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The Estee Lauder Company - History, Evolution, Present and the Future
History & Origin . . . . . . . . . . . . . . . . . . . 3 
Early Evolution . . . . . . . . . . . . . . . . . . . . 6 
Global Expansion . . . . . . . . . . . . . . . . . 8 
Modern Business . . . . . . . . . . . . . . . . . . 9 
Company Structure . . . . . . . . . . . . . . 16 
Recent Efforts . . . . . . . . . . . . . . . . . . . .17 
Company DNA . . . . . . . . . . . . . . . . . . 32 
Summary . . . . . . . . . . . . . . . . . . . . . . . 35 
Social Media Accounts . . . . . . . . . . . 36 
2
 During the 1920s in New York City, John Schotz, a Hungarian chemist, 
developed a face cream with his niece, Josephine Esther Mentzer 
 It was named ‘Super-Rich All Purpose Crème’ 
 They gave samples to her customers at the Florence Morris Beauty 
Salon 
 Josephine Esther married young, to Joseph Lauter, whose father, on 
moving to the United States, had had his original family name - 
Lauder 
 The couple decided to re-adopt the original family name and Esther 
took the opportunity to nuance her own name 
 Estée continued her uncle’s work and it was a big hit, and used her 
salon job to sell the miracle cream to her customers 
 Her first big idea for sales was to give free samples of her make-up 
products, for every item purchased in the salon 
3
 Estée Lauder’s added-value hairdressing experience was a hit and 
she was soon asked to demonstrate her products in other beauty 
salons 
 With high standards, she recruited and trained saleswomen into her 
own style 
 She thought of ways to make her face cream jars special by 
engraving the brand name on it, and coloring it pale turquoise 
 Estée wanted to sell her products in Saks Fifth Avenue but with an 
order of $800 worth of merchandise 
 Determined, she pulled out her products in two salons and invested 
their entire savings into buying their first factory 
 They prepared the creams on the restaurant’s gas burners and then 
set about talking the buyer into a promotional campaign 
4
 Everyone with a duty account at Saks was sent a card announcing, 
“Saks Fifth Avenue is proud to present the Estée Lauder line of 
cosmetics: now available at our cosmetics department” 
 Estée Lauder had four golden rules: 
 She would open every new franchise herself, spending a week in 
the store to get everything absolutely right. 
 Her salespeople needed to be not just walking advertisements for 
her products, but be gushing enthusiasts for their efficacy 
 The counter had to be a turquoise magnet, a ‘tiny, shining spa’ 
 The gift with purchase was mandatory, whatever the store’s 
policy regarding other cosmetic counters 
 Estée approached New York’s advertising agencies, budget into 
more free samples and postcards were sent out saying, ‘Madam, 
because you are one of our preferred customers, please stop by the 
Estée Lauder counter and present this card for a free gift’ 
 In 1947, The Estée Lauder Company Inc. was formed 
3
 Estée noticed counters in the major department stores were the 
counters of the French perfumers 
 If Estée has to make it big, she needed a killer perfume. Estée’s first 
step was to not call it a perfume at all 
 Her Youth Dew was dubbed a perfumed bath oil 
 As for the packaging, she chose a screw top rather than the more 
usual cellophane wrapping 
 Youth Dew launched in 1953 
 It was immediately a huge success for the Estée Lauder Company 
 Selling 5,000 units a week, it became a long-term best-seller, still 
clearing $30 million a year in the 1980s 
 Estée was now coming to her rivals’ attention. Being number three 
behind Helena Rubinstein and Elizabeth Arden 
6
 Meeting Helena Rubinstein, a Polish-born American business 
magnate for the first time, Estée made an impact by telling the 
madam that her neck would benefit from Estée’s Crème Pack 
 1958, annual sales hit $1 million, and earned leading name in the 
American cosmetics industry 
 In the ten years from 1958, company sales grew at an average of 45% 
a year, and transform the company into an industry powerhouse 
2
 In the 1960s, Estée carried her sales bag around the world, opening 
up concessions wherever she went: Hong Kong, Canada, Austria, 
Italy and Germany 
 Estée then handed over the task to an international sales manager 
 This role soon morphed into a separate division within the 
company, Estée Lauder International Inc. 
 Their first store in Moscow opened in 1981 while it was still the capital 
of the Soviet Union 
 By the mid-1990s, the company was selling in over 100 countries 
 Estée Lauder passed away in April 2004 
 By then the company had 45% of annual sales, amounting to $5.7 
billion, and over half of operating income, was coming from non- 
US affiliates 
2
 Her son, Leonard - fresh from completing his Columbia MBA, joined 
the company in 1958 
 By 1962, Estée Lauder Company chose a different approach 
 She used only one model, who would be the face of the 
company that would appear on every product over several years 
 The first face of Estée Lauder was Karen Harris 
 Estée Lauder’s second masterpiece was men’s fragrance in 1965 
 Aramis was launched - a fragrance, a cologne and an after-shave 
lotion 
 Due to uninspiring sales results, Aramis re-launched in 1967 
 Presented entire range of products: after-shave, eye pads and a 
face mask and covered with brown and gold tortoiseshell livery 
 Estée now presented an entire range of products: after-shave, eye 
pads and a face mask 
 The Estée Lauder name was relegated to small print and soon 
dropped altogether 
2
 The first advertisement for the brand ran in The New Yorker featuring 
the All-Weather Hand Cream – Estée was selling to metrosexuals thirty 
years before the term came into common jargon 
 A successful re-launch that Estée Lauder promoted brand equity. 
