American beauty giant Estée Lauder recently announced that Stéphane de La Faverie will succeed Fabrizio Freda as CEO, who announced his retirement in August this year. The appointment will take effect on January 1 next year, and he will also serve as the group’s president, leading the troubled beauty giant to revive sales.
At the same time, the third-generation heirs of the Estée Lauder family, Jane Lauder and William Lauder, will withdraw from the group’s operations. This marks the first time in Estée Lauder’s 75-year history that family members will not be involved in daily operations and management.
William Lauder will resign as the company’s executive chairman and will continue to retain his board seat after the company’s upcoming annual shareholders’ meeting. Jane Lauder, the founder’s granddaughter, will also resign from her position as chief data officer and will focus on her role on the board in the future.
The resignation of William Lauder and Fabrizio Freda will be the first phase of the power transition at Estée Lauder.
Over the past year, due to increasing performance pressure, the 90-year-old honorary chairman Leonard Lauder, who is about to retire, and some board members have become dissatisfied with CEO Fabrizio Freda, considering replacing this executive hired externally by William Lauder. However, William Lauder is firmly supporting Fabrizio Freda.
The market believes that the differences in operational philosophy between the 90-year-old honorary chairman Leonard Lauder, who is about to retire, and his eldest son William Lauder are one of the obstacles hindering the performance growth of the Estée Lauder Group. In August this year, Fabrizio Freda announced his retirement after 16 years of service due to public pressure, and his supporter William Lauder also subsequently lost influence.
Subsequently, during the selection process for the new CEO, market sources indicated that Jane Lauder and Stéphane de La Faverie were both considered potential candidates for the CEO position.
Last year, the Estée Lauder Group launched a profit recovery and growth plan, and Jane Lauder and Stéphane de La Faverie were appointed as joint executive leaders of the plan, a move considered a test for both candidates.
The latest appointment shows that Stéphane de La Faverie has won.
Before joining the Estée Lauder Group in 2011, Stéphane de La Faverie served the L’Oréal Group for nearly 10 years, where his achievements included leading the core brand Estée Lauder and playing a key role in the new growth area of the beauty industry, the fragrance business.
The picture shows Estée Lauder Group’s new CEO, Stéphane de La FaverieThe Estée Lauder Companies stated in a statement that Stéphane de La Faverie successfully captured the growth essence of the Estée Lauder brand through a series of initiatives such as star products, a digital-first strategy, data-driven marketing, new technology development, and high-growth channels. This has made the Estée Lauder brand appealing to a diverse consumer group ranging from mature to “Generation Z” and has established it as a top brand in the minds of Chinese consumers.
Furthermore, during a historically low period in the traditional high-end skincare and beauty market, Stéphane de La Faverie played a crucial role in the development of the fragrance category as the group strengthened this category.
In September 2022, the Estée Lauder Group divided the company’s brand portfolio into two major brand clusters. The cluster led by Stéphane de La Faverie covered Estée Lauder and the group’s current important fragrance brands, including Jo Malone, Le Labo, KILIAN, and Frederic Malle Editions de Parfums.
The Estée Lauder Group is betting on the fragrance category, including Le Labo and Jo Malone
Perfume, as a new growth point, is also closely related to the Chinese market. Over the past decade, international beauty giants first felt the pressure in competition with domestic beauty brands, and then missed the functional skincare trend in the Chinese skincare market due to slow innovation. To reaffirm their market position, Estée Lauder and L’Oréal are not taking the new growth point of China’s fragrance economy lightly.
By 2030, China is expected to become the world’s second-largest perfume market. Frederic Malle, KILIAN, and Le Labo entered the mainland Chinese market in 2020 and 2023, respectively. Facing a group of consumers who are beginning to form perfume usage habits, international beauty giants are targeting the growth opportunities of niche fragrance brands worldwide, which is also seen as a key lever for Estée Lauder to turn around its performance.
Stéphane de La Faverie, with his deep understanding of brand business, key categories, and global markets, especially the Chinese market, has secured the new CEO position.
