Here Are The Key Growth Drivers For Estee Lauder
Estee Lauder’s fiscal 2016 results (fiscal year ends in June) showed that the company braved both macroeconomic and microeconomic challenges and delivered growth above the industry level. Its fiscal 2016 revenues grew by 4% to $11.3 billion. Here, we discuss some of the growth drivers for the company which we believe will propel the company’s future growth, as well. These include, Estee Lauder’s dominance in the premium makeup and fragrance segment, its aggressive penetration through a multitude of channels, and its focus on research and development.
Dominance In The Makeup And Premium Fragrance Segment
Makeup brands like Bobbi Brown and Smashbox were some of the biggest growth drivers in the makeup category for the fiscal 2016. Also, the flagship and multi-category brands such as Estee Lauder and Clinique have also started displaying growth after the company’s initiatives to revive those brands. Its social media campaigns such as MAC’s “MIX + MASH” global Instagram program and the huge number of digital makeup tutorials boosted the growth of the makeup segment and will continue doing so in the future.
Estee Lauder enjoys a strong position in the premium fragrance market having the second largest piece (around 7%) of the global market share. Over the last couple of years Estee Lauder completed its acquisition of Le Labo, the high-end fragrance and sensory lifestyle brand, Editions de Parfums Frédéric Malle, the storied fragrance brand established by the iconic perfumer Frédéric Malle, and By Kilian, the Paris-based prestige fragrance brand. The acquisitions of the high-end fragrance companies will further bolster the company’s growth in this segment.
Penetration Through Diverse Channels
Estee Lauder’s distribution strategy is customized for its different products and brands. The company’s constant channel expansions and diversification will continue well into 2017 as well. Estee Lauder is continuously looking for growth opportunities through different channels. For example, it believes MAC doesn’t enjoy as wide a distribution as its other brands–with just one-tenth the reach of Estée Lauder and Clinique, and only around half the distribution of several direct competitors. Other than retail, department, and free standing stores, Estee Lauder is also focused on travel retail and the digital e-commerce and m-commerce channels. In fiscal 2016, it exceeded $1 billion in online sales through both the company’s and the retailer’s e- and m-commerce platforms, reflecting around 27% growth in constant currency.
(Source: Estee Lauder’s Fiscal 2016 Annual Report)
Investments In R&D
The company stresses the agility of implementing its innovative ideas and hence as a result in fiscal 2016, more than 50% of its R&D initiatives were completed in less than 12 months time. The importance of innovation for the company is evident by the fact that almost one-fourth of its fiscal 2016 revenues were generated by new products. Estee Lauder’s global patent portfolio has expanded by 40% over the last four years, especially in skin care and in areas with high consumer demands. A recent example of its innovative spirit was the investment in South Korean brand Dr. Jart+, one of the fastest growing skincare brands in the country.
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