Coty to end TJoy skin care brand

Global beauty group Coty Inc will give up on TJoy, a Chinese skin care brand it purchased in 2011, as it plans to focus on international brands, the company announced on its website Tuesday (US time).

In a news release on its official website, Coty also said it has agreed a deal with Hong Kong-based Li & Fung Ltd in which the latter will distribute some of Coty's global brands in the Chinese market, including Adidas, Rimmel, and Playboy.

With the distribution agreement, Coty believes it will benefit from Li & Fung's broad distribution network and the cooperation is part of Coty's intention to reorganize its business in China, according to the news release.

Coty will discontinue the TJoy brand in a bid to focus on global brands, the news release said.

TJoy is a local skin care brand founded in 1995 and purchased by Coty in 2011 for $400 million.

TJoy earned more than 800 million yuan ($128 million) revenue in 2011 but it saw a 50 percent revenue drop in 2012, just one year after being acquired by Coty, fashion news portal nofashion.cn reported Wednesday.

However, a beauty industry insider who declined to be named told the Global Times Wednesday that the actual revenue of TJoy in 2011 may not have been that high because TJoy persuaded distributors to stock its products before the acquisition in a bid to boost brand value.

Coty's skin and body care unit saw a $7 million loss in the first quarter, but excluding TJoy, the unit would have been profitable, according to Coty's earnings report for the first quarter of 2014.

The report also said TJoy's new ginseng product line, which it launched in December 2013, did not prevent the brand from struggling.

The anonymous insider also said that the core management team of TJoy, including the founder Zhuang Wenyang, left TJoy soon after the acquisition, which contributed to the brand falling.

Another main reason is Coty's lack of experience in the skin care sector, the insider said, noting that the majority of Coty's brands are fragrances, which are quite different from the skin care segment.

The changing Chinese market has made it more difficult for low-priced open-shelf skin care products to survive, he said.

With increasing incomes, Chinese consumers are inclined to choose leading products of higher-level brands, he explained, noting there is now less of a market for brands without strong features like TJoy.

Coty obviously does not have a good knowledge of the Chinese market as it already gave up on another local brand Yue-Sai before, he said.

Coty sold Yue-Sai, a high-end Chinese beauty brand that Coty jointly owned with Yue-Sai's founder since 1996, to L'Oréal Group in 2004.

TJoy is not the first Chinese brand to be ended after being acquired by global beauty giants, Lin Yue, chief analyst of Guangdong-based Lynear Consulting, told the Global Times Wednesday, noting Mininurse, purchased by L'Oréal in 2003, is another example.

"The global companies bought local Chinese brands for their brand value or distribution channels, so when the brands became less favored by the market or the distribution channels were taken control of, these local brands were cut," he said.

Coty, founded in 1904 in Paris, has a portfolio of well-known fragrances, color cosmetics and skin & body care brands, including Adidas, Calvin Klein, Chloe, Davidoff and Marc Jacobs.