Estée Lauder, that “grand dame” of cosmetics companies, seems to have found the secret to staying young forever.
Founded in 1946 by Estée Lauder and Joseph Lauder, Estée Lauder Companies Inc. (ELC) has managed the near-impossible task of never growing old by changing with the times, while maintaining its image of glamour and quality.
First impressions are always important but in the beauty business, image is critical and image making is one of the things that ELC does best. Which is why the readership of Cosmetic Packaging & Design magazine voted overwhelmingly for Estée Lauder to be the Company of the Year 2001, Excellence in Packaging.
Estée Lauder: The Big Picture
Ranked fourth in sales in Happi magazine’s 2001 Top 50 of household and personal product companies, ELC is the number one prestige marketer of cosmetics and fine fragrances in the U.S. with net sales for fiscal year 2001 of $4.6 billion. The company’s products, including skin care, makeup, fragrance and hair care, are sold in more than 20 countries and territories under a wide variety of well-known brand names. Today, the company’s brands consist of Estée Lauder, Aramis, Clinique, Prescriptives, Origins, M·A·C, La Mer, Bobbi Brown, Tommy Hilfiger, Jane, Donna Karan, Aveda, Stila, Jo Malone, Kate Spade and Bumble and bumble.
Along with a remarkable roster of brands, Estée Lauder’s record as a well-run business is also impressive. It has recorded more than 45 years of consecutive annual sales increases.
Most of those sales are derived in the Americas, which accounted for 61 percent of net sales and 54 percent of operating income before restructuring and other non-recurring charges in fiscal 2001. The Europe/Middle East/Africa region represented 26 percent of net sales and 36 percent of operating income before restructuring and other non-recurring charges. And the Asia/Pacific region represented 13 percent of net sales and 10 percent of operating income before restructuring and other non-recurring charges.
Internal and External Growth
While most of ELC’s sales are made through high end, limited distribution channels, principally department and specialty stores, in recent years part of its strategy has been to diversify across channels and markets. Hence, the acquisition of Jane, a mass brand of color cosmetics for teens that is sold through drug stores and such big box discounters as Wal-mart and Kmart.
The acquisition of Aveda gave the company entry to professional hair salons. Since 1997 when it bought Aveda, a manufacturer and marketer of plant-based hair care, skin care, makeup and fragrance products, Estée Lauder has also acquired selected Aveda distributors and retail stores. The company now sells Aveda products to third-party distributors and prestige salons and spas, and directly to consumers at its own freestanding Aveda Environmental Lifestyle Stores and Aveda Institutes.
ELC is also active on the Internet. It first took some of its products online in November 1998, then in April 2000, it announced a comprehensive Internet strategy, which included the acquisition of Gloss.com. In August 2000, Chanel and Clarins became partners with Estée Lauder Companies in Gloss.com. The site Gloss.com re-launched in 2001, featuring brands of all three companies.
In December 2001, Fred Langhammer, chief executive officer of Estée Lauder Companies, said, “At this date, it is too early to report on Gloss.com. Our focus for Gloss.com is on building a deeper relationship between our customers and our brands and this is a marathon, not a sprint.”
A Family of Brands
Probably the biggest surprise about ELC to someone not familiar with the business side of the company is that it is now the proud parent of 16 brand names in addition to Estée Lauder. Some of these brands were created by the company: Aramis, Clinique, Prescriptives and Origins Natural Resources. Others are exclusive licensed lines: Tommy Hilfiger, Kate Spade (the line will launch this quarter) and Donna Karan Cosmetics. And M·A·C, La Mer, Bobbi Brown, Jane, Aveda, Stila, Jo Malone and Bumble and bumble are acquisitions made in the past eight years.
Acquisition has long been a successful strategy for growth but can also be problematic. The list of companies that at first succeeded through acquisition only to collapse under the weight of too many divisions gets longer each year. But, so far, ELC has managed to reap the benefits while avoiding the hazards. The company is emphatic about its acquisition policy. Among the criteria it uses for acquiring new brands or companies are the following requirements: the acquisition must offer unique business opportunities that complement, not cannibalize, its existing brands; it must focus on quality and innovation; it must have the potential for global development and it must have the potential for long-term growth both in the U.S. and internationally.
