According to the firm’s financial results for the three months ending June 30, its market share in China stands at 23%, down one point due to the lockdown, which resulted in a two-month-long closure of its distribution centre.
This impacted the firm’s capacity to serve the entire China market through the end of May.
During its fourth quarter (Q4) earnings conference, Estée Lauder Companies president and CEO Fabrizio Freda outlined the company’s plans to recovery the lost market share in China over the next six months.
First, Freda highlighted premium hair care brand Aveda, which launched in China just last month on Tmall and unveiled its first freestanding store.
“We are going to reinforce [our strong portfolio of brands] with the launch of Aveda that just started, which is a very important launch entering hair care... The luxury hair care is a big and growing category in China,” said Freda.
At the same time, it is set to launch new exciting products, most notably, Estée Lauder’s upgraded Advanced Night Repair Eye Supercharged gel cream. According to the firm, the launch considers modern lifestyles to address ageing concerns.
“[Eye care] is one of the most important categories in China, and to be clear, it’s one of the most important recruitment strategies is eye products in the market,”
Estée Lauder is also set to unveil a new R&D facility in Shanghai, which will increase its capability to develop localised products for the Chinese consumer.
“Fiscal 2023 is set to be a monumental year for us as our Shanghai Innovation Lab opens, advancing our ambition to best create for the Chinese consumers,” said Freda.
The company will reinforce its presence in the online space with the help of e-commerce partners Tmall and JD.com
“We are going to double down on Tmall and entering new successful online distribution that we started with JD, where we still have the opportunity of deploying more brands in other areas where we are testing or distributing,” he said.
It also has plans to improve its distribution in brick-and-mortar with openings in new and existing markets in China.
Furthermore, to alleviate the risk of disruptions to its distribution, the company will be expanding its distribution locations. In August, it opened a new distribution centre in Guangzhou.
“This will turn into a definite ongoing new second big distribution centre at the beginning of 2023,” said Freda.
As for the travel retail business in China, especially Hainan Island, Freda believes it will rebound strongly after the lockdown.
“We believe the Hainan, despite the current lockdown, which is obviously painful in the short-term but is a super strong opportunity for the long-term. The power of Hainan in the future remains intact and we have strong presence and market share in this operation.”
In Q4, Estée Lauder Net sales in the Asia-Pacific region fell 19% organically and the decline was attributed to troubles in China.
Skin care, which represents approximately two-thirds of the APAC business, was severely affected by the disruptions in Shanghai. Overall, net sales fell by 21%, with the greatest impact felt by Estée Lauder and La Mer brands.