In contrast, Jane Lauder’s strengths lie more in brand image, marketing, and digitalization. She has overseen brands such as Clinique, Origins, and Darphin. However, Clinique’s weak performance in recent years has left Jane Lauder lacking effective competitive leverage. Additionally, Jane Lauder is less familiar with the Chinese market compared to Stéphane de La Faverie.
Judging from the choice of the new CEO, Estée Lauder Group still chooses to bet on brand business and the Chinese market, focusing on improving and transforming the company’s fundamentals. Stéphane de La Faverie will face a giant ship with all departments declining, proving to investors that the transformation is underway.
According to the latest performance data recently released by Estée Lauder, the group’s first fiscal quarter revenue fell by 4% to $3.36 billion, with organic revenue down by 5%, mainly due to the sluggish Chinese market and declining demand across Asia. The net loss reached $156 million, compared to a net profit of approximately $36 million in the same period last year.
Estée Lauder also unexpectedly withdrew its full-year performance guidance for the fiscal year 2025, providing only second-quarter performance guidance, with an expected organic revenue decline of 8% to 6%, mainly due to uncertainties faced by the new CEO and continued weak demand in the Chinese market. The group also stated that it will adjust the dividend payout ratio to enhance financial flexibility.
Taking a pragmatic approach may somewhat reassure the market, but the complete withdrawal of family members from daily management raises questions about what this means for this family-oriented American company, and in fact, it brings greater fear of the unknown to the market.
From left to right are Jane Lauder, William Lauder, Leonard Lauder, Ronald Lauder, and Aerin Lauder
The Estée Lauder Company was founded by Mrs. Estée Lauder in 1946. The founder, Estée Lauder, who came from a poor Jewish family, gained fame early on through her excellent sales skills and unique understanding of beauty. In 1958, her 25-year-old son Leonard Lauder joined the company and took over the management from his mother in 1982, becoming the company’s CEO.
Estée Lauder is believed to have grown from a family business with annual sales of only $800,000 in 1958 to a global beauty giant worth over $10 billion, mainly thanks to the international expansion and multi-brand strategy led by the second generation of the family, Leonard Lauder, who began developing and acquiring new brands in 1964.
In 1995, to alleviate the financial difficulties brought about by large-scale acquisitions, Estée Lauder began seeking help from the capital market. In 1996, Estée Lauder was listed on the New York Stock Exchange. Through equity structure design, the Lauder family continued to maintain control of the company, currently holding about 38% of the common stock and approximately 86% of the voting rights.
However, in addition to equity and voting rights, the family’s ability to maintain control over the company for more than seventy years is mainly due to the deep involvement of family members in the specific operations and management of the company.
William Lauder, the son of Leonard Lauder, followed his father’s career path by joining the Clinique brand under the Estée Lauder Companies in 1986 at the age of 26. In 2004, he took over the CEO position from the professional manager Fred H. Langhammer, whom Leonard Lauder had brought in. In the same year, Mrs. Estée Lauder passed away, and at that time, the Estée Lauder Companies’ annual revenue had already reached $5.7 billion.
During his tenure as the head, William Lauder faced a complex situation.
Father Leonard Lauder, as the soul of the company and honorary chairman, has always exerted influence on the company, while uncle Ronald Lauder and his two daughters, third-generation heirs Jane Lauder and Aerin Lauder, hold executive positions in the company. His grandmother’s youngest son, Gary Lauder, also holds a seat on the board.
Pictured are Leonard Lauder and William Lauder, father and son
William Lauder realized that even though his family business had grown into a global giant, decision-making was still constrained by a few people in the company, especially the complex relationships among family members, making him feel powerless as the leader. He further realized the necessity of finding external managers as intermediaries.
In 2009, William Lauder brought in Procter & Gamble veteran Fabrizio Freda to serve as Estée Lauder’s CEO until August of this year.
Unlike the professional manager Fred H. Langhammer, who was once brought in by Leonard Lauder, Fabrizio Freda, appointed by William Lauder, holds considerable power.
Fabrizio Freda has been the highest-paid CEO in the beauty and fashion industry for a long time, with an annual salary exceeding $20 million, which is five times the average salary of executives in the beauty industry. Previously, 70% of institutional shareholders voted against his compensation plan.
