The Estée Lauder Companies or Estée Lauder (EL) is a pioneer in the cosmetics industry. The company believes in a strong research and development, or RD, function for an innovative product pipeline. Estée Lauder’s RD expense for fiscal 2014 came in at $0.2 billion or 1.8% of net sales.
Scientists on the RD team work closely with the marketing and product development team for product innovation. This includes extending product lines, developing new packaging concepts, and improving, redesigning, or reformulating existing products.
RD facilities and regional innovation centers
EL has five RD facilities in:
- Blaine, Minnesota
- Melville, New York
- Markham, Ontario, Canada
- Oevel, Belgium
- Shanghai, China
EL and its peers Procter & Gamble (PG) and Unilever (UL) focus on creating products that cater to consumers in specific markets and regions, based on their cultural preferences, skin tones, and beauty habits.
Estée Lauder established regional innovation centers in Asia and Europe to complement the team in North America. In addition, EL has long-standing working agreements with the several US and international medical and educational facilities to supplement its research.
Recently successful innovations
Product launches such as Advanced Night Repair Synchronized Recovery Complex II from Estée Lauder and Dramatically Different Moisturizing Lotion+ from Clinique have contributed to the company’s growth, especially in the Asia Pacific region.
New collections from makeup artist brands, rollout of Pure Color Sculpting lipstick from Estée Lauder, and new launches and innovation in the fragrance segment such as Estée Lauder Modern Muse, Michael Kors (KORS), and Tory Burch have helped strengthen the net sales of higher-end prestigious products.
Focus on product development via customization
Estée Lauder intends to identify and create more quality products that can be customized for its international clientele and then spread them out around the globe.
EL’s in-house RD facilitates a quick response to any shift in customer preference, which gives the company a competitive advantage. In addition, product development backed by strong research will enable quicker market penetration and customer acceptance of new products.
Estée Lauder has exposure in the Consumer Staples Select Sector SPDR ETF (XLP) with 1.2%[1. Updated July 28, 2015] of the total weight of the portfolio.