A New Line For Young Consumers: Can This Strategy Drive Growth For Estee Lauder?

Estee Lauder (NYSE:EL)  announced that its “Estee Edit” makeup and skin care collection will be launched in Sephora stores and will be available online from March 2016. ^[1]. Sephora is considered to be the “go to” store for millennials and this launch by Estee Lauder is its largest effort to attract younger consumers  to its brand, which is known for its premium cosmetics.  According to a study by TABS group, young women are the heaviest buyers of cosmetics with 47% buying more than 10 products in the year. ^[2]. The millennial generation’s spending is expected to reach $2.5 trillion in the next five years and 73% of women in this category affirm that it is important to look beautiful. ^[3]. This generation will be a key revenue driver for the beauty industry and Estee Lauder is looking to grab a share in this growing market.

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According to our estimates the Skin Care and Make Up segments account for more than 90% of Estee Lauder’s valuation and the company plans to focus mostly on make-up and some skin care products for its new line, Estee Edit, created specially with the social media generation in mind.  A survey revealed that the millennial generation likes high end brands and Estee Lauder’s Clinique and MAC brands were two of the top five most cited brands, with many respondents to the survey planning to increase their purchases of these brands as their disposable income rises. ^[4]. While the young generation is limited by purchasing capacity and hence might not shop for cosmetics through luxury channels, negatively impacting Estee Lauder, its partnership with Sephora, the preferred shopping place for millennials, with a new line designed specifically for this generation, could help overcome this hurdle. The attraction towards prestige brands for millennials, a distribution channel via Sephora, and the right pricing strategy, can be a win-win situation for Estee Lauder to attract a higher market share in this growing market.

With the millennial generation forming a significant part of the beauty market, it is essential for Estee Lauder to attract this audience towards its products and create a line which is within their reach.  The company will be promoting its new line on the social media accounts of its brand ambassadors – Kendall Jenner and Irene Kim, who are extremely popular with their target audience. While the products will be sold at 320 outlets of Sephora in North America, the company is going all out in using social media for promotions, which include a dedicated Instagram account. While Estee Lauder’s traditional consumers are known to be older women, above 45 years of age, the company is now trying to expand its market by attracting more younger consumers towards its brand with a range merchandized by category and beauty attitudes which should appeal to this audience. As millennials drive the beauty industry going forward, we believe if the company is able to succeed in this endeavor, it can be a key revenue driver for the brand going forward.

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1. Estee Lauder launches Estee Edit, WWD, January 21, 2016 [↩]
2. Millennials Run The Beauty Industry, Says Study, Yahoo, December 2015 [↩]
3. Millennial Buying Power Is Set to Transform The Beauty Business, Cosmetics Design, August 2015 [↩]
4. Millennial’s top beauty brands, WWD, June 2015 [↩]