Welcome back to the Deep Dive. Today we are opening
up a topic that quite honestly is probably sitting
in your bathroom cabinet right now. Oh for sure.
It might be hiding in your gym bag or maybe it's
sitting front and center on your dresser. It
is a name that feels incredibly familiar almost,
you know, like it's part of the wallpaper of
our lives. It really is. You see it, you recognize
it, but you probably don't think about it. It
is absolutely ubiquitous. You see it in every
airport duty free shop from Heathrow to Hong
Kong, every high end department store from Saks
to Harrods. And this is the important part. It
is increasingly dominating your social media
feeds, whether you realize it or not. We are
talking about the Estee Lauder companies, and
I have to be honest, before digging into this
massive stack of research, I just thought of
it as, well, a brand, you know. Just Estee Lauder.
Exactly, Estee Lauder. The perfume your mom wore,
or maybe that distinct little brown bottle of
advanced night repair serum. But looking at the
sheer scale of this operation, calling it a brand
is a massive understatement. It is a behemoth.
It really, really is. It's so easy to mistake
the name on the bottle for the entirety of the
business. But the Estee Lauder companies, or
ELC as it's known in the financial world and
the industry, is actually a massive corporate
infrastructure that essentially shapes the global
prestige beauty industry. Shapes it. We aren't
just talking about one line of lipstick here.
We are talking about the second largest cosmetics
company in the world. Sitting right behind L
'Oreal. Okay, let's unpack this immediately because
the scale here is kind of mind -blowing. When
we say second largest, what are we actually looking
at in terms of the numbers? Because the research
here points to some, well, some dizzying figures
for the fiscal year 2025. Right, so to give you
the headline numbers first, as of fiscal year
2025, the company reported revenue of $14 .3
billion. $14 .3 billion. Billion, with a B. They
are sitting on total assets worth $19 .9 billion.
That is a massive financial footprint. They employ
roughly 57 ,000 people globally. But, and this
is crucial for our analysis today, sheer size
doesn't insulate you from volatility. That's
the hook, isn't it? Because looking at these
reports, despite that massive $14 billion revenue,
everything isn't exactly perfect in Canada. No,
it's not. And that's the central tension of our
deep dive today. While they pulled in massive
revenue, they actually posted a net loss of $1
.1 billion in 2025. Wait, let me just pause you
there. A $1 .1 billion loss on $14 billion in
revenue? That is a significant disconnect. How
does a company selling that much product end
up in the red by a billion dollars? It is a stark
contrast. And it signals that we are looking
at a company in a very, very painful transition.
We are seeing a legacy giant that generates massive
sales but is facing significant profitability
challenges, structural overhead issues, and a
changing consumer landscape that they are, frankly,
frantically trying to adapt to. It's a giant
ship trying to make a very sharp turn. It's a
very complex moment for them, yeah. Which makes
this the perfect time to explore their story.
Our mission today is to figure out how a husband
and wife team in 1946 transformed four symbol
skin creams into a global empire that now owns
everything from Tom Ford to the ordinary. And
more importantly, we need to understand how they
are navigating this turbulent economic landscape
in 2026. Exactly. It's a story of legacy versus
modernity. It's about how a company built on
the high -touch service of department store counters
survives and attempts to thrive in the age of
algorithmic feeds and AI. And just to set the
stage for the listener who might not realize
just how much this company owns, it's not just
the name Estee Lauder on the door here. Well,
far from it. That's the empire aspect we need
to grasp. The portfolio is incredibly vast. strategically
segmented. Right. You have the powerhouse makeup
brands like Emmy Cosmetics, which basically defined
artistry in the 90s. You have the clinical skincare
giants like Clinique. Everyone knows Clinique.
Everyone knows Clinique. You have the ultra luxury
tier with La Mer. You have the niche fragrance
houses like Jo Malone London and La Labo. You
have hair care with Aveda and Bumble and Bumble.
