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NEW YORK, United States — Estée Lauder Companies (ELC) has announced annual revenues of $11.8 billion for the fiscal year ending June, an increase of 5 percent on 2016.
Sales of beauty products online were up 33 percent across the board, the luxury beauty conglomerate announced on Friday. The makeup category alone posted growth of 7 percent to $5 billion, while shares increased 13 percent to $3.35, up from $2.96 last year.
These gains were attributed largely to the success of e-commerce globally — especially in China, where all of ELC’s 29 brands posted double-digit growth in online sales — as well as the acquisition of two millennial-focused makeup brands: Becca Cosmetics and Too Faced.
ELC purchased Becca Cosmetics for $200 million in October 2016, and Too Faced for $1.45 billion in November 2016: sales from both brands since acquisition contributed 2 percent of the overall 5 percent in terms of revenue growth. No easy feat, considering other ELC brands, like Clinique, Tom Ford and Bobbi Brown, have a more established beauty counter presence. But both Becca and Too Faced target a younger demographic, one that the Estée Lauder Companies is aggressively targeting.
“Millennials are spending more money on beauty products than any other demographic,” Dennis McEniry, president of Estée Lauder Companies online, tells BoF. “They are buying more beauty products per person than any other age bracket. They are more experimental and they are very very quick to react to new trends. Social media is the place where they discover what’s next.”
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Prior to the ELC acquisition, Becca Cosmetics had gained traction with beauty bloggers on social media — a single makeup tutorial led to 25,000 highlighter compacts being sold in 20 minutes. Currently, Becca has 1.9 million followers on Instagram: a recent video of a glittery lip gloss was viewed over 100,000 times. Too Faced has 9.9 million followers, and its page is a visually stimulating mood board that includes product flat-lays against a millennial pink backdrop: Boomerang videos of its cheek palettes regularly hit over 400,000 views. In contrast, Clinique, which was founded in 1968, has 1.4 million followers on the photo-sharing app.
Millennials are more experimental... Social media is the place where they discover what's next.
Too Faced and Becca are the first brands to be acquired by the group since it purchased Smashbox Cosmetics in 2010, and their addition to the ELC portfolio reinforces its new digital focus. Speaking at the time of the acquisition, Fabrizio Freda, president and chief executive of the Estée Lauder Companies, said “Too Faced is one of the most dynamic brands in the world… It has tremendous growth momentum online, [an] important, strategic and fast-growing channel.” That Too Faced was the Estée Lauder Group’s biggest-ever purchase is also relevant — especially considering its best-selling products include the Hangover 3-in-1 facial mist and Better than Sex mascara.
And ELC is not alone in its strategy. Three months prior to its acquisition of Becca, L’Oréal paid $1.2 billion for IT Cosmetics. While only 50 percent of L’Oréal’s $27 billion French business (the “Luxe” division) competes with Estée Lauder’s $11 billion prestige one, the two rivals have been locked in a race over the last three years to acquire brands, boost revenue and maintain relevance.
As far as ELC's acquisitions are concerned, both brands "are over-performing our expectations," says Dennis McEniry, president, ELC Online. "Too Faced more than doubled in sales last year over the 12 month period. These brands are performing well with strong product launches — and they're performing well in social media. They're really attracting to consumer trends, really focused on makeup category and connecting to trends," he says. Online sales within the ELC group are growing month-on-month, quarter-on-quarter, according to Friday's report.
In ELC's effort to harness the tech-savvy millennial consumer, this year saw the launch of services that allow consumers to digitally try on makeup. Estée Lauder’s "Lipstick Chatbot" — which uses augmented reality and was developed by creators of AI-software Modiface — allows consumers to see how the brand's lip colours will look on their own face. Meanwhile, Smashbox's "Try-On Studio" facility allows users to upload a selfie, and see how the brand's face, eye, lip and cheek products look on that image.
The group has also launched an online tool that connects customers with trained MAC makeup artists, Clinique consultants and Estée Lauder beauty advisors, instead of customer service representatives. "We think stores will always be a strong part of our business, but we can be very data driven online," says McEniry. "Every visit, every source of traffic, every item that they looked at, every product that they looked at, which allows us to drive better results of repurchase, and it's where we create long-term value."
ELC's heritage brands are also making efforts to connect with the millennial customer. Last year, Clinique launched the Pep-Start range, with Instagram-friendly fluro-orange and fuchsia packaging, created especially for younger skin. And Estée Lauder itself has enjoyed a boost in sales thanks to millennial demand for its Double Wear foundation, for which 21-year-old Kendall Jenner is the face. Why? Social media has created a demand for makeup that can deliver a perfect selfie — and an airbrushed complexion offline too.
"The millennial generation is very visual... they live their lives taking pictures of themselves," says Jennie Tse Wang, vice president of global finance and planning, Estée Lauder Companies online. "There are more photographs taken every day than there were in the first 100 years of photography. That's why you're seeing such an explosion in makeup."
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