Top Companies Report

4. Estée Lauder

July 2, 2008

New York, NY
212.572.4200
www.esteelauder.com
Sales: $7 billion



Sales:

$7.0 billion. Net income: $448 million for the year ended June 30, 2007.

Key Personnel:

Leonard A. Lauder, chairman; Ronald S. Lauder, chairman, Clinique Laboratories; William P. Lauder, chief executive officer; Fabrizio Freda, president, chief operating officer; Daniel J. Brestle, vice chairman and president, ELC North America; Malcolm Bond, executive vice president, global operations; Roger Caracappa, executive vice president global packaging, quality assurance, store development, design and merchandising; John Demsey, group president; Cedric Prouvé, group president; Amy Digeso, executive vice president,  global human resources; Harvey Gedeon, executive vice president,  global research and development/corporate product innovation; Richard W. Kunes, executive vice president, chief financial officer; Evelyn H. Lauder, senior corporate vice president; Sara E. Moss, executive vice president, general counsel; Sally Susman, executive vice president, global communications.


Major Products:

Skin care, makeup, fragrance and hair care products marketed under such brand names as Estée Lauder, Aramis, Clinique, Prescriptives, Lab Series Skin care for Men, Origins, Tommy Hilfiger, M•A•C, Kiton, Bobbi Brown, La Mer, Donna Karan, Aveda, Jo Malone, Bumble and bumble, Michael Kors, Darphin, American Beauty, Flirt!, Good Skin, Grassroots, Sean John Fragrances, Missoni, Daisy Fuentes, Tom Ford, Mustang and Coach.

New Products:

Estée Lauder

—Private Collection Tuberose Gardenia Fragrance Collection, Sensuous Fragrance Collection, ReNutriv Ultimate Youth Crème, Pure White Linen Light Breeze, Idealist Pore Minimizing Skin Refinisher, DoubleWear Light Stay-in-Place Makeup SPF10, DoubleWear Zero-Smudge Lengthening Mascara, Signature Eyeshadow Quads, Hydra Bright Skin-Tone Perfecting Moisturizers, Resilience Lift Extreme Ultra Firming Concealer SPF15, Bronze Goddess Fragrance Collection, Signature Hydra Lustre Lipstick, High Gloss Plump, Tender Lip Balm, Nutritious Skin Care Collection.
    

Clinique—

Happy Custom Bottle, Acne Solutions Clear Skin System, Superbalm Moisturizing Gloss, Zero Gravity Repairwear Lift Supermoisture Makeup, Redness Solutions, Lash Power Mascara, Even Better Skin Tone Corrector, Almost Powder Makeup SPF 15, Long Last Glosswear SPF 15, Quick Eyes Cream Shadow, Moisture Surge Extended Thirst Relief, Touch Of Bronze Moisturizing Body Lotion.
    

Prescriptives—

Instant Gratification Skin Renewal Peel, Intensive Rebuilding Moisture-Rich Cleanser, Custom Blend Bronzer, Groom Stick for Brows, Colorscope Creamy Eye Color, Here To Stay 24-Hour Longwear Mascara, Better Off Fast-Acting Waterproof Eye Makeup Remover, Custom Blend Tinted Moisturizer, All-Weather Friend Daily UVA/UVB Sun Protection SPF 40, Blush More or Less Creamy Cheek Color, AnyWear Multi-Purpose Makeup Stick SPF 15, Good In Bed Skin Restoring Night Moisturizer, Colorscope Lip Gloss, All You Need SPF 15 Renovation.
    

Origins—

Origins Organics Collection, Grapefruit Bath and Body Collection, Make A Difference Skin Rejuvenating Sheet Mask, Dr. Andrew Weil for Origins Plantidote Mega-Mushroom Body Cream, Youthtopia Firming Eye Cream with Rhodiola, Dr. Andrew Weil for Origins Plantidote Mega-Mushroom Treatment Lotion, Gloomaway Origins Organics Totally Pure Deodorant, Origins Organics Refreshing Body Powder, Dr. Andrew Weil for Origins The Way of the Bath Matcha Tea Body Soak, Dr. Andrew Weil for Origins The Way of the Bath Matcha Tea Body Lotion.
    