And of course. Massive recent acquisition of
the Tom Ford brand. It's like the Avengers of
the beauty world. They've just assembled every
heavy hitter under one roof. That's a really
good analogy. Yeah. And physically, while they're
headquartered in the General Motors building
in midtown Manhattan, which feels very classic,
old school New York luxury, their footprint is
truly global. They actually opened a massive
high -tech distribution center in Galgen in Switzerland
back in 2022. So it's not just an American company
anymore. Not for a long, long time. This is a
machine with moving parts all over the world.
So we have the current picture, massive revenue,
a confusing Met loss, and a portfolio of brands
that basically runs the world. But to understand
the DNA of this company and perhaps why they
are struggling to pivot today, we have to go
back. Way back. We need to go back to 1946. We
do. To New York City. The humble hustle. I love
this part of the story because it really strips
away the glamour. It starts in New York City
with Estee and Joseph Lauder. And what blows
my mind is that they didn't launch with some
massive conglomerate strategy or venture capital.
No, not at all. They started with just four products.
That's right. Just four. Cleansing oil, skin
lotion, super rich all -purpose creme, and creme
pack. That was it. It sounds so simple now. Super
rich, all -purpose creme. It's very descriptive,
very utilitarian. It almost sounds like something
you'd buy at a hardware store, not a luxury counter.
It does, doesn't it? Yeah. But you have to remember
the context. This was post -war America. The
consumer market was just starting to boom again
after years of rationing and austerity. People
were hungry for a bit of luxury, but they also
wanted things that worked. And Estée Lauder herself.
She was the engine. She was a marketing genius
before the term really existed. She understood
something that modern digital marketers often
forget, the power of touch. The high touch method.
I see that term popping up in business schools
all the time in relation to her. Exactly. She
famously said, telephone, telegraph, tell woman.
She believed that if you put the product on the
woman's face, the product would sell itself.
She didn't just advertise. She demonstrated.
She's in the trenches. She's out there on the
floor, touching faces, applying creams. She realized
that beauty is an intimate transaction. It's
not just about selling a product. It's about
selling confidence. And the hustle to get that
first department store count. The research mentions
they got into Saks Fifth Avenue in 1948. That
feels like a huge turning point. It was the defining
moment. You have to understand retail hierarchy,
especially in the 1940s. Getting into Saks established
the brand as prestige immediately. So it wasn't
a choice. It was a strategy. It was absolutely
a strategy. They weren't selling at the drugstore.
They were selling at the most exclusive address
in Manhattan. That single decision set the pricing
power and the brand positioning for the next
80 years. It positioned the company as an aspirational
luxury player right from the jump. And there's
a famous story about how she got that order,
right? Something about accidentally spilling
perfume? That's the legend, yes. The story goes
that she went to the Galleries Lafayette in Paris
much later. But even in the early days in New
York, she was known to accidentally drop a bottle
of her youth do bath oil on the floor of a department
store. Accidentally? Exactly. The scent would
waft up. Women would stop and ask what that amazing
smell was and demand the product. It forced the
store managers to stock it because the customers
were literally following their noses. That is
guerrilla marketing at its finest. Before we
had viral videos, we had spilled perfume. It
really is. And she pioneered the concept of the
gift with purchase. Today, we take it for granted.
You buy a lipstick, you get a little makeup bag
with samples. I just assumed that always existed.
Nope. Estee Lauder invented that. Wait, she invented
the free gift? Essentially, yes. She realized
that giving away a free sample wasn't a loss.
It was a customer acquisition cost. It got the
product into hands and once they tried it, they
came back to buy the full size. It transformed
the economics of the beauty counter. It turned
a transaction into a relationship. That's brilliant.
Just fundamentally brilliant. And they didn't
stay local for long. I was surprised to see how
early they went international. Harrods in London
by 1960. Yes. And opening an office in Hong Kong
in 1961. Think about that. 1961. Global travel
and communication weren't what they are today.
