Estée Lauder: Tapping the Fast Growing Global Anti-Age Creme Category

Estée Lauder (NYSE:EL) is scheduled to launch  its Revitalizing Supreme Global Anti-Aging Creme, designed specifically for European women, in February 2012. ^[1] This marks the company’s entry into the growing global anti-aging skin care market. Global anti-age refers to a single, complete product that can treat multiple signs of skin aging at one time, and is a fast-growing segment under anti-aging beauty products. Estée Lauder, one of the leading cosmetics and beauty care players globally, competes with others such as Revlon (NYSE:REV), L’Oreal (PINK:LRLCY) and Avon Products (NYSE:AVP).

Europe is a core market and a major focus of growth for prestige beauty products maker Estée Lauder. Growing in double digits, the firm currently generates >25% of its sales from Europe and leads the anti-aging and facial skin care segments in the region. The new Revitalizing Supreme Global Anti-Aging Creme, set for launch in February 2012, is particularly designed for European women. The new product is expected to be priced at €86 ($116) for 50 ml and €56 ($75) for the 30 ml version and is estimated to generate $70 million sales in 2012. The product’s success will also hasten the company’s efforts to tap into the demand for global anti-aging products in the North American and Asian markets, where P&G’s Olay dominates the category currently, mainly in the mass segment. Olay generated over $3 billion of P&G’s $80 billion sales last year.

Skin Care and Anti-Aging: Most Valuable Business for EL

By our analysis, Estee Lauder derives around 54% of its stock value from the skin care segment, which contributes 42% of the company’s total sales and is growing at double digits. Half of the company’s skin-care business comes from anti-aging products, of which global anti-aging has emerged as the largest, most dynamic and fastest growing sub-segment. Estée Lauder’s skin care market share grew from 5.5% in 2007 to 7% in 2011 and could reach 8.3% by 2018 based on our estimates. The segment is also the most profitable of all its beauty products, generating EBITDA margin of 19%, compared to the company average of 16%.

We have a revised $116 Trefis price estimate for Estee Lauder stock, which is almost in line with its current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Estee Lauder Maker Cream for Europan Women, Hellobealla Blogspot, Dec 2, 2011 [↩]