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Beauty Inc issue 11/11/2011

Forty floors above Fifth Avenue, in a tastefully decorated if somewhat bland room dominated by a Richard Serra lithograph, lies the corner office of John Demsey.

Group president of the Estée Lauder Cos. Inc., Demsey oversees eight of the company’s key brands, including Estée Lauder, MAC, Bobbi Brown, La Mer, Jo Malone, Tom Ford, Prescriptives and the recently acquired Smashbox. In all, industry sources estimate Demsey’s brands generated an estimated $5 billion of the $8.8 billion in net sales that the company reported for its fiscal year 2011.

This story first appeared in the November 11, 2011 issue of WWD. Subscribe Today.

The 40th floor aerie is a visible manifestation of Demsey’s professional achievements, but the executive isn’t one to roost comfortably in an ivory tower. Rather, Demsey’s success stems from his prowess in knowing what’s happening outside the insular walls of his office. More than any other beauty executive working today, Demsey is a master at keeping his fingers on the pulse of pop culture, continually ahead of the curve in anticipating the next big thing — be it in the worlds of fashion, music, art, celebrity, retail, photography, publishing or design. By applying that connectivity to the brands he oversees — most notably starting with MAC back in 1988 — Demsey has helped redefine modern-day beauty branding.


“The brands that have long-term sustainability are the brands that live in the context of now — not based on who you used to be,” says Demsey, who declined to comment on sales figures for this story.


Living in the context of now means that Demsey is as comfortable at Saks Fifth Avenue, schmoozing with its chief executive offiver Steve Sadove during a frenzied Fashion’s Night Out pit stop, as he is two hours later welcoming hipster songstress Beth Ditto in a makeshift dressing room at MAC’s SoHo store before she performs an electrifying set to adoring fans. It means navigating his way through throngs of cross-dressing fashionistas to greet Nicola Formichetti, Lady Gaga’s stylist turned fashion designer who tonight is opening a pop-up store in TriBeCa, and the next day escorting pop star Nicki Minaj to her front-row seat at Prabal Gurung amid the glare of flashbulbs.


“If anyone else looked at my schedule, they would think, Why on earth is he doing those things?” says Demsey. “Yet what I know is that there is a rhyme and reason behind every single thing that I do.”


That approach is one of his most defining characteristics. “John’s greatest strength is his insight into the often not obvious aspects of the business, such as popular culture and distribution,” says Leonard Lauder, chairman emeritus of the Estée Lauder Cos. Inc., who has known Demsey since 1991. “He shows a tremendous flexibility in comprehending how each brand needs a unique approach. Each brand that he supervises has created its own unique personality and individual growth rate. No two brands look or sound
alike. That’s beyond brilliant.”


Jane Hertzmark Hudis, the global brand president of Estée Lauder, has seen firsthand how Demsey filters the myriad influences he surrounds himself with, parceling ideas to the brands they are most relevant for. “What he’s amazing at is that he has his finger on the pulse. He knows the beat, and he can go to the edge and exciting part of any opportunity,” she says. “He has a sensibility about culture, about edge, about the next big trend, and it is percolating with him. He is sitting on it, thinking about it, and he looks among his brands for the right opportunity and puts it there. He has a sensibility to pick up whatever is about to happen and seize that and see where the next opportunity can be.”

Fabrizio Freda, the chief executive officer of Lauder under whose tenure has seen Demsey’s role at the company evolve from day-to-day brand steward to group strategic thinker, agrees. “John is strategic and creative at the same time,” says Freda. “He is very good about taking a chance when he sees the opportunity, and enabling his team to have the courage to take a chance. He knows when the right moment is to take risk. He has a good hunter instinct.”

For proof, take the rejuvenation of the Estée Lauder brand. Demsey was named its president in early 2005, after successfully transforming MAC from an indie makeup artist brand into a color cosmetics giant. While Lauder was undeniably a prestige sales powerhouse, its image had become staid and in need of modernizing. Demsey was very familiar with the brand — his first job at the corporation was as its vice president of sales for the West Coast, and he diligently absorbed the teachings of Estée Lauder and Leonard Lauder. However, it was the time he spent away from it that held the key to Demsey’s ideas for its reinvention. “The great-est liberator to me was coming back after eight years at MAC, with fresh eyes,” he says. “The ability to have fresh eyes is not forever, and I started thinking more abstractly in terms of what does Estée Lauder really mean? Who is our competition? Who is really buying the product?

“If a brand is successful, there’s a reason, and the answer is usually sitting in the room,” he continues. “And I try to go back to the original DNA of what the brand was about.”