We didn't have Zoom. We barely had reliable international
phone lines. So that was a huge risk. A massive
risk. And expanding to Hong Kong that early showed
a tremendous amount of foresight. regarding the
global market, particularly the potential of
the Asian consumer, which we will see becomes
critical to their finances later on. OK, so they
have the prestige locations, they have the international
footprint, but they also started doing something
that I think is the secret sauce of this company.
They stopped just being Estee Lauder and started
inventing new personalities. Innovation and diversification.
Yeah. Precisely. They realized early on that
they couldn't just sell one idea of beauty to
everyone. They needed to segment the market.
You can't be everything to everyone under one
label. Exactly. If Estee Lauder was the elegant
mother, who was the daughter? Who was the husband?
Let's talk about the husband, Eramis, introduced
in 1964. Right. This was a dedicated move into
men's grooming and fragrance. At the time, this
was a very, very niche market. And here's a fun
fact that I love. The name Aramis isn't just
a musketeer reference. No, it's not. It comes
from an exotic Turkish root that was originally
used as an aphrodisiac. No way. That is incredible
marketing. Here, splash this aphrodisiac root
on your face. It worked. It created a distinct
identity for men, separate from the floral or
feminine associations of the main Estee Lauder
brand. It gave men permission to care about grooming
by packaging it in something masculine and slightly
mysterious. But the real game changer, the one
that I feel like everyone knows, is Clinique.
1968. This seems like a massive pivot from luxury
creams to hard science. Clinique was revolutionary.
Right. Before 1968, skincare was often sold on
mystery, allure, and packaging. It was about
hope in a jar. Right. The miracle broth idea.
Exactly. Clinique was sold on dermatology. It
was guided by Dr. Norman Orrentree. It was fragrance
-free. It was allergy tested. The people at the
counters wore lab coats. The lab coats. I remember
that. It was a whole aesthetic. It feels very
modern, doesn't it? Like that pitch, dermatologist
guided, fragrance free is exactly what brands
are doing today on social media. It was decades
ahead of its time. Consider the risk. Allergy
tested? Sounds clinical. Almost medicinal. At
the time, beauty was supposed to be romantic.
But they bet that women wanted efficacy. And
it worked. It worked spectacularly. It allowed
them to capture a completely different customer,
someone who wanted a regimen, who wanted something
clean before clean duty was a buzzword. And interestingly,
Clinique was the first women's cosmetic company
to introduce a second line for men, skin supplies
for men, in 1976. So they were doubling down
on that clinical approach for everyone. Exactly.
They're covering all the bases. High -end luxury
with Estee, men with Aramis, science -based skincare
with Clinique. It's a portfolio strategy before
they even started acquiring other companies.
And then there is this fascinating historical
footnote. They entered the Soviet Union in 1981.
Yes. This is where we... the geopolitical ambition
of the company. Entering the Iron Curtain in
1981 was not a small feat. I can't even imagine
the logistics of that. It was incredibly complex.
Most Western brands weren't there. It speaks
to a strategy of planting flags in emerging markets
long before competitors dare to go. It established
them as a truly global player, not just a Western
one. It's incredible to think about. Okay, so
that's the foundation, the origin story. But
here's where it gets really interesting. The
1990s. Because up until this point, it's mostly
a family business building their own brands from
scratch. But in the 90s, the vibe shifts. The
acquisition era begins. And structurally, the
company changes forever. The IPO. Correct. On
November 16th, 1995, the Estee Lauder companies
went public on the New York Stock Exchange. The
share price was $26, which, if you adjust for
splits and inflation, is roughly equivalent to
$50 in 2024 terms. And this is a huge moment.
This moved them from a private family fiefdom
to a publicly traded organization. It did. But,
and we have to stress this, they didn't lose
control. Right. This is critical. No, and that's
a critical distinction. They implemented a dual
-class share structure. We'll get into the gritty
details of that later. But essentially, the family
kept the shares with the super voting rights.
They raised capital from the public, but they
kept the steering wheel firmly in their own hands.
