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Text｜He Zhexin

Editor: Qiao Qian

Estee Lauder, whose market value has lost hundreds of billions of dollars, is finally changing its boss.

Fabrizio Freda, who has served as CEO for 16 years, announced on Monday that he will officially step down at the end of the next fiscal year in June 2025. Thus, the personnel turmoil that has been entangled in this beauty empire since 2022 has finally come to an end.

According to a statement from Estée Lauder, the group has not yet named a successor, but the board of directors has "pre-arranged" the succession plan.Both internal and external candidates were considered. Fu Yide will continue to lead the company until a new CEO takes over and will continue to serve as an advisor to the company through 2026.

In the fiscal year 2024 ending June 30, Estee Lauder's profit and revenue fell by 61% and 2% respectively. In the earnings call, the CEO, known as the "working emperor" of the beauty industry, was "pessimistic" about the earnings in fiscal 2025, because the Chinese market, which accounts for 30% of the group's revenue, will "continue to be weak."

There is no doubt that Estee Lauder needs a CEO who understands China better.

He is a hero, but more like a family defender.

Objectively speaking, Fu Yide's 16-year resume is absolutely remarkable.

Since he took over as CEO in 2009, Estee Lauder's stock price has risen from less than $20 to more than $300 in 2021. He has also successfully acquired well-performing brands such as Tom Ford, Lelabo, and The Ordinary, diversifying business lines; it was also his idea to continue to expand the Asian and Chinese markets. During Fu Yide's tenure, Estee Lauder's total return rate was about 780%, while the average return rate of the S&P 500 index was only 550%.

But in fact, Fu Yide is just the "spokesperson" of this century-old beauty family.The Lauder family has maintained absolute control over the Estee Lauder Group to this day: 80% of the voting rights are in the hands of family members, and several children and grandchildren have more or less participated in the group's operations and have a seat on the board of directors even after retirement.

Of course, Mrs. Estée Lauder's influence remains to this day.

Today, in the Estee Lauder Group's office building on Fifth Avenue in Manhattan, the entire 59th floor is decorated according to Mrs. Estee Lauder's favorite style during her lifetime: blue floral wallpaper, a huge sofa that wraps around one wall, gorgeous court-style chairs and tassel curtains - it does not look like a modern company, but rather like the bedroom of Louis XVI.

Fu Yide also missed the golden age of Estee Lauder. Leonard Lauder, the eldest son of the founder, witnessed the rise of Estee Lauder Group.

From working odd jobs to becoming CEO, Leonard Lauder witnessed Estee Lauder's rise from a small company with annual sales of millions to surpassing the then No. 1 Revlon, snatching the endorsement of high-end luxury beauty from Rubinstein Helena, and competing with Lancome. In the 1990s, Estee Lauder took the lead in laying out the Asian market and enjoyed the fruits of the rapid economic development in this region, eventually growing into one of the top cosmetics empires in the United States and even the world.

Leonard Lauder's son Willam Lauder served as CEO for a period of time, but he obviously had no interest in managing a beauty company. He once said: Managing a company is like going to jail, and managing a family business is a life sentence. I don't want to devote my whole life here.

Fu Yide took over. As an external member who took the position of CEO, he was deeply trusted by family members at the beginning and strictly implemented Leonard Lauder's management philosophy. Although most of the marketing methods at that time no longer work (such as giving away samples and sexy girls marketing), he knew the importance of seizing the initiative to success.

Therefore, in China, when peers such as L'Oreal and Shiseido were reserved about high-end consumption at the time and adopted a mass market-first strategy, Estee Lauder decisively and even stubbornly implemented a high-end strategy: maintaining limited channels, strictly controlling prices, and supplementing it with a large dose of celebrity marketing, it ultimately successfully established itself as the number one spokesperson for high-end beauty products.

But when the wheel of time changes, the one who survives is often not the one who most wants to take risks.