They could appeal to both sexes and all ages 
 Leonard appealed medical reassurance and partnership with Dr. 
Norman Orentreich, an expert in skin sensitivities and formed Clinique 
 At department stores, Clinique stood out for its bright, clean lines and 
it’s not too clinical packaging; the artist’s lamp for examining 
customers’ skin; and a question-and-answer board 
 Codenamed as Project Miss Estée, Clinique’s launch day 
approached but a complaint was filled by Jacquet and Jacquet 
with their trademark product called Astringent Clinique 
2
 Leonard loaded up and went to the Jacquet and Jacquet’s owners 
with a $5,000 offer 
 He came back with the name but was $100,000 poorer 
 Clinique launched in 1968, and lost $3 million in its first seven years; no 
mean sum for a company with a $40 million a year turnover 
 By the 1970s, Revlon and Avon were their main competitors and they 
were able to outdo Estée Lauder in personalised selling 
 Estée Lauder was being squeezed with the launch of Revlon’s Charlie 
and Yves Saint Laurent’s Opium. Soft Youth Dew and Cinnabar were 
rushed, and both fell well short of past standards of success 
 Annual sales had reached close to $250 million by 1978 
 Clinique’s Prescriptives: customer got one-hour consultation, with a 
custom-coloured make-up to exactly match skin-type and tone. This 
concept gave Estee Lauder $40 million worth of investment and 
losses 
2
 More success came with the Launch of White Linen as part of the trio 
of fragrances called New Romantics 
 The company returned to its skin care roots in 1983 with the launch of 
Night Repair, trumpeted in ads as a biological breakthrough 
 Unfortunately, the message was undermined by the Clinique 
collaborator, Dr Orentreich, going rogue, and debunking the whole 
idea in the press 
 Launched of “Their Beautiful” in 1985, was a blockbuster that 
became another long-term success 
 Estée Lauder were now un-disputed kings of the department store 
cosmetics floor, and second only to Avon in sales of fragrances 
 In 1990, Leonard recruited Robin Burns from Calvin Klein. Under Burns’ 
leadership, company’s portfolio and advertising was updated 
2
 A notable development was Origins, which was run as a separate 
entity and headed by Leonard’s son, William 
 Origins was a range of botanically based products aimed at heading 
off the threat posed by the rise of Body Shop 
 William described Origins’ mission as “trying to rewrite the book on 
how a cosmetics company operates and thinks in the 21st-century.” 
 Estée Lauder signed a deal with Tommy Hilfiger to license his name on 
cosmetics in 1993 
 Pro-active thinking was at the heart of the company’s strategy during 
the 1990s as it made the precarious transition from being family-run to 
being run as a corporation 
 Joseph was deceased, Estée in semi-retirement in an advisory and 
figurehead role, and other family members uninvolved 
2
 In 1996, sales, which had grown every single year since the 
company’s inception, rose to nearly $3 billion 
 So far, the company had been hugely successful developing its own 
brands, but around the IPO, they ventured into acquisitions 
 They decided to merge with Make-up Art Cosmetics Ltd. 
(M•A•C) followed by another professionals’ beauty line, Bobbi 
Brown Essentials 
 Sassaby Inc. with its Jane brand, was also purchased for its 
populist appeal to teenagers 
 Aveda was purchased for $300 million - 85% of their sales coming 
from the channel where Estée started, hair salons 
 La Mer brand of high-end moisturisers was purchased 
 Deal with Donna Karen International Ltd., for use of the ‘Donna 
Karen New York’ and ‘DKNY’ trademarks 
2
 Licensing deal with Stila, was acquired, as was a British brand, Jo 
Malone 
 Five deals soon followed, adding the Bumble and bumble, Kate 
Spade, Michael Kors, Darphin and Rodin & Fields brands to the 
portfolio 
 By 1998, Estée Lauder assumed an industry leadership role in selling its 
products over the Internet and formed ELC Online 
 Estée Lauder had become an industry giant covering a wide variety 
of channels and consumers 
 It was also by now a global company, with sales in the billions and 
promotional and advertising budgets that exceeded $1 billion 
 Each brand had its own president to drive sales and marketing and 
the same was pursued within the international division. A matrix-type 
complex of manufacturing, finance etc. supported these units 
2
 In 2009, Fabrizio Freda, CEO, announced a major change in 
company structure 
 The brands would now fall into one of four groupings: 
 High-end prestige brands and make-up artist brands: Estée 
Lauder, M•A•C, Bobbi Brown, Prescriptives, La Mer, Jo Malone, 
Tom Ford Beauty 
 Prestige skin care and alternative channels: Clinique, Origins, Ojon 
 Fragrance licensing: Aramis and designer fragrances 
 Salon and Pharmacy channel: Aveda, Bumble and bumble, 
Darphin 
 North American business, together with Canada and Puerto Rico was 
united into one North American affiliate. This gave one point of 
contact for their customers 
 With 42% of sales coming from this one unit, it was a huge 
multi-billion dollar enterprise in its own right 
2
2004 
 The 58th successive year of sales growth saw a company-record 
increase of $700 million, making the top line up to $5.8 billion 
 Five of the company’s brands - Estée Lauder, Clinique, Aramis, Donna 
Karen fragrances and Tommy Hilfiger fragrances were available in 
over 120 countries, Clinique in over 130 countries 
 Estée Lauder and Clinique were growing rapidly in China 
 Aveda was launched in Japan 
 M•A•C was growing fast in Brazil via its own stores 
 Darphin, a high-end botanical beauty brand sold primarily through 
independent European pharmacies, was acquired 
 BeautyBank’s initial output was three new brands, which were 
launched through the Kohl’s chain of 600 department stores 
2
 With Ashley Judd signed up as a brand face and P. Diddy as the 
latest licensed fragrance, the machine was humming 
 The scale and scope of the Estée Lauder business 
 8,000 product lines was now vast 
 400 scientists were working in 6 research centres around the world 
 300 new product launches in the year 
 The Estée Lauder Beyond Paradise launch took place 
 It utilizes essential oils developed exclusively for the company 
 It was a huge success 
 It reached the top five best-selling fragrances in US Department 
stores 
2
2005 
 Sales reached of $6.3 billion 
 Estée Lauder had four of the top five best-selling fragrances in 
department stores. But the fragrance market was getting tougher all 
the time. 
