitally native brands are able to capture consumer attention more effectively than aging mass-market names.

Why are Sales Slipping

Coty’s Consumer Beauty division posted an 8 percent decline in sales for the year ended June 30. Analysts cited by Reuters expect another high-single-digit drop in the current financial year. The division has struggled to compete with social media-driven brands that leverage fast online channels and influencer marketing.

Bank of America analyst Anna Lizzul told Reuters that Coty’s in-house manufacturing has slowed product innovation compared with competitors using third-party production. “It’s a melting iceberg situation,” she said, emphasizing how gradual losses in market share could become increasingly difficult to reverse.

Is Coty Running Out of Time to Reinvent its Fragrance Strategy?

Coty became a beauty industry powerhouse after acquiring Procter & Gamble’s perfume, hair care, and makeup businesses in 2015 for $12.5 billion. Today, fragrance accounts for nearly 70 percent of Coty’s sales and is performing far better than its consumer cosmetics division, with growth between 2 percent and 9 percent.

Licensing Opportunities: Much of Coty’s fragrance revenue relies on licensed brands, with around 14 percent of licenses set to expire in the next three and a half years. The Gucci fragrance license alone generates an estimated $500 million annually, nearly double Coty’s free cash flow of $277.6 million in the last financial year.

Strategic Timing: Industry veterans suggest Coty may have acted too late to fully capitalize on shifting consumer preferences. Alfonso Emanuele de Leon, a beauty consultant based in Hong Kong, told Reuters that the company should have anticipated trends moving toward conceptual, experiential fragrance brands. Competitors like L’Oreal, Estee Lauder, and Puig have aggressively invested in niche or emerging brands, securing growth opportunities that Coty may now find more expensive to access.

“Strategic reviews like this would have helped 10 years ago,” de Leon said. “They can still act, but the wave has already reached the shore.”

Coty’s future depends on shedding weaker brands while keeping pace with a rapidly changing fragrance market.

Inputs from Diana Chou

Editing by David Ryder