Coty Inc. Outlines Strategy for Creating First Globally Distributed Chinese Cosmetics Brand.

NEW YORK--(BUSINESS WIRE)--April 30, 1998--

Chairman and CEO Peter Harf Discusses Chinese Joint Venture at

The Conference Board's 1998 Strategic Alliances Conference

In a keynote speech presented before The Conference Board today, Coty Chairman and CEO Peter Harf outlined how his company has become the number one cosmetics manufacturer in China through a joint venture with Yue-Sai Kan, the premier supplier of prestige cosmetics in China.

"Our key global strategy is to build a leadership position for Coty in China and Pan-Asia, and to create the first world-class, globally distributed Chinese brand," explained Harf. "To achieve this goal, we knew the right alliance was critical." He continued, "Our relationship with Yue-Sai Kan, the leading cosmetics company with 95 percent brand awareness in China, has given Coty immediate access to the world's largest consumer base and propelled Coty to the number one market position."

Mr. Harf said the potential of China's fragrance and cosmetics market is "exploding" citing statistics that indicate between 1996 and 2001, annual sales of fragrances are forecast to increase 31 percent; make-up 26 percent; and skin care 20 percent. Overall, the cosmetics market should grow by 22 percent, Harf added.

In 1996, Coty formed a joint venture with Yue-Sai Kan and moved with unprecedented speed to break ground on a new 300,000 square foot manufacturing facility in Pudong, China less than a year later. This summer, Coty's new facility will commence operations to produce Coty brands that are available around the world, such as skin toners, hair mascara and color-proof lipsticks. Located across the river from Shanghai, the factory provides Coty and Yue-Sai Kan with increased opportunity to jointly develop and distribute in the near term new and innovative products for the Pan-Asian market. With a production capacity of 60 million units, the new plant establishes Coty as one of the largest consumer manufacturers in the country.

"The new facility will be fully integrated into our supply chain, consistent with Coty's single high standard of quality and seamless worldwide product delivery," explained Harf. "The Pudong facility will utilize the same equipment, manufacturing processes, training programs, R&D expertise, and distribution systems that define Coty's operations throughout the world," Harf continued.

"Coty seizes opportunity 100 percent of the time," Mr. Harf said, adding the company is "totally dedicated to a unique business opportunity - the opening of the Chinese market."

"We are offering the Chinese consumer the best products sold in the West," Mr. Harf said. "We're building a brand for the next 50 years."

A $1.6 billion company, Coty is the leader in sales of mass fragrances worldwide and second in sales in European mass cosmetics. The company has operations in 28 countries and sales in over 80 markets. Coty also markets prestige skin and sun care products. Its prestige fragrances include Jil Sander, Davidoff Cool Water and Vivienne Westwood.

Yue-Sai Kan, established in 1992, is named after its founder, one of China's most prominent businesswomen and an international television personality. Yue-Sai Kan's goal in founding the company was to address the distinctive needs of the Asian woman. Its products, which are sold in over 600 stores throughout China, are number one in department stores, overall market share and consumer preference. In 1992, the company offered 76 products. This year, the company plans to launch 146 new products.

In today's speech, Mr. Harf also emphasized the changing nature of today's Chinese woman, whom he termed "sophisticated, fashion conscious, optimistic, and, star struck. She has far more disposable income than she has ever had before. She has seen - or will see - 'Titanic' two or three times." He added, "She is one of a new breed in China - the 60 million Doo-Shoo-Yuh-Pee. We call them 'yuppies'."

Mr. Harf said there are 1.3 billion consumers in China today, half of whom are women, a large portion of whom are upwardly mobile women who are traveling abroad. In 1997, 2.5 million Chinese traveled abroad, an increase of 67 percent from the previous year, he said, adding that in 15 years, he expects Chinese tourists will outnumber those of any other nation.

"When that Chinese woman gets to Sydney, Honolulu or Vancouver, I want her to be able to buy Yue-Sai cosmetics as easily as she can now buy a Pepsi," he said.

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