 The company was now marketing a range of over 90 prestige 
fragrance brands with over 200 new ones being launched by the 
industry each year 
 Stood at 26 with the addition of fashion designer Tom Ford’s name 
 70% of sales was coming from the five core brands the company had 
developed themselves: Estée Lauder, Clinique, Aramis, Prescriptives 
and Origins 
 Clinique was launched into Vietnam during the year, soon followed 
by Estée Lauder 
2
 M·A·C launched into both India and China during the year 
 Clinique and Estée Lauder, launching in another 23 Chinese cities, 
almost doubled sales 
2006 
 Estée Lauder being squeezed at either end: by category killer chains 
and by Wal-Mart, experienced a huge struggle for the company to 
keep growing sales 
 There was a slow but unstoppable decline in the effectiveness of the 
gift-with-purchase promotional technique 
 Sales declined, despite makeovers for the venerable Youth Dew, 
White Linen and Pleasures brands 
 M•A•C was the company’s fastest growing brand, launching into 
Russia as well as China and India 
2
 The super-premium skin care brand, La Mer, had quadrupled sales 
since 2002 
 The management’s strategic review resulted in the development of 
five strategic imperatives to negotiate the more difficult trading 
conditions 
 Optimising the Brand Portfolio 
 Strengthening Product Categories 
 Strengthening and Expanding Global Presence 
 Diversifying Distribution 
 Achieving Operational and Cost Excellence 
 9% increase drove sales over the $7 billion barrier 
 Mergers and Acquisitions disposed of Rodan & Fields, and acquired 
the Ojon Corporation 
2
 Tom Ford Beauty added to Estée Lauder’s range of brands in the 
ultraluxe niche 
 Two Daisy Fuentes fragrances were launched exclusively in Kohl’s 
 A Coach-branded fragrance was introduced through distribution in 
Coach stores 
 Estée Lauder collaborated with the Ford Motor Company to launch 
Mustang onto the mid-tier retail channel 
 Internet sales grew another 25% with the expansion of the online 
business to the UK, Australia and France 
 Certain brands were listed in Sephora, Canada’s Shoppers Drug Mart 
and ULTA’s 450 beauty superstores 
 Estée Lauder now had more than 450 free-standing stores around the 
world for its prestige brands 
 Origins was available in the European pharmacy channel 
2
 Bobbi Brown’s debut on QVC 
 The company now had 35 international affiliate organisations. These 
supported sales in over 130 countries 
 Eight brands were now available in China with Estée Lauder leading 
the way in 32 cities 
2008 
 12% increase that seemed to belie the global economic crisis 
 Skin care was again the best category, and generated almost $3 
billion in sales 
 Their performance was driven by the Asia/Pacific region’s very 
strong sales of skin-whitening products and fast growth in China 
 Make-up, another $3 billion category, grew 10% , M•A•C and 
Bobbi Brown 
2
 $3.2 billion, international sales had doubled to nearly $4.7 billion - 
impressive by any standards. This was due to three factors: 
 The company’s core product range was well aligned to the 
aspirations of the fast-growing middle classes around the world 
 The company was flexible in positioning itself 
 Emerging markets, where the company accounting of 9% in sales 
 Another significant factor behind the continued good news was the 
company’s success in positioning itself not as a reactive victim of the 
changes in how their consumers were reached, but as proactive 
beneficiaries 
 In the US, selling their products was in trouble - slipping from being 
worth 41% of sales in 2003, to 30% in 2008 
 But the international department stores were doubling the sales to 
over $2 billion in the previous five years, were Estée Lauder’s fastest 
growing channel 
2
 The company was then most excited about the potential offered in 
four up-and-coming channels: 
 The Internet – 15 brands became available for sales online in a 
growing number of countries - Korea being the latest. In line with 
Estée Lauder’s trademark personal touch, Clinique, M•A•C, Bobbi 
Brown and Origins all offered live chat, with real make-up artists 
providing personalised advice 
 Direct Response TV - This was another arena where a prolonged 
interaction with the audience played to company strengths. 