Langhammer summarized the company’s policy, saying, “While we do not believe in acquisition for the sake of acquisition, and are quite pleased with the depth and range of brands in the Estée Lauder Companies family, we are always interested in new companies that might meet our standards for growth and innovation.”
Protecting Brand Value
One of the most damaging problems that has often haunted acquisitions is that in integrating the new business, the parent company dilutes or destroys the very quality that made the brand desirable in the first place. But from its first acquisition of M·A·C in 1994 to its most recent purchase of Bumble and bumble in 2000, ELC has managed to bring each new brand into the family while preserving and protecting the distinct identity of each.
Preserving Identity
The most obvious way the company maintains each brand’s unique personality is how it handles the packaging process. For while there is a corporate packaging staff that sets and maintains standards for consistent quality, each brand/subsidiary has its own design staff to create a look consistent with each unique fashion image.
Packaging for The Estée Lauder Companies is a huge undertaking. For all the ELC brands, including repackaging existing items and introducing new products, about 4,000 projects are completed each year, according to Roger Caracappa, Estée Lauder Companies’ senior vice president creative global packaging.
“Redesign is based on marketing initiatives,” said Caracappa. “There are no hard and fast rules. A package is made up of many pieces and each is considered a project.”
The company’s corporate packaging development staff is a core team of about 75 employees, including package developers, engineers and lab technicians. It does not include package design, which is a separate function for each brand. Each company has a team of package developers assigned by Caracappa with direct responsibility to the brand.
For example, M·A·C has its own dedicated team of package developers responsible to M·A·C marketing and creative design while reporting to Caracappa. This approach ensures that the individual identity of each brand will remain distinct as it is reflected in its packaging, while corporate standards for quality are enforced.
“We’re sensitive to the needs of our internal customers, marketing and design,” Caracappa said, referring to each separate brand. “There are basic requirements that are corporate. We set standards, policies and practices that must be met, because the overall commitment is to quality and regulatory requirements on a global basis. Each brand still has flexibility.”
Quality Starts in R&D
The research and development effort is the first part of the equation, Caracappa explained. A continual stream of new products is essential.
Generally, one-third of ELC’s sales volume in a year comes from products developed by research and development within the previous three years, according to the company.
Its global research and development organization covers basic research in the biological and physical sciences, product development, consumer evaluation, regulatory affairs and process development.
Approximately 395 chemists, biologists, microbiologists and physicists are currently on the staff at facilities in Melville, New York; Oevel, Belgium; Tokyo, Japan; Markham, Ontario and Blaine, Minnesota.
Packaging Is Form and Function
Once a product has been developed, packaging works hand-in-hand with marketing, design and product development to come up with a package that performs the practical function needed and also makes the fashion statement desired.
Caracappa noted that the packaging staff works from a list of priorities and technical properties necessary for each product. He said, “The packaging testing lab plays a vital role in the process. As product technologies continue to evolve, testing protocols require constant review and evaluation in order to ensure ELC’s requirements for performance and product compatibility are maintained.”
Caracappa stated, “Where corporate packaging excels is with its very strong emphasis on innovative packaging.
“The company’s corporate packaging department has a dedicated team of packagers whose sole responsibility is innovation,” stressed Caracappa. “We have a room set up where we maintain an active library of new material concepts and new package technologies. This library has proven to be a fabulous on-site resource for all brands to use when considering a new project. Our strategic suppliers have played a critical role in continuing to provide new concepts daily. Our network for new ideas reaches from New York, to Paris, to the Far East. Internally, processes have been established that allow each of our brands to review new concepts on a daily basis. In order to maintain our leadership position, we must continue to research and explore new package opportunities in many different venues. Each assignment is treated with intense scrutiny and dedication to ensure the very best is delivered.”
Future Demands Innovation
“As selling environments continue to change and new product technologies evolve, packaging concepts must continue to be innovative and always supportive of the brand’s position and consumer needs,” stressed Caracappa.
He concluded, “The challenges we face are enormous, but these challenges provide an environment conducive to the corporate vision of bringing the best to everyone we touch. These are rules that each package developer/engineer and technician live by.”
