Byline: Julie L. Belcove

NEW YORK — For the first time in its history, Estee Lauder Cos. has inked a joint venture deal with a rival cosmetics company, taking on distribution for MAC outside of North America.
The deal is intended to meld the power and experience of Lauder, an estimated $2.7 billion global company, with the innovation and ultra-hip image of MAC, a roughly $36 million upstart.
“I want to emphasize the fact that it’s their brand,” said William Lauder, vice president and general manager of Origins Natural Resources. “They know their brand, and we know how to market brands. We have expertise marketing cosmetics around the world.
“The potential is enormous,” he continued, but he declined to project MAC’s worldwide sales under the joint venture.
Lauder, who said he will be involved in the operation but will not take on an additional title, said his firm’s expertise includes knowledge of foreign markets and a long list of contacts. Lauder International will handle the MAC distribution.
Although the joint venture is framed as a distribution deal, Lauder would not rule out sharing other kinds of know-how, such as product development. “We’re here to assist them,” he said. “There are things they’re expert at, and we believe we also have some expertise.”
The Lauder-MAC deal demonstrates how important makeup artist lines have become in the directional color cosmetics market. Founded by makeup artist Frank Toskan, MAC’s widespread influence has spread from the pages of fashion magazines to the new colors and packaging that have been developed by bigger, more established companies.
MAC paved the way for an onslaught of makeup artist lines, which together have encroached on the traditional territory of prestige makeup brands, including Lauder’s Prescriptives division. But Lauder dismissed suggestions of sleeping with the enemy.
“I think MAC and Prescriptives have two very different followings of consumers,” Lauder said. “The MAC message and the Prescriptives message are very different.”
The 800-item MAC line is now available in about 80 department and specialty store doors in the U.S., Canada and the U.K., including Nordstrom, Marshall Field’s and Henri Bendel, as well as in 16 freestanding doors.
Lauder said the company is considering both a traditional retail distribution for MAC and more of its own stores. He said discussions are well under way with several retailers in Europe and Asia, and he hopes to strike some deals within a few months.
Founded in 1984, MAC has been the subject of repeated acquisition rumors in the industry, but Toskan and his partner, Frank Angelo, reportedly remained steadfast against selling. Toskan and Angelo declined comment on the deal.
The MAC deal is the latest in a series of experiments uncharacteristic of the Lauder conglomerate that began four years ago with the creation of Origins. Within the last year, Lauder signed its first designer licensing deal — with designer Tommy Hilfiger — and opened its first freestanding Lauder brand store stateside — in Las Vegas.

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