That thinking led Demsey to Estée herself, who he saw in a new, more modern light. “I began to understand that she wasn’t conventional, that her command of point of sale, her point of view relative to product, the way she conceptualized things and the way she worked with Leonard were all quite different for the time.” And that thinking led Demsey to decide that it was time for a jolt. Enter Tom Ford, the superstar designer who had recently inked a deal with Lauder for an eponymous fragrance line and whose overtly sexual ethos was the polar opposite of Lauder’s genteel universe. Demsey decided to do a co-branded limited edition color cosmetics collection to be called the Tom Ford and Estée Lauder Collection.

“The idea was a shock to the brand and a shock to the world,” he says. “It was a short-term association for the Estée Lauder brand, but it was a turning point in that it reframed the importance of aspiration, storytelling and establishing uniqueness and a point of difference to sell product.”

Aspiration is a word that comes up often in Demsey’s conversation. In his mind, it is the single most important attribute that the company sells. “Beauty in its abstract concept is an aspiration. It’s not always a reality,” he says. “There is an aspirational element to beauty that exists from dollar stores all the way up to Bergdorf Goodman, because beauty in its ultimate is an aspiration.”


To that end, aspiration is the lens through which Demsey views all aspects of the business — be it product development or distribution strategies, global expansion or brand messaging. The success of Tom Ford’s collaboration with Estée Lauder helped clarify that vision even more. “All of a sudden, I had people calling me for the brand who had never called before,” Demsey recalls. “That started to stimulate the thought in terms of how do you define modern-day aspiration, where does it exist and how do you live it?”

The answer was China. Period. “Thia Breen and I came to the conclusion that the aspirational future of the world was Asia, and that was really the pull in terms of where, if you wanted to win the hearts and minds of the aspirational consumer for the next 20, 30, 40 years, you’d better be successful there. To that end, Lauder shifted its message in China from “less promotional to more aspirational,” Demsey says, with a clear emphasis on luxury skin care. The concept, Demsey points out, “was very similar to the way the brand was originally established in the U.S. in the late 1940s and ’50s at stores like Saks Fifth Avenue and I. Magnin.”

The strategy worked. Today, Estée Lauder claims to be the number-one prestige beauty brand in its distribution and the fastest-growing Western brand in Asia. The Estée Lauder Cos. doesn’t break out regional sales by brand, but sales in the Asia Pacific region increased 17 percent, or $250 million, for the fiscal year 2011, to almost $1.8 billion. Sales in China alone grew 33 percent, and the company expects it to become its largest market in Asia Pacific this year.

Still, it’s one thing to build a global business with a brand that already has more than $1 billion in sales. It’s quite another to do it with a brand from scratch, a feat Demsey is currently tackling with the introduction of an ambitious color cosmetics and skin care line under the Tom Ford banner. Although the 132-stockkeeping-unit line is currently bowing in just 45 doors worldwide, the launch is primarily a global play, not a U.S. one. “Tom Ford has placed a big bet on China and Korea and, to a lesser extent, Japan,” says Demsey. “He sees the future of luxury as heavily rooted in those capital cities in Asia.”

That being said, Tom Ford beauty won’t launch in Asia until sometime next year. While the brand currently has a strong fragrance and lipstick business with estimated global sales of $150 million at retail, and rich Chinese consumers have a predilection for luxury labels from the West, fragrance is still a cultural anomaly in Asia. “We deliberately held off on the Asian articulation of the brand to make sure we understand everything that is working and to make sure it goes into the marketplace in the right way,” says Demsey.

The launch of Tom Ford is ambitious to be sure, but Demsey has proven himself to be an able brand builder over the years. When he took over MAC in 1998, it had an estimated wholesale volume of $140 million. Today, industry sources estimate its wholesale volume at more than $1.5 billion. The NPD Group reports the brand is ranked number one in prestige color, and is number one in the lip and eye categories, number two in foundation and number five in mascara. Those figures exclude sales in MAC’s own stores. Demsey declined to comment on the sales figure but does note that the MAC AIDS Fund raised about $3 million when he first arrived, a figure which has risen to $230 million collectively today ($38 at million of that in the last fiscal year alone).


Although sources estimate Tom Ford’s makeup and skin care is expected to hit $40 million in first-year sales — a pittance compared to Lauder’s billion-dollar behemoths — the company has thrown the full weight of its support behind it. “New brands today are the big brands of tomorrow,” says William Lauder, chairman of the Estée Lauder Cos. “I remember being asked to speak once about MAC and niche brands at a conference, and my comment was, ‘Every brand has a niche. Some are bigger than others. The characterization of MAC as niche still holds today — it just has a very nice niche.”