Clinique, Origins, Bobbi Brown and Ojon had all been big hits, but 
only Ojon had been acquired because it was primarily a direct 
response TV brand 
2
 Company Stores - Estée Lauder now operated 577 stores, which 
acted as advertising billboards in some of the world’s most 
prestigious real estate 
 Travel Retail - Estée Lauder brands had always been well featured 
in Duty Free outlets 
 This combination of routes to the consumer also gave the company 
an opportunity to develop ground-breaking, multi-channel launch 
strategies for new products 
 Tri-Aktiline Instant Deep Wrinkle Filler was launched internationally in 
2008 via speciality cosmetics stores, direct response TV, the internet 
and travel retail 
2
2009 
 A declined of 7% to $7.3 billion was more due to currency fluctuations 
 Estée Lauder reduced its SKU (Stock Keeping Unit), count by 16% and 
cut merchandising, advertising and sampling budgets 
 At the Bobbi Brown counters and in the Origins stores: for the 
traditional fragrance brands, smaller, less expensive pack sizes were 
introduced 
 Bouncing back with a 6% sales increase to $7.8 billion 
 Asia and Europe drove the growth 
 Sales in China increased by almost 30%, with E-commerce chipping in 
a 23% increase 
 The launch of Estée Lauder’s Advanced Night Repair was the most 
successful in the company’s history 
 79 M•A•C stores opened around the world 
2
 Bobbi Brown line was launched into Poland 
 The fragrance category declined, as sales of the franchise name 
brands such as DKNY, Hilfiger and Sean John fell off 
 The major acquisition was the Smashbox Beauty Cosmetics 
Company, a prestige brand sold primarily in speciality beauty 
channels in the US and 40 other countries 
 A decision to discontinue the Prescriptives brand was partially related 
due to a social media campaign by its core followers 
 The company was a year into its new four-year strategy, which 
involved a significant restructuring (covered previously) and resizing of 
the company 
 The number of SKUs was reduced again, by 10%, and a programme to 
trim the workforce by 2,000 was put into place 
2
2011 
 13% increase which was three-times the growth rate of the total 
industry 
 Here increased footfall in department stores encountered Estée 
Lauder’s revitalised counters: 
 special lighting 
 interactive touch screen tools 
 a host of new products 
 Business also grew in other US channels, particularly fast-growing multi-brand 
beauty retailers like Sephora, where Bumble launched in 298 
stores 
 In digital selling, sales rose by 28% 
 The company became leaders in China in the prestige beauty 
category 
2
 Selling 11 brands in 38 cities through a variety of department stores, 
company stores and multi-brand specialist retailers 
 Estée Lauder opened a larger R&D facility to focus on new products 
 La Mer grew by 55% through increased distribution and the launch of 
an E-Commerce site 
 Combined sales in China, Hong Kong, Taiwan and Korea grew by 
$181 million 
 In Brazil, company growth was spearheaded by Clinique and M•A•C, 
focused on opening company stores and expanding E-Commerce 
2012 
 10% record increase grew at double the sector rate make Estée 
Lauder brand became the largest prestige beauty brand in the world 
 US sales grew by over $250 million 
2
 Clinique consolidated its position as the number one overall beauty 
brand 
 New products in the Estée Lauder range brought many new 
customers into the brand 
 Outside the US, another 50 company stores opened and online 
business increased by 24% 
 The company had now 340 marketing and E-Commerce sites across 
more than 50 countries 
 In China, opened more company stores helped them drive up brand 
availability to 58 cities 
 In Brazil, opened with seven new M•A•C stores cementing the 
brand’s number 1 position in the beauty market 
 Jo Malone and Bobbi Brown also opened stores in the Middle East 
 Estée Lauder became the market leadership in Mexico, Venezuela 
and Peru 2
Consumer Contact 
 The most important aspect was making human contact 
 Product selection is personalized 
 Company’s greatest achievement has been to translate their USP 
(unique selling point) into areas such as company stores, direct 
response TV and, most successfully, the Internet 
Global 
 Helping to meet basic needs applicable across all races, countries 
and languages 
 Estée Lauder is in an ideal position to benefit hugely from the rapidly 
increasing new middle classes in emerging markets - having powerful, 
leading positions in the BRIC markets (Brazil, Russia, India and China) 
and elsewhere 
2
Innovation 
 Innovation has always been at the heart of the company: both what 
the products did and how they were sold 
 8 global R&D laboratories provide an endless stream of hundreds of 
new products a year 
 The company’s prowess in innovation is best illustrated by the Forbes’ 
2012 lists: The Estée Lauder Companies ranked #933 in sales, #716 in 
profits, #348 in market cap and #23 in Innovative. This is one place 
above Google. 
2
Brand Management 
 All of the original brands have been developed and adapted to be 
still relevant today 
 Every acquired brand has gone on to much greater heights under 
their stewardship. M•A•C. Brand equities have been passionately 
protected, a process continues today. 
 “Which brands should appear in which retail environments” has 
always been a company obsession - iron discipline in this area is the 
key reason that the Estée Lauder brand itself is now the world’s 
leading beauty brand. 
