Estee Lauder Cos Inc-The Stock

The Estee Lauder Companies Inc. operates as a manufacturer, marketer, and seller of quality skin care, makeup, fragrance and hair care products.

The company is a steward of luxury and prestige brands globally. The company’s products are sold in approximately 150 countries and territories under a number of well-known brand names, including Estee Lauder, Clinique, Origins, M·A·C, Bobbi Brown Cosmetics, La Mer, Aveda, Jo Malone London, TOM FORD, Too Faced, Dr.Jart+, and The Ordinary. The company is also the global licensee of the AERIN and BALMAIN brand names for fragrances and cosmetics. Each brand is distinctly positioned within the market for cosmetics and other beauty products.

The company sells its prestige products through distribution channels that complement the luxury image and prestige status of the company’s brands, and the company provides ‘High-Touch’ consumer experiences across its distribution channels. The company’s products are sold on its own and authorized retailer websites, on third-party online malls, in stores in airports, in duty-free locations and in the company’s own and authorized freestanding stores. In addition, the company’s products are sold in brick-and-mortar retail stores, including department stores, specialty-multi retailers, upscale perfumeries and pharmacies and prestige salons and spas. The company’s strategy of pursuing selective distribution heightens the aspirational quality of the company’s brands.

Products

Skin Care - The company’s broad range of skin care products address various skin care needs. These products include moisturizers, serums, cleansers, toners, body care, exfoliators, acne and oil correctors, facial masks and sun care products.

Makeup - The company’s full array of makeup products includes lipsticks, lip glosses, mascaras, foundations, eyeshadows, nail polishes and powders. Many of the products are offered in an extensive palette of shades and colors. The company also sells related items, such as compacts, brushes, and other makeup tools.

Fragrance - The company offers a variety of fragrance products. The fragrances are sold in various forms, including eau de parfum sprays and colognes, as well as lotions, powders, creams, candles and soaps that are based on a particular fragrance.

Hair Care - The company’s hair care products include shampoos, conditioners, styling products, treatment, finishing sprays and hair color products.

Other - The company also sells ancillary products and services that do not fit the definition of skin care, makeup, fragrance, and hair care. The other category also includes royalty revenue from the company’s licensing of the TOM FORD trademark to third parties since the company’s fiscal 2023 (the year ended June 30, 2023) acquisition of the TOM FORD brand.

Brands

Estée Lauder

Estee Lauder brand is one of the world’s most renowned beauty brands, producing iconic skin care, makeup and fragrances.

Aramis

The company pioneered the marketing of prestige men’s fragrance, grooming and skin care products with the introduction of Aramis products in 1964.

Clinique

Clinique skin care and makeup products are all allergy tested and 100% fragrance free and have been designed to address individual skin types and needs. Clinique also offers select fragrances. The skin care and makeup products are based on the research and related expertise of leading dermatologists.

Lab Series

Lab Series is a series of high performance, specialized skin care solutions uniquely created to improve the look and feel of men’s skin.

Origins

Origins is known for high-performance natural skin care that is ‘powered by nature and proven by science.’ The brand also sells makeup and fragrance products and is distributed primarily through online, specialty-multi and freestanding Origins stores. Origins has a license agreement to develop and sell beauty products using the name of Dr. Andrew Weil.

M·A·C

M·A·C, the leading brand of professional cosmetics, was created in Toronto, Canada. The company completed its acquisition of M·A·C in 1998. The brand’s popularity has grown through a tradition of word-of-mouth endorsement from professional makeup artists, models, photographers and journalists around the world.

Bobbi Brown

Bobbi Brown is a global prestige beauty brand known for its high quality and undertone-correct makeup and skin care products that celebrate individual beauty and confidence. Reflecting its artistry roots, the brand is focused on creating a teaching and learning community of women around the world.

La Mer

La Mer is a leading global luxury skin care brand that is available in limited distribution worldwide. The brand is known for its iconic Crème de la Mer moisturizer, serums and lotions, as well as other skin care and foundation products that are created around the original ‘Miracle Broth.’