So flush with cash from the IPO, let's talk about
the shopping spree, because instead of just building
new brands like Origins, which they launched
in 1990, they started buying the competition
and they weren't just buying anyone. They were
buying the cool kids. They were. They realized
they couldn't inherently be cool in every demographic.
Sometimes corporate culture is too slow or too
polished to create something gritty. So you buy
the grit. And first up is MSC Cosmetics. The
Messy. I remember when MC was the edgy makeup
artist brand. It fell underground. It was the
brand for people who were serious about makeup.
Exactly. It was Toronto -based, started by makeup
artists, Toscan and Frank Angelo. It was very
inclusive, very bold, very Viva Glam. Estee Lauder
made an initial investment in 1994 and fully
acquired it by 1998. So why would MC sell to
the establishment? Scale. Distribution. Supply
chain. Emeke needed the muscle that only a giant
like ELC could provide to go from a niche artist
brand to a global powerhouse. And for ELC, what
did it get? Street cred. It gave them access
to a younger, more artistic demographic that
would never have walked up to an Estee Lauder
counter to buy super rich creme. It was a genius
move. And then Bobby Brown in 1995. The natural
look revolution. Bobby Brown was the antithesis
of the 80s excess. It was about looking like
yourself, only better. ELC saw that trend coming
a mile away and just bought it instantly. And
La Mer in 1995, the same year. The ultimate luxury
play. This was a different strategy entirely.
They acquired the brand and the original recipe
for the Miracle Broth from the estate of the
founder, Max Huber. So this wasn't about a trend.
This was about owning the absolute peak of the
luxury mountain. Exactly. If you wanted the most
expensive cream on the market, the status symbol
cream Estee Lauder companies now owned it. That
solidified their hold on the ultra -premium skincare
market. Then Aveda in 1997. Entry into holistic
beauty and hair care. They bought the natural
and eco -conscious angle before it was mainstream.
And Jo Malone London in 1999 for Neusch Fragrance.
Right. They realized fragrance was moving away
from big blockbuster designer scents and towards
more personal boutique experiences. So they bought
one of the leaders in that space. They really
just covered every single base in the 90s. It's
an incredible portfolio. They built a portfolio
that made them recession -proof in a way. If
people weren't buying $300 cream, maybe they
were buying a $20 lipstick from Emery. If they
weren't into makeup, maybe they bought a Veda
shampoo. It's portfolio theory applied to your
bathroom cabinet. That's the perfect way to put
it. So that brings us into the 2000s and 2010s.
The strategy seems to shift again. They keep
buying, but now they are chasing trends even
harder. They seem almost desperate to stay young.
I think chasing relevance is the right phrase.
The market was speeding up. You had the rise
of YouTube beauty gurus, then Instagram. The
high -tech counter at Saks wasn't where trends
were starting anymore. They were starting online.
So they buy Smashbox in 2010. A studio -born
brand from Los Angeles. Very photo -centric.
It was designed to look good on camera, which
was perfect for the emerging selfie culture.
And then the big one in 2016, Too Faced. They
spent $1 .45 billion on that. That was a massive
bet. At the time, their largest ever. And was
it worth it? Well, frankly, in hindsight, it's
often debated by analysts. Two -Faced was huge
on social media. It was fun, pink. unapologetic.
It was the antithesis of the clinical clinique
look. So this was a pure play on social media
hype. Absolutely. It signaled that ELC was willing
to pay a massive premium to capture the digital
native generation. And more recently, they bought
into the skintellectual movement with Deceum
and The Ordinary. Yes, initially investing in
2021 and completing the acquisition in June 2024.
Now, this is a fascinating strategy. And it feels
counterintuitive. It does. The Ordinary changed
the industry by offering active ingredients like
niacinamide, Right. This completely undercut
the entire luxury markets model of selling you
a fancy cream for $100 with a tiny amount of
that same ingredient. So why buy them? Isn't
that cannibalizing your own sales? That's a defensive
acquisition. If you can't beat them, buy them.
