Some Recent Developments In The Cosmetics Arena: Estee Lauder, L’Oreal, Avon Products

There have been some important developments in the beauty arena lately. It seems all the major players want to start 2016 with fresh vigor and growth opportunities. Premium beauty giant, Estee Lauder (NYSE:EL), announced a new Vice President for its Travel Retail segment in Europe, Middle East, and Africa. After launching a host of products under the Travel Retail channel in October 2015, this is yet another move by the company to revive the performance of one of its biggest growth drivers. L’Oreal (OTC:LRLCY), on the other hand, is still maintaining its pioneering position in beauty related research and has recently launched stretchable skin sensors which could detect the wearer’s exposure to ultraviolet rays. This is the first attempt by a beauty company to introduce wearables among its users. Finally, after the financial support from Cerberus Capital, Avon Products (NYSE:AVP) has started taking initiatives to better adapt to the changes in the beauty industry, as well as control its costs to demonstrate better profitability in the future. Avon’s recent partnership with Hewlett-Packard for hybrid infrastructure information marked a progress towards that end.

Estee Lauder

Effective January 4th, Estee Lauder (NYSE:EL) announced Sue Fox as its new Vice President/General Manager, Travel Retail Europe, Middle East, and Africa. Prior to this Fox has served in Estee Lauder’s travel retail  in EMEA and lately was the General Manager, South Africa. According to Olivier Bottrie, Estee Lauder’s President for Travel Retail Worldwide, Fox’s vast experience with Estee Lauder is what made her the best choice for the current role which entails further developing the company’s Travel Retail business. ^[1]

Travel retail is one of the primary growth drivers for Estee Lauder, but over the last few quarters, the company had been lagging behind in sales through this channel, primarily due to a slowdown of travel owing to economic crises across the globe, as well as natural calamities like the MERS virus attack in Korea. However, Estee Lauder had been trying hard to revive sales and towards this end, it had launched a pipeline of products through this channel in October of last year. The products include face contouring, eye makeup, lipstick, serums, treatment creams, and fragrances. ^[2]

 (Source: The Moodie Report)

L’Oreal

In the beginning of January, L’Oreal (OTC:LRLCY) launched a stretchable skin sensor called My UV patch. The product, which is currently in beta form is designed as a wearable, and it will help educate users about their exposure to ultraviolet rays. The patch will be released under the company’s dermatological skincare brand, La Roche-Posay. Guive Balooch, L’Oreal’s Global VP of Technology Incubator, has indicated that this might be a start for the company to bring more sophisticated hardware and software technologies into its products. He said that understanding customer behavior would be facilitated, and the value creation for the users would be enhanced, through these technologies which the user can wear at all times.

L’Oréal has always been a pioneer in technological advancements in the beauty industry. My UV Patch is the first attempt by a beauty company to introduce wearables among beauty users. The information gathered through this device might give L’Oreal a further competitive advantage over its peers. ^[3]

Avon Products

Avon Products (NYSE:AVP) entered into a strategic collaboration with Hewlett-Packard for hybrid infrastructure information. The agreement is expected to enhance Avon’s global IT infrastructure, where Hewlett-Packard will help Avon by identifying cost-effective tools and processes in order to boost the beauty company’s operational efficiencies. This will improve Avon’s adaptability to the ever-changing dynamics in the beauty industry.

Avon has been on a downhill journey since 2011 (its last profitable year) as its direct selling model continued losing market share to retail outlets and online shopping. Avon’s annual sales had declined by 25% since 2011, and its share price, too, fell by 81% during the same period. ^[4] Read more about how Avon’s resistance to adapting to the current times, led to its downfall, here. In 2015, Avon had been on the lookout for an investor which it finally found in December when it entered into an alliance with the private equity management firm, Cerberus Capital Management.  The transaction entailed Cerberus investing $435 million into Avon and carving Avon’s North American division into a separate entity by investing another $170 million in it. Avon sold 80.1% of its North American business to Cerberus. Avon had vowed to make a turnaround post the injection of capital and this seems to be a step towards that direction.

As per the deal, Avon will set up a Security Operation Center in Hewlett-Packard’s international delivery hub. The beauty company will also launch a Global Service Desk with the help of remote support, data analytics, and self-service mechanisms, in order to improve the user’s experience. Moreover, the tech giant’s Global Network Operating Center can be used by Avon to offer network data services. Along with other such enhanced technological upgrades, Avon also intends to cut its global headcount as a part of this initiative. This might result in Avon incurring a pre-tax burden of around $30 million, of which $20 million might be realized in Q4 2015. However. the partnership is expected to generate annual pre-tax savings of almost $10-$15 million, starting from 2019. ^[5]

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1. Sue Fox named Estée Lauder VP/General Manager Travel Retail, The Moodie Report, Jan 8, 2016 [↩]
2. The Estée Lauder Companies prepares for key launches at Cannes, The Moodie Report, September 3, 2015 [↩]
3. L’Oreal: Technology is a new way for consumers to experience beauty, Cosmetics design-Europe, Jan 14, 2016 [↩]
4. Deal Gives Avon CEO Sheri McCoy a Chance to Revamp, The Wall Street Journal, Dec 17, 2015 [↩]
5. Avon Inks Deal with Hewlett-Packard to Boost IT Structure, Yahoo Finance, Jan 11, 2016 [↩]