New Structure for Global Growth
Designed to continue the company’s growth in the global marketplace, Estée Lauder Companies created four group president positions in 2001.
Dan Brestle, William Lauder and Patrick Bousquet-Chavanne were appointed to the new roles effective July 1, 2001. Philip Shearer was named group president, international, effective September 1, 2001.
The organizational change was designed to have all ELC brands “operate globally with a single vision and a unified marketing strategy,” according to the company.
Dan Brestle, who had served as president, Estée Lauder (USA & Canada), became group president for the specialty group including Aveda, Bobbi Brown, Bumble and bumble, La Mer, Jane, Jo Malone, Kate Spade, Prescriptives, and Stila on a worldwide basis.
William Lauder, formerly president of Clinique Laboratories, Inc., became group president for Clinique, Origins, and the company’s retail division, which includes over 300 freestanding stores for Origins, M·A·C and Aveda. Lauder is also leading the company's online activities, including Gloss.com, on a worldwide basis.
Patrick Bousquet-Chavanne, whose prior position was president, Estée Lauder International, Inc., is now group president for Estée Lauder, M·A·C and the fragrance brands Aramis, Tommy Hilfiger Toiletries, Donna Karan Cosmetics, and fashion fragrances.
Philip Shearer, formerly president of the Luxury Products Division at L'Oréal U.S.A., is leading all of the activities in ELC’s sales affiliates and distributor relationships worldwide and is responsible for sales and profits for the company in the markets outside of North America.
Nevins Leads EL Brand Renewal
Maintaining image while modernizing EL’s brand status is a top priority. The company recently appointed Jim Nevins to a senior member position on the team leading the conceptual brand renewal process for the Estée Lauder brand.
As of Dec. 1, 2001, Nevins began overseeing global merchandising, store and package design, as well as brand operations and creative services. He reports to Bousquet-Chavanne.
Nevins is an Estée Lauder veteran, having spent seven years starting in 1992 with Clinique as senior vice president and creative director. From 1999 to 2001, Nevins served as executive vice president of global marketing for the Gap Inc. From 1990 to 1992, he was senior vice president of marketing for J. Crew Inc.
“Clearly, Jim has a strong track record in marketing and brand building, and a deep understanding of the retail business on a worldwide basis,” Bousquet-Chavanne said. “He is a creative visionary who will work closely with the Estée Lauder leadership group and me, as we continue to redefine luxury and aspiration in contemporary terms.”
The Estée Lauder Brand
Estée Lauder appeared on upscale counters in 1946 and has maintained a record for technologically advanced and innovative prestige products including skin care, color cosmetics and fragrance ever since.
Being identified as prestige is dependent on first impressions, but the perception of what prestige means is changing for consumers, according to John Fling, vice president of design for the packaging of the EL brand.
“It used to be that glass was ‘the’ prestige material but now consumers realize that the functional aspect is as important. Our challenge is to find what the new prestige (material) is and use it,” Fling said.
Fling’s group develops the packaging, not only for all new EL brand products but also for all gift promotions, all promotional pieces and specialty items. “Last year, we produced over 10,000 comps for presentations,” he said. The packaging group is made up of five directors, who cover the range from makeup to fragrance, and 15 personnel.
Two Estée Lauder gift specialties have become collectibles. A group of miniature solid perfume containers are tiny, bejeweled sculptures in a wide variety of forms that have been part of the Holidays for over 20 years. For Holiday 2001, the line of dated miniatures included White Linen Penguin, Pleasures Fairy, Beautiful Red Cherry with Beautiful fragrance, Dazzling Silver Bejeweled Artichoke and many more. Each year, the company creates 30 to 40 new designs.
Likewise, the company develops 30 to 40 collectible metal compacts each year that are also bejeweled and crafted in a myriad of shapes. While a few compacts are carried over from year to year, most are new each season. “The ideas for the collectibles are fun and the process is very creative,” said Fling. “We use all kinds of things for inspiration.”
