Estée Lauder Acquires DECIEM | the Ordinary
In a strategic move that has sent ripples through the beauty industry, In June 2017, Estée Lauder Companies Inc. (NYSE: EL) made a surprising move by acquiring the Canadian beauty company DECIEM, the parent company behind the immensely popular skincare brand, the Ordinary. The acquisition was executed for an undisclosed sum, raising eyebrows in the industry due to Estee Lauder's reputation for high-end luxury brands. However, it was clear that Estee Lauder recognized the enormous success of the Ordinary and wanted to capitalize on it.
Nonetheless, the situation has placed suppliers of the Ordinary, such as ourselves, in a challenging position. Estée Lauder has gradually stopped the supply to all former suppliers associated with DECIEM. Consequently, we regret to inform you that we will not be able to offer the Ordinary products directly from DECIEM with English labels until we successfully navigate these uncertain circumstances. Although the Ordinary from the Korean channel is still available, each item of the Ordinary sold in Korea has one side labeled in the Korean language to comply with the local regulations while the rest of everything is the same as the English version products. In Korea, we also source the items directly from the official distributor of the Ordinary brand.
DECIEM, the parent company behind the wildly popular skincare brand, the Ordinary, has left an indelible mark on the beauty industry. Founded in 2013 by the visionary Brandon Truaxe, DECIEM disrupted traditional beauty norms by championing affordable, high-quality skincare solutions. the Ordinary, one of DECIEM's most celebrated brands, has gained a devoted global following thanks to its commitment to simplicity, transparency, and effective formulations. With a focus on providing skincare enthusiasts with access to potent ingredients without the luxury price tag, the Ordinary has become a household name, revolutionizing how consumers approach skincare and setting a new standard for accessibility and efficacy in the beauty industry.
About Estée LauderEstée Lauder, founded in 1946 by Estée Lauder and her husband Joseph Lauder, is the second biggest company in the beauty industry, only after L'Oreal. With a rich heritage and a commitment to innovation, the company has established itself as a leading provider of skincare, makeup, and fragrance products. Estée Lauder's extensive portfolio includes renowned luxury brands like Dr. Jart+, Clinique, and Tom Ford, making it a symbol of elegance and quality. Its relentless pursuit of excellence has earned it a place in over 150 countries, serving customers worldwide with a wide array of beauty offerings.
Estée Lauder's Ongoing Investment in DECIEM
Estée Lauder's journey with DECIEM began in 2017 when the cosmetics conglomerate initially invested in the brand, acquiring a minority stake. DECIEM, known for its innovative and science-backed approach to skincare and beauty, quickly gained popularity among consumers for its standout brands like the Ordinary and NIOD. The agreement will see Estee Lauder purchase the Toronto-based company in two phases. The first phase, which was completed on May 18, 2021, increased Estee Lauder’s ownership in DECIEM from 29% to 76%. The second phase will allow Estee Lauder to purchase the remaining interests after a three-year period at a price that will be determined based on the future performance of DECIEM. The second phase is expected to begin in May of 2023.
DECIEM's Unique Appeal to Estée Lauder
DECIEM's unique appeal, marked by transparency, affordability, and science-backed formulations, presents an attractive proposition for Estée Lauder. This acquisition provides Estée Lauder with a powerful entry into the science-based skincare market, tapping into DECIEM's devoted customer base while strengthening its commitment to innovation and ethical practices. DECIEM's distinct identity aligns with changing consumer preferences, making it a valuable addition to Estée Lauder's portfolio.
Impacts of the Acquisition
Retailers of the Ordinary products are likely to see increased demand and sales as Estée Lauder's global distribution network expands the brand's presence in various regions. This could translate into higher revenues for these businesses. However, they may also face heightened competition as the Ordinary becomes more widely available through Estée Lauder's marketing and distribution capabilities. While promising numerous benefits, however, the acquisition only translates into trouble for wholesale suppliers of the Ordinary like us. It is because Estee Lauder has cut supply to the majority of the previous affiliates of DECIEM and so we are unable to source the Ordinary for now. The acquisition also presents potential challenges for both the companies and customers:
Challanges for Estée Lauder
Integrating DECIEM into Estée Lauder's extensive portfolio may prove challenging due to differing corporate cultures, management styles, and operational processes. Ensuring a smooth transition and maintaining the agility that has characterized DECIEM could require careful planning.
Brand Identity Balance
Estée Lauder must strike a delicate balance between preserving DECIEM's unique identity and leveraging its resources. Overemphasis on cost-cutting or altering DECIEM's values could risk alienating the brand's loyal customer base.
Estée Lauder operates in a highly competitive beauty market. The acquisition of DECIEM may lead to market saturation within the science-based skincare niche, requiring innovative strategies to maintain a competitive edge.
Managing multiple brands can be resource-intensive. Estée Lauder must allocate sufficient resources to support DECIEM's growth and innovation while ensuring other brands in their portfolio receive adequate attention.
Challenges for Customers
Customers may experience disruptions in product availability during the transition phase, especially if supply chain adjustments are required. This could impact loyal DECIEM customers who rely on their favorite products.
Changes in ownership can raise concerns about product quality and formulation consistency. Customers may be wary of any alterations to their beloved DECIEM products, leading to uncertainty and skepticism.
Pricing and Affordability
Estée Lauder may adjust pricing strategies for DECIEM products, potentially affecting affordability. Customers who have appreciated DECIEM's cost-effective offerings may face higher price points.
Ethical and Environmental Considerations
DECIEM's commitment to ethical and sustainable practices has been a major draw for conscientious consumers. Any perceived deviation from these values under Estée Lauder's ownership could disappoint customers.
Navigating the Future
As we grapple with these uncertainties, we are committed to exploring all possible avenues to ensure our business remains resilient and able to meet the needs of our customers. We will closely monitor the developments surrounding Estée Lauder's acquisition of DECIEM and look for alternative sources to get the Ordinary.
We remain hopeful that, with careful adaptation and a focus on customer relationships, we can navigate these uncharted waters and continue to serve the beauty community effectively.