By owning the ordinary, ELC essentially bought
the disruption that was threatening their high
-margin brands. They capture the customer at
the entry -level price point, hoping to trade
them up to Clinique or Estee Lauder later. It's
like a gateway drug for skincare. That's a cynical
way to put it, but from a business perspective,
yes. And they did the same with K -Beauty by
buying Dr. Chart Plus in 2019, the pioneers of
BB cream. So they're just constantly looking
for where the heat is. Exactly. Whether it's
Korea, social media, or ingredient transparency.
But then we have to talk about the crown jewel
of luxury acquisitions, the Tom Ford deal. The
luxury capstone. announced in November 2022.
$2 .8 billion. That is a serious chunk of change.
It is. But think about what they bought. Tom
Ford isn't just a beauty brand. It's a global
fashion house. By acquiring the brand, they secured
the rights to the Tom Ford Beauty line, which
is incredibly profitable, especially the fragrances
like Black Orchid. Which they already had the
license for, right? They had the license, yes.
But licenses expire. This was about owning it
forever. And they also took ownership of the
intellectual property of a major luxury house.
So they own the name Tom Ford now, even the suits.
They own the brand trademark. Now, the structure
of the deal was very clever. They licensed the
fashion back to Zygna Group to handle the suits
and clothes, and they kept the beauty for themselves.
Ah, so they control the high margin part. It's
a brilliant, asset -light way to control the
high margin part of the business. beauty fragrance
while letting experts handle the low margin high
complexity part manufacturing suits so they've
assembled this empire they own the high end the
low end the science the fun the hair the skin
you would think they would be printing money
well they generate revenue certainly but as we
mentioned at the top the modern era specifically
looking at 2024 through 2026 has been rocky let's
get into that section three the modern era and
the financial landscape Because there's been
a changing of the guard, hasn't there? Huge leadership
changes. Fabrizio Freyda, who was the CEO from
2009 all the way through 2024, stepped down.
He was the architect of that massive growth period
we just discussed. He turned ELC into a stock
market darling for a decade. And who is running
the ship now? As of 2025, the new president and
CEO is Stephan De La Favre. He's a veteran of
the company, a former executive group president
who oversaw Estee Lauder and Aaron. So it's an
internal promotion. It is, which signals they
want someone who understands the complex machinery
of the company rather than an outsider coming
in to slash and burn. They want stability. But
we have to address the elephant in the room,
or perhaps the elephant in the boardroom, the
Lauder family. You cannot separate the company
from the family, even in 2026. The Lauder family
still owns about 38 % of the total equity. But
here is the kicker. They control 86 % of the
voting power. 86%. Let's just sit with that for
a second. So basically, what the family wants
happens. Effectively, yes. William P. Lauder
is the chairman of the board. This dual -class
stock structure means that while it is a public
company, it is governed like a kingdom. What
are the pros and cons of that? Because it seems
like a double -edged sword. It absolutely is.
The pro is long -term thinking. They aren't just
looking at the next quarter. They're looking
at the next generation. They protect the brand
equity from short -term activist investors. And
the con? A con is a potential lack of agility.
It can make it harder to pivot quickly when the
market demands radical change or to remove leadership
that isn't performing. It can create an environment
where legacy can sometimes trump innovation.
And radical change might be needed. If we connect
this to the bigger picture, let's look at that
2025 financial report again. Revenue, $14 .3
billion. Operating income loss, $785 million.
Net loss, $1 .1 billion. What is driving this?
Is it just that people aren't buying makeup?
It's more complex than that. It's a combination
of three big things. First, operating costs and
restructuring. They're spending money to streamline
the business. Closing underperforming stores,
laying people off. That costs money up front.
You have to spend money to save money. In theory.
Second, something called goodwill impairment.
Okay. Can you explain that in plain English?
Sure. Remember those big acquisitions? Two -face
for $1 .45 billion, Dr. Chart, Plessy. When you
buy a company, a lot of the price you pay is
for the goodwill, the brand name, the reputation.