M.A.C.—

Smoke Signals Fall Color Collection, MAC for McQueen, Lashes by Christina Smith, Originals, N Collection,  Mineralize SPF 15 Foundation/Loose, Fafi for MAC, Fergie/Viva Glam VI, Heatherette for MAC, Dazzleglass.
    

La Mer—

The Moisturizing Gel Cream, The Eye Concentrate, The Cleansing Foam.
    

Bobbi Brown—

Custom Beauty Collection (19 new eyeshadow shades and six new blush shades), Stonewashed Nudes, Moisturizing Cream Compact, Luxe Brush Collection, Pink Raspberry Collection, Creamy Lip Color, Nude Collection, Quick Face Collection, Bridal Kit, Bronzed Pink Collection, Almost Bare Fragrance.
    

Tommy Hilfiger—

Dreaming Tommy Hilfiger Collection, Tommy Limited-Edition Summer Cologne, Tommy Girl Limited-Edition Summer Fragrance.
    

Donna Karan/DKNY—

Donna Karan Gold; Cashmere Mist Silky Body Crème; DKNY Be Delicious Art; DKNY Red Delicious Art; DKNY Delicious Night Collection; DKNY Be Delicious Charmingly Delicious EDT; DKNY Red Delicious Charmingly Delicious EDT; DKNY Delicious Shine Eau de Parfum, Lip Gloss Trio & Body Gloss Spray; DKNY Limited-Edition Summer Eau de Toilette.  
    

Aveda—

Aveda Men, Outer Peace Cooling Masque, Scalp Remedy Dandruff Solution, Smooth Infusion Style-prep smoother, Men’s Exfoliating Shampoo, Nourish-mint Lipstick, Earth Month Candle, Green Science Skin Care, Chakra Balancing Mists.
    

Jo Malone—

Jo Malone White Jasmine & Mint Cologne; Jo Malone Bath Oil Collection;  Jo Malone White Jasmine & Mint Cologne Body Crème, Bath Oil and Home Candle;  Jo Malone Kohdo Wood Collection including Lotus Blossom & Water Lily Cologne, Bath Oil and Home Candle, Dark Amber & Ginger Lily Cologne, Bath Oil and Home Candle;
Jo Malone Vitamin E Body Scrub.
    

Bumble and bumble—

Bb. Spray de Mode, Bb. Crème de Coco Masque.
    

Michael Kors—

Michael Kors Island Capri Collection, Very Michael Kors.
    

Darphin—

Body Collection: Hydroactive Body Lotion, Seaweed Bath and Shower Gel, Aromatic Bath and Body Oil; Azahar Cleansing Water; Aromatic Renewing Balm; 8 Flower Nectar; BCA Rose Aromatic Care; Fibrogene Collection: Serum, Cream, Balm; Spa Kits: Calming Cocoon and Firming; Intral Collection: Serum, 2 Creams, Balm; Dry and Sensitive Body Collection: Wash, Balm and Deodorant; Clear White Collection: Serum, Cream; Vital Protection Collection: SPF15, Repair Lotion.
    

American Beauty—

Beloved Fragrance, Beloved Baked Rose Blushes, Perfect Mineral Powders.
    

Good Skin—

Citra Peel High Intensity Resurfacing Peel, Eyliplex-2 Eye Lift + Circle Reducer, Lumecin Overnight Brightening Gluco-Protein Treatment.
    

Flirt!—

Vanessa Minnillo Collection, Glamourazzi Fragrance,  Glamourazzi Extreme Lip Lacquers, Flirt-tinis Protective Lip Balm SPF 15.
    

Grassroots—

Pomegranate Overnight Recovery Serum, Pomegranate Super Anti-Oxidant Cream.
   

Sean John Fragrances—

Unforgivable Woman Scent Spray, Unforgivable Woman Shimmering Body Lotion (Limited Edition), Unforgivable Woman Body Oil Spray, Unforgivable Woman Body Lotion, Unforgivable Woman Bath and Shower Gel, Unforgivable Black (Collector’s Edition Fragrance), Unforgivable Woman Black (Collector’s Edition Fragrance).
  

