Estée Lauder: Updating a Classic Brand

NEW YORK — Leonard Lauder, chairman of The Estée Lauder Cos., talks in terms of turning around a battleship. Group president Patrick Bousquet-Chavanne has a sign in his office that proclaims, "It can be done."<br><br>The Herculean task in...

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NEW YORK — Leonard Lauder, chairman of The Estée Lauder Cos., talks in terms of turning around a battleship. Group president Patrick Bousquet-Chavanne has a sign in his office that proclaims, “It can be done.”

This story first appeared in the December 20, 2002 issue of WWD.  Subscribe Today.

The Herculean task in question is the 18-month battle to restore the luster and reverse the declining fortunes of the Estée Lauder brand, the Lauder corporation’s traditional flagship, and get the previously number-one prestige leader back on top. And many influential retailers see signs of improvement as well as a renewed vigor in the more-than 50-year-old brand.

“I think they are making some progress,” said Robert Mettler, chief executive officer of Macy’s West and head of the cosmetics committee of parent Federated Department Stores. “I’ve got to give [Bousquet-Chavanne] credit. He made a lot of moves that were the right moves.”

“Patrick is a risk-taker,” agreed an admiring Jonathan Pollack, executive vice president and general merchandise manager for cosmetics, accessories and shoes at Belk’s. “It speaks well of him that he is able to take those risks.”

On the surface, the brand is solid, with a global sales volume estimated by industry sources at $2.6 billion retail, or $1.5 billion wholesale, 50 percent of it done inside the U.S. And with well-developed positions in fragrance, color cosmetics and skin care, Lauder blue, as it’s called, is arguably the most well-rounded major cosmetics brand and it ranks second in the world in the prestige category. But it once was number one, a position it lost to its sister brand, Clinique. And for the last couple of years, Lauder’s sales trend has been negative in a number of department stores, as the company cut back on what critics called the brand’s over-reliance on promotion.

Prior to Bousquet-Chavanne, Dan Brestle had taken charge of the Lauder brand and began the process of pruning the promotional calendar, or what Leonard Lauder described as beginning the conversion of Lauder from a promotion-driven brand to “more of a fashion brand.” Then Lauder’s top management was completely reorganized in May 2001 and Bousquet-Chavanne took the helm of the Lauder brand on a global basis, plus MAC Cosmetics and the fragrance division. Carolyn Murphy was signed in September 2001 as Lauder’s new face, supplanting Elizabeth Hurley, while Bousquet-Chavanne assembled a global management team that included Aerin Lauder, vice president of global advertising; consultant Jim Nevins, and Peter Lichtenthal, senior vice president of global marketing.

The brand was given a new look, complete with a new salon-style counter design that debuted at Bloomingdale’s. The product assortment was energized with the spring launch of Pure Color cosmetics, which sported very modern-looking glass packaging. According to the company, Pure Color lipstick ranked number two after two months and the nail polish hit number one. Pure Color had such a contemporary look that, according to Bousquet-Chavanne, for the first time in memory, 18-year-olds could be seen wearing a Lauder brand product.

Lauder recently expressed great satisfaction with the moves made so far, particularly the color product launches, but he counseled the need for patience. “It will take time,” he said. Lauder also noted that department stores have to be mindful of the need to build core brands, while also cultivating the newcomers.

An eye cream was added to the core Advanced Night Repair franchise and exceeded the forecast by 76 percent. Illusionist mascara was introduced in April and climbed to number two. Pleasures Intense, a flanker scent with a younger appeal, exceeded plan by 32 percent after its August launch.

Intuition for Men, the male follow-up to the women’s fragrance, climbed into the top 10. By Bousquet-Chavanne’s calculation, the Intuition master brand was joined by the Pleasures and Beautiful consolidated brands in the top 10 for the combined men’s and women’s fragrance categories.

Lauder’s big push in the key skin care category will begin Dec. 26 with the debut of Perfectionist, billed as the first nonacidic antiwrinkle product — a new star in the repair category that Lauder dominates. According to the company, shipments are running 37 percent ahead of plan, and retailers are enthusiastic. “Perfectionist is a blowout,” said Pollack at Belk’s. “We’re into our third reorder before the launch.” Pollack predicted that the Lauder brand will show a mid-single-digit growth for the fourth quarter, which was stronger than last year’s gain, he said, adding that Lauder has fared better at Belk’s than elsewhere. “Intuition for Men is in the top 10 for the season and will continue to be a strong player into December.”

Rita Mangan, senior vice president of cosmetics at the Federated Merchandising Division of Federated Department Stores, said, “We are expecting a much-improved fourth quarter over last year.” She cited the impact of the new product focus, driven by Pure Color, Illusionist and Perfectionist. The latest skin care product is checking already before the launch, she said, and pointed out that the treatment business is being driven by innovation. Mangan also suggested the new Carolyn Murphy advertising has given the brand a more youthful image, a key factor in a brand that is more than a half-century old.