It's an intangible asset on your books. Got it.
If those brands stop performing as well as you
projected when you bought them, accounting rules
say you have to admit the brand isn't worth what
you paid for it. You have to write down the value
of that goodwill. And that write down counts
as a loss on your income statement. So the shopping
spree is coming back to bite them a little bit.
Some of those big bets aren't paying off as expected.
Precisely. And the third factor, and this is
a huge one, is the travel retail slump. Duty
free shops. Yes. ELC was heavily, heavily dependent
on duty free sales, particularly in Asia. The
Daegu market, personal shoppers in places like
Korea buying beauty products in bulk to resell
in China, that market basically collapsed due
to new regulations and the economic cooling in
China. I mean, that was a massive profit engine
for them. Massive. And it just sputtered out.
The stock price reflects this. Oh, absolutely.
Remember, the IPO was $26. Well, while it soared
to over $300 at its peak a few years ago, the
current financial challenges have put significant
pressure on their valuation. It's been a painful
correction for investors. So how are they trying
to fix it? They aren't just sitting there losing
a billion dollars, right? There has to be a plan.
No, of course not. They are pivoting. And the
strategy seems to be twofold, technology and
emerging markets. Let's talk about the tech.
October 2024, they opened something called the
Global Fragrance Atelier in Paris. This is fascinating.
It's located in La Maison des Parfums. It's an
AI -enabled innovation hub. AI perfume? How does
that even work? Essentially, they're using artificial
intelligence to analyze decades of fragrance
formulas, global scent trends, ingredient combinations,
and consumer preferences at a speed no human
nose could ever match. So it tells the perfumer,
hey, people in Brazil are really into notes of
vanilla and cedar right now. Exactly that. But
on a much more complex level, they are trying
to marry the artistry of French perfumery, the
nose, with the data analysis of AI. It shows
they're trying to innovate their way out of the
slump by creating blockbusters faster and with
a higher chance of success. And then the second
part of the strategy. Emerging markets. I saw
a note here about December 2025. Yes. They announced
they are taking minority stakes in brands across
China, Mexico, and India. Now, they had already
dipped their toes in India with forest essentials
back in 2014, right? They did, buying a minority
stake in that Ayurvedic luxury brand. But this
new push in 2025 is more aggressive and broader.
They are targeting the growing middle class in
these specific regions. So they've realized something.
They realize that growth isn't going to come
from selling more Clinique in a mall in Ohio.
That market is saturated. Right. The growth is
going to come from selling local, culturally
relevant brands in Mumbai, Mexico City, and Shanghai.
It's a... hyper -local strategy on a global scale.
Instead of forcing Western beauty standards on
the world, they are investing in the local definitions
of beauty. It's a much smarter, more sustainable
approach for the next decade. No, we can't talk
about a beauty company without talking about
marketing. And for Estee Lauder, that means the
face. The face is iconic. The Estee Lauder woman.
From the past to what we see today, it's been
quite a journey. It used to be very specific.
Karen Graham, Elizabeth Hurley, very polished,
very wealthy looking. Very aspirational in a
traditional Western aristocratic sense. It was
about old money glamour. But the evolution of
the face. mirrors the evolution of cultural standards
of beauty. Right. I mean, signing Kendall Jenner
in 2015 was a huge moment. That was the bridge
to the Instagram generation. Yeah. Before Kendall,
Estee Lauder felt like your mother's brand. It
did. Kendall made it relevant to the girl browsing
her phone. It was controversial at the time.
Purists hated it, but it brought in the numbers.
It was a purely commercial decision. Well, he
didn't stop there. The diversity push has been
significant. And necessary. Absolutely necessary
for a global brand. They signed Leah Kibede as
the first African face. They brought on Lou Nguyen,
Joan Smalls. These weren't just token nods. These
were major global campaigns. They needed the
face of the brand to actually look like the customers
they were selling to globally. And recently,
the ambassadors have become even more interesting.
