Today 4

Coty sues Kering over Gucci Beauty license, putting 2028 handover at risk

Bottom Line Impact

Litigation raises execution risk and may compress near-term revenue and margin for Coty while strengthening Kering’s leverage to optimize Gucci Beauty’s long-run positioning with L’Oréal, with brand equity outcomes hinging on a tightly managed, compensated transition.

Executive Summary

Coty has filed a UK lawsuit against Kering and Gucci over the Gucci Beauty license, which is set to transfer to L’Oréal under a 50-year exclusive deal starting in 2028. With Gucci contributing an estimated 8% of Coty sales and 11% of profit, litigation introduces execution risk to transition planning, capital allocation, and retailer confidence, potentially altering timing and economics of any early exit or handover.

Actionable Insights

Immediate Actions (Next 30-90 days)
Model three exit scenarios (on-time 2028, 6-month early, 12-month early) with explicit EBITDA, working capital, and covenant impacts; set a walk-away floor for early-exit compensation equal to 9–12 months of Gucci gross profit plus inventory unwind.
Rationale: Quantified thresholds enable disciplined negotiation and protect balance sheet from a sudden $70m–$100m profit gap.
Role affected:Coty CFO
Urgency level:immediate
Short-term Actions (6-12 months)
Reallocate 150–250 bps of Gucci A&P to Marc Jacobs, Burberry, and Boss in top 10 markets; secure Q1–Q2 2026 incremental end-caps and gift-with-purchase to defend shelf share.
Rationale: Mitigates potential mid-single-digit sell-out softness from litigation overhang and de-risks retailer rebalancing.
Role affected:Coty CMO
Urgency level:short-term
Establish a transition services agreement framework by Q2 with defined data-room protocols, regulatory dossier transfer milestones per market, and a capped early-termination consideration range.
Rationale: Reduces operational and legal uncertainty, enabling a 6–12 month acceleration of L’Oréal’s launch roadmap without IP leakage.
Role affected:Kering Chief Strategy Officer
Urgency level:short-term
Strategic Actions
Lock retailer capacity for 2028 H2 launch waves by pre-negotiating incremental shelf space and media weight, and begin parallel regulatory registrations in priority APAC markets under permissible clean-room processes.
Rationale: Secures first-mover retail advantages and compresses time-to-scale by 1–2 seasons post-handover.
Role affected:L’Oréal Luxe President
Urgency level:strategic

Strategic Analysis

Next 30–90 days: heightened legal costs and management distraction; retailers and suppliers may pause or condition 2026–2028 commitments; Coty likely rebalances A&P toward non-Gucci hero franchises while safeguarding Q4 holiday sell-out; Kering and L’Oréal accelerate transition workstreams under stricter legal clean rooms and documentation.

Over 6–12 months: negotiations around early termination or transition services fees become more probable; Coty may seek compensation equivalent to 9–12 months of gross profit to exit early, while Kering aims to pull forward L’Oréal’s innovation and market activation runway by 6–12 months; risk of innovation slowdown for Gucci SKUs in 2026–2027 under dispute management, with potential mid-single-digit sell-out drag if A&P is curtailed.

If Gucci migrates to L’Oréal in 2028, L’Oréal deepens its fashion-fragrance scale alongside YSL Beauty and Prada, consolidating bargaining power with Sephora, Ulta, travel retail, and Tmall partners; Coty faces portfolio risk concentration and must over-index on Marc Jacobs, Burberry, Boss, and CK to protect shelf space; Kering tightens brand control vs multi-licensor dispersion, aligning luxury masterbrand equity across categories.

Suppliers: formula IP, fragrance oil houses, and packaging vendors may face dual-track planning and slower approvals; Retailers: planograms and coop commitments could shorten to 6-month cycles pending clarity; Customers: potential SKU rationalization and reduced NPD cadence risk in 2026–2027; Compliance: dossier and registration transfers, especially in China, typically require 9–18 months and must be sequenced to avoid out-of-stocks.

Risks & Opportunities

Primary Risks

  • Extended litigation delays knowledge transfer and slows 2026–2027 NPD cadence, pressuring Gucci sell-out by 3–5%
  • Retailers reallocate shelf space away from Gucci due to uncertainty, affecting Coty’s holiday and Spring resets
  • Regulatory dossier and IP disputes cause gaps in market authorizations, risking out-of-stocks in China and travel retail

Primary Opportunities

  • Negotiated early exit with compensation improves Coty’s cash and allows reinvestment into higher-growth franchises
  • Kering and L’Oréal synchronize brand codes and media at scale, lifting Gucci Beauty’s ASP and mix by 2–3 pts post-2028
  • Transition services agreement minimizes disruption, enabling an earlier wave of hero launches with stronger retailer backing

Market Context

Prestige beauty remains one of luxury’s most resilient categories, outgrowing soft luxury with high-single-digit global growth even as China’s discretionary spend moderates and US traffic normalizes. Consolidation of fashion-fragrance under mega-houses like L’Oréal and Estée Lauder is increasing retailer bargaining power and shelf-space compression, raising stakes for innovation cadence and A&P efficiency. Gen-Z momentum in fragrance and social-first discovery favors portfolios that can sustain rapid launch cycles and global media, advantaging L’Oréal if Gucci migrates; Coty must counter by focusing on hero franchises and travel retail strength while navigating sustainability packaging mandates in the EU that complicate rapid reformulations and transfers.

Back to Coty All Companies