Estée Lauder unveils bold advertising strategy amidst changing market dynamics

Source: Shutterstock

Estée Lauder, a renowned beauty company, has pledged to raise its advertising expenditure as a proportion of sales in the upcoming fiscal year, even with a decline of 10% in net sales during its previous fiscal year.

Estée Lauder, the company that owns renowned brands such as Clinique, M.A.C., Bobbi Brown, and Estée Lauder itself, experienced a decline in sales to $15.91bn (£12.49bn) for the 12-month period ending on June 30, 2023. This decrease can mainly be attributed to the slow recovery in Asia's travel retail sector and the weakening consumer sentiment in China.

During an investor call on August 18, the chief financial officer Tracey Travis expressed dissatisfaction with Estée Lauder's performance in 2023. However, the company plans to boost its marketing spending in the upcoming fiscal year.

The company asserted that it experienced growth in almost every market except for Asia travel retail and the Hainan region in China. It specifically mentioned that its travel business in Europe and the Americas achieved significant success. Developed markets witnessed an upsurge in net sales, with particular emphasis on the UK contributing to this growth.

According to the company, these expanding markets were fortified by its investments in advertising and promotional endeavors. Travis stated that the company prioritized investing in markets where it identified growth potential.

"We remained committed to investing in key markets that showed signs of recovery, such as advertising, promotion, innovation, and selling, despite the sales pressures," she declared. Despite facing challenges in its fiscal year 2023, Estée Lauder has made a commitment to ongoing marketing investments "in order to support the recovery, gain market share, and achieve sustainable long-term growth."

Content must be written in English:

Investment in innovation is a key area of priority for the company. According to CEO Fabrizio Freda, the company's innovation initiatives have played a crucial role in driving growth. He revealed that over 20% of sales in fiscal year 2023 were attributed to innovation.

The company's focus on innovation proved to be highly beneficial for its makeup brand, M.A.C, which emerged as the company's top-performing brand during the fiscal year. Freda expressed the company's commitment to continue this successful streak in innovation into 2024. The brand experienced significant sales growth, thanks in part to adjustments made to its loyalty program.

The company experienced a 16% decline in profits, amounting to $11.35 billion (£8.91 billion), in the past year. The company predicts a return to growth in organic sales and a gradual improvement in margins in the upcoming fiscal year.

During a meeting with investors, CFO Travis expressed her belief that no forecasting tool could have predicted the challenges faced by the company in its 2023 financial year, including a data breach and increased demand. However, she did mention that the company is investing in technology to better navigate the ever-changing macroeconomic landscape.

It is using technology to optimise inventory planning and how it launches innovation, she said, something which will increase Estée Lauder’s “agility” going forward.