The Estée Lauder brand has been developing a strong presence in China since opening the market in 1993, and remains the company’s principal engine. During fiscal 2011, it became the leading prestige brand in its distribution, with growth outpacing the total prestige market, according to company documents. Overall, Asia-Pacific is the Estée Lauder Companies’ fastest-growing region with sales up 17% last year, driven by skin care.
Despite a price hike of 8% to 10% on its products in China last year, investment researchers at Trefis, a financial forecasting site, expect little impact to sales. “Estée Lauder makes premium cosmetics and (Chinese) consumers are led by brand image and product quality rather than prices,” Trefis stated in a report. “As a result, we do not expect to see any noticeable loss in market share.”
Meanwhile, Euromonitor International predicts that total sales of beauty and personal care in China will rise rapidly, from $24 billion in 2010 to $34 billion by 2015.
The Estée Lauder brand connects with the Chinese consumer in a number of ways:
*Skin care represents more than 60% of the beauty market in China. So, the Estée Lauder brand skewed its product offering toward that segment. But it also paid attention to specific product preferences: Initially, the company focused on moisturizers as a key entry item, but learned that eye products were more important and changed approaches.
*Along with offering the brand’s core items, the Estée Lauder brand designs formulas for Chinese preferences. In 2005, it opened its first research lab in China, and in 2011, expanded capabilities with the Asia Innovation Center in Shanghai. The company said the new facility reinforces its “strong commitment to local consumers by developing products tailored to the specific needs of Chinese and Asian skin.” It also draws expertise from its Chinese Dermatological Expert Panel, which includes dermatologists and researchers from the country’s top hospital, China Medical University.
*In 2010, the Estée Lauder brand signed its first Chinese global face of beauty when it tapped fashion model Liu Wen, a native of Beijing. She began appearing in Estée Lauder brand advertisements in January 2011.
*Looking to gain deeper business insight into China, the company named Wei Sun Christianson to its board of directors in March 2011. Wei, a graduate of Amherst College and Columbia University Law School, is the Managing Director and Chief Executive Officer for Morgan Stanley China.
*The number of Chinese traveling is on the rise, and the brand has used the travel retail channel as a point of introduction. The company has found that not only will the consumer buy while on the road, but she will also remember the brand when she returns home. Advertising supports the effort with Estée Lauder banners found in airports and even at online travel sites.
*Estée Lauder has a physical presence in 52 Chinese cities, but has been able to reach consumers in 345 Chinese cities through its Estée Lauder brand e-commerce platform launched in 2008. And, the company’s efforts in China are apparently just beginning. “Expansion in China continues every quarter through increased distribution to organic growth,” said Estée Lauder Companies President and Chief Executive Officer Fabrizio Freda, at a recent investor’s conference. “Our biggest emerging market opportunity is China.”