Intuition fragrance (on the cover) launched recently in the U.S. The company’s design center in France developed the Intuition bottle, which is reflective of global groups created in May 2001, according to Fling. He stated, “Having the design resource in Paris is crucial in creating a more global perspective. Now most projects are intended to have a global reach and we are trying to have a global sensibility.”
In all new product launches, the goal for packaging is to find the core element that communicates the Estée Lauder image. “We’re constantly working on modernizing the brand while keeping its image intact,” Fling said.
The Pure Color line of makeup was also introduced last year, Fling said, “It has very unique packaging. The lipstick has a beautiful Lucite base with a ball of color.”
In skin care, LightSource, a new moisturizer was introduced. Its packaging design “speaks to the image of clean and tailored,” said Fling.
Time is of the essence in package preparation. Fling added, “From start to finish, we try to have about 17 weeks of design and development. We’re constantly trying to shorten that, but we can’t launch until it’s totally ready.”
In the future, packaging for the Estée Lauder brand will be shaped more and more on a worldwide basis. “It’s important for us to look at the brand globally and create a more defined, cohesive image,” he said.
Several new products are set to launch in the first quarter of 2002. So Ingenious Multi-Dimension Powder Makeup, scheduled to be on counters in March, is a new formulation delivered in a new, sleek compact. The compact, in EL’s signature deep blue with gold accents, comes with a special applicator sponge that applies a silky sheer or a suede-like finish, depending on which side is used.
New cosmetic colors, called sheer, light, fluid, romantic and calm, for face, lips, cheeks, eyes and nails will be available in February.
Aramis
The Aramis brand was introduced in 1964 as a prestige line of men’s grooming, skin care products and fragrances. Aramis Classic, the signature fragrance, remains one of its best selling fragrances to date. Other Aramis brand fragrances are Aramis 900, Devin, Tuscany, JHL, New West and Havana and Kiton.
In 2000, Aramis launched Surface - In an Instant, a line of grooming products for men, and, in 2001, extended the line with Surface, the Fragrance Collection. The brand is sold in more than 10,000 locations and over 100 countries and territories.
Clinique
Clinique was established in 1968 as a line of women’s cosmetic, skin care, hair care and fragrance products. The line is known for being allergy-tested and 100 percent fragrance-free.
At retail, Clinique is represented by consultants wearing white coats who reinforce the line’s image of a scientific approach to beauty. The packaging is likewise clean and tailored.
Some of Clinique’s most successful products are: 3-Step Skin Care System, Lash Doubling Mascara, Clinique Happy, Anti-Gravity Firming Lift Cream. Clinique is available in more than 9,000 doors in over 80 countries and territories.
Prescriptives
Prescriptives appeared in 1979 as a prestige cosmetics line that stresses exact color matching for all skin types.
In 2000, Prescriptives introduced a totally new approach to makeup based on optical technology, dubbed magic by Prescriptives. The line includes “potions, powders and wands” developed to create the illusion of flawless skin.
Other well-known Prescriptives’ products are False Eyelashes Plush Mascara, Luxe Soft Glow Moisture Makeup and Super Line Preventor. The line’s fragrances include Calyx, Flirt and Potion. Prescriptives is sold in 800 specialty and finer department stores across the country.
Origins Natural Resources
Origins was launched in 1990 as the first major brand to address total well-being with a collection of unconventional products that “go beyond the parameters of traditional personal care.”
Origins consists of contemporary products that stress natural ingredients, such as plant extracts, minerals, and earth and sea substances. The line is made up of products for skin care, bath and body, hair care and color cosmetics.
Origins’ packaging uses simple whites and pale greens in keeping with its policy of no added color or fragrances in its products and is committed to the preservation of the earth, animals and the environment.
Some of its major products are Have a Nice Day super-charged moisture cream, Ginger Soufflé whipped body cream, Salt Rub smoothing body scrub and Sensory Therapy sleep collection.
Origins opened its first retail store in Cambridge, MA, in 1991, and recently celebrated the grand opening of new stores on both U.S. coasts–one located in the historic Flatiron Building in New York City, and the other located at the Century City Shopping Center in Los Angeles. Currently there are more than 125 freestanding stores in the U.S., Europe, Asia and Australia.
