596. Bart Sayer, Looking Beyond the Mirror: The Business and Science of Beauty.

Show Notes:
In this episode of Unleashed, Will Bachman interviews Bart Sayer, a former senior vice president at Estee Lauder, to discuss how to analyze a cosmetics company. Bart has two quick chapters in consulting, having worked as a partner in the consumer retail practice of Booz and PWC. He then joined ELC, where he held three different roles, including SVP, General Manager of Clinique’s international business. The conversation focuses on understanding the structure of major cosmetic companies and the various types of companies encountered in the industry.
The Beauty Industry Explained
Bart explains that the beauty industry is divided into four main categories: skincare, makeup, hair, care, and body. The market is divided into luxury and mass segments, with luxury beauty expected to grow between six and 8% in the foreseeable future. Mass brands are more likely to be found in drugstores, such as Walgreens and CVs. Premium brands are more available in department stores or specialty multi, such as Sephora and Ulta, and a third channel being direct to consumer. At Estee Lauder they believed that distribution defines your equity, so prestige brands are careful about where they appear. Specialty channels like QVC and travel retail offer exposure to premium-priced and mass brands within the United States and other markets. Travel retail has been a growth vehicle for multiple brands, but it is more of a prestige and luxury phenomenon.
Ingredients in Beauty Products
The ingredients in mass and prestige products differ fundamentally. While not all ingredients are created equal, they are used in formulations that push efficacy to the furthest boundaries while maintaining safety. Prestige brands also put extra protections in place to ensure product safety for sensitive skin. The formulation philosophies vary widely across different entities. Allergy testing is also highly variable across these different entities. The difference in ingredients and formulations between mass and prestige products is significant, as is the importance of customer service and product quality. Bart discusses the importance of clinical testing in product and research development, highlighting that it is a high barrier to entry for indie brands. He also discusses the shift from paid media-led to earned media-led marketing models in the beauty industry, where companies work with contract manufacturers to access the latest ingredients and formulation philosophies. Bart emphasizes the blend model in which cosmetics companies come up with formulation philosophies, select ingredients, design tests, and select categories and subcategories. This approach is not binary, as L'Oreal has over 40 different manufacturing facilities worldwide. The marketing model has evolved from paid media-led to an earned media-led model, where companies seize organic market buzz and amplify their products on social channels.
Local vs. Global Adaptation
The concept of local versus global adaptation is crucial in the beauty industry. Brands must find a locally relevant articulation of their brand essence to convince Chinese consumers that their product is top-notch. Large media companies often have global ambassadors who can speak for the brand, but if a local face is not available, the brand may not get the traction needed. To succeed in the beauty industry, companies must balance being more reactive to market trends and being part of a locally relevant conversation. This involves being more reactive to market trends through an earned media-led approach on social media platforms and ensuring that they are part of a locally relevant conversation in terms of platforms, messaging, and talent. Bart highlights the importance of clinical testing, R&D conceptualization, marketing, and consumer insights in the beauty industry. By understanding these factors, companies can better navigate the competitive beauty market and achieve success in the ever-changing beauty industry.
Indie and Newer Brands
The conversation turns to the shift towards indie and newer brands in the beauty retail industry. He explains that the advantages of paid media are significant for big brands, but indie brands may find it less exciting to introduce new products. The reasons behind this growth include lower barriers to entry on social media channels, an agile marketing model, contract manufacturers growing their footprints, and channel partners like Sephora. When it comes to the minimum viable cosmetics companies, which can be as small as a team of five to 10, the problem with these companies is not the launch itself, but the stickiness. Many of these companies struggle with repeat purchases, which are the key to success.
Sales and Distribution in the Beauty Industry
Bart discusses the global phenomenon of Sephora, a leading premium beauty retailer owned by the LVMH group. They highlight two or three global phenomenon channels that matter from a...