2
 As exposed to spending downturns in the economy and currency 
fluctuations, their strengths in brand portfolio, consumer contact, 
innovation, emerging markets and E-Commerce mean that any such 
problems have a solution 
 They have strong competitors but they are exceptionally well-positioned 
competitively. They have never been a company to 
slavishly follow what someone else is doing 
 Although the company has been publicly quoted for almost two 
decades, it is still in the control of the family. It deserves much credit 
for cherishing the company’s heart and soul, while bringing in outside 
expertise to keep it up-to-date and relevant 
2
Website: www.esteelauder.com/index.tmpl 
LinkedIn: www.linkedin.com/company/estee-lauder-group-of-companies 
Facebook: www.facebook.com/EsteeLauder?fref=ts 
Instagram: www.instagram.com/esteelauder 
Youtube: www.youtube.com/user/EsteeLauder 
Google+: plus.google.com/110286608411428712603 
Pinterest: www.pinterest.com/esteelauder/ 
Flickr: www.flickr.com/photos/este_lauder/ 
Twitter: www.twitter.com/EsteeLauder 
2
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The Estee Lauder Company - History, Evolution, Present and the Future

  • 2. History & Origin . . . . . . . . . . . . . . . . . . . 3 Early Evolution . . . . . . . . . . . . . . . . . . . . 6 Global Expansion . . . . . . . . . . . . . . . . . 8 Modern Business . . . . . . . . . . . . . . . . . . 9 Company Structure . . . . . . . . . . . . . . 16 Recent Efforts . . . . . . . . . . . . . . . . . . . .17 Company DNA . . . . . . . . . . . . . . . . . . 32 Summary . . . . . . . . . . . . . . . . . . . . . . . 35 Social Media Accounts . . . . . . . . . . . 36 2
  • 3.  During the 1920s in New York City, John Schotz, a Hungarian chemist, developed a face cream with his niece, Josephine Esther Mentzer  It was named ‘Super-Rich All Purpose Crème’  They gave samples to her customers at the Florence Morris Beauty Salon  Josephine Esther married young, to Joseph Lauter, whose father, on moving to the United States, had had his original family name - Lauder  The couple decided to re-adopt the original family name and Esther took the opportunity to nuance her own name  Estée continued her uncle’s work and it was a big hit, and used her salon job to sell the miracle cream to her customers  Her first big idea for sales was to give free samples of her make-up products, for every item purchased in the salon 3
  • 4.  Estée Lauder’s added-value hairdressing experience was a hit and she was soon asked to demonstrate her products in other beauty salons  With high standards, she recruited and trained saleswomen into her own style  She thought of ways to make her face cream jars special by engraving the brand name on it, and coloring it pale turquoise  Estée wanted to sell her products in Saks Fifth Avenue but with an order of $800 worth of merchandise  Determined, she pulled out her products in two salons and invested their entire savings into buying their first factory  They prepared the creams on the restaurant’s gas burners and then set about talking the buyer into a promotional campaign 4
  • 5.  Everyone with a duty account at Saks was sent a card announcing, “Saks Fifth Avenue is proud to present the Estée Lauder line of cosmetics: now available at our cosmetics department”  Estée Lauder had four golden rules:  She would open every new franchise herself, spending a week in the store to get everything absolutely right.  Her salespeople needed to be not just walking advertisements for her products, but be gushing enthusiasts for their efficacy  The counter had to be a turquoise magnet, a ‘tiny, shining spa’  The gift with purchase was mandatory, whatever the store’s policy regarding other cosmetic counters  Estée approached New York’s advertising agencies, budget into more free samples and postcards were sent out saying, ‘Madam, because you are one of our preferred customers, please stop by the Estée Lauder counter and present this card for a free gift’  In 1947, The Estée Lauder Company Inc. was formed 3
  • 6.  Estée noticed counters in the major department stores were the counters of the French perfumers  If Estée has to make it big, she needed a killer perfume. Estée’s first step was to not call it a perfume at all  Her Youth Dew was dubbed a perfumed bath oil  As for the packaging, she chose a screw top rather than the more usual cellophane wrapping  Youth Dew launched in 1953  It was immediately a huge success for the Estée Lauder Company  Selling 5,000 units a week, it became a long-term best-seller, still clearing $30 million a year in the 1980s  Estée was now coming to her rivals’ attention. Being number three behind Helena Rubinstein and Elizabeth Arden 6
  • 7.  Meeting Helena Rubinstein, a Polish-born American business magnate for the first time, Estée made an impact by telling the madam that her neck would benefit from Estée’s Crème Pack  1958, annual sales hit $1 million, and earned leading name in the American cosmetics industry  In the ten years from 1958, company sales grew at an average of 45% a year, and transform the company into an industry powerhouse 2
  • 8.  In the 1960s, Estée carried her sales bag around the world, opening up concessions wherever she went: Hong Kong, Canada, Austria, Italy and Germany  Estée then handed over the task to an international sales manager  This role soon morphed into a separate division within the company, Estée Lauder International Inc.  Their first store in Moscow opened in 1981 while it was still the capital of the Soviet Union  By the mid-1990s, the company was selling in over 100 countries  Estée Lauder passed away in April 2004  By then the company had 45% of annual sales, amounting to $5.7 billion, and over half of operating income, was coming from non- US affiliates 2
