Global makeup and skin care giant Estée Lauder (NYSE:EL) is expanding its Melville production facility in an effort to optimize the plant size and achieve better economies of scale. This decision is in line with the overall company strategy to streamline its operations to extract efficiencies and cut costs. The company reported revenues of about $10 billion in 2012 with an EBITDA margin of 22.4%. We estimate that the streamlining of operations would push margins higher.
The company had shut down its Oakland production facility earlier this year. The 148,000 square feet fragrance bottling plant was shut down in April, and its operations were merged with the company’s Melville plant. The company expects its Melville facility to be crucial for its overall growth strategy.  
- Driven By Its Strong Brand Portfolio And Distribution Channel Diversification, Estee Lauder Delivered A Robust Q2 FY 2017
- Some Of The Key Trends That Will Drive Sales In The Skincare Segment In 2017
- Estee Lauder’s Q2 FY 2017 Earnings Preview
- Along With Their Current Focus On Millennials, Beauty Companies Need To Focus On This Segment As Well
- This New Trend Followed By The Beauty Leaders Has Its Advantages As Well As Its Pitfalls
- Why Did MAC Rope In An International Team Of Beauty Influencers To Create Its New Lipstick Range?
Plans To Tap Higher Market Share Through New Product Launches
New product launches are extremely important in the cosmetics and fragrance industry to maintain and expand market share due to fierce competition in the industry. Estée Lauder has been a pioneer in launching new product variants keeping in mind the changing needs of its clients. Below are some noteworthy launches that the company is planning this season.
With an estimated 4.6% market share, Estée Lauder’s fragrance division reported $1.28 billion of revenues last year, up 2.2% year-on-year. The company is launching two new fragrances this year to enhance its scents portfolio and improve market share. The first fragrance, branded “Modern Muse,” is described by the company as having a “lush floral woody” scent. The fragrance is expected to be launched in September and will be composed of two contrasting notes, jasmine and woods.  The second fragrance is a limited-edition brand, Pleasures Pop Eau de Parfum, specially crafted for the summer 2013 collection and has a fruity-floral fragrance.  The fragrance division accounted for over 13% of the company’s revenues in 2012. You can see how the new launches can benefit Estée Lauder’s fragrance market share by tweaking the interactive chart below.
Estée Lauder has also launched a limited-edition Bronze Goddess Summer Collection which is inspired by the shades and color of the Caribbean. The name draws itself from the intense heat and tropical scents of the Caribbean. The collection consists of palettes of warm sultry shades and shimmering hues. The company also launched Limited Edition Pure Color Five Color Eyeshadow Palette in Batik Sun, Limited Edition Pure Color Liquid Eyeliner Duo in Black Sands and Limited Edition Pure Color Illuminating Powder Gelée in Heat Wave. 
The makeup division contributed about 38% to total company revenues in 2012, up 5.2% year-on-year. With these exciting new launches, we estimate the company to report strong revenue growth in the next earnings.
We have a $66 Trefis price estimate for Estée Lauder.Notes:
- Estée Lauder to expand skin-care plant, May 2013 [↩]
- Estée Lauder To Shut Down Oakland, N.J. Plant, Lay Off Workers, January 2013 [↩]
- Estée Lauder to Release First Fragrance in 10 Years, May 2013 [↩]
- Estée Lauder announces new limited-edition fragrance for Summer 2013, May 2013 [↩]
- Estée Lauder Bronze Goddess Summer Collection, May 2013 [↩]