Amanda Gorman, the poet. Yes. That signals a
shift from just visual beauty to substance and
intellect. It's a very smart move. Saying smart
is beautiful. And then the K wave. The K wave
capturing the massive influence of Asian pop
culture. They announced IU as the first Korean
global brand ambassador in 2024. IU is huge.
That connects directly back to that Asian market
strategy we talked about. It's a very calculated
move to leverage the Halley global phenomenon.
If IU uses a serum, it sells out in Seoul, Tokyo
and increasingly Los Angeles. Now. Running a
company this big isn't always about glamorous
photo shoots. Sometimes crisis strikes. And we
have to look at how they handled the big one,
COVID -19. August 2020, a very difficult time.
Remember, this is a company built on department
stores. When the malls closed, their revenue
tap turned off. Their whole business model was
threatened overnight. Completely. The company
had to make some hard choices. They cut between
1 ,500 and 2 ,000 jobs. That was about 3 % of
their workforce. And they closed stores. 10 to
15 percent of their standalone stores. They realized
that the foot traffic just wasn't coming back
the same way, so they had to aggressively pivot
to digital operations. It was a painful but necessary
correction to survive the pandemic. It forced
them to accelerate their e -commerce capabilities
by about five years in the span of five months.
Speaking of operations, I want to briefly shout
out a name that popped up in the research, Jeanette
Sarkeesian Wagner. Ah, yes, an unsung hero of
the operational side. She was the one who really
opened up those difficult markets in the 80s
and 90s, right? The Iron Curtain? Correct. As
head of international operations, she was pivotal
in getting Estee Lauder into the USSR and China
when those doors were just barely cracking. open.
Under her watch, the international division went
from a small side project to generating half
the company's revenue. It's a good reminder.
It is. A reminder that behind the famous faces
like Kendall Jenner, there are incredibly sharp
business operators making this machine run. Absolutely.
But talking about the machine running, sometimes
the machine runs into trouble. We need to move
into Section 5, controversies and challenges.
Because you don't get to be a $14 billion company
without stepping on some toes or facing some
ethical dilemmas. That is unfortunately true.
When you operate at this scale, ethical consistency
becomes very, very difficult to maintain across
every single market and supplier. The biggest
one that always seems to come up in the beauty
community is animal testing. This is a major
tension point. A real thorn in their side. Estee
Lauder companies owns brands like Aveda and Smashbox
that built their reputations on being cruelty
free. That's their whole identity. It is. They
market themselves heavily on not. testing on
animals. But. But the parent corporation sells
other brands in mainland China. And historically,
the Chinese government has required animal testing
for many cosmetic products to be sold in the
country. This is called post -market surveillance
or entry testing. So if you are a consumer who
buys Aveda because you love animals, but Aveda
is owned by a parent company that pays for animal
testing in China for its other products or even
for Aveda products sold there. It's a contradiction.
It creates a massive ethical gray area for the
consumer. ELC states they perform non -animal
testing where possible and advocate for alternative
methods globally, but they comply with local
laws where required. For a purist, that compliance
is a deal breaker. No way around it. For a pragmatist,
they might argue that being in the market allows
them to influence the Chinese government to change
the laws. Which, to be fair, China has started
to do recently, slowly phasing out some of those
requirements. It's complicated. Then there was
the child labor issue. This was back in 2001.
This was a disturbing report involving a contract
manufacturer in New York, of all places, making
products for their Origins brand. What happened?
It turned out the manufacturer, a company called
Common Sense Natural Soap and Body Care, was
owned by a group led by a cult leader, and children
were found working in the factory. That is horrifying.
How did ELC respond? they terminated the contract
immediately they stated they were totally unaware
of the conditions prior to the inspection but
it highlights the risks of complex supply chains
even if you are a massive company if you outsource
manufacturing you are vulnerable to the bad practices
of your partners it was a wake -up call for the
industry regarding auditing suppliers There are
also geopolitical issues. We mentioned the family's
strong influence. That has led to boycotts. Yes.
