Introduction
Estée Lauder Companies, Inc. was started by Estée Lauder and her spouse Joseph in 1946. Nowadays, it is among the leading producers and advertisers of fashionable cosmetics and fragrances across the world. Estée Lauder Companies, Inc. also produces hair care products which are used by many people globally. It also has more than 40 percent market share. The first products to be produced by the corporation were skin lotions, makeup, and fragrances.
These were followed by the production of men’s ointments and perfumes (Aramis) in 1964 (Estée Lauder Companies, n. pag). The third brand to be introduced into the market was the Stylish Line in 1979 (Estée Lauder Companies, n. pag). This product was not only sold to those individuals living in towns but also international people. In 1990, Estée Lauder Companies, Inc. released a plant treatment product (Origins) designed for those customers who were aware of their environment (Estée Lauder Companies, n. pag).
After four years of its operation, the company did not only produce a particular beauty artist brand but also make-up products called MAC. In 1995, it produced Bobbi Brown basics, a particular brand of cosmetics. It also produced Tommy Hilfiger perfumes and elegant products.
Two years later, Estée Lauder Companies, Inc. produced a make-up called Jane, majorly meant for young consumers. In 1997, Aveda and Donna Karan perfumes were introduced into the local and international market. Aveda is a fresh make-up and skin care product. Even though 61 percent of the company’s total sales come from the United States, it also supplies its products to more than 100 nations across the world.
Moreover, 27% of its total sales come from Europe, Africa, and a few countries from the Middle East (The Estée Lauder Companies Inc. History, n. pag.). The remaining percentage comes from the Asia-Pacific region. Estée’s family controls more than 60 percent of the organization’s general stock.
The family also controls more than 93% of the company’s shares; hence, they are allowed to participate in the election of directors (The Estée Lauder Companies Inc. History, n. pag.). The company’s administrative center is found in the General Motors Building, New York City. Its recent revenue in 2010 was roughly $7,795.8 billion (“Fortune 500” n. pag.).
History and advancement of Estée Lauder Companies, Inc.
In 1908, Rose and Max gave birth to their 9th baby, Estee Lauder. This happened after they had moved from Hungary to New York in the USA. Since she was born in an industrialized country, she developed an interest in cosmetics at a tender age. In 1924, the establishment of her uncle’s chemist’s shop greatly inspired her to join the cosmetics business. They produced various lotions (six-in-one cold and Dr. Schotz Viennese) and fragrances.
Between 1939 and 1942, Estee started her career by selling her uncle’s products in New York and Miami. This allowed her to interact with many people and establish her network. In 1944, she worked in several beauty salons, selling and marketing her goods (Hitt, Ireland, and Hoskisson 103). Estee also worked in various New York departmental stores.
Some of the products she sold were lipsticks and facial powder. Since her main aim was to sell her goods at Saks Fifth Avenue, she convinced the owner of Saks that her products were on high demand. This implied that most of the customers were then interested in new products hence has increased the company’s sales.
One of her product’s unique characteristics became a standard Estee Lauder technique for many years. After World War II, most of the cosmetics were sold covered with plastics, but Estée’s cosmetics were available in stylish metal cases. She made a lot of sales out of those unique products. Due to the help she received from Saks Company, Lauder was able to distribute and sell her products across the country.
Consequently, this began in 1940, where she participated in training departmental stores workers. The connections she had made before that with important people led to her recognition by I. Magnin stores located in San Francisco. This resulted in the creation of a new market in San Francisco, where the company only traded in Lauder’s products. During this period, she made friends with several clients who would later help her make the achievements.
Lauder and her family fully entered this business, popularly recognized by its unreliable market, despite being advised on the kind of risks involved by her legal representative. Her husband, Joseph, worked at a little room they had obtained on a lease, while their son distributed their products to Saks and other departmental stores in the market. To favorably compete in the cosmetics market, Estée Lauder came up with an offer, according to which the buyers were given gifts for every item bought.
To retain the customers she had acquired, Estee Lauder provided them with free samples for every item bought. After some time, she introduced the provision of free products to be sold for a particular minimum amount. This improved her performance and image in the local market. Conversely, the revenues of the Estée Lauder Companies and other beauty industries in the market tremendously reduced.
Lauder was interested in employing an advertising representative spending all the money she had managed to gain from her business. Lauder used Saks direct-mail program to market her products because she did not have money for her campaign, even considering all the amount she had saved. With the establishment of a fresh brand of products, the organization’s advertising budget considerably increased. She later developed an interest in making fragrances after meeting a perfume manager.