Due to misjudging the recovery of consumption, Estee Lauder suffered a serious inventory backlog in 2022. It has long been over-reliant on the Chinese and Asian travel retail markets, making it difficult for goods to be digested through official channels. A large number of informal channels and distributors dumped Estee Lauder products at almost floor prices, and the group had to stop, but the damage to the brand image had already occurred. It is a bit reluctant to talk about the little brown bottle myth now.

In the United States, Estee Lauder also experienced the dilemma of poor sales in department stores. Although the long-term simple sales channels can stabilize the brand image, it is powerless to resist when the crisis comes. After several internal mediations by family members, Clinique finally became the first brand of the group to "take the lead" in entering Amazon.

William Lauder believed that Estee Lauder needed to enter more supermarkets like Target and Ulta Beauty, but his father strongly opposed it.

Last November, the Wall Street Journal published an unprecedented article about the internal discord of the Lauder family, which caused a "collective panic" at Estee Lauder. Contributor Emily Glazer later said in a podcast that the Lauder family usually "digests" any negative news internally, so even if the outside world has been doubting the rationality of Fu Yide's continued tenure, the family will usually speak out in a supportive manner to the outside world - "until the moment they no longer support it."

Who will save Estee Lauder?

In history, Estee Lauder has also faced crises of varying sizes. In 1969, Estee Lauder had cash flow problems due to overly optimistic expectations of Clinique's performance. It had no choice but to lay off employees and cut the budgets of some weaker brands, focusing on marketing activities, and eventually got out of the crisis.

Later, as department stores in the United States changed, Estee Lauder also used its keen sense of smell to capture the "new winner" in the department store industry, and successfully moved in, defeating potential competitors at the time.

All this sounds simple, but it is a time-consuming and expensive process. Today, the department store industry has not experienced the stage of new players replacing old players, but has almost completely withered - online transactions have gradually reconstructed the consumer society. Estee Lauder, which has prospered with modern department stores, faces challenges that can be imagined.

In the United States, Clinique's listing on Amazon means that Estee Lauder has finally taken the first step in channel reform. But in China, apart from launching on Tmall a few years ago, Estee Lauder has not made any new channel layout moves.

In June, some media reported that Estee Lauder Group might officially incorporate duty-free channels into domestic team management in July. The duty-free channels have always belonged to the group's travel retail department, but the group did not comment.

On the other hand, the traditional domestic department store channels are already in danger.

36Kr visited several offline counters of beauty brands, and the sales staff told us that a large part of the counter sales have been "official group purchases", that is, purchasing initiated by store managers or department managers, and the purchasing agents are usually various online channels: such as live broadcast rooms and Taobao C stores.

The advantage of this model is that the larger the volume, the better the price, and "stores can achieve sales results", but the long-term damage to the brand image is imaginable - unauthorized C stores and live broadcasters are the source of fakes; and the price difference between the purchasing price and the regular price is usually subsidized by samples and free packs. Over time, the gifts and gifts received by store customers are discounted, and many consumers have made similar complaints on social networks.

Change is imminent.

Among several potential CEO candidates, Jane Lauder, William Lauder's cousin and Leonard Lauder's niece, seems to be the most likely to take over - companies in crisis often hand over the burden to female leaders because they make decisions not solely based on report numbers, but with sensitive decisiveness that is rare among male leaders.

Estee Lauder family holdings

As a member of the family, Jane Lauder's succession can ensure that Estee Lauder's structure is basically stable at least in the short term - but the shortcomings are also obvious. Jane Lauder has never led any brand to actually charge into battle, and of course has never set foot in China. Her role in the group is more related to digital marketing and gender equality.

Last month, Estee Lauder announced that it would increase prices of all its brands by 10% to 20% due to "increases in raw material prices and labor costs." Analysts believe that Estee Lauder's move is to "test the tolerance of domestic consumers for the upper limit of high-end beauty prices." However, in such a consumer environment, raising prices against the trend may be more dangerous than beneficial.