Building a Beauty Empire: The Estée Lauder story

If you could picture Estée Lauder herself looking down at her eponymous company from above, you’d have to imagine that she would be pleased by the view. After all, the self-proclaimed ‘Kennedy of the beauty world’ came from humble beginnings, building her beauty empire over the family stove in Queens, New York City. In the decades since then, the Estée Lauder Companies (ELC) story is one that has continued to reflect how generational changes in leadership have developed it from its namesake brand into the strategically-organised collection of niche luxury brands that it is in the present day – all the while remaining loyal to its founding heritage.

In only the last 50 days of 2016, ELC completed its acquisition of Too Faced and Becca – the former its largest acquisition to date at approximately US$1.45bn and the latter its first colour cosmetics group since it acquired MAC in 1998. In the two years before, 2014 and 2015, the group went on another notable spree, buying RODIN oil lusso, Le Labo, Editions de Parfums Frédéric Malle and GLAMGLOW.

These purchases, alongside earlier buys such as Stila in 1996 and Smashbox in 2010, have allowed ELC to capitalise on the momentum of emerging brands – and in particular, the trend of beauty customisation and personalisation that has taken the industry by storm. They have also signified the group’s commitment to reach through to the younger generation of beauty consumers, eschewing a brand image associated with glass jars adorning a grandmother’s dressing table. Colour cosmetics have proven a strong point for the company as it looks to bolster sales with millennials: net makeup sales grew 9% in 2016, compared to flat skincare sales growth.

ELC acquired Le Labo, along with RODIN and GLAMGLOW between 2014 and 2015

ELC, which was founded in 1946, is no stranger to growth: the company hit US$10bn in revenues for the first time in 2013 and added another billion just three years after. An overview of the company’s history, as told on the ELC website, shows that it has been on an upwards trajectory since the beginning. International sales began in 1960 with the group’s first overseas account at Harrods, and three manufacturing sites were built throughout the decade to keep up with demand.

The notable change, however, that pulled ELC through the door into the modern era, allowing it to compete with the likes of L’Oréal and Procter & Gamble, was a series of changes in top-level management, beginning with the appointment of Estée’s son Leonard as president of the company in 1972, and his subsequent appointment as chief executive in 1982.

During his tenure, ELC not only launched its fourth and most modern brand, Origins, but it also launched its initial acquisition spree, bringing Bobbi Brown, La Mer, Aveda and Jo Malone, among others, under the ELC umbrella. His goal, according to an article from The New York Times, was to “strike a balance between the heritage of [the] matriarch and the relentless demands of the global marketplace.” He held the top role for seventeen years before becoming chairman in 1995 and chairman emeritus in 2009.

When his son, William Lauder, became chief executive for five years between 2004 and 2009, acquisitive growth paused, and it was at the end of his tenure that current chief executive Fabrizio Freda was named chief executive. He had joined the previous year as president and COO from Procter & Gamble – a company well-known not only for its acquisitive growth, but also for its ability to develop credible prestige brands under a corporate umbrella. His appointment from a mass FMCG conglomerate to a more specialised luxury one reflects similar ones we’ve seen at companies like Unilever, which has historically hired executives from small luxury brands to maintain authenticity within the corporate structure.

Colour cosmetics have been a particularly successful area in developing the business for millennials

Fabrizio, who was tasked with creating a new vision for the company, spent nine months drafting a restructuring plan that included growing core brands while nurturing smaller players, along with looking for new growth from underexploited categories. The string of acquisitions in the past few years have been a core element of Fabrizio’s strategy – brands that are popular with the younger generation due to their social media- and selfie-friendly packaging, and are often used by online stars in tutorial videos on YouTube and Instagram.

Fabrizio has also tackled issues such as distribution, moving away from the department stores closely associated with the Estée Lauder and Clinique brands and into specialty stores like Ulta and Sephora to match the changing shopping habits of millennials. The company recently set up a ‘millennial advisory board’ to inform the business about latest trends, along with a reverse-mentoring programme that has young employees teach senior managers how to use social media. Creativity and innovation are a core focus for the company, with new investments in creative talent development and technology – including Facebook Messenger bots for quick orders within London – allowing group to remain at the cutting-edge.

As one of the few global conglomerates to maintain a namesake flagship product, the leadership at ELC has gracefully navigated a crucial period in the company’s history, allowing it to maintain its relevance whilst remaining loyal to its heritage at the same time. Through strong leadership choices and careful acquisitions, the group has allowed each individual brand to shine through, catering to all women – exactly the way Estée had always wanted.