Industry sources speculate that the Lauder brand could finish the fall season 2 to 3 percent ahead, with a possibility of gaining 4 to 5 percent next spring. Lauder does not break out figures and Bousquet-Chavanne refused to discuss figures. But he noted: “We are turning around the U.S. business. There is a renewed momentum. We are on track and we have to gain speed.”

Bousquet-Chavanne, who readily admits to having encountered “a steep learning curve,” has been intent on not only deemphasizing promotion, but also looking for new volume potential. He also has been attempting to reinvigorate and reinterpret the very character of the brand, or what he keeps referring to as the DNA. In addition to the new look in advertising and merchandising, he has pushed product innovation to the max with the aim of creating a younger attitude and an edge that will attract new users, particularly those younger than Lauder’s aging customer core. “It’s all about creating buzz and coolness, which is not something you associate with the Lauder brand,” he said.

The question of Lauder’s relevance to the 25- to 35-year-old consumer is a burning issue with Bousquet-Chavanne. “We are on a mission to make sure that the brand is received in a modern light,” he said, carefully pointing out that this reinvention has to be done on a global basis “without leaving behind the core users.”

By intensifying product innovation, he is hoping that the increased relevancy “can create an emotional reaction with the consumer and look at Lauder in a new way.” He added: “Relevancy is something you do not inherit. You earn it. Heritage is something you inherit.” His goal is to take the brand’s DNA “and make it relevant to the modern woman.”

Mettler at Macy’s West applauds Bousquet-Chavanne’s moves so far. But he wishes Lauder would cycle through even more new product, particularly in color. But the retailer, like other store executives, says that Bousquet-Chavanne’s changes in promotional strategy seem to be paying off in a big way. One of the problems had been that the huge blockbuster purchase-with-purchase bonanza had gradually evolved from an igniter of Christmas shopping to a cure-all promotion meant to carry the entire fall business. Stores were putting the blockbuster out as early as Oct. 1. Bousquet-Chavanne moved the promotion back to its traditional spot after Thanksgiving. In November, he instituted a weekender tote bag gift-with-purchase followed by a new holiday purchase-with-purchase promotion, a handbag priced at $22.50 that was coordinated to match the tote.

Bousquet-Chavanne also stoked up the morale of his army of beauty advisers by not only giving them new uniforms, but by also giving them a choice of three looks: classic, chic and very trendy. “You can’t put an 18-year-old beauty adviser in the same uniform as a 55-year-old,” he pointed out.

How this is playing out is far from linear, since the brand is so complex and multilayered. Industry sources point to sales being up double digits for November and December at Nordstrom, with sales moving ahead 19.7 percent for the first two weeks of December, following a 11.2 percent increase in November. The blockbuster ignited with sales of 98,000 units nationally for the first two days throughout the 2,038-door distribution. Other assessments vary, with some retailers saying November was strong but December, with the fixation on fragrance, is problematic. Others say December is simply a question mark.

NPD BeautyTrends, which tracks department store sales, has a mixed picture for the Lauder brand in the key month of November, which was a complicated period this year because of the lateness of Thanksgiving. Timra Carlson, vice president of NPD BeautyTrends, said makeup was Lauder’s stellar performer in November, along with skin care, while fragrance continued to drag.

William H. Steele, security analyst with Banc of America Securities, said, “I think they are doing a lot of the right things to support the brand.” He raised the question, however, on whether Lauder is able to maintain relevance in the consumer mind in an increasingly crowded field. That task, he suggested, is “not easy.” But he gave the company credit for investing in advertising, product development and in-store promotion. “As long as they spend behind the brand, that is the right thing to do,” Steele said.

Industry consultant Allan Mottus said, “The problem with the Lauder brand is that it is so dependent on department stores for its state of health.” He added that Lauder’s product mix is not edgy enough to compete in the top 200 fashion-forward specialty and department stores. That forces the brand to depend on the broad department store market, which is feeling the brunt of the nation’s economic slowdown. Kohl’s and Target are siphoning traffic from department stores, Mottus noted, and Lauder thrives on traffic. Thirdly, Lauder is so aspirational that it cannot compete in terms of price with the discount world.

Adding to the brand’s woes is the fact that it has not had a runaway success in the women’s fragrance market since Pleasures in 1995, despite scoring this year in men’s with Intuition. Moreover, with 20 fragrances, the brand saddled with its deep involvement in the troubled and declining fragrance business, with a 17 percent market share, an NPD figure quoted by Lauder.

All of this and more is on Bousquet-Chavanne’s mind. His one brand is a collection of businesses flung around the world — all at different stages of development. Lauder is 13 years old in Korea and more than 50 years old in the U.S., where Bousquet-Chavanne knows he must foster vibrancy.

Asked about his expectation of regaining the lead from Clinique, he said: “The leadership position of Clinique in the U.S. is solid, a few points of market share ahead of Lauder. That being said,” he continued, “I wasn’t born to be in the number-two position any place.”

When pressed on when this may occur, Bousquet-Chavanne ruefully smiled and replied, “Within a reasonable amount of time.”

How long is that? He laughed and said, “Before I retire.”

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