Aveda

Aveda sells high-performance, naturally-derived hair care products, as well as skin care, makeup and fragrance. The brand is known for its innovative plant-based products and its commitment to environmental sustainability and corporate responsibility. It is distributed primarily through top-tier hair salons and direct-to-consumer, via online and Aveda stores.

Jo Malone London

Jo Malone London is a scented British lifestyle brand with understated elegance, offering enchanted story-telling and ‘High-Touch’ boutique services. The brand’s famous colognes are perfect alone or artfully layered with Fragrance Combining. Jo Malone London embodies the spirit of gifting generosity and inspires emotional elevation.

Bumble and bumble

Bumble and bumble is a New York-based hair care brand that creates high-quality hair care and styling products. The brand is distributed primarily through top-tier salons, including Bumble and bumble’s own flagship salons, specialty-multi retailers and online.

Darphin

Darphin is a Paris-based, prestige skin care brand known for its high-performance botanical skin care. The brand is distributed primarily through high-end independent pharmacies and online brand and retailer channels.

TOM FORD

On April 28, 2023, the company acquired the TOM FORD brand and related intellectual property. The TOM FORD brand is a luxury brand created in 2005, encompassing fashion, fragrance, eyewear and other accessories. From 2005 until the closing of the acquisition, the company developed, manufactured and distributed luxury fragrances and beauty products as a licensee. As the current owner and steward of the brand, the company is continuing with the beauty products and has licensed the fashion brand and operations and eyewear to third parties. Consistent with the fashion brand, the company’s products exude seductive modern-day glamour and include luxury fragrance, color cosmetics, men’s grooming products and skin care products for discerning consumers globally.

Smashbox

Smashbox Cosmetics is a Los Angeles-based, photo studio-inspired makeup brand with high performance products created for the company’s consumer’s everyday life in the spotlight.

AERIN

AERIN is a luxury lifestyle beauty and fragrance brand inspired by the signature style of its founder, Aerin Lauder.

Le Labo

Le Labo is a sensory and experiential lifestyle brand, deeply rooted in the craft of slow perfumery. Born in Grasse, France and raised in downtown NYC, it offers hand-crafted and personalized fragrances, as well as ‘alternative’ and genuine experiences celebrating craftsmanship.

Editions de Parfums Frédéric Malle

Les Editions de Parfums Frederic Malle is a collection of exclusive, sophisticated, ultraluxury fragrances crafted by some of the world’s most talented perfumers and published by the brand.

GLAMGLOW

GLAMGLOW started as a behind-the-scenes Hollywood secret to instant glow. The brand is known for bold, sensorial products that deliver instant results, and its unconventional philosophy that high performance skin care should also be fun and sexy.

Kilian Paris

Kilian Paris is a prestige fragrance brand that embodies timeless sophistication and modern luxury.

Too Faced

Too Faced is a serious makeup brand that knows how to have fun. The brand is unabashedly pink, pretty and feminine with a playful wink that is beloved for its high-quality formulas, cheeky product names and distinctive packaging.

Dr.Jart+

Dr.Jart+ is a Seoul-based, global skin care brand known for its innovative formulations and unique combination of dermatological science and art. Its high-quality masks, moisturizers and serums are distributed primarily through travel retail, specialty-multi and online channels.

The Ordinary and NIOD

In 2021, the company increased its investment in Deciem Beauty Group Inc. (‘DECIEM’) to approximately 76%. Known as ‘The Abnormal Beauty Company,’ DECIEM is a Toronto-based, vertically integrated multi-brand beauty company rooted in a consumer-focused and functional approach. Its portfolio includes The Ordinary, an ingredient-focused brand, and NIOD, a science-driven skin care brand.

In 2021, the company made the decision to exit the global distribution of BECCA products, a makeup brand the company acquired in 2016 and substantially completed this exit during 2022. In 2022, the company negotiated early termination agreements for the company’s previous license agreements for the Donna Karan New York, DKNY, Michael Kors, Tommy Hilfiger and Ermenegildo Zegna product lines effective June 30, 2022 and continued to sell products under these licenses through such time.

