‘Accelerate on all fronts’: Skin, fragrance, luxury hair categories set to lead growth in China reopening – Estée Lauder CEO
Now that the country is reopening, the company was expecting the business to “accelerate on all fronts” particularly as brick-and-mortar recovers, said Freda during the firm’s most recent earnings conference.
Going into specific categories, he said that the firm expected a tremendous acceleration in the skin care category.
“Skin care will be the biggest beneficiary for the simple reason that skin care is the biggest percentage of beauty business in China… Skin care will benefit the biggest from the normalisation of consumption patterns and of the purchase patterns of the consumer.
Another category that will benefit from China’s reopening is fragrance, which experienced a boom in recent years.
“Fragrance is on a roll in China. Fragrance was already growing before COVID… and will continue to grow with the reopening because there is a clear passionate development of this category,” said Freda.
“In China, the fragrance category is developing bigger percentage at the high-end where we are focused. The high-end fragrance has a much bigger percentage of the total market than in the rest of the world, which is great news for the development this category.”
Lastly, Freda highlighted the importance of the hair care category, particularly in luxury hair care.
The company recently launched Aveda in China last year and the brand has been performing well so far, he said.
“We have launched Aveda in China for a reason. We have seen clear signs of development in luxury hair care. Obviously, hair care is a category that’s super well developed among the Chinese consumers, but it's mainly developed in mass [segment].
“It’s the beginning of a journey of the development of luxury hair care, sustainable hair care. That’s really exciting for us and is in front of us for future development.”
He added that the company's research and development facilities in China will play a significant role in Asia moving forward.
“Our R&D Centre in China will increase the amount of local relevant innovations in Asia in an important way in the next fiscal year.”
All’s well in China
In the three months ending December 2022, the rising number of COVID-19 infections significantly resulted in a double-digit decline in China for the company.
Despite this, Freda expressed that China’s results were “pretty good” as the company’s brands were able to gain market share in every single category.
Furthermore, during the Double 11 mega shopping festival, its net sales were up 10.9% and many of its brands managed to rank at the top of various categories.
“Now this, for us, is a very important sign that our brands are really working. The aspirational value of our brands remains very, very strong, which in the moment of reopening is a very strong position to be,” he said.
“China is developing the way we planned. From a market share standpoint, it’s recovering and definitely going in the right direction.”