The firm's Estée and Bobbi are counted among some of the closest friends to women worldwide. Estée Lauder sells cosmetics, fragrances, and skin care products, with brands including upscale Estée Lauder and Clinique, professional Bobbi Brown essentials, and luxurious Tom Ford Collection. The company's lines are sold in department stores, company stores, and by specialty retailers, as well as online. The firm operates a chain of freestanding retail stores (primarily for its M.A.C, Origins, and Aveda brands). The founding Lauder family controls about 77% of its voting shares. CEO Fabrizio Freda, a veteran of Procter & Gamble, joined the firm in 2008 as president and COO.
Through a worldwide economic downturn, the executive has helped Estée Lauder to remain a relevant company to consumers. Freda, who had been serving as president and COO of Estée Lauder, took over as chief executive in mid-2009. He succeeded William Lauder, who became executive chairman of the cosmetics maker, completing a succession plan first drafted in 2007. Previously, Freda was president of global snacks at P&G and logged more than 20 years at the consumer products company. During half of his tenure there, he worked in P&G's health and beauty care division and had a two-year stint heading up marketing and strategy for Gucci SpA in the late 1980s.
With its products available in more than 150 countries, Estée Lauder is a world leader in upscale personal care products. The company captures nearly half of all US prestige cosmetics sales.
Nevertheless, the downturn in consumer spending spurred the beauty company in early 2009 to announce a four-year turnaround plan, which has eliminated some 2,000 jobs in an effort to save as much as $550 million during the next four years. The plan aims to boost non-US sales to more than 60% of revenue, with the Asia-Pacific region leading the way.
While it makes plans for the future, the company's surely holding its own for now. Through the economic downturn, Estée Lauder was able to maintain its sales revenue. Even the firm's products category sales remained the same during turmoil in retail markets, with its skin care and makeup businesses together generating about 80% of its overall revenue since 2008. Fragrances (with 15%), hair care (another 5%), and other (1%) comprise the balance of its segment sales.
As part of its strategy, Estée Lauder is shifting its category mix to more high margin products that has global growth potential. To this end, the company is focused on skin care products, its most profitable category.
Despite its ranking and market share, Estée Lauder and the Lauder family have been working during the past couple years to breathe new life into the company's flagship brand as competition has heated up in the industry. While Coty, Elizabeth Arden, and L'Oréal are enlisting the help of celebrities to elevate and give credibility to their brands, Estée Lauder sewed up its brand rejuvenation with a boost from the fashion world. The company partnered with former Gucci Group creative director and fashion talent Tom Ford in recent years to develop a Tom Ford-inspired Estée Lauder line. The line struck a chord with customers immediately. The Ford-inspired scent Black Orchid had a $100,000 week at its debut, unseating a record set by Viktor & Rolf's Flowerbomb, which generated some $65,000.
The company has expanded its customer base to include younger shoppers by peddling the M.A.C and Clinique cosmetics lines. It aims to attract additional clientele through its 2010 acquisition of Los Angeles-based Smashbox Beauty Cosmetics. Founded by the great-grandsons of legendary makeup artist Max Factor, Smashbox offers studio-inspired prestige cosmetics that are sold in high-end and specialty retail outlets, including Sephora, Ulta, and Nordstrom. Smashbox has been looking to grow its base of devoted followers and benefits from Estée Lauder's know-how in product development, marketing, and international distribution. As part of the acquisition, Estée Lauder executive Beth DiNardo became Global General Manager of Smashbox, working alongside Smashbox co-founder and CEO Dean Factor and president Budd Taylor.
In addition to widening its customer base, Estée Lauder has expanded its distribution channels to include mass merchandisers and salons. The firm has been gradually shifting business from department stores to its own stores and other outlets. Its online Origins presence has expanded, too. Clinique, M.A.C, Origins, and Bobbi Brown sell products online. Estée Lauder now has more than 600 free-standing retail stores, with most of those being M.A.C, Origins, and Aveda shops. It also operates some 100 multibranded stores. Estée Lauder's prestige fragrances, including Beautiful, DKNY, and Tommy Hilfiger, have been global successes.
Partnering with other retailers and manufacturers has enabled Estée Lauder, through its BeautyBank unit, to expand its reach. An agreement with Coach gives Estée Lauder's BeautyBank the rights to develop fragrances and related items to be sold in Coach's US retail outlets. Also, the company spent some $15 million to fund an alliance with Kohl's Corporation, which hosts Estée Lauder in its department stores to create and manage color cosmetics and skin care departments. The firm's BeautyBank brands -- American Beauty, Flirt!, Daisy Fuentes, grassroots research labs, and GoodSkin Labs -- are sold in Kohl's stores.
In addition to its partnerships with retailers, Estée Lauder has been penning licensing agreements to boost its brand and reach. Estée Lauder and Sean John, the private company formed by Sean "Diddy" Combs, co-developed a line of fragrances under the Sean John name. The first fragrance to bow, called Unforgivable, is a successful, pricey couture version that rolled out internationally. In recent years Estée Lauder has expanded its European fragrance offerings through a deal with the Milan-based Missoni fashion business. The two companies market scents and related products through Lauder's Aramis and Designer Fragrances division.
While the company is busy signing fragrance deals, Estée Lauder is also jockeying for position in the doctor-based skin care arena. The firm operates the Clinique Skin Wellness Center through a partnership with Weill Cornell Medical College. The beauty company boasts The Estée Lauder Companies Innovation Institute located in Shanghai, China. The purpose of the institute is to study topical botanicals and synthetic materials for safety and efficacy, as well as study human skin in relation to the environment. In 2008 the company rolled out an upscale Clinique skin care line through a partnership with Allergan that is sold exclusively through doctors' offices.
Estée Lauder's also extending its reach internationally. Revenue generated by its two international segments -- Europe, the Middle East, and Africa, as well as Asia/Pacific -- rose while sales in the Americas dropped. The company saw stronger sales in Asia/Pacific in 2009. Estée Lauder branched out into Turkey and operates a unit in Istanbul named ELCA Kozmetik Ltd. Sti. Estée Lauder sees Turkey as a springboard into the young and growing market. Estée Lauder purchased privately held Ojon Corporation, based in Canada. Ojon sells high-end hair care products through fast-growing QVC, specialty retailers (such as Sephora, Ulta, and Nordstrom), as well as hundreds of upscale salons. Ojon also boasts a limited distribution of its products overseas. The deal has not only extended Estée Lauder's reach into other parts of the world, but it added Ojon's natural brands -- such as its Rare Harvest Tawaka Collection -- to its products portfolio.