  • 9.  Her son, Leonard - fresh from completing his Columbia MBA, joined the company in 1958  By 1962, Estée Lauder Company chose a different approach  She used only one model, who would be the face of the company that would appear on every product over several years  The first face of Estée Lauder was Karen Harris  Estée Lauder’s second masterpiece was men’s fragrance in 1965  Aramis was launched - a fragrance, a cologne and an after-shave lotion  Due to uninspiring sales results, Aramis re-launched in 1967  Presented entire range of products: after-shave, eye pads and a face mask and covered with brown and gold tortoiseshell livery  Estée now presented an entire range of products: after-shave, eye pads and a face mask  The Estée Lauder name was relegated to small print and soon dropped altogether 2
  • 10.  The first advertisement for the brand ran in The New Yorker featuring the All-Weather Hand Cream – Estée was selling to metrosexuals thirty years before the term came into common jargon  A successful re-launch that Estée Lauder promoted brand equity. They could appeal to both sexes and all ages  Leonard appealed medical reassurance and partnership with Dr. Norman Orentreich, an expert in skin sensitivities and formed Clinique  At department stores, Clinique stood out for its bright, clean lines and it’s not too clinical packaging; the artist’s lamp for examining customers’ skin; and a question-and-answer board  Codenamed as Project Miss Estée, Clinique’s launch day approached but a complaint was filled by Jacquet and Jacquet with their trademark product called Astringent Clinique 2
  • 11.  Leonard loaded up and went to the Jacquet and Jacquet’s owners with a $5,000 offer  He came back with the name but was $100,000 poorer  Clinique launched in 1968, and lost $3 million in its first seven years; no mean sum for a company with a $40 million a year turnover  By the 1970s, Revlon and Avon were their main competitors and they were able to outdo Estée Lauder in personalised selling  Estée Lauder was being squeezed with the launch of Revlon’s Charlie and Yves Saint Laurent’s Opium. Soft Youth Dew and Cinnabar were rushed, and both fell well short of past standards of success  Annual sales had reached close to $250 million by 1978  Clinique’s Prescriptives: customer got one-hour consultation, with a custom-coloured make-up to exactly match skin-type and tone. This concept gave Estee Lauder $40 million worth of investment and losses 2
  • 12.  More success came with the Launch of White Linen as part of the trio of fragrances called New Romantics  The company returned to its skin care roots in 1983 with the launch of Night Repair, trumpeted in ads as a biological breakthrough  Unfortunately, the message was undermined by the Clinique collaborator, Dr Orentreich, going rogue, and debunking the whole idea in the press  Launched of “Their Beautiful” in 1985, was a blockbuster that became another long-term success  Estée Lauder were now un-disputed kings of the department store cosmetics floor, and second only to Avon in sales of fragrances  In 1990, Leonard recruited Robin Burns from Calvin Klein. Under Burns’ leadership, company’s portfolio and advertising was updated 2
  • 13.  A notable development was Origins, which was run as a separate entity and headed by Leonard’s son, William  Origins was a range of botanically based products aimed at heading off the threat posed by the rise of Body Shop  William described Origins’ mission as “trying to rewrite the book on how a cosmetics company operates and thinks in the 21st-century.”  Estée Lauder signed a deal with Tommy Hilfiger to license his name on cosmetics in 1993  Pro-active thinking was at the heart of the company’s strategy during the 1990s as it made the precarious transition from being family-run to being run as a corporation  Joseph was deceased, Estée in semi-retirement in an advisory and figurehead role, and other family members uninvolved 2
  • 14.  In 1996, sales, which had grown every single year since the company’s inception, rose to nearly $3 billion  So far, the company had been hugely successful developing its own brands, but around the IPO, they ventured into acquisitions  They decided to merge with Make-up Art Cosmetics Ltd. (M•A•C) followed by another professionals’ beauty line, Bobbi Brown Essentials  Sassaby Inc. with its Jane brand, was also purchased for its populist appeal to teenagers  Aveda was purchased for $300 million - 85% of their sales coming from the channel where Estée started, hair salons  La Mer brand of high-end moisturisers was purchased  Deal with Donna Karen International Ltd., for use of the ‘Donna Karen New York’ and ‘DKNY’ trademarks 2
  • 15.  Licensing deal with Stila, was acquired, as was a British brand, Jo Malone  Five deals soon followed, adding the Bumble and bumble, Kate Spade, Michael Kors, Darphin and Rodin & Fields brands to the portfolio  By 1998, Estée Lauder assumed an industry leadership role in selling its products over the Internet and formed ELC Online  Estée Lauder had become an industry giant covering a wide variety of channels and consumers  It was also by now a global company, with sales in the billions and promotional and advertising budgets that exceeded $1 billion  Each brand had its own president to drive sales and marketing and the same was pursued within the international division. A matrix-type complex of manufacturing, finance etc. supported these units 2
  • 16.  In 2009, Fabrizio Freda, CEO, announced a major change in company structure  The brands would now fall into one of four groupings:  High-end prestige brands and make-up artist brands: Estée Lauder, M•A•C, Bobbi Brown, Prescriptives, La Mer, Jo Malone, Tom Ford Beauty  Prestige skin care and alternative channels: Clinique, Origins, Ojon  Fragrance licensing: Aramis and designer fragrances  Salon and Pharmacy channel: Aveda, Bumble and bumble, Darphin  North American business, together with Canada and Puerto Rico was united into one North American affiliate. This gave one point of contact for their customers  With 42% of sales coming from this one unit, it was a huge multi-billion dollar enterprise in its own right 2
