History & Origin . . . . . . . . . . . . . . . . . . . 3

Early Evolution . . . . . . . . . . . . . . . . . . . . 6

Global Expansion . . . . . . . . . . . . . . . . . 8

Modern Business . . . . . . . . . . . . . . . . . . 9

Company Structure . . . . . . . . . . . . . . 16

Recent Efforts . . . . . . . . . . . . . . . . . . . .17

Company DNA . . . . . . . . . . . . . . . . . . 32

Summary . . . . . . . . . . . . . . . . . . . . . . . 35

Social Media Accounts . . . . . . . . . . . 36

2

During the 1920s in New York City, John Schotz, a Hungarian

chemist, developed a face cream with his niece, Josephine Esther

Mentzer

It was named ‘Super-Rich All Purpose Crème’

They gave samples to her customers at the Florence Morris Beauty

Salon

Josephine Esther married young, to Joseph Lauter, whose father,

on moving to the United States, had had his original family name -

Lauder

The couple decided to re-adopt the original family name and

Esther took the opportunity to nuance her own name

Estée continued her uncle’s work and it was a big hit, and used her

salon job to sell the miracle cream to her customers

Her first big idea for sales was to give free samples of her make-up

products, for every item purchased in the salon 3

Estée Lauder’s added-value hairdressing experience was a hit and

she was soon asked to demonstrate her products in other beauty

salons

With high standards, she recruited and trained saleswomen into

her own style

She thought of ways to make her face cream jars special by

engraving the brand name on it, and coloring it pale turquoise

Estée wanted to sell her products in Saks Fifth Avenue but with an

order of $800 worth of merchandise

Determined, she pulled out her products in two salons and

invested their entire savings into buying their first factory

They prepared the creams on the restaurant’s gas burners and

then set about talking the buyer into a promotional campaign

4

Everyone with a duty account at Saks was sent a card announcing,

“Saks Fifth Avenue is proud to present the Estée Lauder line of

cosmetics: now available at our cosmetics department” Estée Lauder had four golden rules:

She would open every new franchise herself, spending a week

in the store to get everything absolutely right. Her salespeople needed to be not just walking advertisements

for her products, but be gushing enthusiasts for their efficacy The counter had to be a turquoise magnet, a ‘tiny, shining spa’ The gift with purchase was mandatory, whatever the store’s

policy regarding other cosmetic counters Estée approached New York’s advertising agencies, budget into

more free samples and postcards were sent out saying, ‘Madam,

because you are one of our preferred customers, please stop by

the Estée Lauder counter and present this card for a free gift’ In 1947, The Estée Lauder Company Inc. was formed

3

Estée noticed counters in the major department stores were the

counters of the French perfumers

If Estée has to make it big, she needed a killer perfume. Estée’s

first step was to not call it a perfume at all

Her Youth Dew was dubbed a perfumed bath oil

As for the packaging, she chose a screw top rather than the more

usual cellophane wrapping

Youth Dew launched in 1953

It was immediately a huge success for the Estée Lauder Company

Selling 5,000 units a week, it became a long-term best-seller, still

clearing $30 million a year in the 1980s

Estée was now coming to her rivals’ attention. Being number three

behind Helena Rubinstein and Elizabeth Arden

6

Meeting Helena Rubinstein, a Polish-born American business

magnate for the first time, Estée made an impact by telling the

madam that her neck would benefit from Estée’s Crème Pack

1958, annual sales hit $1 million, and earned leading name in the

American cosmetics industry

In the ten years from 1958, company sales grew at an average of

45% a year, and transform the company into an industry

powerhouse

2

In the 1960s, Estée carried her sales bag around the world,

opening up concessions wherever she went: Hong Kong, Canada,

Austria, Italy and Germany

Estée then handed over the task to an international sales manager

This role soon morphed into a separate division within the

company, Estée Lauder International Inc.