Demsey is modest about the brand’s success. “When I first got to MAC, Leonard Lauder told me to make it more MAC than it ever was. I thought, ‘Whatever that means,’” he laughingly remembers.

Demsey has a droll manner when speaking, and he tends to think as others write — in fully formed paragraphs that segue crisply from one thought to the next, each point building upon the
previous to substantiate the original hypothesis. It’s a mana- gerial style under which people either thrive or wilt, associ- ates say. Many of his key team members have been with him for 10-plus years, and laud his leadership technique. Still, for others, his flashes of steeliness can be off-putting.

Says James Gager, who today is senior vice president and group creative director of the MAC, La Mer and Jo Malone brands, and who was one of the first people Demsey tapped for MAC, “I’m not for everybody as a person. I’m a very specific guy. What I admire about John is that he truly understands what I bring to the party. And I could say that about John, as well. He’s not for everybody either, but he brings special skills to whatever situation he is in, and that’s important in terms of being a success and a leader.”

He’s also not afraid to take risks. Jennifer Balbier, senior vice president of global product development for artistry brands, remembers the birth of MAC’s Mineralize line. “I found a complex in our lab comprised of 77 minerals fermented in yeast water, and a little factory in Italy — who we didn’t do business with — who could bake it,” she recounts. “Bare Escentuals was starting to explode, but I was having a hard time getting anybody interested. I took it to John, who believed in my vision and said, ‘Let’s do it.’” The risk paid off. Today, Mineralize is one of MAC’s biggest franchises.

As Demsey delved deeper into MAC, he began to fulfill Leonard Lauder’s mandate. “I came to understand what he meant, that the life force of the brand was its counterculture beginnings and the focus on the makeup artist and the theatricality, and that the heart and soul was the MAC AIDS Fund,” he says. Demsey eschewed traditional beauty-industry brand-building strategies (such as print advertising) and focused instead on building a passionate community of acolytes, using the credo, all ages, all races, all sexes. “We built the brand on word of mouth and on a community social relevance platform that was in a fashion context,” he says.

Though this was the pre-Facebook age, the brand was able to effectively harness the rise of social media because it already had such a loyal community, particularly among makeup artists. “The fashion outreach, the events, the pop-culture icons — those were the underpinnings of MAC,” Demsey says. “Add into that when the Internet and community and blogs became a driving force for how you communicate brand, and suddenly you have a brand that didn’t advertise except for Viva Glam becoming the most active brand in the online community, because it was authentically sitting in the middle of the content. For MAC, that was another game-changer, not by design, but because it was authentic and organically there.”


MAC became synonymous with fashion — it was the original and is still one of the most involved beauty sponsors of fashion week, both in New York and worldwide — as well as pop culture. Demsey tapped everyone from Lil Kim to Lady Gaga to star as the faces of Viva Glam, the MAC lipstick whose proceeds are completely funneled to charity, demonstrating an ability to recognize star potential that rivals that of a teenager.


“John is tapped in not just because he’s a marketer but because he’s a consumer,” says Sarah Brown, Vogue’s beauty director. “When he signed Nicki Minaj, I was only vaguely aware of her, and he said, ‘No, she’s going to be big.’ Look at her now, a year later,” Brown says of the budding superstar. “The same thing with Lady Gaga,” she continues. “He has incredible instincts for what is going to explode and sell. Here’s this guy in a beautifully tailored suit who looks like a businessman, and is a businessman, but he’s also a voracious consumer of pop culture.”

(When asked what he spotted in Minaj that wasn’t immediately apparent to others, Demsey turns unchar- acteristically reticent — “My niece is a fan of Lil’ Wayne. She enlightened me” — and he likewise refuses to name names when asked for potential phenoms on the rise.)

The amount of media that Demsey digests is astonishing in its scope. “I watch a lot of TV. I go to a lot of theater. When I’m home late at night and reading and on my computer, I multitask. I watch Morning Joe, CNN, MSNBC, CNBC, the Today show. I like watching talk shows, like Oprah or Ellen or Kelly and Regis. I like reality TV and the Housewives,” Demsey ticks off. “I get all of the top celebrity magazines for the U.S., the U.K., France. I get Spanish and Italian Vanity Fair. I like to read Point de Vue to see what the royalist European point of view is. I surf YouTube, and I always look at Billboard to see what the top songs are in each country. If you look at fashion, at celebrity, at music, that tells you a lot about where people’s minds are.”

Demsey pauses to take a breath. “When I travel, I want to know what’s going on, so I go a day in advance,” he continues. “I ask the office to have in my room a stack of 40 or 50 magazines, from lifestyle to fashion to celebrity, and I’ll turn on MTV, no matter what the language is. I always go to the hot neighborhood, just to sit and see what people look like. I’m also addicted to going on The Sartorialist. You learn a lot — street culture and pop culture infuse themselves into what’s commercial.”

