There is an article by research firm Trefis about how prestige cosmetic product maker Estee Lauder Companies Inc (NYSE: EL) has seen success in emerging markets while some of its cosmetics competitors like Avon Products, Inc (NYSE: AVP) and Revlon Inc (NYSE: REV) have stumbled or not done so well. This is an important overall advantage because emerging markets have young populations with rising disposable incomes whereas most developed markets are seeing weak consumer discretionary spending.
Some key points from the article included:
- Mass-market cosmetics players such as Avon Products and Revlon have struggled to maintain sales momentum, especially in the Asia-Pacific region where Revlon announced its exit from the huge Chinese cosmetics market in January 2014. The problem for both Avon Products and Revlon are their limited R&D and advertising budgets for developing and promoting locally relevant products. This has restricted both to launching new and trendy products and to having to refresh their product cycles regularly.
- Estèe Lauder is different from mass-market cosmetics manufacturers because of the exclusivity of its product portfolio. Being a prestige beauty product manufacturer, Estèe Lauder has faced limited competition from either domestic or international mass-market brands. This exclusivity also adds makes the brand more appealing to emerging market consumers.
- Estèe Lauder has had a strong performance in the Asia-Pacific market with regional revenues increasing about $110 million over fiscal 2012 to reach $2.12 billion for fiscal 2013. Excluding currency volatility of 1%, constant currency revenues grew 6% in fiscal 2013.
With that in mind, take a look at this long term performance chart for all three cosmetics stocks that shows how Estèe Lauder has made a big recovery since the financial crisis:
To read the whole article, Here’s What Estee Lauder Has Done To Boost Its Share In Emerging Markets, go to the website of Forbes.
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