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Estée Lauder (Tom Ford, Jo Malone, Le Labo) on the “Clean Perfume” Movement | 2023

Estee Lauder Clean Perfume Movement
We look at Estée Lauder's 2022 year-end report to see what, if anything, they say on the clean perfume movement.

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Insight into Publicly Traded Perfume Brands - 2022 Annual Reports

When it comes to all the major players in the perfume world, there are two major categories. Perfume brands that are privately-owned and perfume brands that are publicly-owned. 

Publicly-owned companies, also known as public companies, have a greater degree of responsibility to their shareholders and the general public compared to private companies. This is because they have sold shares of ownership in the company to the public, and are therefore subject to regulatory requirements and financial reporting obligations. Public companies have a legal obligation to act in the best interest of their shareholders and provide them with accurate and timely financial information, and may be subject to additional scrutiny from regulators and other stakeholders. Private companies, on the other hand, have more freedom to operate as they see fit, as they are not beholden to shareholders or required to publicly disclose financial information.

So what does this mean? Any perfume brand that is owned by a public company must disclose certain information to the public. This is done in various ways, including an “Annual Report”. There’s a lot of good information to be gleamed from these Annual Reports. They are often hundreds of pages long, but don’t worry, we read them for you and pulled out all of the best information related to perfume and the clean perfume movement, and summarized it below.

Even though there’s a ton of perfume brands, fewer are owned by publicly-traded companies. And these public companies own many perfume brands.

 

Estée Lauder

We read through the 297 page Estée Lauder Annual Report for 2022. Here’s the highlights when it comes to perfume:

Perfume Brands Owned by Estee Lauder

Estée Launder owns the following perfume brands:

  • Estee Lauder
  • Aramis
  • Clinique
  • Origins
  • Aveda
  • Jo Malone
  • Tom Ford
  • Aerin
  • Le Labo
  • Les Editions de Parfums Frederic Malle
  • Killian Paris
The Annual Report also says: “Our “designer fragrances” are sold under the Tommy Hilfiger, Donna Karan New York, DKNY, Michael Kors, and Ermenegildo Zegna brand names, which we license from their respective owners.”

Estée Lauder on the Clean Perfume Movement

Here’s what Estee Lauder has to say on the clean perfume movement – we underlined specific areas of interest:

Business Update

  • In fiscal 2022, we continued to further integrate social impact and sustainability into our strategy and business operations. Areas of differentiation include climate & energy, green chemistry, social investments, employee engagement and safety and inclusion, diversity & equity. Other areas of focus include responsible sourcing, plastics & packaging, ingredient transparency, and animal welfare.

Competition

  • There is significant competition within each market where our skin care, makeup, fragrance and hair care products are sold. Brand recognition, product quality and effectiveness, distribution channels, accessibility, and price point are some of the factors that impact consumers’ choices among competing products and brands. Marketing, merchandising, in-store and online experiences and demonstrations, and new product innovations also have an impact on consumers’ purchasing decisions. There continues to be increased interest and awareness from our customers and consumers in responsibly-sourced ingredients and environmentally sustainable products, and we believe we are well-positioned to benefit from the resulting change in consumer preferences due to our social impact and sustainability efforts. With our portfolio of diverse brands sold in a variety of channels, we are one of the world’s leading manufacturers, marketers and sellers of skin care, makeup, fragrance and hair care products.
  • We compete against a number of global and local companies. Some of our competitors are large, well-known, multinational manufacturers and marketers of skin care, makeup, fragrance and hair care products, most of which market and sell their products under multiple brand names. Our competitors include L’Oreal S.A.; Unilever; Procter & Gamble; Shiseido Company, Ltd.; LVMH Moët Hennessey Louis Vuitton; Natura & Co.; Chanel S.A.; Beiersdorf; Coty Inc.; Kao Corp; and LG Household & Health Care. We also face competition from a number of independent brands, some of which are backed by private-equity investors, as well as some retailers that have their own beauty brands. Certain of our competitors also have ownership interests in retailers that are customers of ours.