Demsey is continually filtering the new developments he picks up around the world, and has successfully applied many of those lessons to MAC. “If you look at MAC, most of the successes we have around the world, there is generally a flagship store that we own, which is not a beauty concept, it’s a fashion concept,” he says. “The decision to make MAC into a retailer was a defining tenet that to this day matters for the brand.”


Demsey actually began his career in retail, clocking time at Bloomingdale’s, Macy’s and Saks before joining the brand side. He points to recent phenomenons such as pop-up stores, flash sales, underground stores and crowdsourcing as factors that are changing the way he approaches the sector. “Retailing is becoming interesting,” he says. “People want to go to new environments and discover new things. People don’t just want to be sold product. They want brand experiences. They want feelings. They want to have a good time.
“The forms of commerce and communication and luxury and prestige and aspiration are starting to blur,” he continues. “It’s incredibly exciting and incredibly tricky. It’s a very fine line between what’s prestige, what’s masstige, what’s mass and how they cross over.” Out of the blurring must come extreme focus. “In the midst of all this clutter,” he maintains, “you must go back to the brand story. A long-term business isn’t sustainable unless you’ve got a strong brand story and can keep telling it in new ways and keep it fresh over and over and over again.”

Like his sister brand Clinique, Demsey has successfully tapped into the power of national television advertising to tell the Estée Lauder story. (“If you would have told me four years ago that the big news in marketing cosmetics was broadcast, I would have been surprised,” he deadpans.)

Another fundamental change he grapples with balancing is the incredible fragmentation of media. “You used to be defined by whether you advertised or didn’t advertise, or whether you were a word-of-mouth brand or not, or if you were on a paid for media basis or an earned media basis,” he says. “What community, online and YouTube have done is level the playing field. Just having a lot of money doesn’t mean you’re going to win the communications game. Strategic media tactics — in terms of breaking through the clutter — and ideas and brand stories matter a lot.”

One such brand story is Smashbox Beauty Cosmetics, the Hollywood-based makeup brand the Estée Lauder Cos. acquired in May 2010 for a reported $200 million to $300 million. Demsey had long known its founders, Dean and Davis Factor, the great-grandsons of makeup legend Max Factor, and helped spearhead the acquisition. “I thought Smashbox had a unique opportunity to institutionalize the Hollywood makeup position, which has been lost,” he says. “I also liked that they’re in the distribution that most of my brands are not. I know that people who buy my brands also shop in those channels,” he continues, referring to Smashbox’s primary outlets, such as QVC, Sephora and Ulta. “The development of Smashbox and the changing distribution patterns in terms of what you consider prestige to be, or multispecialty retailing, is an important evolutionary step in terms of the Estée Lauder Companies’ approach to an important segment of the market.”

Demsey also sees huge potential for Smashbox in Asia, where it is virtually non-existent. “In the time we were associated with Stila, the one part of the world where it was very successful was Japan and Hong Kong and Taiwan, and that was not a Hollywood position the way that this is,” he says, “so I know that a Hollywood position done correctly is commercial.”


Above providing the potential for another brand-turnaround success story, Smashbox — which also encompasses a photo studio and for which celebrity pho- tographer Davis Factor continues to be a creative force — most of all epitomizes the personal and professional passions that drive Demsey. An ardent photography enthusiast whose extensive collection lines the walls of his Upper East Side town house, Demsey is driven by the coupling of the creative with the business. (To wit: In one swoop, he recently bought four pictures during a day of management meetings.) “Fred Langhammer [Lauder’s chief executive officer from 1999–2004] used to say that nothing good comes without growth,” Demsey muses. “This is not just an exercise in branding. It’s the convergence of business dynamics, creativity, intuition, marketing and brand development. The reason why I love my job so much is the left-brain, right-brain thing,” he continues. “To be successful today, you have to be able to do both.”

The Demsey Doctrine: 5 Key Points

I Want My MTV: Popular culture drives mass consumption. Being plugged in— to movies, music, art, style, celebrity—is crucial.

Shock and Awe: Big ideas (like Tom Ford for Estée Lauder) can make an instant difference in a business where perception and reality are closely aligned.

Beauty Is Aspiration. Period: Demsey’s not selling lipstick. He’s selling the universal desire to be beautiful that exists across all price points, all retail channels and all geographies.

Fun and Games: Women shop because they like to have new experiences—not because they need a new product. Retail must deliver a memorable moment.

The Level Playing Field: In a world of fragmented media, all brands are equal.


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