  • 17. 2004  The 58th successive year of sales growth saw a company-record increase of $700 million, making the top line up to $5.8 billion  Five of the company’s brands - Estée Lauder, Clinique, Aramis, Donna Karen fragrances and Tommy Hilfiger fragrances were available in over 120 countries, Clinique in over 130 countries  Estée Lauder and Clinique were growing rapidly in China  Aveda was launched in Japan  M•A•C was growing fast in Brazil via its own stores  Darphin, a high-end botanical beauty brand sold primarily through independent European pharmacies, was acquired  BeautyBank’s initial output was three new brands, which were launched through the Kohl’s chain of 600 department stores 2
  • 18.  With Ashley Judd signed up as a brand face and P. Diddy as the latest licensed fragrance, the machine was humming  The scale and scope of the Estée Lauder business  8,000 product lines was now vast  400 scientists were working in 6 research centres around the world  300 new product launches in the year  The Estée Lauder Beyond Paradise launch took place  It utilizes essential oils developed exclusively for the company  It was a huge success  It reached the top five best-selling fragrances in US Department stores 2
  • 19. 2005  Sales reached of $6.3 billion  Estée Lauder had four of the top five best-selling fragrances in department stores. But the fragrance market was getting tougher all the time.  The company was now marketing a range of over 90 prestige fragrance brands with over 200 new ones being launched by the industry each year  Stood at 26 with the addition of fashion designer Tom Ford’s name  70% of sales was coming from the five core brands the company had developed themselves: Estée Lauder, Clinique, Aramis, Prescriptives and Origins  Clinique was launched into Vietnam during the year, soon followed by Estée Lauder 2
  • 20.  M·A·C launched into both India and China during the year  Clinique and Estée Lauder, launching in another 23 Chinese cities, almost doubled sales 2006  Estée Lauder being squeezed at either end: by category killer chains and by Wal-Mart, experienced a huge struggle for the company to keep growing sales  There was a slow but unstoppable decline in the effectiveness of the gift-with-purchase promotional technique  Sales declined, despite makeovers for the venerable Youth Dew, White Linen and Pleasures brands  M•A•C was the company’s fastest growing brand, launching into Russia as well as China and India 2
  • 21.  The super-premium skin care brand, La Mer, had quadrupled sales since 2002  The management’s strategic review resulted in the development of five strategic imperatives to negotiate the more difficult trading conditions  Optimising the Brand Portfolio  Strengthening Product Categories  Strengthening and Expanding Global Presence  Diversifying Distribution  Achieving Operational and Cost Excellence  9% increase drove sales over the $7 billion barrier  Mergers and Acquisitions disposed of Rodan & Fields, and acquired the Ojon Corporation 2
  • 22.  Tom Ford Beauty added to Estée Lauder’s range of brands in the ultraluxe niche  Two Daisy Fuentes fragrances were launched exclusively in Kohl’s  A Coach-branded fragrance was introduced through distribution in Coach stores  Estée Lauder collaborated with the Ford Motor Company to launch Mustang onto the mid-tier retail channel  Internet sales grew another 25% with the expansion of the online business to the UK, Australia and France  Certain brands were listed in Sephora, Canada’s Shoppers Drug Mart and ULTA’s 450 beauty superstores  Estée Lauder now had more than 450 free-standing stores around the world for its prestige brands  Origins was available in the European pharmacy channel 2
  • 23.  Bobbi Brown’s debut on QVC  The company now had 35 international affiliate organisations. These supported sales in over 130 countries  Eight brands were now available in China with Estée Lauder leading the way in 32 cities 2008  12% increase that seemed to belie the global economic crisis  Skin care was again the best category, and generated almost $3 billion in sales  Their performance was driven by the Asia/Pacific region’s very strong sales of skin-whitening products and fast growth in China  Make-up, another $3 billion category, grew 10% , M•A•C and Bobbi Brown 2
  • 24.  $3.2 billion, international sales had doubled to nearly $4.7 billion - impressive by any standards. This was due to three factors:  The company’s core product range was well aligned to the aspirations of the fast-growing middle classes around the world  The company was flexible in positioning itself  Emerging markets, where the company accounting of 9% in sales  Another significant factor behind the continued good news was the company’s success in positioning itself not as a reactive victim of the changes in how their consumers were reached, but as proactive beneficiaries  In the US, selling their products was in trouble - slipping from being worth 41% of sales in 2003, to 30% in 2008  But the international department stores were doubling the sales to over $2 billion in the previous five years, were Estée Lauder’s fastest growing channel 2
  • 25.  The company was then most excited about the potential offered in four up-and-coming channels:  The Internet – 15 brands became available for sales online in a growing number of countries - Korea being the latest. In line with Estée Lauder’s trademark personal touch, Clinique, M•A•C, Bobbi Brown and Origins all offered live chat, with real make-up artists providing personalised advice  Direct Response TV - This was another arena where a prolonged interaction with the audience played to company strengths. Clinique, Origins, Bobbi Brown and Ojon had all been big hits, but only Ojon had been acquired because it was primarily a direct response TV brand 2
  • 26.  Company Stores - Estée Lauder now operated 577 stores, which acted as advertising billboards in some of the world’s most prestigious real estate  Travel Retail - Estée Lauder brands had always been well featured in Duty Free outlets  This combination of routes to the consumer also gave the company an opportunity to develop ground-breaking, multi-channel launch strategies for new products  Tri-Aktiline Instant Deep Wrinkle Filler was launched internationally in 2008 via speciality cosmetics stores, direct response TV, the internet and travel retail 2
