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Keeping It in the Family: Estée Lauder Cos. Taps William Lauder as CEO

The Estée Lauder Cos. will get a new ceo July 1 when William Lauder, 43, succeeds Fred Langhammer, who becomes chairman of global affairs.

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NEW YORK — One of the beauty industry’s most venerable companies will get a new chief executive this summer — and one who’s already in the family.

William Lauder, 43, currently chief operating officer of the Estée Lauder Cos. and grandson of company founder Estée Lauder, will become the corporation’s new ceo on July 1, succeeding Fred Langhammer, 59. At that time, Langhammer will assume the newly created post of chairman of global affairs.

Lauder, one of two sons of the firm’s chairman Leonard Lauder and senior corporate vice president Evelyn Lauder, is an 18-year veteran of the corporation that bears his family’s name.

“I’m very excited about this opportunity, and I know it’s going to be a tremendous challenge,” Lauder told WWD on Tuesday, noting that his “single most important mandate in the next year to 18 months will be continuing to maintain the momentum” that the brands currently have in the market. According to Lauder, there are no current plans to add additional members to the senior management team.

Lauder also noted that he intends to “leverage the most important assets of the company — great brands and great people.” His focus areas will include strengthening existing brands, as well as exploring opportunities for additional acquisitions and developing future brands.

While Lauder officially joined the corporation in 1986, he joked, “I joined the Estée Lauder Cos. 43 years ago, but I’ve only been paid for it for the better part of the past 17 or 18 years.” After graduating from the Wharton School of Business at the University of Pennsylvania and prior to joining his family’s business in 1986, Lauder was associate merchandising manager at Macy’s East, working in Dallas. His first role at the Lauder Cos. was as regional marketing director for Clinique, followed by stints as field sales manager for Prescriptives and at Origins. From 1990 to 1998, Lauder served first as vice president and general manager and later, as president of Origins, a brand which he helped introduce to the market.

In 1998, Lauder was named president of Clinique, where he was credited with increasing the brand’s share in the hair care category and increasing sales on its Web site. In fiscal 2002, Clinique.com was one of the brand’s top five doors in North America in sales.

In a corporate restructuring in 2001, Lauder was named as one of the company’s four group presidents; Lauder’s responsibilities in that role included leading the worldwide businesses of Clinique, Origins, the retail division (which encompassed the management of the company’s freestanding stores, including MAC, Aveda and Origins doors) and the company’s online business.

In September 2002, the company appointed him chief operating officer, a position he officially assumed in January 2003. At that time, it was indicated that he would eventually take over as ceo.

Lauder called Langhammer — to whom he currently reports —“a great leader” who has “helped me to learn a great deal.”

Langhammer was named ceo of the Estée Lauder Cos. in 2000 — assuming that role from Leonard Lauder, now chairman of the corporation. A longtime Lauder veteran, Langhammer joined the firm in 1975 as president of the Japanese division of the Estée Lauder Cos., a role he held for seven years. During that time, he raised Lauder’s profile in Japan and established Clinique as the market’s dominant department store brand, also establishing the Japanese affiliate as one of Lauder’s biggest overseas businesses in both sales and profits. Langhammer later served as managing director of the firm’s business in Germany and, in 1985, was named chief operating officer of the corporation, adding the title of president in 1995. Langhammer’s new position is widely seen as a natural fit for his talents, particularly given his extensive international experience.

“I’m turning 60 in a few more days, and I’d always intended when I reached that milestone to create more time for myself and for new adventures,” said Langhammer. “By new adventures, I don’t mean running other companies, although I will of course be available to help facilitate the corporation’s entries into new markets and to help develop new acquisitions. But overall, I am looking forward to a new position that doesn’t control my time to as great an extent as the ceo position does.”

Langhammer noted that this is possible because “over the past few years, we’ve put together a very strong organizational structure, which includes the group president structure. William has been in this industry for a long time — starting out in retail and rising through so many positions within the company. It’s been my personal pleasure to see William grow in responsibility. Over the last year, he has been exposed to even more of the company —including manufacturing, research and strategic planning —and I’m very pleased with his accomplishments in these areas. William is also a very strong proponent of developing talent throughout the world. He bets on the best people in the place. I am sure that three years from now, we will be looking at William’s accomplishments as ceo and will be very proud.”

Langhammer added, “I feel terrific about where the company stands today, and I feel very good about what I see going forward, with William’s leadership and the team that he has in place. It’s a good time for me to take a new role.”

In a letter to Lauder employees dated Tuesday, Leonard Lauder said, “Simply put, Fred Langhammer has had a monumental effect on the course of our company and the careers of far too many people to name here. Fred’s strategic prowess and legendary drive were key to our ability to maintain 57 years of growth and to pass the $5 billion [sales] mark this year. Fred’s strategic and financial accomplishments, however, are only part of the picture of his leadership. As the company grew, and Fred’s role in the business expanded to the highest level, he always maintained his rock-solid values and extraordinary personal qualities. Fred is a leader and team player who cares deeply about every individual on the field. Just as important, he has distinguished himself among chief executives today as a person of the highest integrity in a commercial world where decency is at a premium. He sets an example for all of us.”

Of his son’s appointment to the ceo slot, Leonard Lauder noted, “Naturally, I am delighted — and of course proud — to see William become chief executive officer. One of our greatest competitive assets is the ability to operate as a world-class public company and keep the spirit of family alive among us. I know that William will hold true to the traditions created by Mrs. Estée Lauder and enhanced by Fred Langhammer during his distinguished service as our chief executive officer.”