 Missoni—

Missoni Face Highlighter, Missoni Lip Gloss, Missoni It Item,  Missoni acqua It Item, Missoni Eau de Parfum Fringe Spray,  Missoni Acqua Eau de Toilette Fringe Spray,  Missoni Colori Fragrances (Rosa, Giallo, Arancio, Gianduia), Missoni Eau de Parfum Refillable Spray, Missoni Acqua Eau de Toilette Refillable Spray,  Missoni Purse Spray, Missoni Acqua Purse Spray.
    

Daisy Fuentes—

Dianoche Night, Dianoche Ocean.
    T

om Ford Beauty—

Black Orchid Voile de Fleur Eau de Toilette, Black Orchid Voile de Fleur Ancillary Collection, Tom Ford for Men, Tom Ford for Men Ancillary Collection, Tom Ford for Men Extreme (limited edition).
    

Mustang—

Mustang for Men Fragrance Collection.
    

Coach—

Coach Body Lotion, Coach Shimmer Powder, Coach Lipstick, Coach Lipgloss, Limited Edition Coach Fragrance in Summer Bottle.


Comments:

There were gains across the board for Estée Lauder in 2007. For the fiscal year ended June 30, net sales jumped 9% to $7.04 billion. Operating income increased 21% to $749.9 million. Net earnings also jumped 38% to $448.7 million. Gross profit was $5.2 billion—up 10% from $4.7 billion in 2006.
   
By category, net sales of skin care products increased 8% to $2.6 billion. According to the company, most of this growth was fueled by new product launches, which made their most significant impact in the Europe, Middle East and Africa and Asia/Pacific regions. The recent launches of Advanced Night Repair Concentrate Recovery Boosting Treatment and Idealist Refinisher from Estée Lauder and Repairwear Lift Firming Night Cream, Continuous Rescue Antioxidant Moisturizer, All About Eyes Rich and Repair-wear Contour Firming Formula from Clinique contributed incremental sales of approximately $95 million, combined. Net sales increases from the fast-growing La Mer brand, Resilience Lift Extreme Ultra Firming products and other existing Advanced Night Repair products from Estée Lauder, along with products in the Clinique 3-Step Skin Care System and Superdefense from Clinique, totaled approximately $97 million.
   
Makeup net sales increased 8% to $2.7 billion, reflecting growth from the company’s makeup artist brands of approximately $191 million.
   
Net sales of fragrance products increased 8%, to $1.3 billion, primarily driven by incremental international sales from newer fragrance offerings. DKNY Red Delicious, Pure White Linen from Estée Lauder, Sean John Unforgivable, DKNY Red Delicious Men and Donna Karan Gold collectively contributed approximately $128 million to the category.
   
Hair care net sales increased 18% to $377.1 million, primarily due to sales growth from Aveda and Bumble and bumble products. Aveda net sales increases were primarily due to sales of professional color products, the recent launch of Be Curly shampoo and conditioner and the acquisition of an independent distributor. Bumble and bumble sales benefited from a new hotel amenities program, sales growth in its existing salon distribution and new points of distribution.
   
By way of geographic regions, net sales in the Americas increased 3% to $3.6 billion. The increase was led by growth in the U.S. of approximately $152 million from the company’s makeup artist brands, hair care business, internet distribution and the recent launch of the Unforgivable fragrance by Sean John. Net sales growth in Canada, Latin America and Mexico contributed an additional $31 million to the increase.
   
In Europe, the Middle East & Africa, net sales increased 16% to $2.5 billion. The growth in the region reflected higher net sales of approximately $260 million in the United Kingdom, Russia, Germany, Spain and Turkey. Net sales in the Asia/Pacific region increased 13%, to $983.2 million. The growth in this region reflected higher net sales of approximately $86 million in Korea, China, Hong Kong and Australia.

A New Leader


The most buzzworthy corporate news for the company in 2007 was the announcement of a senior management change effective this past March. Fabrizio Freda was named president and chief operating officer.
   