From time to time, the company also makes strategic minority investments in other companies, mainly in the beauty industry. In some cases, the company has acquired the remaining interest or a majority interest (e.g., Have & Be Co. Ltd. (i.e. Dr.Jart+) and Deciem Beauty Group Inc., respectively). The company’s minority investments include a company based in India that manufactures, markets and sells Ayurvedic skin care and other products under the Forest Essentials brand name, primarily in India.

The company’s ‘luxury brands’ are La Mer, Jo Malone London, TOM FORD, AERIN Beauty, Le Labo, Editions de Parfums Frederic Malle and Kilian Paris. The company’s ‘large brands’ are Estee Lauder, La Mer, M·A·C and Clinique. The company’s ‘scaling brands’ are Jo Malone London, TOM FORD, Aveda, Bobbi Brown Cosmetics and The Ordinary. The company’s ‘developing brands’ are Le Labo, Too Faced, Dr.Jart+, Origins, Kilian Paris, Bumble and bumble, Smashbox, Darphin Paris, Lab Series, Editions de Parfums Frederic Malle and GLAMGLOW.

Distribution

The company sells its prestige products through distribution channels that complement the luxury image and prestige status of the company’s brands, and the company provides ‘High-Touch’ consumer experiences across the company’s distribution channels. The company’s products are sold on its own and authorized retailer websites, on third-party online malls, in stores in airports, in duty-free locations and in the company’s own and authorized freestanding stores. In addition, the company’s products are sold in brick-and-mortar retail stores, including department stores, specialty-multi retailers, upscale perfumeries and pharmacies and prestige salons and spas.

Online, the company sells products from most of its brands direct-to-consumer through the company’s brand.com sites and third-party online malls. The company also sells its products wholesale to authorized retailers that resell online through retailer.com and pure-play sites. The company’s sites are in approximately 50 countries. While a majority of these online sales are generated in mainland China, the United States and the United Kingdom, the company continues to expand in other markets globally.

The company operates freestanding stores. Most freestanding stores are operated by the company under a single brand name, such as M·A·C, Jo Malone London and Aveda. The company also operates multi-branded company stores in outlet malls.

The company maintains dedicated sales teams that manage its retail accounts. The company has wholly-owned operations in over 50 countries through which the company markets, sells and distributes its products. In certain countries, the company sells its products through carefully selected distributors who share the company’s commitment to protecting the image and position of the company’s brands.

The company’s ‘emerging markets’ in Europe, the Middle East and Africa are India, the Middle East, Turkey, South Africa, Central Europe, Israel, Russia and Kazakhstan; in the Asia/Pacific are Thailand, Malaysia, Vietnam, Indonesia, the Philippines and Singapore; and in the Americas are Brazil, Mexico, Chile, Colombia, Panama, Peru and Argentina.

Customers

The company’s strategy is to build strong relationships globally with select retailers. In addition, the company connects with its consumers directly through freestanding stores, e-commerce sites and social media to build a robust omnichannel experience that allows a consumer to shop in these and other channels.

Marketing

The company’s strategy to market and promote its products begins with the company’s well-diversified portfolio of distinctive brands across four product categories. The company’s portfolio can be deployed in multiple distribution channels, key travel corridors and geographies where the company’s global reputation and awareness of the company’s brands benefit it. The company’s geographic and distribution channel diversity allows the company to engage local consumers across an array of developed and emerging markets by emphasizing products and services with local relevance, inclusiveness and appeal. This strategy is built around ‘Bringing the Best to Everyone We Touch’.

The company has a diverse portfolio of brands. The company employs different engagement models suited to each brand’s equity, distribution, product focus, understanding of the core consumer and local relevance. This enables the company to elevate the consumer experience as the company attracts new consumers, creates trial, builds loyalty, drives consumer advocacy, and addresses the transformation of consumer shopping behaviors.

