The Business of Powder and Paint: Part One

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Posted March 9, 2013 by Katherine Toll in Building Your Brand
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I am frequently asked about the real difference between a drugstore and department store cosmetic brands. Isn’t it really all the same stuff?

I always hesitate when I answer – (in my mind) a complex question just materialized out of thin air, which requires a PowerPoint deck and a step-by-step explanation.

You see, the world of powder and paint manifested itself with (a lot of) help from the mergers and acquisitions’ departments of Estee Lauder, L’Oreal, and their brethren. Hence, to know of a brand is one thing, but to know its parent company is another. This is about the time the inquisitor casts a confused look at me and asks what the hell I’m talking about.

I patiently explain — I’m talking about context, my dear. You need to understand the context of each brand before you can understand and appreciate the differences.

These are major life lessons that cannot be rushed. So, I like to start with lesson number one: who owns whom?

Strategic alliances and acquisitions built the cosmetic departments we know and love, so I must explain the complex family trees first, before we dare move further into the cosmetic kingdom.

Seriously – you didn’t think Benefit owned Benefit, and Dior owned Dior, did you?   I fear I might just burst your lip-gloss bubble as I deliver this industry primer to you. These companies are not independently owned and operated.

For instance, the MAC mascara you love and the traditional Estee Lauder brand you eschew are, in fact, owned by the same company. To put a sharper point on it – Estee Lauder owns MAC. The makers of Estee Lauder’s Youth Dew also manufacturer the edgy MAC In Extreme Dimension Lash mascara you love

For all practical purposes, the cosmetic world breaks down into three big players. The three musketeers? Estee Lauder Corporation, L’Oreal and Louis Vuitton Moet Hennessey (LVMH).

They own practically everything. And, if they don’t, they’ll acquire it soon enough. Let’s take a closer look at each, shall we?

  • We begin with Estee Lauder Corporation: the strategic erudite of the industry. Mrs. Lauder’s son, Leonard Lauder, used the philosophy of “why build it when you can buy it?” Hence, the corporation deftly amassed an enviable brand portfolio. At last glance, Estee Lauder Corporation owns more than 17 brands including: its name sake, Clinique, MAC, Bobbi Brown, Origins, Crème de Le Mer and Jo Malone. The corporation developed or acquired quite the well-rounded portfolio. N’est pas?

Now think about a typical department store’s cosmetic department – Lauder Corporation might produce 50% – 60% of the department’s volume. Crazy, huh?

This begs the question: Are the deceptively similar L’Oreal and Lancôme mascaras the same formula? No. They’re not — but more on that topic next week.

  •  And, finally the third musketeer: LVMH — the proud owners of Sephora, Dior, Guerlain, Givenchy, Fresh, and Benefit. Isn’t it the bomb when you own a cosmetic store (Sephora) to promote your own cosmetic brands? How darn convenient is that??

 I realize this onslaught of information feels overwhelming – you might even feel compelled to rest as you contemplate the gravity of this news.

I understand…. it’s a lot to absorb in one lesson. Next week we’ll venture forth into the original question. But, for now I bid you adieu and leave you to enter a cosmetic department with a savvier perspective and a sharper appreciation of strategic alliances.

 

 


About the Author

Katherine Toll

Katherine (Kathi) Toll possesses more than 20 years of management and consulting experience within the retail and beauty industry. Her industry experience combined with her special brand of irreverence fuels her mission to find the ‘must-have’ beauty products for Career Girls of all ages. She aspires to remind women the airbrushed perfection of the beauty industry must be tempered with a healthy dose of humor. Kathi holds a general management certification from Northwestern’s Kellogg School of Management, along with an undergraduate degree from Northwestern’s School of Communications.

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