William P. Lauder will remain chief executive officer, and Daniel J. Brestle is now vice chairman and president, ELC North America. Mr. Brestle will continue to oversee the Estée Lauder, M.A.C, Prescriptives and Tom Ford Beauty brands and the BeautyBank division on a worldwide basis and will lead the company’s North American business.
   
The company’s current succession plan anticipates Mr. Freda becoming chief executive officer within 24 months. At such time as Mr. Freda becomes chief executive officer, it is expected that William P. Lauder would become chairman of the board and Leonard A. Lauder would become chairman emeritus and continue  as a director.                                                                  
   
From 2001 through mid-2007, Mr. Freda was president, global snacks, of The Procter & Gamble Company (P&G). Mr. Freda held several executive positions at P&G, which he joined in 1998 after serving as director of marketing and planning for Gucci SpA.
    

The Brand Buzz


Estée Lauder also integrated a variety of new business strategies for many of its brands. For Estée Lauder, Aerin Lauder traveled globally to launch her Private Collection fragrance and solidify her role as a brand ambassador. And for the first time, the namesake brands uses all four spokesmodels in an ad campaign for the Sensuous fragrance launch.
   
Clinique launched on QVC on Feb. 17, resulting in Clinique breaking the record as the largest two-hour beauty launch in QVC’s 21-year history. The company also collaborated with Allergan to offer clinically proven skin care products that are expected to be available later this year. Beauty Bank also announced its partnership with HSN.

Fergie Joins MAC Campaign


Fergie becomes new spokesperson for the MAC Viva Glam VI campaign. The brand also rolled out successful limited-edition collections with McQueen, Fafi and Heatherette. The MAC AIDS Fund reaches a milestone and raises $100 million to help fight and raise awareness of HIV/AIDS around the world. MAC Cosmetics opened a new PRO Store concept in New York’s Flatiron District—a prototype for all future Pro Stores.
   
DKNY collaborated with artist Yoon Lee to commission bottle design for DKNY Be Delicious and Red Delicious Art bottles. The brand also launched the DKNY Delicious Night interactive website, www.uncoverthecity.com, as well as a DKNY fragrance website, www.dknyfragrances.com.
   
Dreaming Tommy Hilfiger collaborated with Glamour Reel Docs for the launch of the dreamingaboutyou.com interactive website. Tom Ford Beauty embarked on the first global advertising campaign to feature Tom Ford himself, creating identity and synergy with the Tom Ford portfolio, according to the company.
   
Bobbi Brown repackaged its Custom Beauty palettes. The brand also launched the Quinceanera program in strategic Hispanic markets and created the  Be True to Your Heart Palette in support of the Heart Truth Fashion Show and to raise awareness for heart disease.
   
Origins announced its “Three Pillar Strategy.” According to the company, Origins is now a “master brand with three distinct sub-brands all dedicated to offering healthy choices for every consumer.” The pillars include: Core Origins, Dr. Andrew Weil for Origins and Origins Organics. The brand also announced a long-term partnership with The Harmony Project with kick-off sponsorship of a star-studded event at The Sundance Film Festival.  
   
For the nine months ended March 31, 2008, sales were up 11.8% to nearly $5.9 billion, but net income declined about 2% to $353.6 million

Jane Lauder Named Senior VP/GM of Origins


Jane Lauder was named senior vice president, general manager of Origins at the Estée Lauder Companies in June. Ms. Lauder will report to Jane Hertzmark Hudis, president, who overseas BeautyBank and Ojon, and who now will add Origins to her portfolio.
   
Ms. Lauder has been senior vice president, global marketing for Clinique since July 2006, and has been responsible for the brand’s overall strategic marketing and positioning, including developing products and expanding the brand into new channels and categories globally. According to the company, Ms. Lauder was instrumental in a number of Clinique’s recent successes, including the launches of Acne Solutions and Almost Powder Makeup, which used innovative multi-media marketing and distribution approaches, and Clinique’s February debut on QVC. As a member of Clinique’s senior management team, Ms. Lauder also helped develop a line of doctor-distributed products created in collaboration with Allergan.