Much can be said for the company that gave us an array of fragrances, cosmetics, and apparel over the years. Esteé Lauder Companies along with the its affiliates have come a long way from starting out as a small counter on Saks Fifth Avenue in New York City in the late forties.
The company grew out to become a market leader in the cosmetics market in the United States. With sales amounting up to $ 6 billion in 2006, the “ quite small” company that Joseph Lauder and his wife started is a typical success story emulated the world over.
However, intrigues and controversies abound as the company that is still dominated by the Lauderfamilyat present faces a dilemma whether to directly face the conflicts head-on or just hold on and do business the usual way.
In February of 2001, a pro-Palestinian group led a boycott on all Estee Lauder Companies products after allegations of pro-Israel activities that were done by Ronald Lauder, the current CEO of Estee Lauder Companies. The boycott cost a decrease in the profits of the entire group of companies while at the same time affecting the image of the company as a whole because of the incident. Steps of remarketing strategies were done by the company so as to offset the negative effects of the boycott on the image of the entire company.
This was preceded by a long-standing legal battle of Ronald Lauder with Vladimir Zelezny and the Czech Republic in 1999 which has resulted in a payout to the Estee Lauder chief executive by the Czech businessman who incidentally was elected as senator of the Czech Republic.
In addition, Estee lauder is facing the pressures of answering claims that the ingredients in some of its cosmetics offerings are cancerous and should not be sold in the market. Likewise, the company also has to address the growing number of natural alternative cosmetics in the market that is slowly eating up its market shares.
The boycott was received by the public with mixed reactions. Most of the Muslim population adhered to the group that started the boycott and saw Ronald Lauder as an alleged Zionist who, though a businessman, is really supportive of the Israeli occupation of Palestine. The argument here is the legality and intent of Mr. Lauder to make such statements without considering the fact that he represents a large multinational company and anything that comes out of his mouth could affect the image and impression on the company that he leads.
On the other hand, the actions that the head executive made towards political issues are viewed by some groups, particularly by Pro-Israeli groups as an exercise of his right to free speech and free actions. This was even answered by an anti-boycott which is geared to contradict the allegations that the chief executive of Estee Lauder did was the appropriate thing to do.
The primary conflict here not exactly the question of whether Ronald Lauder did something that would please a certain group of people or not but the negative effects that the incident entailed on the image of the company, as well as Mr. Lauder himself. The effects can be exemplified by a significant decrease in the stock prices of Estee Lauder in the stock markets in 2001 which amounted to a continuous bearish descent and cost the company losses along the way.
Estee Lauder’s marketing efforts have also been significantly affected by the perception towards Ronald Lauder. As a matter of fact, telecommunication ventures of the company in Europe, RSL Communications went bankrupt the same year after the incident. The operations of the telecoms company are mainly based in Europe and the United States.
Furthermore, what happened in the media venture between Ronald Lauder and his Czech partner, Vladimir Zelezny resulted in a legal suit after the latter failed to release the license for the local network Nova which was under Lauder’s Central European Media Enterprises (CME). This further affected the image of the CEO and led to the bankruptcy of CME in 2000. This however was compensated by the damage fees that were awarded in favor of Ronald Lauder in 2003.
Furthermore, the issue of Estee Lauder fooling customers over synthetic and toxic ingredients over their cosmetics is one serious conflict that the company is trying hard to face. For instance, a report by Dr. Samuel S. Epstein, M. D., chair of the Cancer PreventionCoalitionin Chicago, indicated in one of his reports that most of the products that Estee Lauder sells in the market today contain certain carcinogens that could cause cancer through continuous use.
He furthered that the products in particular that Origins released recently which claims to “ optimize skin defense against skin age accelerators” have been deemed confusing and that the marketing strategy used here by Estee Lauder clearly hides the truth to its clients.
In the same study that was published by Dr. Epstein, he claims that ingredients such as Limonene, PEG-100, among others are known carcinogens all of which are present in the current product lines that the cosmetics company sells in the market. Also, the study includes the presence of Parabens and Bisabolol, both of which are known to disrupt endocrine functions of the body and penetrate skin respectively.
With the growing market for more natural and animal-friendly cosmetics slowly eating up the market, Estee Lauder has to rethink its current marketing strategy and invest more in the product development of its cosmetic product lines in order to cope up with the high growth in demand in the market.