  • 27. 2009  A declined of 7% to $7.3 billion was more due to currency fluctuations  Estée Lauder reduced its SKU (Stock Keeping Unit), count by 16% and cut merchandising, advertising and sampling budgets  At the Bobbi Brown counters and in the Origins stores: for the traditional fragrance brands, smaller, less expensive pack sizes were introduced  Bouncing back with a 6% sales increase to $7.8 billion  Asia and Europe drove the growth  Sales in China increased by almost 30%, with E-commerce chipping in a 23% increase  The launch of Estée Lauder’s Advanced Night Repair was the most successful in the company’s history  79 M•A•C stores opened around the world 2
  • 28.  Bobbi Brown line was launched into Poland  The fragrance category declined, as sales of the franchise name brands such as DKNY, Hilfiger and Sean John fell off  The major acquisition was the Smashbox Beauty Cosmetics Company, a prestige brand sold primarily in speciality beauty channels in the US and 40 other countries  A decision to discontinue the Prescriptives brand was partially related due to a social media campaign by its core followers  The company was a year into its new four-year strategy, which involved a significant restructuring (covered previously) and resizing of the company  The number of SKUs was reduced again, by 10%, and a programme to trim the workforce by 2,000 was put into place 2
  • 29. 2011  13% increase which was three-times the growth rate of the total industry  Here increased footfall in department stores encountered Estée Lauder’s revitalised counters:  special lighting  interactive touch screen tools  a host of new products  Business also grew in other US channels, particularly fast-growing multi-brand beauty retailers like Sephora, where Bumble launched in 298 stores  In digital selling, sales rose by 28%  The company became leaders in China in the prestige beauty category 2
  • 30.  Selling 11 brands in 38 cities through a variety of department stores, company stores and multi-brand specialist retailers  Estée Lauder opened a larger R&D facility to focus on new products  La Mer grew by 55% through increased distribution and the launch of an E-Commerce site  Combined sales in China, Hong Kong, Taiwan and Korea grew by $181 million  In Brazil, company growth was spearheaded by Clinique and M•A•C, focused on opening company stores and expanding E-Commerce 2012  10% record increase grew at double the sector rate make Estée Lauder brand became the largest prestige beauty brand in the world  US sales grew by over $250 million 2
  • 31.  Clinique consolidated its position as the number one overall beauty brand  New products in the Estée Lauder range brought many new customers into the brand  Outside the US, another 50 company stores opened and online business increased by 24%  The company had now 340 marketing and E-Commerce sites across more than 50 countries  In China, opened more company stores helped them drive up brand availability to 58 cities  In Brazil, opened with seven new M•A•C stores cementing the brand’s number 1 position in the beauty market  Jo Malone and Bobbi Brown also opened stores in the Middle East  Estée Lauder became the market leadership in Mexico, Venezuela and Peru 2
  • 32. Consumer Contact  The most important aspect was making human contact  Product selection is personalized  Company’s greatest achievement has been to translate their USP (unique selling point) into areas such as company stores, direct response TV and, most successfully, the Internet Global  Helping to meet basic needs applicable across all races, countries and languages  Estée Lauder is in an ideal position to benefit hugely from the rapidly increasing new middle classes in emerging markets - having powerful, leading positions in the BRIC markets (Brazil, Russia, India and China) and elsewhere 2
  • 33. Innovation  Innovation has always been at the heart of the company: both what the products did and how they were sold  8 global R&D laboratories provide an endless stream of hundreds of new products a year  The company’s prowess in innovation is best illustrated by the Forbes’ 2012 lists: The Estée Lauder Companies ranked #933 in sales, #716 in profits, #348 in market cap and #23 in Innovative. This is one place above Google. 2
  • 34. Brand Management  All of the original brands have been developed and adapted to be still relevant today  Every acquired brand has gone on to much greater heights under their stewardship. M•A•C. Brand equities have been passionately protected, a process continues today.  “Which brands should appear in which retail environments” has always been a company obsession - iron discipline in this area is the key reason that the Estée Lauder brand itself is now the world’s leading beauty brand. 2
  • 35.  As exposed to spending downturns in the economy and currency fluctuations, their strengths in brand portfolio, consumer contact, innovation, emerging markets and E-Commerce mean that any such problems have a solution  They have strong competitors but they are exceptionally well-positioned competitively. They have never been a company to slavishly follow what someone else is doing  Although the company has been publicly quoted for almost two decades, it is still in the control of the family. It deserves much credit for cherishing the company’s heart and soul, while bringing in outside expertise to keep it up-to-date and relevant 2
  • 36. Website: www.esteelauder.com/index.tmpl LinkedIn: www.linkedin.com/company/estee-lauder-group-of-companies Facebook: www.facebook.com/EsteeLauder?fref=ts Instagram: www.instagram.com/esteelauder Youtube: www.youtube.com/user/EsteeLauder Google+: plus.google.com/110286608411428712603 Pinterest: www.pinterest.com/esteelauder/ Flickr: www.flickr.com/photos/este_lauder/ Twitter: www.twitter.com/EsteeLauder 2