On this week's earnings: Puig and Estée Lauder Companies

This week’s Earnings shined a spotlight on both ends of the beauty performance spectrum: Puig announced an 11% rise in Q3 sales (leading to a 10% rise in share price that day), while 2 days later Estée Lauder Companies revealed their organic sales dropped 5%, triggering a 21% share decline.

Every quarter since late 2022, China-related factors are brandished as THE reason why the company is underperforming. Meanwhile, no one ever mentions social media where consumers spend so much of their time, and Estee Lauder brands have been underperforming this decade. It’s as if marketing barely plays any role anymore, and results are strictly down to macro-economic trends.

It’s worth remembering that while Estee Lauder’s share price dropped 83% since its late-2021 peak, the global beauty market has enjoyed its best 3-year growth span this century. So even if China is indeed slowing down, savvy beauty brands, including Puig’s, are finding other ways to grow in different geographies:

How is Puig doing it?

We have been bullish about Puig ever since their fragrance brands Jean Paul Gaultier and Carolina Herrera jumped to the top of TikTok Earned rankings. Several categories have benefitted from the rise of TikTok, but none more so than fragrances. For 2 of Puig’s fragrances brands to be in the top 5 there is meaningful:

As more rivals catch on to the social playbook powering Puig’s brands, the company should next aim to master Owned social content if it wants to sustain its momentum. In the age of (paid) influencer fatigue, our data tells us Owned-done-right is more fundamental to long-term brand health than even high quality Earned investments.

What about Estee Lauder Companies? 

The company’s social strategy has been on the wrong side of history on multiple fronts for many years now:

1. Its brands have failed to embrace Owned on TikTok — MAC was an Instagram powerhouse when the platform dictated the rules and shaped preferences (up until 2021), but hasn’t made the transition to the new social dynamics introduced by TikTok and now also largely prevailing on Instagram.

2. As for Earned:

• Many of ELC’s fragrance brands (e.g., Le Labo, Jo Malone, Tom Ford) were well positioned on TikTok in 2021-22 (when most of the category footprint was organic), only to be overtaken by brands more deliberate about their TikTok strategy.

• Clinique does land bright moments on TikTok with Black Honey, but its paid influencer execution can feel Instagram-ish ca. 2019.

• Last, Estee Lauder has been a perennial social under-achiever, and is today helpless against the long-tail of socially savvy players like rhode skin:

As mentioned in earlier newsletters, this social media era could be called the Age of Communities, where Social interactions play a role exponentially more important than Media exposures. To nurture these communities, brand teams are advised to focus less bandwidth & budget on (paid) influencers & ads, and more on mastering both the social content codes that get viewers socialising, and the off-line investments that communities are keen to relay on social.