Taking examples from Helena and Elizabeth, Lauder produced a Bath Ointment (Youth Dew) with a smell that would last for one day. In 1953 after the introduction of the Bath Ointment into the market, this product became a real success and one of the company’s bestsellers (Estée Lauder Companies, n. pag). The company was able to sell approximately 5,000 unite every week (The Estée Lauder Companies Inc. History, n. pag.). Youth Dew improved the company’s sales because many customers bought Lauder’s skin care products. After three decades, the sale of perfumes was still high globally.
In 1960, Lauder merged with other companies (Rubenstein and Revlon), which had a lot of experience in the production of cosmetics, to produce a skin care ointment. This was to counter the European cosmetics which were becoming popular during that period. In 1960, the image of her company had already improved both in the local and the international markets (Sherrow 172).
They used black-and-white images in the product advertisement since they did not have enough money for colored advertisements. However, such a move turned out to improve the company’s image as it was viewed as a stylish brand. During that period, Estée Lauder Companies, Inc.’ sales increased to $14 million. She had also created a small and competent workforce that stayed in the company for several years.
The company later produced Aramis and a trendsetter male fragrance. Initially, the sale of male perfumes was considered to be low since Estée Lauder Companies, Inc. faced a stiff market competition from Revlon. The first national appearance of this product, which occurred at a gathering of Vogue specialist, Carol, and skin care specialist, Norman, drew several reactions.
Soon afterward, Philip gave Lauder’s son an opportunity to work in the company and control the production of fresh Clinique products. Those individuals who sold the products were called “consultants.” Additionally, they had adequate skills and wore white laboratory coats.
At the counters, transactions were taking place as there were bright lights, and the goods were enclosed in light boxes. Pictures were also pinned at the counters to assist customers to locate the type of Clinique product, which resembles their skin type. In 1968, the company’s administrative office was moved to General Motors Building.
Moreover, it was no longer a privately owned company considering that it had been bought at $40 million (The Estée Lauder Companies Inc. History, n. pag.). In a quick and finally failed attempt of introducing a fresh brand of product to counter Clinique’s products, Revlon’s owner made an important invention. Lauder had maintained a good relationship with the clients she had previously obtained at the departmental stores. Therefore, this ensured the customer’s loyalty to all her product sales.
After working with the company for many years, Lauder’s son, Leonard, became the head of Estee Lauder Inc. Moreover, his major focus was to maintain good relations with departmental store clients. His leadership qualities improved the company’s performance. For instance, the organization was able to achieve various selling techniques and harmonize the advertisement levels for different products. The company’s board chairman performed his duties both at home and office.
On the other hand, Lauder’s husband administered the activities at the Melville, Long Island industrial unit. In the early 1970s, the company was faced with the problem of improving its common presence while making use of its reputable position. However, considering that it was being run by Lauder’s family, it became flexible since it was able to speedily react to various changes and competition.
Because of the stiff competition both in the local and international cosmetics market, Estee Lauder Inc. was forced to look for better solutions to counter the problem. With the introduction of “Charlie” fragrance and “Opium” in 1973, Revlon made an improved performance in the market. During this time, the company had been planning to establish a smarter edition of its Youth Dew fragrance (Gillespie and Hennessey 309).
Following the success of Opium, Lauder produced two versions of the Youth Dew (Estée Lauder Companies, n. pag). The two fresh editions were Soft Youth Dew and Cinnabar, respectively. Many people questioned the organization’s marketing programs after the introduction of the two fresh versions.
Both wholesale traders and consumes were left wondering whether Cinnabar was an edition of Youth Dew or a fresh product. Estee Lauder Company ensured its customers that it would carry on with the promotion of both fragrances. Even though the methods in advertising their products were considered to be confusing, Estée Lauder Companies, Inc. demonstrated that it could speedily react in a forceful market.
In 1979, another edition of stylish Clinique “perspectives” was introduced into the marketplace. It was launched as a modern skin care product. Moreover, this product was warmly welcomed into the cosmetics market. Hence, the organization decided to restructure its approach. Estée Lauder Companies, Inc.’s other departments were also affected considering that the already stiff competition was being felt by other companies producing men’s fragrances.
In 1978, the total revenue of this company was roughly $170 million (The Estée Lauder Companies Inc. History, n. pag.). Even though several people were not buying men’s products, there was an increase in their annual net sales. A number of the men’s fragrances introduced into the market recorded lower sales.