Fabrizio Freda’s ability to remain in position for 16 years indirectly proves his personal strength and the support he received from William Lauder.
Despite the market’s poor opinion of Fabrizio Freda during the performance crisis of the past three years, under his leadership, Estée Lauder achieved a significant surge in performance before the pandemic. This was driven by consumption upgrades in the Chinese market, the popularity of high-end beauty products, and the boost from live-streaming e-commerce, with 2019 revenue approaching $15 billion.
Fabrizio Freda has stated that the strong growth in Estée Lauder’s performance is mainly due to continuous creativity, digital marketing advertising, and the Tmall platform. As Chinese consumers increasingly prefer to purchase cosmetics on mobile devices, more than half of Estée Lauder’s sales in the Chinese market come from mobile, with Tmall contributing the most.
Looking back now, under the leadership of Fabrizio Freda, Estée Lauder seized the opportunities brought by technology and demographics in the Chinese market, meeting consumers’ demand for premium products at specific stages. However, as Chinese consumers rapidly grew and entered a more segmented and rational stage of awareness, Estée Lauder’s products and brand story failed to keep up.
The long-term reliance on high-growth channels such as e-commerce and travel retail has led Estée Lauder Group to overlook product innovation, with star products like the Advanced Night Repair lacking necessary iterations. Today’s Chinese consumers are more purposefully seeking skincare efficacy rather than blindly pursuing high-end products, and the widespread adoption of medical beauty techniques is continuously eroding consumer investment in high-end skincare products.
The long-term reliance on high-growth channels such as e-commerce and travel retail has led the Estée Lauder Group to overlook product innovation
In the face of the crisis, Estée Lauder misjudged consumer psychology by continuously raising prices, and the expected phenomenon of buying more as prices rise did not occur. While e-commerce channels driven by promotional events like Double Eleven slowed down, Estée Lauder turned to overly rely on travel retail channels represented by Hainan duty-free, but this move caused profound damage to the brand’s high-end image and pricing system.
Although Fabrizio Freda is also a veteran in the beauty industry, he clearly has not focused much energy on the products and the business itself. Just as another sports giant, Nike, faced issues when recently changing CEOs, the company’s former CEO, John Donahoe, spent a lot of effort on reforming DTC channels and improving company efficiency, but neglected the mission of a consumer goods company to create new demand through product innovation.
The training that the consumer goods industry provides people is the instinct to constantly respond to market changes. When Nike mistakenly believed that its product foundation was deep enough and that it should enter a modernization phase, it turned out that this industry never has such a phase or next phase; there is only the vigilance of every day.
Estée Lauder is the same. Mrs. Estée Lauder’s initial uncompromising pursuit of product quality and excellence endowed the core brand with a high-end gene. Seventy years later, as the Estée Lauder Group’s footprint extends into the global market, the group still needs to return to an understanding of beauty, which requires sufficient insight and focus.
For a giant with a complex structure, achieving this turnaround is easier said than done. William Lauder and Jane Lauder of the Lauder family each took a step back, exerting influence through the board of directors, seemingly calming internal conflicts. However, this means that proxy wars will continue to exist beneath the surface, and proxy wars have always been a reason for slowing down the pace of large companies.
Who exactly decided on Stéphane de La Faverie, whether it was William Lauder’s Plan B or Leonard Lauder’s maneuver, remains a mystery to outsiders. For whom he will speak, and how he will accomplish the daunting task of transformation within the complex network of family relationships to meet shareholders’ expectations, is even more of an enigma.
Washing away the traces of a family business is a double-edged sword for Estée Lauder. In the last century, Leonard Lauder, as the soul of the group and chief instructor, maximized the family spirit and developed Estée Lauder into a distinctly characterized company. However, in the 21st century, this has become the shackle that the third generation of the family most wishes to break.
Estée Lauder, facing many uncertainties, saw its stock price plummet by 20% to $68 yesterday after the earnings release, marking a cumulative decline of 50% since the beginning of the year, with a market value of approximately $24.7 billion.