Their first store in Moscow opened in 1981 while it was still the

capital of the Soviet Union

By the mid-1990s, the company was selling in over 100 countries

Estée Lauder passed away in April 2004

By then the company had 45% of annual sales, amounting to

$5.7 billion, and over half of operating income, was coming

from non-US affiliates

2

Her son, Leonard - fresh from completing his Columbia MBA, joined

the company in 1958

By 1962, Estée Lauder Company chose a different approach She used only one model, who would be the face of the

company that would appear on every product over several years

The first face of Estée Lauder was Karen Harris

Estée Lauder’s second masterpiece was men’s fragrance in 1965 Aramis was launched - a fragrance, a cologne and an after-

shave lotion

Due to uninspiring sales results, Aramis re-launched in 1967 Presented entire range of products: after-shave, eye pads and a

face mask and covered with brown and gold tortoiseshell livery

Estée now presented an entire range of products: after-shave, eye

pads and a face mask

The Estée Lauder name was relegated to small print and soon

dropped altogether2

The first advertisement for the brand ran in The New Yorker

featuring the All-Weather Hand Cream – Estée was selling to

metrosexuals thirty years before the term came into common

jargon

A successful re-launch that Estée Lauder promoted brand equity.

They could appeal to both sexes and all ages

Leonard appealed medical reassurance and partnership with Dr.

Norman Orentreich, an expert in skin sensitivities and formed

Clinique

At department stores, Clinique stood out for its bright, clean lines

and it’s not too clinical packaging; the artist’s lamp for examining

customers’ skin; and a question-and-answer board

Codenamed as Project Miss Estée, Clinique’s launch day

approached but a complaint was filled by Jacquet and Jacquet with

their trademark product called Astringent Clinique 2

Leonard loaded up and went to the Jacquet and Jacquet’s owners

with a $5,000 offer

He came back with the name but was $100,000 poorer

Clinique launched in 1968, and lost $3 million in its first seven

years; no mean sum for a company with a $40 million a year

turnover

By the 1970s, Revlon and Avon were their main competitors and

they were able to outdo Estée Lauder in personalised selling

Estée Lauder was being squeezed with the launch of Revlon’s

Charlie and Yves Saint Laurent’s Opium. Soft Youth Dew and

Cinnabar were rushed, and both fell well short of past standards of

success

Annual sales had reached close to $250 million by 1978

Clinique’s Prescriptives: customer got one-hour consultation, with

a custom-coloured make-up to exactly match skin-type and tone.

This concept gave Estee Lauder $40 million worth of investment

and losses2

More success came with the Launch of White Linen as part of the

trio of fragrances called New Romantics

The company returned to its skin care roots in 1983 with the

launch of Night Repair, trumpeted in ads as a biological

breakthrough

Unfortunately, the message was undermined by the Clinique

collaborator, Dr Orentreich, going rogue, and debunking the whole

idea in the press

Launched of “Their Beautiful” in 1985, was a blockbuster that

became another long-term success

Estée Lauder were now un-disputed kings of the department store

cosmetics floor, and second only to Avon in sales of fragrances

In 1990, Leonard recruited Robin Burns from Calvin Klein. Under

Burns’ leadership, company’s portfolio and advertising was

updated 2

A notable development was Origins, which was run as a separate

entity and headed by Leonard’s son, William

Origins was a range of botanically based products aimed at

heading off the threat posed by the rise of Body Shop

William described Origins’ mission as “trying to rewrite the book

on how a cosmetics company operates and thinks in the 21st-

century.”

Estée Lauder signed a deal with Tommy Hilfiger to license his

name on cosmetics in 1993

Pro-active thinking was at the heart of the company’s strategy

during the 1990s as it made the precarious transition from being

family-run to being run as a corporation

Joseph was deceased, Estée in semi-retirement in an advisory and

figurehead role, and other family members uninvolved

2

In 1996, sales, which had grown every single year since the

company’s inception, rose to nearly $3 billion

So far, the company had been hugely successful developing its

own brands, but around the IPO, they ventured into acquisitions

They decided to merge with Make-up Art Cosmetics Ltd.