In addition to its stores, Origins is currently available in more than 575 department and specialty stores worldwide, and offers its spa at the Origins Feel-Good Spa at Chelsea Piers in New York City and the Origins Feel-Good Spa, Store, Tea Room and Garden at the NorthPark Mall in Dallas, Texas.
Tommy Hilfiger
In 1993, ELC signed an exclusive global licensing agreement to develop and market a line of men’s and women’s fragrances and cosmetics under the Tommy Hilfiger brand name.
ELC’s Tommy Hilfiger Toiletries division launched tommy, a men’s fragrance in 1995, the success of which lead to the introduction of tommy girl in 1996. The newest fragrance, T for Him, was launched in 2001.
In 1998, the tommy's shops, a store-within-a-store format with an open-sell concept introduced hair, face and body products, and color cosmetics targeted to a youthful audience.
Some popular Tommy Hilfiger products include tommy, tommy girl, tommy's juiced up shower gel, tommy and tommy girl cool spray.
Tommy Hilfiger Toiletries can be found at www.tommy.com.
M·A·C
ELC acquired a majority interest in M·A·C (originally called Make-Up Art Cosmetics) in 1994 and purchased the balance in 1997 and 1998.
Established in 1985 in Toronto, Canada, M·A·C offers a broad line of color-oriented professional cosmetics, skin care, and makeup tools for makeup artists and consumers.
M·A·C’s image is that of a trendsetter for non-traditional beauty. Entertainer RuPaul launched Viva Glam lipstick in 1994, singer k.d. Lang promoted Viva Glam II in 1997, and Mary J. Blige and Lil’ Kim were the spokeswomen for Viva Glam III.
M·A·C recently announced that music star and AIDS activist Elton John, Grammy Award winner Mary J. Blige and Shirley Manson of the band Garbage have been named the spokespersons for VIVA GLAM IV lipstick, which launches in February.
M·A·C has a strong history of corporate social responsibility and created the M·A·C AIDS Fund, which donates 100 percent of the entire selling price of Viva Glam lipsticks to local AIDS services. M·A·C is an active supporter of other HIV and AIDS programs as well on local to international levels. To date, the M·A·C AIDS Fund has raised more than $23 million. The proceeds of the sale of VIVA GLAM lipsticks have been the primary fund-raising tool for The M·A·C AIDS Fund.
Some of M·A·C’s best-selling products are: Lipglass lip gloss and Studio Fix, M·A·C's foundation plus powder in one. The M·A·C Pro shop opened in New York’s Flatiron district in 1998 with a studio environment with exclusive, professional-only products for makeup artists.
M·A·C is sold in over 350 locations and at www.maccosmetics.com, its website.
La Mer
La Mer came under the ELC umbrella in 1995. This luxury line started in the 1970s with Crème de la Mer, a moisturizer developed by Max Huber, a NASA scientist.
In 1999, La Mer expanded from the original, best-selling Crème de la Mer into a complete yet simple range of facial skin care and body products. In 2000, La Mer SkinColor was added, a collection that combines care and color.
La Mer is sold in more than 25 countries and territories.
Bobbi Brown
ELC acquired Bobbi Brown in 1995, four years after the line was founded by makeup artist Bobbi Brown. Originally consisting of Brown’s 10 Lip Colors sold only at Bergdorf Goodman in New York City, the line has grown to a diversified brand that is available in over 300 doors in 20 countries. It is also offered online at website www.bobbibrowncosmetics.com.
Bobbi Brown now includes color cosmetics, skin care, makeup brushes and tools, beauty books, baby care products and fragrances.
Some of the most popular products are: Concealer Kit, Bobbi Brown Extra skin care collection, Bobbi Brown Lip Gloss, and Long-Wear Gel Eyeliner.
Jane
When ELC bought Sassaby, Inc. in 1997, it acquired Jane, a line of mass market color cosmetics developed for teens. The brand is now available in 13,000 mass merchandiser and drug chain outlets. The line now targets 12 to 19 year-old women (see article on Packaging for Kids, Tweens and Teens on page 32) with a complete line of face, lip, eye and nail products as well as goodskin, a skin care collection.
