This company's Estée and Bobbi are counted among some of the closest friends to women worldwide. Estée Lauder sells cosmetics, fragrances, and skin and hair care products, with brands including upscale Estée Lauder and Clinique, as well as professional Bobbi Brown and luxurious Tom Ford beauty and fragrance lines. Its products are sold through its network of upscale department stores, via specialty retailers, and online. Estée Lauder operates a chain of freestanding retail stores (primarily for its M.A.C, Origins, and Aveda brands). Fabrizio Freda, a veteran of Procter & Gamble, heads Estée Lauder as CEO.
In fiscal 2016 (ended June), the company operated some 1,260 freestanding stores; another 400 stores were operated by third parties.
Estée Lauder products are sold in more than 150 countries and territories. The Americas (primarily the US) is the company's largest market, representing more than 40% of sales. Europe, the Middle East, and Africa combined accounted for more than a third.
Sales and Marketing
Advertising and promotions are key in the ultra competitive personal care products market. The company's marketing creed is to provide "high-touch" service to build customer loyalty. Estée Lauder advertises on TV, in magazines and newspapers, on digital and social media sites, and on billboards and via direct mail. Promotional activities include in-store displays. The company's largest customer is department store operator Macy's, representing about 10% of fiscal 2015 (ended June) sales.
Other sales channels include the company's freestanding stores, upscale salons and spas, and duty-free shops in airports or on cruise ships.
The company spent $2.82 billion on advertising, merchandising, sampling, promotion and product development in fiscal 2016, up from $2.77 billion in fiscal 2015.
Estée Lauder's net revenue has been increasing for the last five years (2012-16), except for a marginal decrease in fiscal 2015.
For fiscal 2016 net revenue increased by 4% to $11.3 billion due to higher net revenue from the Makeup and Fragrance segments.
Makeup segment’s net revenue increased by 9% to $4.7 billion due to higher sales of $397 million accumulated from the makeup artist brands, Clinique, Smashbox, Tom Ford, and Estée Lauder.
Fragrance segment’s net revenue increased by 5% to $1.48 billion, driven by higher net sales received from the luxury fragrances (Jo Malone London and Tom Ford), as well as incremental sales from thefiscal 2015 acquisitions of Le Labo and Editions de Parfums Frédéric Malle and the fiscal 2016 acquisition of By Kilian (approximately $134 million, combined).
Net income has been increasing for the last five years (2012-16), except for a decrease in fiscal 2015.
In fiscal 2016 Estée Lauder's net income increased by 2% to $1.11 billion due to higher net revenue and an increase in selling, general, and administrative expenses (up 4% compared to fiscal 2015).
In fiscal 2016, the company’s cash flow from operations decreased by 8% to $1.79 billion.
The company focuses on geographic AND product portfolio expansion, and on strengthening its distribution. It is also pushing brand awareness and sales by expanding its digital presence (e-commerce and m-commerce, and digital and social media). The company also continues to build its makeup product category through the introduction of new product offerings, including new collections from makeup artist brands and Pure Color Sculpting lipstick from Estée Lauder and the fragrance category via new launches and innovation, such as Estée Lauder Modern Muse and new fragrances from Michael Kors and Tory Burch. In addition the company is continuing to expand its hair care brands both in salons and in other retail channels.
Despite its ranking and market share, Estée Lauder and the Lauder family have been working to breathe new life into its flagship brand as competition has heated up. While Coty, Elizabeth Arden, and L'Oréal are enlisting the help of celebrities to elevate and give credibility to its brands, Estée Lauder sewed up its brand rejuvenation with a boost from fashion. The company is banking on a multi-year partnership with former Gucci Group creative director and fashion talent Tom Ford to continue its successful Tom Ford-inspired Estée Lauder line. The company has expanded its customer base to include younger shoppers through its M.A.C and Clinique cosmetics lines.
Estée Lauder's geographic growth is focused on emerging markets and consumers who purchase in the travel retail channel, in stores at their travel destinations or when they return to their home markets. The company is increasing its presence in countries such as China, the Middle East, Eastern Europe, Brazil, Russia, India, Mexico and South Africa.
As part of its strategy, Estée Lauder is shifting its category mix to more high-margin products that have global growth potential. To this end, the company is focused on skin care products -- its most profitable category. Also, Estée Lauder has been penning licensing agreements to boost its brand and reach.
In 2014 the company launched the Jo Malone London brand in China, at the Mitsukoshi store in Beijing.
Mergers and Acquisitions
To underscore its panache for high-touch service and its growing portfolio of prestige brands, Estée Lauder in 2016 acquired by Kilian, the Paris-based prestige fragrance brand. In 2015 it acquired Editions de Parfums Frédéric Malle, a famous fragrance brand established by perfumer Frédéric Malle, and GLAMGLOW, a high-end skin care brand focusing on facial masks.
In late 2014 the company acquired Le Labo, which specializes in distinctively French high-end fragrance and sensory items that have earned a loyal consumer following for its exclusivity and personalized service. With offices in London and New York, Le Labo has freestanding stores in New York, London, Paris, Los Angeles, San Francisco, Tokyo, and Hong Kong.
In 2014 the company acquired RODIN olio lusso, a luxury skin care brand founded by New York stylist Linda Rodin.