Estee Lauder SWOT and PESTLE Analysis

Strength

1. Strong portfolio spread across 25 brands: Estee Lauder has been a leading American brand ever since 1946 when it was started by the Lauder couple in Manhattan. Once started as a brand with only 4 products has expanded into various product lines wherein it has established itself as the gold standard of cosmetics in America. Additionally, it has roped in brand ambassadors like Ana de Armas, Amanda Gorman, Bianca Brandolini d'Adda, Carolyn Murphy, Grace Elizabeth, Imaan Hammam, Karlie Kloss, Manushi Chhillar and Yang Mi. Such leading names in the industry showbiz for a long time, have ended up as brand influencers and faces of the brand, giving it a wider appeal in the minds of the masses as a brand of premium cosmetics. In addition to that the brand has taken part in various movements of a widespread social dimension like the Breast Cancer campaigns ever since 1992, accumulating a huge fund as of date, which has endeared it all the more creating a strong brand legacy and corresponding recall factor. Estée Lauder Companies, the Forbes Most Admired Company in 2023, was named a "Best Place to Work for LGBTQ+ Equality" by Bloomberg's Gender Equality Index Campaign. The Ordinary was added to its scaling brands portfolio, driven by strong double-digit sales growth. MAC, the world's largest prestige makeup brand, was the best-performing brand across the entire portfolio. The company expanded its brand reach with Aveda, Le Labo, and The Ordinary debuting in China and the Middle East. It acquired the TOM FORD brand after 15 years of collaboration. The luxury portfolio expanded with a licensing deal to create BALMAIN BEAUTY with the luxury fashion house.

2. Growth reflected through financial parameters: Estée Lauder Co. reported a US$15.91 billion net sales in 2023, with 76% international and 24% US sales. The company's primary product categories include skin care, makeup, fragrance, and hair care. The CDP (Carbon Disclosure Project) has recognized the company for its water security, climate change, forest palm oil, and forest timber ratings. It raised its quarterly dividend by 10% and has a long-term growth algorithm, aiming for 6% to 8% annual net sales growth and double-digit annual EPS growth. It also aims to exceed global prestige beauty growth by at least 1% and achieve an average annual operating margin improvement of approximately 50 basis points. It invested US$100 in stock or index, including dividend reinvestment, for the fiscal year ending June 2023. Its regional net sales CAGR from 2018 to 2023 is 1.9% in Europe, the Middle East & Africa, and 11.2% in Asia/Pacific. The main factors that have promoted this growth have been identified as an increased appeal to millennials by roping in celebrities with a heightened social media presence like Kendall Jenner, who is highly popular with that particular age group. Additionally, the demographic factor has also helped the company.

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Weakness

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Opportunity

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Threat

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Political

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Economic

1. Supply chain disruptions could increase costs: A report by Avery Dennison reveals that over 10% of beauty products worth US$4.8bn are going to waste in brands' supply chains. Overproduction and excess inventory are the main culprits, accounting for 6.2% of discarded goods. Brands are increasingly aware of the issue, with 77% tracking their supply chain waste. Supply chains in 2024 have been particularly marred by the OPEC+ cuts, the Red Sea crisis and the Iran-Israel conflict. ELC manufactures its products in its facilities in the US, Belgium, Switzerland, the UK, and Canada, and also uses third-party manufacturing networks. It focuses on improving innovation, reducing environmental impact, and ensuring supply sufficiency. It has a flexible global distribution network managed by the company or third parties and has established regional and local distribution centres strategically positioned worldwide. The company focuses on social impact and sustainability, investing in employee health and safety, enhancing the work environment, and investing in renewable energy sources. It uses essential oils, alcohols, and specialty chemicals, and partners with a reliable network of third-party manufacturers. It continually benchmarks its supply chain performance and adjusts its distribution networks and manufacturing plants based on changing business needs. However, the company is subject to risks such as industrial accidents, environmental events, labour disputes, and supply chain disruptions.

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Social

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Technological

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Legal

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Environmental

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