Since at least 2001, there have been boycott
campaigns led by pro -Palestine activists. This
is largely due to Ronald Lauders, one of the
key family members and son of Este, and his very
public, very significant pro -Israel activities
and political stances. And again, we aren't taking
a side here on the conflict itself, but it's
important to note that for a global brand, the
political activities of its owners can have a
direct impact on consumer sentiment. Absolutely.
In a polarized world, the family aspect of a
family -controlled business becomes a liability
as much as an asset. When the name on the building
is the same as the name on the political donation,
consumers connect those dots. And briefly, SOPA.
The SNAP Online Piracy Act. Right, the Internet
Freedom Controversy. ELC appeared on lists of
companies supporting SOPA back in the day. Critics
felt the bill was overreaching and would harm
Internet freedom. It didn't sit well with the
younger digital native audience they were trying
to court with brands like MAC and Smashbox. The
real disconnect. It showed a disconnect between
the corporate lawyers and the marketing department
for sure. It seems like they're constantly walking
a tightrope. But we can't finish without talking
about the other side of their impact. The positive
side. The pink ribbon. You really can't tell
the story of Estee Lauder without the Breast
Cancer Awareness Campaign. It's part of their
DNA now. I think people forget that the pink
ribbon didn't just appear out of nowhere. It
was launched in October 1992 by Evelyn Lauder.
Estee's daughter -in -law. She co -created the
ribbon with Self Magazine. And you have to remember,
back then... Breast cancer was spoken about in
hushed tones. It wasn't a public conversation.
It was stigmatized. Very much so. This campaign
helped bring it into the light. And the impact
has been undeniable. It has. They have raised
over $89 million globally for research, education,
and medical services. And what's impressive is
how they mobilized the entire portfolio. It wasn't
just an Estee Lauder brand initiative. It united
all 19 of their brands at the time. That's powerful.
It is. Whether you were at a Clinique counter
or buying La Mer, you saw that ribbon. It's arguably
one of the most successful corporate social responsibility
campaigns in history. It changed the culture
surrounding the disease. So we have covered a
lot of ground. here, from four creams in a kitchen
in 1946 to an AI fragrance lab in Paris in 2024,
from a net loss of $1 .1 billion to a charitable
impact of $89 million. So what does this all
mean? Where does this leave them? We are looking
at a company at a crossroads. That is the only
way to describe it. How so? They have the legacy.
They have the moat of these incredible brands,
Tom Ford, Lemaire, Amaze Command. Those names
aren't going away. They have brand equity that
takes decades to build. That's their strength.
But they're facing a financial reality that is
harsh. Losing a billion dollars is a wake up
call. The travel retail bubble has burst. The
department store model is fading. And the market
is changing faster than ever. Exactly. They are
trying to pivot with this hyper localization
in India and Mexico and this investment in AI.
But the question remains, can a company that
is still 86 percent controlled by the founding
family truly be agile enough? Right. Can you
really disrupt yourself when your primary mission
might be protecting a legacy? Or will they just
rely on their old playbook? Yeah. Waiting for
someone else to innovate and then buying them.
They bought the cool with Ambat. They bought
the science with The Ordinary. They bought the
luxury with Tom Ford. But at a certain point,
can you buy your way out of every problem or
do you eventually run out of money to buy the
solution? That is the big question. With the
new CEO, Stéphane de la Favre, taking the helm
in 2025 and the family still holding the keys,
the next five years will determine if ELC remains
the undisputed beauty behemoth. or if it starts
to show its age. It's going to be a fascinating
watch for anyone interested in business, branding,
or, you know, just lipstick. So here is my challenge
to you, the listener. Go to your vanity table.
Go to your bathroom. Look at the labels. Flip
them over. See how many of them trace back to
the General Motors building in New York. You
might be surprised to find that your indie favorite
is actually part of the empire. It's a good exercise
in realizing just how consolidated the world
of beauty really is. Thanks for joining us on
this deep dive into the Estee Lauder companies.
We will catch you on the next one.