After its growing success with a 51% stake in Kylie Jenner’s Kylie Cosmetics line, Coty sets its sights on Kim Kardashian’s KKW Beauty. It expects to launch KKW Beauty products in fiscal 2022.

Cosmetics company Coty Inc. has acquired 20% of KKW Beauty, Kim Kardashian West’s beauty business, for $200 million.

The deal was first announced in June with a plan to develop skin care, hair care and nail products under KKW Beauty to launch in its fiscal 2022, which begins in June 2021. This acquisition comes after Coty also bought a 51% stake in Kylie Cosmetics, Kylie Jenner’s beauty business, for $600 million in November 2019. Kylie initially sold its products exclusively online before Ulta stores began carrying the brand in late 2018. Coty is No. 91 in the Digital Commerce 360 Europe 500.

“Kim shares our true passion for beauty products, and this acquisition allows us to leverage our respective strengths for mutual benefit and value creation,” said Coty CEO Sue Nabi in a statement. “She has a unique ability to read the latest beauty and wellness trends, while we have the expertise on global product positioning, access to a vast global distribution network, and the resources to enter new beauty categories.”

Coty will focus on developing the brand’s personal care products, while Kardashian West and her team will lead the creative efforts around products and communications. As of publication, Kardashian West has 198 million followers on Instagram and KKW Beauty has 4.6 million, giving Coty a boost in social media reach as it has just 27,900 followers.

The back-to-back acquisitions with members of the same empire are intended to rekindle sales growth and drive ecommerce at Coty, which took a $3 billion writedown last summer, as the cosmetics retailer admitted that many of its mass-market brands are out of touch. A writedown is a  term for the reduction in the book value of an asset when its fair market value falls below the carrying book value, and thus becomes an impaired asset. The amount to be written down is the difference between the book value of the asset and the amount of cash that the business can obtain by disposing of it in the most optimal manner, according to Investorpedia.

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Coty’s move to up the ante with one of the world’s most famous families is “a smart deal” that solidifies the company’s push to boost its direct-to-consumer channel, says Shelly Socol, co-founder of One Rockwell, a brand marketing firm specializing in ecommerce.

“They know that they haven’t been as successful with some of their internal brands. This is a way to parlay that, use their knowledge and the Kardashian name,” Socol says. “Kim’s beauty brand isn’t as big as Kylie’s was, so they’re getting it at a good time.”

Kylie Cosmetics boosts revenue for Coty

In its last earnings release for the first quarter of fiscal 2021 ended Sept. 30, 2020, Coty reported revenue declines across its three geographic regions, with the Americas posting the smallest drop.

Revenue—excluding the company’s Wella business, which is being sold—fell 20% to $1.1 billion in the quarter ended Sept. 30. Including Wella, the decline was 13%, compared with a drop of 56% in the previous quarter. The percentage of its revenue generated by ecommerce and direct-to-consumer has doubled compared to where it stood in March at the beginning of the COVID-19 pandemic, the company says. And its ecommerce penetration in its fiscal first quarter doubled year-over-year to more than 13%.

Coty, however, singled out Kylie Jenner’s line of products as helping to prop up results.

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Nabi, who took over in September, comes aboard as the company reshapes its business to meet rapid changes in consumer tastes amid the global pandemic. Despite the contraction, she said recent changes, such as focusing on ecommerce, have better prepared Coty to weather the storm.

In an earnings call transcribed by Seeking Alpha, Nabi said that Coty has rolled out Kylie Skin Care selling direct-to-consumer online in the U.K., Germany, France and Australia. “The initial results have been very very positive, with international traffic from this market to Kylie Skin Care website doubling and in-market sales up seven times,” she said.

In its fiscal first quarter, Kylie Skin Care sales tripled year over year. Plus, close to 50% of Kylie Skin Care direct-to-consumer online orders are from returning customers, Nabi says.

“With… Kylie Skin Care boasting a loyal customer base in the beauty category already known for loyalty, we will continue to build on this success and expand our skin care footprint worldwide,” Nabi says.

New hires

After recently taking over as CEO in September 2020, Nabi brought on new hires to help reignite the cosmetics company’s growth.

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The hires include Isabelle Bonfanti, who spent 17 years at L’Oréal S.A. (No. 24 in the Europe 500) as chief commercial officer of luxury. She will bring experience in developing skin care and makeup brands in Asia. The company also named Jean-Denis Mariani as chief digital officer a newly created role for Coty, but the same role he held at LVMH-owned brand Guerlain. LVMH is No. 8 in the Europe 500.

Mariani will help develop Coty’s ecommerce platform, which recently expanded its offerings of Kylie Skin Care in Germany and Australia.

Cosmetics acquisition spree

Other big health and beauty conglomerates also have been on an acquisition spree. In November 2019, The Estée Lauder Cos. Inc. (No. 69 in the 2020 Digital Commerce 360 Top 1000) agreed to buy the remaining two-thirds of Have & Be Co., the South Korean owner of cosmetics line Dr. Jart+ and men’s grooming brand Do The Right Thing, that it didn’t already own for about $1.1 billion. According to Estée Lauder, the acquisition will expand the company’s reach in the Asia-Pacific region.

Japanese cosmetics group Shiseido bought Drunk Elephant for $845 million in October 2019. The move is expected to help Shiseido appeal to younger consumers in the United States and adds to its portfolio of prestige skin care brands, a key growth area for the company in recent years as consumers have shown willingness to spend on higher-priced beauty products. Shiseido is No. 26 in the Digital Commerce 360 Asia 450.

Since the takeover, Shiseido hasn’t done much to put its stamp on Drunk Elephant yet and likely wishes the company was further along, says Eric Roth, managing director at investment firm MidOcean Partners.

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Jessica Young and Bloomberg contributed to this report.

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