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FEATURE: As Companies Seek To Tap Growth In Prestige ELC Gains Traction In India

November 28, 2016: 12:00 AM EST
Beauty and personal care brands and companies continue their drive into prestige, tempted by stronger growth rates and the lure of greater profit margins. In the US, for example, sales of prestige beauty products grew at 8% in Q3 2016 about two or three times the growth rate of the wider market.
 
We previously set out L’Oréal’s strategy to push into prestige: the company is continuing to acquire prestige brands, push high-touch channels and invest in innovation, strategies that are yielding superior financial performance – its L’Oréal Luxe division is growing at 7.1% versus 4.5% for the Group as a whole and has shown a growing profit margin for each of the last four years. 
 
Many other companies are playing to the trend: Marc Jacobs and Tom Ford launched premium make-up, bath products, and nail polishes, Unilever established a prestige skincare division based on the acquisition of four prestige companies and Shiseido’s prestige business grew 18.1% in H1 2016.  
 
But in a sign that the trend will endure, prestige is driving growth in emerging markets too. In India, the premium cosmetics segment, for example, is growing at 24% and companies there are jostling for position. 
 
An interview with Fabrizio Freda, CEO of Estée Lauder Companies, gives some insights to its India strategy. 
  • Careful pricing: ELC benefited from being present early and pricing sensitively. It sees the brands it first introduced – Clinique and MAC – as the entry price of prestige and the price point where it could maximize the conversion from mass to prestige. 
  • Playing to local conditions: ELC carefully adapted to local circumstances and cultures, recognizing that the traditional way Indian women see and use make up is very distinct, so adapted its go-to-market strategy accordingly. It also tried to address local needs through some philanthropic efforts.  For example, when it launched the MAC brand in India it donated money to local organizations fighting AIDS.
  • Leverage online reach: Freda claims ELC is the first company to invest in ecommerce and online distribution globally and it sees great potential online because of its scope and reach. “We are the biggest company in our space globally that is online, and we frankly believe, that online is one of the strongest channels and one of the best channels with highest preference from consumers around the world. So you can go to a brand’s own store where you have the whole assortment or products with concepts and education.”
  • Invest in educating the consumer: ELC drew in consumers in by educating them about their products, often leveraging their online platforms. The MAC website gives tutorials on how to use the products and at the Clinique site there are free online consultations from skin care experts. Freda: “So online you don’t just find the product but you find stories, education, service and experience.”
The company’s approach looks to be working. Its Indian brand portfolio — MAC, Estée Lauder, Clinique, Bobbi Brown, and others — is growing ahead of the market and Freda believes demand will continue to grow and be stable: “People may not be able to invest in a big luxury item but they can still afford a lipstick. And also the desire of quality cosmetics is growing so much in the world that it limits volatility.”
Vinod Mahanta & Neha Tyagi, "Our priority in India is to grow the prestige part of the business: Fabrizio Freda", Economic Times, November 28, 2016, © Bennett, Coleman & Co. Ltd.
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