your brand is not what you tell people; it’s what a 19 YO SAYSin the halls of high finance, we talk about "alpha." In the beauty industry, they talk about "aesthetics." Coty Inc. (NYSE: COTY) has spent the last decade failing at both.
To understand why a heritage giant is currently trading at the price of a latte, you have to go back to the "Original Sin": the 2016 acquisition of P&G’s specialty beauty business. It was a deal sold as a coronation—Coty would become the #3 beauty company in the world. Instead, it was a poisoning.
Coty swallowed 43 brands for $12.5 billion. They bought declining assets (CoverGirl, Max Factor) at peak valuation, financed by debt that would cripple their balance sheet for a decade. When Sue Y. Nabi took the helm in 2020, she didn't inherit a company; she inherited a crime scene.
The "Old World" Trap vs. The TikTok Guillotine
While Coty was busy integrating P&G’s clunky supply chains and fighting with SAP migrations, the world changed. The "Gatekeepers" of beauty (Vogue editors, Department Store buyers) were executed by the "Algorithm."
The Miss: Coty played the game of Television. Competitors like e.l.f. Beauty and Rare Beauty played the game of TikTok.
e.l.f. understood that in 2024/25, your brand is not what you tell people it is; it’s what a 19-year-old creator in Ohio says it is. They leaned into "dupe culture," speed-to-market (weeks, not months), and raw, lo-fi content.
Coty (specifically CoverGirl and Rimmel) kept hiring "safe" celebrity ambassadors and producing polished, 16:9 TV spots that looked like artifacts on a vertical phone screen. They tried to buy coolness, but on TikTok, you can only earn it.
The Sue Nabi Era: A valiant Defense
Sue Y. Nabi is a product genius. Let’s be clear: she is the only reason Coty isn't bankrupt. She correctly identified that the Consumer Beauty division (drugstore makeup) was a bleeding ulcer and that the Prestige division (Gucci, Burberry, Chloe fragrances) was the life raft.
Her strategy was sound: "Fragrance is the Lipstick Index of the 2020s."
She premiumized the portfolio. She launched Burberry Goddess (a massive hit). She stabilized the ship. But you cannot bail out a boat with a teaspoon when the hull is breached. The P&G debt load means every dollar of profit goes to interest payments, not to the R&D and marketing risks required to beat e.l.f. or L'Oréal.
The Verdict: The "Split" is Inevitable
The strategic review announced in late 2024 is the writing on the wall. Coty must amputate the limb to save the body.
The Play: Spin off or sell the Consumer Beauty division (CoverGirl, Rimmel, Sally Hansen). Let private equity strip it for parts.
The Future: Coty becomes a pure-play Prestige Fragrance & Skincare House. Smaller revenue, but higher margins, better multiples, and a balance sheet that doesn't look like a horror movie.