Estée Lauder Companies, Inc. introduced their men’s product because other male products from other companies had already existed. Therefore, this led to the introduction of JHL and other products which were considered to be stylish fragrances.
Immediately after its introduction, customers were being asked to provide their business cards to receive free samples. This was majorly aimed at promoting new products. In 1982, the president of Estée Lauder Companies, Inc., Leonard, was also given the position of Chief Executive Officer during managerial adjustments. Also, Ronald was named the chairman of international operations. However, the above-mentioned changes did not affect the position of Joseph Launder.
The company was considered to be one of the most established cosmetics organizations because its profits were more than $1 billion. Joseph Lauder’s retired in the same year and sold all his shares at $28 billion to the remaining family members (Hellman 118). It later emerged that the charge was underestimated hence Estée Lauder Companies, Inc. was left with a debt of $42.7 million for avoiding tax payment (The Estée Lauder Companies Inc. History, n. pag.).
This is because the shares of this organization could not be sold. By the time Estée Lauder Companies, Inc. had realized $1 billion in its returns, its closest competitor (Revlon) returns was slowly coming down to $1.2 billion (The Estée Lauder Companies Inc. History, n. pag.).
Conversely, in comparison to Revlon, which was not promoting most of its products, Estée Lauder Companies, Inc.’s sales dropped. After a substantial study and improvement, the company introduced a new product (Night Repair) into the market. According to the advertisement made on the product, an individual would argue that it’s a natural improvement to repair the body tissues affected during the day.
Conversely, Dr. Norman, a skin therapist, came up with his different view. He argued that the applicable preparations affecting the outer layer of the skin did not exist. Despite the above arguments, the sales of Night Repair were not affected. The company later made a lot of profits in the sale of Clinique and night repair products because it had put a lot of focus on lab study and development. In 1990, during the executive changes, Robin got employed as the manager of domestic division. This managerial position had already been served by Barnes for more than 25 years.
Moreover, Barnes became Estée Lauder Companies, Inc.’s advisor for the global division. Robin has a wide experience considering that he has worked in many cosmetic companies. For instance, he started working with Bloomingdale Company before moving to the Calvin Klein Cosmetics Company.
During his term in office, Robin fully participated in the introduction of new perfumes into the market. He also changed the net value of the company from $6 million to $200 million. Robin ensured that the products had an improved image and quality. The other achievement is that he changed the level of product promotion by ensuring that it is friendlier, thus attracted more customers. Moreover, he gave Estée Lauder Companies, Inc.’s White Linen fragrance its emblem (Devicq).
Therefore, this increased the amount of money spent on promotions and print announcements by roughly forty percent. Advertisements on TVs were changed from news to comedy programs respectively. This was majorly done to accommodate the organization’s young clients. Prescriptive products were established in 1990 and majorly designed to accommodate women from different ethnical backgrounds. Many cosmetics organizations were criticized for not considering various ethnical backgrounds when producing their products.
In the same year, a fresh company called Origin Natural Resources Inc. was formed from Estée Lauder. Besides, it was majorly formed to conserve the environment. For instance, it used wasted papers to produce packaging materials and organization’s parcels. They also made animal products like lanolin from the recycled papers. Origins were accepted in various areas like Cambridge and Manhattan, which became one of the leading selling sites.
The company’s department was controlled by Lauder’s grandson (William). He wanted to review how various cosmetics companies operate to improve his performance. The reviews would also make the company adapt to the 21st century rapid developments. Therefore, producing more products and improving customer relationship was the company’s main objective.
Two years later, the head of prescriptive (Daniel) became the head of Clinique Laboratories in America. Lauder’s sons, Leonard and Ronald retained their positions. Leonard retained his position as the Chief Executive Officer, while Ronald also stayed as the C.E.O. of both international and Clinique departments.
Evelyn (Leonard’s spouse) was given the position of senior vice-president, where she administered the advancement of fresh products. She later became Origin Natural Resources Inc.’s spokesperson since Launder could no longer be seen. In 1993, Origin Natural Resources Inc. accepted its first licensing business enterprise. Together with Tommy Hilfiger, this organization signed an elaborate international licensing contract. This led to the introduction of both Tommy fragrance and Hilfiger Athletics to be used by men.
Women fragrance introduced was called Tommy Girl. Two years later, Estee Launder bought many shares in Make-up Art Cosmetics Ltd. This company was considered as the producer of designer fragrances and meant for specialized fragrance artists as well as clients who were familiar with fashion.
