U.S. Estée Lauder, known for its "brown bottle essence," is accelerating brand consolidation amid weak results. As the global beauty market, centered on Korea, shifts toward new indie brands, profitability pressure is mounting in the traditional luxury beauty sector.
According to the industry on the 14th, Estée Lauder has begun earnest portfolio adjustments this month. It is reviewing sales of brands with poor performance. Dr. Jart+, Too Faced, and Smashbox have been mentioned as candidates.
Recently, major luxury brands including Estée Lauder's flagship brown bottle essence, La Mer, and Jo Malone London have seen profitability deteriorate due to slowing demand. Consumption in Asia, including China, is sluggish, and duty-free channel sales have contracted.
Along with brand consolidation, Estée Lauder is also cutting expenses. Last year, as part of restructuring, the company announced it would reduce up to 7,000 global employees. It is streamlining offline distribution networks while pursuing simplification of operating structures.
The rising preference for indie brands in the global beauty market is also eroding Estée Lauder's position. Entry by small and new brands is increasing, centered on global beauty distribution channels such as Sephora and Ulta Beauty. K-beauty brands, which are accelerating overseas expansion by touting ingredients and price competitiveness, are representative.
Estée Lauder is not the only luxury beauty company reorganizing its business amid this trend. Louis Vuitton Moët Hennessy (LVMH) is considering selling its 50% equity stake in the beauty brand "Fenty Beauty," launched in 2017.
Last year, Kering Group, the parent of luxury brand Gucci, sold its beauty business to rival L'Oréal. Japan's Shiseido is expected to post losses for two consecutive years in 2024 and last year and has begun a voluntary retirement program locally. Coty, which owns fragrances such as Hugo Boss and Vera Wang, is also speeding up restructuring.
With the growing presence of new brands such as APR Co. and Beauty of Joseon, the landscape of the domestic beauty industry is changing rapidly. Amorepacific and LG H&H, which have pursued a premium strategy led by Sulwhasoo and The History of Whoo, are also reorganizing their portfolios.
Amorepacific is renewing flagship brands Sulwhasoo and Hera while trimming low-revenue, noncore brands and stores at home and abroad. While reducing its reliance on the Chinese market, it is pushing to diversify global channels, centered on North America and Japan.
LG H&H, which saw a leadership change late last year, has repeatedly signaled its intent to accelerate business restructuring. This year's key tasks include reorganizing the brand portfolio and readjusting the profitability structure. For luxury brand The History of Whoo, the plan is to deliver results in the North American market through aggressive renewal.