In 1995, with Langhammer as president and chief operating officer, the Lauder Cos. went public. Since going public, the corporation’s original portfolio of five brands — Estée Lauder, Clinique, Prescriptives, Aramis and Origins — has nearly quadrupled, to 19. In fact, during much of the late Nineties, Lauder was in an acquisitive mind-set, purchasing a number of indie brands, including MAC Cosmetics, Stila, Bobbi Brown, Aveda, Bumble & bumble, La Mer, Jo Malone and Jane, as well as acquiring the fragrance licenses for Donna Karan and Tommy Hilfiger. The corporation’s most recent acquisitions are Rodan & Fields, acquired in July 2003; the Michael Kors fragrance license, acquired in May 2003, and Darphin, acquired in January 2003.

This past year, under Langhammer’s watch, the corporation established affiliates in both China and Russia and relocated the corporation’s Asian regional headquarters from Singapore to Shanghai — moves that are intended to set the stage for the corporation’s expansion in two of the fastest-growing regions in the world. International business currently accounts for 45 percent of the corporation’s business; the objective, noted Langhammer, is to move that percentage to a 50-50 ratio — North American vs. international business — over the next few years. “Eastern Europe and Asia have great opportunities,” said Langhammer. “We have an opportunity to bring many brands to the world market, and we’ve got lots of irons in the fire.”

During Langhammer’s tenure, entering emerging channels of distribution has been a strong focus. In addition to acquiring the corporation’s first mass brand — Jane, in 1997 — the corporation also expanded its influence in the dot-com business, partnering with Chanel and Clarins in April 2000 to run e-tailer Gloss.com. The corporation’s acquisition of Darphin also offers the Lauder Cos. entrée into the European pharmacy market, while its recently announced partnership with Kohl’s Department Stores — with products expected to roll out this fall — will add business in the discount department store arena, a growing channel of distribution between traditional mass merchandisers and traditional department stores. The Kohl’s deal marks the first time Lauder has formed such a relationship with a store. It is also the company’s first significant move into the moderate beauty market and into creating proprietary brands for a retailer.

Under Langhammer’s watch, as well, the company has had to deal with a variety of industry challenges — including the post-Sept.11 retail atmosphere, the SARS outbreak and widespread U.S. unemployment, all of which have significantly impacted the beauty business over the past several years. In that time frame, the corporation has worked hard on internal challenges, such as learning the ins and outs of the mass business with its Jane brand and its continuing drive to draw younger consumers to the Estée Lauder brand.

“We’re driven by strategy, not by short-term issues,” Langhammer told WWD’s sister publication, Beauty Biz, in a March 2001 interview, of the Gloss.com partnership. “If we believe that we can create value for the shareholders of this corporation, we will pursue it vigorously.” Having “a portfolio of brands of rule-makers and rule-breakers with different objectives and different stages of development is a key balancer of your activity. Distribution diversification is a necessity today,” he added.

In that same interview, he noted of new distribution channels: “[Department stores] are a platform that still attracts a tremendous amount of customers…But as we acquire a portfolio of brands, which allows us to address the customer who does not necessarily shop in department stores, it gives us the flexibility to participate in other distribution channels without cannibalizing our base. I’m fully committed to the department stores, but if we were only selling to [them] there would be a finite growth potential, which would not get us to $10 billion [the company’s oft-stated financial target].”

Retailers and other industry observers said they see the executive announcements as a positive thing for the industry.

Robert Mettler, chairman and chief executive officer of Macy’s West, was enthusiastic. “I’ve had the opportunity to work with Fred for quite some time. He has done a great job of running a very large public company, and William has had a chance to learn and work with Fred — as well as learn from his natural lineage,” said Mettler, referring to Lauder’s parents and grandparents.

Speaking to the timing of the announcement, Mettler noted, “While Fred has only been ceo for a few years, he has been a senior executive of the company since 1985 — he’s basically spent close to 19 years helping to run the company. It’s a natural time for him to transition.”

Mettler added, “Fred is a very strong professional manager. He understood the costs and relationships of marrying operating efficiencies with running the business. He deals strongly with people, challenging and setting appropriate goals for people and the corporation, and has been a great partner. William has been part of the business for many years, and he has a passion for the business — and he is also a very bright guy. He’s an intellectually curious person who has spent a lot of time in a lot of different roles in the beauty business.”

“We’ll all miss Fred, who has been so dominant both in the corporation and in the industry,” said Thia Breen, senior vice president of cosmetics for the Federated Merchandising Division and a 24-year Lauder veteran who worked as a senior executive on both the Clinique and Origins brands. “Fred has been been a tremendous driver of business in the department store arena. And certainly, William has also been a tremendous partner in the business, and will continue to be in this new role. It’s a very positive move for both of them.”

Of the timing, Breen noted, “William’s been working toward this, and it’s something we’ve all anticipated. I think the timing is great for both of them.”

Michael Gould, chairman and ceo of Bloomingdale’s, said, “I think it will be great for the business long-term. William is a terrific businessperson, and has a great feel for the business. I think it will be a continuation of a great partnership between Bloomingdale’s and the Estée Lauder Cos. I’m not surprised [by the announcement] and I think it’s very exciting. [The company is] moving on to the next generation.”

Robin Burns, president and chief executive officer of the Limited’s Intimate Beauty Corp. and its Aura Science and Victoria’s Secret Beauty divisions — and a longtime Lauder veteran who worked on the Lauder brand — said, “William is an exceptional leader whose talent and vision will maintain and grow the company’s heritage of success.”

Jon Pollack, executive vice president and general merchandise manager of Belk’s, added, “I think it will be a smooth transition, with William Lauder ascending to that post. They’ll have a smooth transition with good continuity, and I think that’s important today.”

Ed Burstell, vice president and general manager at Henri Bendel, said: “I’ve known William for a number of years and I think he understands innovation and isn’t afraid of taking chances. So I feel that he’s uniquely positioned to take the Estée Lauder group forward.”

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