Some best-selling products are: Weather Wear Anti-Chap Lipstick, Stay Calm Face Makeup, MegaBites Flavorful Lipstick, and goodskin.
Donna Karan Cosmetics
ELC signed its second high-fashion exclusive global licensing agreement in 1997 with Donna Karan International, creating Donna Karan Cosmetics.
Donna Karan Cosmetics now manufactures, markets an distributes a full range of beauty and fragrance products under the Donna Karan New York and DKNY brands to more than 120 countries and territories.
Select products include: Donna Karan Cashmere Mist, Donna Karan Formula skin care, DKNY Women and DKNY Men.
The line is available in department and specialty stores.
Aveda
ELC acquired the socially and environmentally sensitive Aveda in 1997. Founded in 1978 by Horst Rechelbacher, Aveda products are based on Aromaology, the art and science of pure flower and plant essences. The line of personal care and lifestyle products feature pure flower and plant ingredients.
Aveda’s acquisition strengthened ELC’s position in the quality hair care industry and gave it access to the professional hair salon channel.
Today, Aveda’s line of premium hair, hair color and perm, skin, spa, makeup, lifestyle, aroma and body care products are sold in 10,000 professional salons, spas and Aveda-owned Environmental Lifestyle Stores in more than 20 countries.
Some of Aveda’s leading products are: Desert Pure-Fume, Tourmaline Charged Eye Creme, Custom Control and Shampure.
Brand information is available at Aveda’s website, www.aveda.com although it does not allow consumers to buy online. It has a locator to find the nearest source of Aveda’s products.
Stila Cosmetics
Stila Cosmetics was established by Jeanine Lobell, an American makeup artist, in 1994. When ELC acquired Stila in 1999, Lobell was named president and chief financial officer for the subsidiary, retaining creative control and continuing to work as a makeup artist in Hollywood. Lobell personally works with three chemists to develop and create all Stila products.
The Stila philosophy is to promote a realistic, classic, attainable beauty for all women. Because the brand embraces difference and believes in the intrinsic charm of each woman, it uses illustrations rather than models in its promotions. Its packaging makes use of recycled materials such as aluminum, glass and paper.
Some select products are: Lip Glaze, Pivotal Skin, Clear Color and Eye Glaze. The line is carried in department and specialty stores and is available at Gloss.com. It also opened its first Stila freestanding store in 2001 at the Beverly Center in Los Angeles.
Jo Malone
When a strategy works, it’s always good to stick with it. ELC acquired the Jo Malone business in 1999 from founder Jo Malone, a London-based fragrance and skin care expert.
Malone first developed the line with her name in 1983. Trained as a facialist, she created her technique of facial massage using her own handmade products. Following the success of her skin care products, she started her fragrance business with one product, Nutmeg and Ginger bath oil, which continues to be a leading product in the brand.
Other select products are: Lime Basil & Mandarin Cologne and Lime Blossom Home Candle.
Today the collection includes some 200 skin care and fragrance items including fragrance for the home. The line is available in prestige stores including Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman.
There is a UK flagship store on Sloane Street in London and a Jo Malone U.S. flagship store opened in the Flatiron Building in New York City in 2001.
The Website, www.jomalone.co.uk, gives details on the brand’s products and Jo Malone’s philosophy, but does not offer direct sales. Rather, Jo Malone Express offers mail order delivery for telephone orders.
Kate Spade
ELC signed a licensing agreement with Kate Spade in November 1999.
Prescriptives has worldwide rights to the Spade trademark for manufacture, marketing, distribution and sale of fragrances, cosmetics, skin care, toiletries and accessories.
The products are expected to launch at Kate Spade cosmetics counters in the first half of 2002.
Bumble and bumble
ELC acquired a majority interest in Bumble and bumble, a New York City-based hair product company, in 2000. The New York salon was founded in 1977 by hairdresser Michael Gordon, who began making products in 1991.
The line, with products such as Surf Spray, Does It All, Color Support and Deeep Treatment, is available through the Bumble and bumble network of 1,400 select salons, as well as certain prestige retailers in 11 countries. Its Website, www.bumbleandbumble.com, includes a store locator that is reminiscent of a video game.
The company’s education program offers advanced training to stylists in its salon network.