How Might Estee Lauder’s Hair Care Business Trend In The Future And Why?

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Estee Lauder

Estee Lauder’s currently has a limited presence in the hair care market with only ~1% market share. Estee Lauder’s haircare division contributes to around 5% of its revenues and 3% of its stock price valuation for the company. However, the segment is expected to grow well with a CAGR of over 5% between 2016 to 2023. Below, we outline some of the reasons for this.

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Note: Retailers Average Gross Profit is the gross income earned by the distributor or retailer on account of selling. This income is used for paying expenses on rents, staff, and other logistics and admin costs, leaving the seller with a net income (profit). Estee Lauder’s Revenues are calculated after subtracting the retailer’s profit margin from its total market share. We expect the retailer’s gross profit margin to remain at around 42% over the five year period.

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Reasons Behind The Expected Growth In Estee Lauder’s Hair Care Market Size

  • Estee Lauder sells its hair care products through the premium distribution channel comprising of upscale department stores and perfumeries. Consumers who buy premium beauty care products get professional hair care done at salons. The Global Professional hair care market had been estimated to grow at a CAGR of 3.68% over the period 2014-2019. Also with the growth of the professional hair care market, Estee Lauder’s growth in this segment is also expected to rise.
  • As macroeconomic conditions improve, we expect the market share of professional hair care products (sold/used at salons) to rise at the expense of hair care products sold through premium retail outlets.
  • As Estee Lauder expands into the emerging markets of Asia-Pacific and Latin America, it stands to gain from cheaper retail rentals and retailing expenses.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Estee Lauder

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