By 1998, Make-up Art Cosmetics Ltd had obtained full control (The Estée Lauder Companies Inc. History, n. pag.). Estee Lauder also bought Bobbi Brown basics (The Estée Lauder Companies Inc. History, n. pag.). This was a specialized brand of cosmetic created by a popular cosmetic artist Bobbi Brown.
After, Lauder left her job as the Chief Executive Officer; she was referred to as the founding chair. Langhammer was named the president, while both Leonard and Ronald retained their positions. Lauder’s company registered as a public organization in 1996. Consequently, this would make the family cash out sections of their shares in the company. Registration as a public organization led to the improvement in the net sales to approximately $450 million (The Estée Lauder Companies Inc. History, n. pag.).
The family’s shares reduced to roughly sixty percent of the total shares and 93% of the voting shares. The company had revenue of $160.4 million on $3.19 billion trade in 1996 (The Estée Lauder Companies Inc. History, n. pag.). The increase was also felt in the following year with the company’s revenue increasing to $197.6 million from $160.4 million (The Estée Lauder Companies Inc. History, n. pag.). In 1997, Estee Lauder bought Sassaby Inc. and Aveda Company.
This led to the introduction of a new version of Jane color perfumes, a stylish product meant for young clients aged between 13 and 18 years. Even though most of the products produced by Estee Launder were considered to be expensive, the Jane line had a wide market range. For instance, they could be sold in both drugstores and Wal-Mart. Therefore, this represented a fresh marketing method for the organization. Aveda Company was purchased at $300 million (The Estée Lauder Companies Inc. History, n. pag.).
Moreover, its purchase led to the introduction of fresh products like shampoo and made-ups into the market. Other beauty products, located within the stylish aromatherapy section, were also produced. The purchase of the two companies showed that Estee Lauder was planning to venture into hair care. Also, it also indicated an average rate of distribution because the majority of Aveda’s profits were accrued made from the sale of hair salons.
In 1997, Lauder’s company signed an international licensing deal with Donna Karan International Company (The Estée Lauder Companies Inc. History, n. pag.). This was aimed at producing numerous brands of fragrances, cosmetic goods, and Donna Karen New York products. Since the company was using departmental store channels to distribute its products, it lost most of the clients who preferred collective sellers and other stores.
Consequently, this made Lauder and her family purchase Donna Karan International Company to avoid losing their market share. By buying fashionable brands, Estée Lauder Company is considered to be abandoning its traditional methods entering the huge market. Arguably, it is also abandoning its traditional ways of acquiring hair salon channels. For the company to maintain its brands, it currently spends a lot of money on advertisements and promotions.
For instance, they spend $1.03 billion in 1998 for advertisements and promotions (The Estée Lauder Companies Inc. History, n. pag.). This amount was considered to be more than 28% percent of the company’s total revenue. Arguably, Estee Lauder’s company will be forced to search for strategic buying targets. Therefore, one of the potential targets will be Stila Cosmetics Company, which is a rapidly advancing cosmetics corporation. Estee Lauder Company had intended to buy Stila Cosmetics Company in 1999.
2010 financial performance
In 2010, Estee Lauder had recorded a net sale of $7.8 billion (“Fortune 500” n. pag.). Arguably, this a six percent increase since it had a net sale of $7.32 billion in the previous year (“Fortune 500” n. pag.). In the same year, the company had accumulated an amount of money worth $478.3 million. This was also an increment considering that the previous year recorded a net income of $218.4 million (“Fortune 500” n. pag.).
Works Cited
Estée Lauder Companies. Heritage of Innovation. 2013.
“Fortune 500: 307. Estée Lauder“. CNN Money. 2011. Web.
Gillespie, Kate, and Hubert D. Hennessey. Global Marketing. Australia: South-Western Cengage Learning, 2011. Print.
Hellman, Anne. Marc Gobé and Joël Desgrippes on Emotional Brand Experience. Beverly, MA: Rockport Publishers, 2007. Print.
Hitt, Michael A, R D. Ireland, and Robert E. Hoskisson. Strategic Management: Competitiveness and Globalization : Concepts. Mason, OH: South-Western, 2007. Print.
Sherrow, Victoria. For Appearance’ Sake: The Historical Encyclopedia of Good Looks, Beauty, and Grooming. Phoenix, Ariz: Oryx Press, 2001. Print.
The Estée Lauder Companies Inc. History. n.d. Web.