BW Confidential - Issue #8 - October/December 2011 - (Page 24)

Interview Estée Lauder Companies group president international Cédric Prouvé Building the brics by Oonagh Phillips US-based Estée Lauder Companies is making a major push in China, travel retail and the skincare category. Group president international Cédric Prouvé talks about the company’s business beyond the US and navigating emerging markets E stée Lauder Companies (ELC) has been winning points with analysts over the past two years. Since taking the ceo role in 2009, ex-P&G executive Fabrizio Freda set out to focus on key strategic areas, such as skincare, emerging markets (especially China) and travel retail, while emphasizing fewer, bigger launches and concentrating on profits rather than just top-line growth. All this was set against a four-year plan to cut costs by $450m$550m (which has since been moved up to $625m-$675m) and reach a 13%-14% operating margin by 2013. The company just announced that it reached this target two years earlier than anticipated and is now aiming for an operating margin of between 14.5% and 15% by 2014. ELC has made strides in many of these areas. In China, for example, the group says its Lauder brand is now number one in prestige distribution. China will also become the group’s third biggest market after the US and the UK this year, accounting for 4% of sales; it is thought China will make up around 8% of sales in the next five years. An increased focus on skincare, now the group’s biggest category at 42% of sales, is also helping it gain traction in this market. China is now referred to as the group’s ‘second home’ and is a big part of the overall strategy to become a more international company, or as ELC puts it “the global leader in prestige”. The international business, led by group president Cédric Prouvé, now represents 62% of sales, up from around 40% just 10 years ago. Also in emerging markets, the group is putting more focus on standalone stores (the company has 750 freestanding stores accounting for around 10% of business). In travel retail, ELC has been growing its market share, which now stands at around 14.5%, up from 13.6% in 2009. ELC’s push in China is set to generate more growth for its travel-retail business given the increasing numbers of Chinese travelers (some 90 million are expected to travel abroad by 2013). The focus on bigger and fewer initiatives backed by increased advertising spend in traditional and new media has also paid off. The group said that for Clinique it launched half as many products in fall 2010 versus the previous year, but those products generated almost 50% more in sales. 24 In addition, the company noted that Clinique’s Even Better Clinical Dark Spot Corrector, which only launched in 2009, had become the brand’s top sku. The group’s Aramis Designer Fragrance division also reduced its sku count by 57% over the past three years, which is said to have helped in making this business more profitable. All this looks positive, but industry watchers nonetheless see challenges ahead. While the group is doing well in China, analysts ask how a prestige company like ELC can capitalize on growth in other emerging markets such as in Brazil, which is largely dominated by mass. Other questions center on the group’s fragrance portfolio, which is still seen as US-centric and could put the company at a disadvantage when it comes to European local and travel-retail markets. (Although it just signed a new license with Italian fashion brand Ermenegildo Zegna.) Prouvé sheds some light on these issues and the group’s international strategy. ELC has stated that it is moving brands out of countries or categories that are not profitable—Origins for example has pulled out of certain markets. Is there still work to be done in this area? We are past that stage and are now more in a high-growth mode. We have made progress in terms of under-performers and the only brand that was discontinued was Prescriptives. As for Origins, it was more about streamlining the brand so we could start with a strong base and be seen as a serious skincare player. To accomplish that we moved Origins out of some markets, but we also launched it in China, which is a major pillar in our future strategy. We have seen great success with the brand there, and winning with Chinese consumers helps us to win globally. You recently bought make-up brand Smashbox. How is the brand developing and are you looking at other acquisitions? Smashbox brings us category expertise in make-up, but it is also a channel play for us. The brand allows us to expand in specialty, TV and online. We are one year into the integration, and have done a lot of work in bringing it up to Estée Lauder standards. We will re-launch it in North America in the October-December 2011 - N°8 - BW Confidential

Table of Contents for the Digital Edition of BW Confidential - Issue #8 - October/December 2011

- Brand & retail news recap
- Companies on the move
Take note
- Market facts, figures & trends
Best of BW
- Highlights from our e-publication
- The latest in fragrance, skincare & make-up
- Estée Lauder Companies group president international Cédric Prouvé
Insight: Fragrance
- Category overview
- Retailer roundtable
- Retailing strategies
- Rare fragrance brands
- Launch roundup
- Spa chains
- Spa case studies
- E-commerce
- Store concepts
Travel retail
- Sector analysis
- Hainan & China Duty Free Group
- Retail concepts
- Passenger habits
- Industry experts on harnassing the power of social networks
- Six up-and-coming beauty brands
Market watch: Russia
- Country overview
- Prestige retailing
- Industry viewpoint
- Market outlook
- Sustainabilty
- Trends
Last word
- Buyology Inc president & co-founder Donna Sturgess

BW Confidential - Issue #8 - October/December 2011