Fabrizio Freda is getting ready to celebrate the prospect of the Estée Lauder Cos. Inc. closing in on the $10 billion mark — a goal it aims to achieve by the end of its fiscal year on June 30.
Once reached, the milestone will mark a robust growth spurt for the beauty firm. Net sales will have gained roughly 37 percent from $7.32 billion in 2009, the year Freda assumed the post of president and chief executive officer. He took the helm while Lauder was grappling with the recession — the company’s sales had decelerated from $7.91 billion in 2008.
The task is to continue to vault its growth rate forward, even as economic troubles ensnare major markets, including Southern Europe.
“We know how to be a high-growth company in a softer global economy,” said Freda, who deftly detailed his plan at a media roundtable on Friday morning at the company’s headquarters. In his view, “the winds of growth” will come from an expanded geographic presence; a focus on high-growth prestige channels; a leadership position in skin care, makeup and luxury; increased direct access to consumers through freestanding stores and e-commerce sites, and a constantly evolving high-touch approach. The company aims to continue to build its stature and share in prestige beauty, in part by recruiting consumers from the mass market. That said, Lauder is steadily building its presence in China across tier-one, -two and -three cities. Freda said tier-three cities without department stores may be ripe for Lauder’s freestanding stores.
“We scan the market, and once a place is ready, we go first,” said Lauder, adding that the company gauges a city’s readiness by consumers’ ability to spend and the distribution infrastructure. He added that in China, about two-thirds of the company’s e-commerce sales stem from areas with no brick-and-mortar retail presence.
Freda has worked to redirect the company’s efforts and resources to fewer, bigger ideas, and the strategy seems to be paying off. He noted that since 2009, the company has cut the number of innovations in half while doubling the rate of growth from these products, in part by doubling its advertising efforts.
The idea is to “take financial resources and our creativity and focus it on the biggest opportunities in the world,” said Freda. Some of those opportunities include an aging and a more ethnically diverse population. But Lauder isn’t painting the entire world with the same brush. The firm is taking an increasingly segmented approach to its markets. Freda noted that in China, 97 percent of women use skin care — many of them incorporate up to seven steps daily — while only 33 percent have ever used makeup. Conversely, in India, women view lipstick as the most important beauty product.
“The world is different, and a global company needs to serve this world with a local touch,” he said.
Freda said to enter a new market, the company — which has a portfolio of 30 brands — selects from one of three brands, namely Estée Lauder, Clinique and MAC Cosmetics, and uses that brand to build a base. For instance, it is building its business in Northern Africa with freestanding MAC stores.
But it’s the U.S. that Freda views as Lauder’s biggest opportunity. Freda referred to the States as “the biggest emerging market” — rife with multiple distribution channels, ethnicities and regional preferences. The company has amped up TV advertising in the U.S. to pull mass shoppers to department store counters.