According to Estée Lauder’s fourth-quarter earnings, the Asia Pacific region saw annual sales growth accelerated from 18% to 22%. This was led by China where net sales rose strong double-digits – a feat that its CEO believes it can replicate.
“We expect the market in China to continue to grow double-digit, and we are very, very optimistic on the strength of this market, as well as on our position with the consumers in this market. We expect to see a continuous acceleration of online, which is already 50% of Mainland China business today, and further growth,” said Fabrizio Freda, who also serves as president and director of the multinational.
The growth in China was led by the continued strength of skin care, the acceleration of fragrance growth, and the recovery of makeup. Sales also benefited from key shopping events, including the 11.11 and 6.18 Shopping Festivals.
The company is optimistic that it will see continued growth on platforms like Tmall, where its beauty brands have experienced great success.
During the recent 6.18 Shopping Festival its brand Estee Lauder was ranked as the top beauty brand on Tmall. La Mer and Jo Malone London also topped their respective categories.
In July, Estée Lauder launched its brands on the Chinese e-commerce platform JD.com to further capture the online opportunities by opening up to a new demographic.
“There are certain brands that are appealing to certain demographics that also decided to expand in JD just now in July. We are very optimistic with also the results on this increased coverage of consumers that we are getting,” said Freda.
He added: “It's a very, very dynamic market and competitive market which keeps evolving. And our principle is always to stay ahead of the evolution, which admittedly is not easy in such a dynamic market. But we are trying to stay always ahead of the evolution and anticipate change.”
To that end, the company has invested in a new innovation centre in Shanghai.
“Our Shanghai innovation centre is expected to open in the second half of this fiscal year, enriching our capability in product design, formulation, consumer insight, and trend analytics for Chinese and Asian consumers. Also, with the new centre, our East to West innovation will benefit, enabling us to create more successes like Estée Lauder Futurist Hydra or Supreme+ Bright and La Mer The Treatment Lotion,” said Freda.
While there is a lot of excitement about the online channels, the company also invested into its offline business as well.
“Mainland China prospered as we invested in its vibrancy of today and opportunity of tomorrow. We entered more cities reaching 145, expanded our presence in speciality multi, opened freestanding doors and increased our advertising spending,” said Freda.
According to the firm, nearly every brand grew, led by its luxury brands, and sales increased double digits in every channel.
Luxury ‘crackdown’ not an issue
When asked about whether the luxury segment would be affected by the Chinese government crackdown on ‘wealth flaunting’ on social media, Freda said the firm did not see an issue.
“We are really an affordable luxury, in the sense that our products are luxury within the beauty category, but they are very affordable purchases in the context of total luxury. So, we don't see any negative at this point in time on this front.”
He elaborated: “Actually, we see a lot of support to the trend and a lot of interest in our products as the middle-class evolves. And we see also given for example all the government actions that have been taken to support the development of Hainan and the duty-free in Hainan, there is obviously an interest in supporting internal consumption.”