(M•A•C) followed by another professionals’ beauty line, Bobbi

Brown Essentials

Sassaby Inc. with its Jane brand, was also purchased for its

populist appeal to teenagers

Aveda was purchased for $300 million - 85% of their sales

coming from the channel where Estée started, hair salons

La Mer brand of high-end moisturisers was purchased

Deal with Donna Karen International Ltd., for use of the ‘Donna

Karen New York’ and ‘DKNY’ trademarks

2

Licensing deal with Stila, was acquired, as was a British brand,

Jo Malone

Five deals soon followed, adding the Bumble and bumble, Kate

Spade, Michael Kors, Darphin and Rodin & Fields brands to the

portfolio

By 1998, Estée Lauder assumed an industry leadership role in

selling its products over the Internet and formed ELC Online

Estée Lauder had become an industry giant covering a wide

variety of channels and consumers

It was also by now a global company, with sales in the billions and

promotional and advertising budgets that exceeded $1 billion

Each brand had its own president to drive sales and marketing and

the same was pursued within the international division. A matrix-

type complex of manufacturing, finance etc. supported these units

2

In 2009, Fabrizio Freda, CEO, announced a major change in

company structure

The brands would now fall into one of four groupings:

High-end prestige brands and make-up artist brands: Estée

Lauder, M•A•C, Bobbi Brown, Prescriptives, La Mer, Jo Malone,

Tom Ford Beauty

Prestige skin care and alternative channels: Clinique, Origins,

Ojon

Fragrance licensing: Aramis and designer fragrances

Salon and Pharmacy channel: Aveda, Bumble and bumble,

Darphin

North American business, together with Canada and Puerto Rico

was united into one North American affiliate. This gave one point

of contact for their customers

With 42% of sales coming from this one unit, it was a huge

multi-billion dollar enterprise in its own right 2

2004

The 58th successive year of sales growth saw a company-record

increase of $700 million, making the top line up to $5.8 billion

Five of the company’s brands - Estée Lauder, Clinique, Aramis,

Donna Karen fragrances and Tommy Hilfiger fragrances were

available in over 120 countries, Clinique in over 130 countries

Estée Lauder and Clinique were growing rapidly in China

Aveda was launched in Japan

M•A•C was growing fast in Brazil via its own stores

Darphin, a high-end botanical beauty brand sold primarily through

independent European pharmacies, was acquired

BeautyBank’s initial output was three new brands, which were

launched through the Kohl’s chain of 600 department stores

2

With Ashley Judd signed up as a brand face and P. Diddy as the

latest licensed fragrance, the machine was humming

The scale and scope of the Estée Lauder business

8,000 product lines was now vast

400 scientists were working in 6 research centres around the

world

300 new product launches in the year

The Estée Lauder Beyond Paradise launch took place

It utilizes essential oils developed exclusively for the company

It was a huge success

It reached the top five best-selling fragrances in US

Department stores

2

2005

Sales reached of $6.3 billion

Estée Lauder had four of the top five best-selling fragrances in

department stores. But the fragrance market was getting tougher

all the time.