Social Impact & Sustainability

  • In fiscal 2022, we continued to further integrate social impact and sustainability into our strategy and business operations. Our social impact and sustainability initiatives help drive innovation, growth and efficiency across the business and within our brand portfolio. These initiatives aim to foster employee engagement and build consumer trust and loyalty. Areas of focus include climate and energy; packaging; responsible sourcing; green chemistry and ingredient transparency; inclusion, diversity and equity; employee health and safety; and social investments. We have set goals or made commitments within these focus areas. For example, our goals related to climate and energy support efficiency and conservation within our facilities, internal supply chain and value chain, and some of these goals are also intended to help us reduce cost and waste.

Interesting Perfume Facts from the Annual Report

Perfume makes up a nice portion of Estée Lauder’s business. Perfume (or “Fragrance”) made up 14% of Net Sales in 2022 (up from 12% from the prior year)

  • In fiscal 2022, our global prestige fragrance net sales increased 30%, leading category growth. Consumers gravitated to luxury and artisanal offerings from Jo Malone London, Tom Ford Beauty, Le Labo and Kilian Paris. 
  • Fragrance net sales grew double digits, led by Jo Malone London, Tom Ford Beauty and Le Labo.

Jo Malone

  • The higher results from Jo Malone London primarily reflected the increase in net sales, partially offset by higher cost of sales given the growth of the home subcategory and the increase in advertising and promotional activities and the increase in selling costs resulting from the brick-and-mortar recovery and new product launches.
  • The increases in net sales from Jo Malone London also reflected the continued success of our hero products, current-year launches and continued growth of the cologne, home and bath & body subcategories.
  • Colognes led growth at Jo Malone London, while bath & body and home subcategories continued to thrive.

 

Tom Ford

  • Operating results from Tom Ford Beauty increased, primarily due to higher net sales, partially offset by higher cost of sales due, in part, to the increase in promotional items and the increase in advertising and promotional activities to support strategic investments in digital advertising and social media spending (including costs associated with influencers), hero product franchises, and new product launches.
  • Net sales increased from Tom Ford Beauty, also reflecting the continued success of Private Blend and Signature fragrances, current-year product launches and the diversification of product offerings by region.
  • Tom Ford Beauty saw strong fragrance growth across regions owing to the popularity of Oud Wood and the launch of Ombre Leather Parfum.

Le Labo

  • The increases in operating income from Le Labo was primarily driven by the increase in net sales.
  • Net sales from Le Labo increased, also reflecting the continued success of hero product franchises, current-year product launches and targeted expanded consumer reach.
  • Outstanding growth from Le Labo and Kilian Paris reflected compelling activations and expanded consumer reach.

More on "Hero" Products

  • Hero products are at the core of our brand marketing strategies. They are the pillars of our brands and historically have provided strong results through high repeat sales and consumer loyalty. In addition to continuing to attract existing consumers, our hero products provide an opportunity for new consumers to be introduced to our desirable products, creating consumer traffic across all channels of distribution. We aim to further strengthen our hero products through continuous review of our product portfolio and strategic innovation. Our marketing planning approach leverages local insights to optimize allocation of resources across different media outlets and retail touch points to resonate with our most discerning consumers most effectively. This includes strategically deploying our brands and tailoring product assortments and communications to fit local tastes and preferences in cities and neighborhoods. Most of our creative marketing work is done by in-house teams, in collaboration with external resources, that design and produce the sales materials, social media strategies, advertisements and packaging for products in each brand. For a number of products, we create and deploy 360° integrated consumer engagement programs. We build brand equity and drive traffic to retail locations and to our own and authorized retailers’ websites through digital and social media, magazines and newspapers, television, billboards in cities and airports, and direct mail and email. In addition, we seek editorial coverage for our brands and products in digital and social media and print, to drive influencer amplification.

