Online Exclusive: Estée Lauder’s Fabrizio Freda Defines a New Beauty Business

Fabrizio Freda

President and CEO addresses sold-out crowd at CEW event

By Jamie Matusow, Editor

More than 400 people—who CEW president Carlotta Jacobson welcomed as “the who’s who in beauty”—packed The Harmonie Club on East 60th Street in Manhattan on Thursday, Jan. 28, to hear Estée Lauder’s president and CEO Fabrizio Freda speak about his successes and strategies in running one of the world’s most successful beauty companies. His presentation was made all the more intriguing as it coincided with the announcement of the company’s double-digit fiscal second-quarter earnings, for which Freda was largely credited.

The former P&G executive, who took the reins at The Estée Lauder Companies Inc., on July 1, 2009, was introduced as “one of the most watched executives in the beauty industry.”

Jill Scalamandre, chief marketing officer, Chrysallis, and chairwoman of the CEW board of governors, moderated the event, and indeed, as she carried out an informal Q&A session with the suave Italian beauty industry leader, his responses unveiled a busy six months of rethinking and redesigning strategies at the company. Change, he said, is paramount to succeeding in today’s beauty industry. “Chances are,” he said, “if you’re not changing, you’re not growing.”

Freda said he looks to a new economy and a new beauty customer with realistic expectations and enthusiasm, and as an opportunity to accelerate changes. “As leaders,” he said, “we have to look reality in the eyes.” But he cautions not to change just for the sake of change.

As a starting point—and one which he said he has carried out with executive chairman William Lauder, is to start with a list of what not to change. Once defined, he said, they created a new vision, one they worked on to ensure its shared acceptance by the entire organization.

Freda noted that he favors rapid change, or “reverse engineering,” as he termed it: "Decide where you want to be in three to five years, then design the capability to get there.” He added, “You have to change continuously.”

The company has always put consumers first, said Freda, starting with their legendary founder visiting department stores to discern just what shoppers wanted. Now, he said, the community is larger, global, and The Estée Lauder Company is investing more in knowing about consumers around the world—“China, Brazil, Russia, it’s the power of a multicultural world.” He added that "today, 50% of women are women of color."

In response to Scalamandre’s question: “How will outsiders view the change from Estée Lauder?” Freda responded: "I hope they will see the market leader in North America becoming a truly global company.”

“We plan to take the best of each country and capture it and sell it to the rest of the world. In the end,” he added, “this will help the home market.”

This global effort, said Freda, requires creativity as well as innovation, and the cues should come from consumers. “A truly global company innovates for the most demanding consumer, and brings that to every country in the world," he said.

New Consumer

“Will the North American consumer ever come back?” asked Scalamandre.

“She is buying much less,” replied Freda, “less as a status symbol. Women are getting tougher in judging value.”

Key now to corporate sales, Freda believes, is enhancing the prestige experience in department stores, where women can get an unmatched level of service and education—“a moment of indulgence, an experience—all of which has a lot more value than what we’ve been communicating.”

More attention, he said, must also be paid to the internet, which by consumers’ ability to talk to each other, has put them in control.

To be successful in a digital environment, he said, “We must go from the world of advertising to the world of storytelling.”

Right now, said Freda, tremendous opportunities lie with consumers in China. They are a very optimistic group, said Freda, with a growing middle class. “They go directly to the expensive product,” he said, “and their ability to afford it is growing.”

Brazil, too, he said, shows much promise. “While a developing market, it’s really a developed market, huge in hair care.” The “problem," he said, is the country’s big on mass-market products. Freda hopes to change all that, “by creating the right prestige shopping experience there, such as self-standing stores.”

If the past six months of Freda’s rapid change leadership are any indication, we should see stores popping up in Brazil any day now.

For upcoming CEW events, please go to www.cew.org.