The Estée Lauder Cos. Inc. will flash its new Mandarin accent in mid-October when it unveils Osiao, its first Chinese skin care line.
The luxury-priced brand was developed by the New York-based company’s Beauty Bank division in partnership with Lauder’s local research and development operation, the Shanghai Asia Innovation Center. Osiao will be launched in two Lane Crawford stores in Hong Kong. Reportedly, Lauder eventually expects to expand the new brand’s distribution into Mainland China.
It is a bold move in a country that has played a key role in the resurgence of Lauder during the three years since the arrival of Fabrizio Freda as president and chief executive officer. But Lauder has not been alone. Shiseido developed and launched its Aupres line for the Chinese market in a pioneering leap in 1994. The Japanese giant now has a distribution of 950 retail doors, reaching beyond the major cities. L’Oréal rides high in the combined mass and class rankings in the skin care market. Procter & Gamble Co. recently planted its flag in Singapore, in a heavily symbolic move. It transferred its skin care, cosmetics and personal care headquarters from Cincinnati to where it saw the future — Asia.
Lauder, which closed its fiscal year on June 30 with a 10.3 percent sales increase — twice the rate of the prestige market — to $9.71 billion, was already established in China. During an earnings call on Aug. 14, Freda told analysts, “China overtook Japan to become our largest Asian affiliate, and our sales there climbed 28 percent in local currency, which enabled us to again expand our leadership position.” He added that Lauder now does business in 58 Chinese cities — 20 more than last year. And through e-commerce, the company’s reach extends to consumers in nearly 350 cities.
The importance of China is magnified since Lauder tracks travellers when they leave home and shop abroad. “For every dollar of sales we generate in China,” he continued, “we find that we get $2 from Chinese consumers elsewhere in places like Hong Kong, New York or Paris.”
Neither was Freda unnerved by talk of a slowdown in China. “We are cautious that macroeconomic conditions may impact future growth trends,” he said. “But we continue to grow by reaching new consumers as we expand into more cities.”
Nik Modi, a security analyst with UBS AG, agreed during an interview that China is a big driver for Lauder. He said the Chinese market generates 5 percent of Lauder’s global sales. Moreover, the company has experienced strong growth in North America and in the travel retail channel, allowing Lauder to reinvest in China. “It could be one of their biggest markets,” he noted, adding that beauty is more of a staple than a discretionary impulse purchase for Chinese women. “Even if there is a slowdown, we think [Lauder] will put up decent growth.” Stifel Nicolaus analyst Mark Astrachan added that the skin care business in Asia has “higher margins, a better mix, better growth and the Asian consumer doesn’t mind trading up.”
China’s beauty industry has been growing at a healthy clip. According to the country’s National Bureau of Statistics, the business in 2011 was up 18.7 percent year-on-year to 1.1 trillion yuan, or $17.1 billion at average exchange. That compares to a 16.6 percent increase in the segment between 2009 and 2010.
“Currently, foreign brands have gained a firm foothold in the mid- to high-end of the luxury cosmetics market in China,” said Li & Fung Research Centre’s study “China’s Cosmetics Market, 2011.” “On the other hand, domestic companies are mainly competing in the low-end market.”
According to Euromonitor International, the top three players in 2011 in the Chinese skin care market — combining both prestige and mass businesses — were L’Oréal, with 16.4 percent; Procter & Gamble, with 10.2 percent, and Shiseido, with 10.1 percent.
However, Lauder’s dynamic growth allowed it to claim superiority in its channel of prestige by this year. During a Consumer Analyst Group of New York Conference on Feb. 24, Freda said, “Mirroring the industry, our biggest emerging market opportunity is China, where we have made impressive inroads. We are the number-one prestige beauty player in our distribution. Estée Lauder is the leading prestige brand in each distribution and La Mer is the fastest growing luxury skin care brand.” Speaking of the global market in general, he pointed out, “by 2020, emerging markets are expected to grow by about $10 billion and represent more than 20 percent of global prestige beauty sales, with the largest portion coming from China, providing untapped opportunity for our brands.”
Donatella Versace will receive the International Award at the 2018 @cfda awards, which were announced tonight. Tap link in bio for a list of all the nominees and honorees. #wwdnews #wwdfashion (📷: @rahirezvanistudio )
The 2018 @cfda Awards nominees are out! @virgilabloh for @off____white for is nominated for Womenswear Designer of the Year. Tap link in bio for all the nominees. #wwdnews #wwdfashion ( 📷: @simonelezzi)
@chanelofficial is suing high-end vintage retailer @whatgoesaroundnyc for trademark infringement, a move that could cost the retailer millions. The French fashion house claims that it’s not only unintentionally sold counterfeit goods on occasion, but that it’s “gone out of its way to create an association with Chanel,” which does not exist. Read Chanel’s statement on WWD.com #wwdnews (@aitorrosasphoto)
Exclusive: Guillaume Henry has left @ninaricci, the fashion house said on Thursday. “After three years of mutually gratifying creative collaboration, Nina Ricci and Guillaume Henry have together decided that the designer will depart the house after the presentation of the fall-winter 2018-19 collection,” Ricci said in a statement. Get all the details on WWD.com #wwdfashion (📷: @aitorrosasphoto)
“When Bella enters a room all heads turn,” said @peterphilipsmakeup, creative and image director for @diormakeup. Last night, the two celebrated the product launch of Dior’s Lacquer Plump in Los Angeles with other celebs like @parisjackson, @winnieharlow and more. Head to WWD.com to see the rest of the photos from the night (📷: @chelsealaurenla) #wwdeye
“These shirts are an art form, it’s about getting the message out to as many people as you can. It breaks down the pretentiousness of the art gallery,” says Kumasi Sadiki, cofounder of @ebayontheblock, a store that sells merchandise by New York artists who are shifting their attention to clothes as a wearable medium. Pictured here is a design by artist @joegarvey_, one of the first to spearhead this movement. Head to WWD.com to read @mistywhitesidell full story on how their designs have become merch for the underground elite #wwdfashion
@netaporter is dedicating a part of its website – called the Fine Jewelry and Watch Destination – to highlight its high-end jewelry. The hub will feature products on the site, as well as incorporate styling advice and educational content about high-priced jewelry items. Get more details on WWD.com. #wwdaccessories
For “The Cher Show,” an upcoming musical based on @cher’s life and career, @bobmackie is once again collaborating with the singer in designing the costumes. For decades, Mackie has designed glitzy stage costumes and red carpet looks for the 71-year-old Grammy winner. Pictured here is a sketch of some of the pieces in the wardrobe of the musical, which is set to debut in Chicago on June 12 before making its way to Broadway #wwdeye