DKNY / Michael Kors/ Tommy Hilfiger

  • Exit of Certain Designer Fragrance Licenses – In reviewing the Company’s brand portfolio of fragrances and to focus on investing its resources on alternative opportunities for long-term growth and value creation globally, the Company announced that it would not be renewing its existing license agreements for the Donna Karan New York, DKNY, Michael Kors, Tommy Hilfiger and Ermenegildo Zegna product lines when their respective terms expire in June 2023. The Company has since negotiated early termination agreements with each of the licensors effective June 30, 2022 and continued to sell products under these licenses until such time. These actions resulted in employee-related costs, asset write-offs, including charges for the impairment of goodwill, and consulting and legal fees.
  • In fiscal 2022, net sales from Donna Karan New York, DKNY, Michael Kors, Tommy Hilfiger and Ermenegildo Zegna accounted for approximately 1% of consolidated net sales and 10% of fragrance net sales. As noted above, we previously announced that we would not be renewing our license agreements for these product lines when their respective terms expire in June 2023. We have since negotiated early termination agreements with each of the licensors effective June 30, 2022 and continued to sell products under these licenses until such time. We are working with the licensors and their respective new licensee, where applicable, to transition the business to the new licensees.

Perfume Facts/Trends by Region

Europe, the Middle East & Africa

Reported net sales in Europe, the Middle East & Africa increased in fiscal 2022, reflecting continued recovery across the region, primarily due to store openings, increased retail traffic, and the easing of travel restrictions compared to the prior year, led by our travel retail business and the United Kingdom of approximately $541 million, combined. Despite the resurgence in COVID-19 cases in many Chinese provinces, which led to restrictions to prevent further spread of the virus and the curtailment of travel during the second half of fiscal 2022, net sales increased in our travel retail business, reflecting continued strength of our brands with the Chinese consumer, the easing of travel restrictions in Europe, the Middle East & Africa and The Americas, and continued success of hero product franchises from La Mer, Jo Malone London, Tom Ford Beauty, Clinique and M·A·C. These benefits were partially offset by lower net sales from Estée Lauder products, primarily reflecting lower net sales from the Advanced Night Repair product franchise primarily due to the prior-period launch of Advanced Night Repair Synchronized Multi-Recovery Complex. Net sales in the United Kingdom increased, primarily reflecting incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter, brick-and-mortar recovery, as noted above, and benefiting from the growth in makeup and fragrance.

Asia/Pacific

Partially offsetting the fiscal 2022 decrease in Asia/Pacific were increased net sales from mainland China and Australia of approximately $82 million, combined. Net sales increased in mainland China, primarily due to the continued success of hero products franchises from La Mer and Jo Malone London, reflecting continued growth in skin care and strong momentum in fragrance, successful performance during holiday and key shopping moments, new product launches, and the current-year launch on a new third-party online platform. This increase was achieved despite the resurgence in COVID-19 cases in many Chinese provinces during the second half of fiscal 2022, which led to restrictions to prevent further spread of the virus and the curtailment of travel. Net sales in Australia increased, primarily driven by incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter.

Click here to view the Estee Lauder 2022 Annual Report

Overall Thoughts

Estée Lauder owns a lot of different perfume brands, most of which we would not consider to be “clean” – they are not transparent about the ingredients used and thus we have to assume that the perfumes contain parabens/phthalates/PFAS/etc. 

Le Labo stands out to us, as they are a brand we like and recommend based on their safe ingredients and transparency. Out of the many perfume brands owned by Estée Lauder, they only called out some in their Annual Report – Le Labo being one of them. We are happy to read that Le Labo is selling well. 

We are also happy to see “ingredient transparency” listed as an area of focus for Estée Lauder. They seem to be acknowleding that consumer preferences are shifting towards this and claim to be a good position to meet these changing needs.

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