The company was now marketing a range of over 90 prestige

fragrance brands with over 200 new ones being launched by the

industry each year

Stood at 26 with the addition of fashion designer Tom Ford’s name

70% of sales was coming from the five core brands the company

had developed themselves: Estée Lauder, Clinique, Aramis,

Prescriptives and Origins

Clinique was launched into Vietnam during the year, soon followed

by Estée Lauder

2

M·A·C launched into both India and China during the year

Clinique and Estée Lauder, launching in another 23 Chinese cities,

almost doubled sales

2006

Estée Lauder being squeezed at either end: by category killer

chains and by Wal-Mart, experienced a huge struggle for the

company to keep growing sales

There was a slow but unstoppable decline in the effectiveness of

the gift-with-purchase promotional technique

Sales declined, despite makeovers for the venerable Youth Dew,

White Linen and Pleasures brands

M•A•C was the company’s fastest growing brand, launching into

Russia as well as China and India

2

The super-premium skin care brand, La Mer, had quadrupled sales

since 2002

The management’s strategic review resulted in the development of

five strategic imperatives to negotiate the more difficult trading

conditions

Optimising the Brand Portfolio

Strengthening Product Categories

Strengthening and Expanding Global Presence

Diversifying Distribution

Achieving Operational and Cost Excellence

9% increase drove sales over the $7 billion barrier

Mergers and Acquisitions disposed of Rodan & Fields, and acquired

the Ojon Corporation

2

Tom Ford Beauty added to Estée Lauder’s range of brands in the

ultraluxe niche

Two Daisy Fuentes fragrances were launched exclusively in Kohl’s

A Coach-branded fragrance was introduced through distribution in

Coach stores

Estée Lauder collaborated with the Ford Motor Company to launch

Mustang onto the mid-tier retail channel

Internet sales grew another 25% with the expansion of the online

business to the UK, Australia and France

Certain brands were listed in Sephora, Canada’s Shoppers Drug

Mart and ULTA’s 450 beauty superstores

Estée Lauder now had more than 450 free-standing stores around

the world for its prestige brands

Origins was available in the European pharmacy channel

2

Bobbi Brown’s debut on QVC

The company now had 35 international affiliate organisations.

These supported sales in over 130 countries

Eight brands were now available in China with Estée Lauder

leading the way in 32 cities

2008

12% increase that seemed to belie the global economic crisis

Skin care was again the best category, and generated almost

$3 billion in sales

Their performance was driven by the Asia/Pacific region’s very

strong sales of skin-whitening products and fast growth in

China

Make-up, another $3 billion category, grew 10% , M•A•C and

Bobbi Brown

2

$3.2 billion, international sales had doubled to nearly $4.7 billion -

impressive by any standards. This was due to three factors:

The company’s core product range was well aligned to the

aspirations of the fast-growing middle classes around the world

The company was flexible in positioning itself

Emerging markets, where the company accounting of 9% in

sales

Another significant factor behind the continued good news was the

company’s success in positioning itself not as a reactive victim of

the changes in how their consumers were reached, but as

proactive beneficiaries

In the US, selling their products was in trouble - slipping from being

worth 41% of sales in 2003, to 30% in 2008

But the international department stores were doubling the sales to

over $2 billion in the previous five years, were Estée Lauder’s

fastest growing channel2

The company was then most excited about the potential offered in

four up-and-coming channels:

The Internet – 15 brands became available for sales online in

a growing number of countries - Korea being the latest. In line

with Estée Lauder’s trademark personal touch, Clinique,

M•A•C, Bobbi Brown and Origins all offered live chat, with real

make-up artists providing personalised advice

Direct Response TV - This was another arena where a

prolonged interaction with the audience played to company

strengths. Clinique, Origins, Bobbi Brown and Ojon had all been

big hits, but only Ojon had been acquired because it was

primarily a direct response TV brand

2

Company Stores - Estée Lauder now operated 577 stores,

which acted as advertising billboards in some of the world’s

most prestigious real estate

Travel Retail - Estée Lauder brands had always been well

featured in Duty Free outlets

This combination of routes to the consumer also gave the company

an opportunity to develop ground-breaking, multi-channel launch

strategies for new products

Tri-Aktiline Instant Deep Wrinkle Filler was launched internationally

in 2008 via speciality cosmetics stores, direct response TV, the

internet and travel retail

2

2009

A declined of 7% to $7.3 billion was more due to currency

fluctuations

Estée Lauder reduced its SKU (Stock Keeping Unit), count by 16%

and cut merchandising, advertising and sampling budgets

At the Bobbi Brown counters and in the Origins stores: for the

traditional fragrance brands, smaller, less expensive pack sizes

were introduced

Bouncing back with a 6% sales increase to $7.8 billion

Asia and Europe drove the growth

Sales in China increased by almost 30%, with E-commerce

chipping in a 23% increase

The launch of Estée Lauder’s Advanced Night Repair was the most

successful in the company’s history

79 M•A•C stores opened around the world2

Bobbi Brown line was launched into Poland

The fragrance category declined, as sales of the franchise name

brands such as DKNY, Hilfiger and Sean John fell off

The major acquisition was the Smashbox Beauty Cosmetics

Company, a prestige brand sold primarily in speciality beauty

channels in the US and 40 other countries

A decision to discontinue the Prescriptives brand was partially

related due to a social media campaign by its core followers

The company was a year into its new four-year strategy, which

involved a significant restructuring (covered previously) and

resizing of the company

The number of SKUs was reduced again, by 10%, and a programme

to trim the workforce by 2,000 was put into place

2

2011

13% increase which was three-times the growth rate of the total

industry

Here increased footfall in department stores encountered Estée

Lauder’s revitalised counters:

special lighting

interactive touch screen tools

a host of new products

Business also grew in other US channels, particularly fast-growing

multi-brand beauty retailers like Sephora, where Bumble launched

in 298 stores

In digital selling, sales rose by 28%

The company became leaders in China in the prestige beauty

category

2

Selling 11 brands in 38 cities through a variety of department

stores, company stores and multi-brand specialist retailers

Estée Lauder opened a larger R&D facility to focus on new products

La Mer grew by 55% through increased distribution and the launch

of an E-Commerce site

Combined sales in China, Hong Kong, Taiwan and Korea grew by

$181 million

In Brazil, company growth was spearheaded by Clinique and

M•A•C, focused on opening company stores and expanding E-

Commerce

2012

10% record increase grew at double the sector rate make Estée

Lauder brand became the largest prestige beauty brand in the

world

US sales grew by over $250 million 2

Clinique consolidated its position as the number one overall beauty

brand

New products in the Estée Lauder range brought many new

customers into the brand

Outside the US, another 50 company stores opened and online

business increased by 24%

The company had now 340 marketing and E-Commerce sites

across more than 50 countries

In China, opened more company stores helped them drive up brand

availability to 58 cities

In Brazil, opened with seven new M•A•C stores cementing the

brand’s number 1 position in the beauty market

Jo Malone and Bobbi Brown also opened stores in the Middle East

Estée Lauder became the market leadership in Mexico, Venezuela

and Peru 2

Consumer Contact

The most important aspect was making human contact

Product selection is personalized

Company’s greatest achievement has been to translate their USP

(unique selling point) into areas such as company stores, direct

response TV and, most successfully, the Internet

Global

Helping to meet basic needs applicable across all races, countries

and languages

Estée Lauder is in an ideal position to benefit hugely from the

rapidly increasing new middle classes in emerging markets - having

powerful, leading positions in the BRIC markets (Brazil, Russia,

India and China) and elsewhere

2

Innovation

Innovation has always been at the heart of the company: both what

the products did and how they were sold

8 global R&D laboratories provide an endless stream of hundreds of

new products a year

The company’s prowess in innovation is best illustrated by the

Forbes’ 2012 lists: The Estée Lauder Companies ranked #933 in

sales, #716 in profits, #348 in market cap and #23 in Innovative.

This is one place above Google.

2

Brand Management

All of the original brands have been developed and adapted to be

still relevant today

Every acquired brand has gone on to much greater heights under

their stewardship. M•A•C. Brand equities have been passionately

protected, a process continues today.

“Which brands should appear in which retail environments” has

always been a company obsession - iron discipline in this area is

the key reason that the Estée Lauder brand itself is now the world’s

leading beauty brand.

2

As exposed to spending downturns in the economy and currency

fluctuations, their strengths in brand portfolio, consumer contact,

innovation, emerging markets and E-Commerce mean that any

such problems have a solution

They have strong competitors but they are exceptionally well-

positioned competitively. They have never been a company to

slavishly follow what someone else is doing

Although the company has been publicly quoted for almost two

decades, it is still in the control of the family. It deserves much

credit for cherishing the company’s heart and soul, while bringing

in outside expertise to keep it up-to-date and relevant

2

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