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The Estée Lauder Cos. Inc. is riding a rising wave of digitally fed consumer empowerment.
This story first appeared in the May 30, 2014 issue of WWD. Subscribe Today.
“I have seen the world change significantly over the years,” said 28-year veteran Cedric Prouvé, group president of international at Lauder. “But the kind of change we are experiencing now — the degree, the magnitude, the speed — is unlike anything we have experienced before.
“Consumers have become empowered through the ubiquity of information,” he said, adding “their connectivity to one another and to us has changed the game. Their rising expectations are helping us reshape the way we understand their needs and desires, how we create and innovate and, of course, how we engage with them.” He added that this is happening in real time, providing the brands with insights and enabling them to spot trends.
Lauder has been so successful in embracing a truly global philosophy — led by chairman emeritus Leonard Lauder, chairman William Lauder and president and chief executive officer Fabrizio Freda — that the total sales balance has completely flipped from more than 50 percent in the Americas in 1996 to more than half overseas today.
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Reminding the audience that “globalization does not mean standardization,” Prouvé pointed out that marketing strategy has dramatically changed since the days when iconic brands in the West distributed and advertised the same product the same way everywhere. “The key is understanding the desires of the local consumer and the nuances of each market,” he said. “And of equal importance is always maintaining the equity of the global brand. We call this local relevance.”
He ticked off a few examples. Estée Lauder Revitalizing Supreme Global Anti-Aging Cream was developed for European women and has met “amazing success” in France and is now being rolled out to the U.S. Clinique launched Shades for Africa and scored a double-digit gain in South African foundation sales. Several Lauder brands launched fragrances in the Middle East that were inspired by local ingredients or designed to be customized for voracious tastes.
The challenges of market change also breed opportunity as populations grow and become more mobile. Prouvé pointed out that two years ago the number of international tourists hit the one billion mark, with Chinese travelers leading the way and Lauder catering to the migratory trend. The doctrine of local relevance is expected to gain importance as markets grow. Prouvé pointed out that four years ago, total consumption in emerging markets stood at $12 trillion. By 2025, it is expected to hit $30 trillion. Much of this is driven by the burgeoning middle class, which is expected to grow by three billion people over the next two decades. India alone is expected to add 475 million people to the global middle class by 2030. But even within mature markets, such as the U.K., there are pockets of ethnic diversity within cities like London and Birmingham that are ripe for a dose of local relevance.
With the opening of new channels to a growing and richer middle class, “we see the promise in a world of accelerating change,” Prouvé declared. “We know this will lead us to paths not yet discovered, and if we are strong leaders, we will take these uncharted paths and turn them into must-win global opportunities.”