In addition to continuing to attract existing consumers, the company’s hero products provide an opportunity for new consumers to be introduced to its desirable products, creating consumer traffic across all channels of distribution. Most of the company’s creative marketing work is done by in-house teams, in collaboration with external resources, that design and produce the sales materials, social media strategies, advertisements and packaging for products in each brand. For a number of products, the company creates and deploys 360° integrated consumer engagement programs. The company builds brand equity and drives traffic to retail locations and to the company’s own and authorized retailers’ websites through digital and social media, magazines and newspapers, television, billboards in cities and airports, and direct mail and email.

The company is increasing its brand awareness and sales through its strategic emphasis on technology, by continuing to elevate the company’s digital presence encompassing e-commerce and m-commerce, as well as digital, social media and influencer marketing. The company is investing in new analytical capabilities to promote a more personalized experience across the company’s distribution channels. The company continues to innovate to better meet consumer online shopping preferences (e.g., how-to videos, ratings and reviews and mobile phone and tablet applications), support e-commerce and m-commerce businesses via digital and social marketing activities designed to build brand equity and ‘High-Touch’ consumer engagement, in order to continue to offer better experiences and services and set the standard for prestige beauty shopping online. The company also supports its authorized retailers to strengthen their e-commerce businesses and drive sales of its brands on their websites. The company has opportunities to expand its brand portfolio online around the world, and the company continues to invest in new omnichannel concepts in the United States, China and other markets to increase brand loyalty by better serving consumers as they shop across channels and travel corridors. The company has dedicated resources to implement creative, coordinated, brand-enhancing strategies across all online activities to increase the company’s direct access to consumers.

The company’s marketing and sales executives spend considerable time in the field meeting with consumers, retailers, beauty advisors and makeup artists at the points of sale to enable the company to offer a seamless experience across channels of distribution.

The company has established a flexible global distribution network that is managed by the company or third parties. The company has established regional and local distribution centers, including those maintained by third parties, strategically positioned throughout the world in order to facilitate efficient delivery of the company’s products to its customers and consumers.

Research and Development

The company’s research and development costs totaled $344 million in fiscal 2023.

Trademarks, Patents and Copyrights

The company owns the trademark rights used in connection with the manufacturing, marketing, distribution and sale of the company’s products both in the United States and in the other principal countries where such products are sold, including Estee Lauder, Aramis, Clinique, Lab Series, Origins, M·A·C, Bobbi Brown, La Mer, Aveda, Jo Malone London, Bumble and bumble, Darphin, TOM FORD, Smashbox, Le Labo, Editions de Parfums Frederic Malle, GLAMGLOW, Kilian Paris, Too Faced, Dr.Jart+, and The Ordinary. The company is the exclusive worldwide licensee for fragrances, cosmetics and/or related products for AERIN, BALMAIN, and Dr. Andrew Weil. The company protects its trademarks in the United States and significant markets worldwide.

Government Regulation

The company and its products are subject to regulation by the Food and Drug Administration and the Federal Trade Commission in the United States, as well as by various other federal, state, local and international regulatory authorities and the regulatory authorities in the countries in which the company’s products are produced or sold. Such laws and regulations relate to a wide range of matters, including ingredients, manufacturing, labeling, packaging, marketing, advertising, transport and the sale, disposal and safety of the company’s products, as well as environmental matters.

Seasonality

The company’s results of operations in total, by geographic region and by product category, are subject to seasonal fluctuations, with net sales in the first half of the fiscal year (year ended June 2023) typically being slightly higher than in the second half of the fiscal year. The higher net sales in the first half of the fiscal year are attributable to the increased levels of purchasing by consumers for special events and by retailers for holiday selling seasons.

Competition

The company’s competitors include L’Oreal S.A.; Unilever; Procter & Gamble; Shiseido Company, Ltd.; LVMH Moët Hennessey Louis Vuitton; Beiersdorf; Chanel S.A.; Natura & Co.; Coty Inc.; and Bath & Body Works, Inc.

History

The Estee Lauder Companies Inc. was founded in 1946 by Estee and Joseph Lauder.