An introduction to the beauty and personal care industry

(Number of beauty-related Youtube views per year over the past decade.)

After clothing and accessories, the second largest social media segment by product category is health and beauty.

Nowadays, Augmented Reality technology is rising, and the two companies are also willing to spend money to constantly ensure that the technology of marketing channels is ahead. Of course, the premise is to have a good product. With a good product, even if the channel is a few years behind, the story of Estee Lauder tells us that the market will always come back.

The beauty and personal care industry can be divided into skin care products, hair care products (such as Aveda), cosmetics, and fragrances (such as Estee Lauder's Zumlon).

Over the past decade, skin care products have seen the fastest growth, hair care products and cosmetics are basically the same, while perfume accounts for a relatively small proportion. Previously, we also saw that skin care products accounted for 44% of the revenue and 75% of the operating profit of the Estee Lauder Group, which is not only the largest plate, but also the most profitable plate. Similarly, among the major sectors of L 'Oreal, skin care products are also the largest sector, accounting for 39%.

So what is the specific difference between skin care products and cosmetics? Skin care products include serum, day/night cream, face cream, eye cream, etc., which mainly solve the following three problems of the skin: cleansing (such as toner to remove the stratum corneum, promote the smooth metabolism of the skin), hydration, isolation (concealer, moisturizing also counts). The rest of the beauty products used on the body belong to cosmetics. Makeup includes Color Corrector (to remove red or black circles), Concealer (to cover scars or imperfections), foundation (to increase the radiance /radiance of the face to cover uneven skin), Matte Primer /Silicone Primer (filling voids /pores and fine liner /fine liner), Powder /Powder (reducing excessive light reflection caused by oily skin), etc.

The history of Estee Lauder is interesting. The biggest company in the 1950s was Revlon, and the head of Revlon wanted to buy out Estee Lauder, but Ms. Lauder refused. In 1968, Estee Lauder launched the Clinique series, which is mainly for hypoallergenic (low allergen), fragrance-free (no fragrance), relatively friendly and suitable for all kinds of skin. Cosmetics and skin care products developed by dermatologists. The brand comes up with a twice-daily, three-step Cleanse that starts with a cleanse, followed by Exfoliate and finally Moisturize, increasing the number of products used in the process and the amount customers spend. At the same time, this customized route for oily skin, dry skin, and combination skin was unique at that time, and it was widely loved by some women who were worried about skin allergies and could not be taken care of by traditional cosmetics. At first, when Leonard proposed the idea, Ms. Lauder was reluctant, but Leonard convinced Lauder not to put his name in the name of the new brand. Clinique was unprofitable for the first few years, and Leonard had to lay off 10% of his workforce (something he had never done before), causing some upheaval in the company. Looking back on the past, whether it is Clinique, TV commercials, or later mergers and acquisitions, or even the lipstick tip cut a flat surface for easy application, Leonard is a very willing to take risks, willing to keep pace with the evolution of the company price, it is no wonder Estee Lauder can achieve today's market value of 100 billion dollars.

By the 90s, the entire beauty and personal care industry had become saturated, and the best way to grow was through mergers and acquisitions. But Ms Lauder is still old-fashioned and reluctant to make acquisitions, for the simple reason that there has never been one before and it has all grown organically. But what Leonard saw at this point was that if I went in for an acquisition, I could get a new product line up very quickly, without having to invest in research and development; However, the acquired parties are generally regional brands, and it is difficult for them to go global. Some operators do not like doing business management and other trivia at all, so it is better to use the channels of Estee Lauder to develop and grow, and their own appeal is to retain "Creative Rights", which is what Estee Lauder is willing to do. Because we bought them for their creative talent. Like the MAC, which was first acquired in the '90s, Frank Toskan originally created Professional Makeup for models (" first manufactured makeup for models, but then the models wanted this makeup for their sisters, friends, and so on...” ), but especially popular with young people, the customer base is very broad, its products belong to colorful and playful, so called radical expression of selfhood, not "cosmetics for your grandma". In fact, the MAC product line is not competitive with Estee Lauder, which is why Leonard chose MAC as the first acquisition object practice. The acquisition board did not approve, but Leonard felt that MAC was like Estee Lauder decades ago, and still insisted on taking it, buying it in two batches for $600 million, and by the time the acquisition was completed in 1998, it had achieved $250 million in revenue, which was a very successful acquisition. By joining the Lauder Group, MAC took off. Bobby Brown, for example, was founded by a couple of drug chemists to make Subtle, accentuating existing features. Instead of using the Bold colors that others liked to use, it was very much in line with the younger generation's preferences at the time, and it quickly emerged, and it was a good acquisition. When it came time for the merger, Frank was strongly against it because he thought why would you buy a new brand when you already bought us? Leonard convinces Frank that the two brands have very different audiences. He does not micro-manage either brand, both retain creative /creative rights for the founders, both retain their separate structures from each other, do not let the two fight each other or attract talent, do not share resources, but through the parent company to give as much support as possible.