Beauty is being written in a completely new way, says Nadine Graf of Estee Lauder Companies

If you happen to shop for beauty products at a Nykaa store, the consultant would invariably get you to do a skin test and recommend products across brands, which, according to her, is ‘best suited’ for your skin type. The products she would recommend could even be from multiple brands.

A Gen Z consumer’s beauty product shopping, on the other hand, is influenced by social media stars. She may buy a foundation and an eyeliner from Lovechild, a lipstick from M.A.C and choose some other brand for her hair. Even if she likes each of those products, in all likelihood she will choose some other brands the next time she has to buy those products. This consumer lives in the moment and may not be bothered if the brand is mass or prestige. She may go for a prestige brand for her beauty needs, but would be happy buying a lipstick from a mass D2C brand.

These trends have made life rather complex for beauty brands across the globe, and are the driving factors of the $14.32-billion Estee Lauder Companies’ (ELC) ‘Beauty Reimagined’ vision. “We are going through a pivotal phase with regard to the transformation of the company but also adapting to the ever-changing environment around us. It is an exciting time because beauty is being written in a completely new way, consumer-led, and that possibility is the biggest opportunity and challenge we have in hand,” Nadine Graf, president, EMEA, the U..K & I, and emerging markets, Estee Lauder Companies, tells Fortune India. Apart from its popular prestige brands such as Estee Lauder, M.A.C, Bobbi Brown and Clinique, the beauty conglomerate recently acquired The Ordinary. “It’s our answer to the fact that we can offer a much wider reach. The Ordinary is priced between $10-$15, its full transparency, ingredient-led, very relevant for Gen-Z consumer,” says Graf. Edited excerpts.

You manage a large part of Estee Lauder’s global business. How has the business of beauty evolved globally?

It is the consumer which is shifting everything. We are going through the biggest consumer and retail revolution ever. This is because of Gen Z consumers who shop, behave and consume media completely differently. Gen Zs are not buying into products, they are buying into brands. What a brand stands for is about products, about proof over promise. While efficacy and safety have become table-stakes, it is also about emotional connection – are you relevant in the world I live in or in the community that I want to support. This has become relevant more than ever before. Gen Zs are not loyal to brands or products, they are loyal to their moods, their discoveries.

There is so much more discovery happening. Globally, TikTok has changed the beauty world. It has become their shop front for beauty in particular, for make-up; it’s way more influencer and creator-led now. Earlier, you would buy one or two products from your favourite brand, but that’s not happening any more. You buy five-six products from different brands, which mean a strategy change aswell. There is no brand loyalty among Gen Zs. When we talk about millennials and consumers who are 45-plus, there is way more loyalty. This is also where we go after--from recruitment to repeat, and that is where skincare comes in.

Then, there is tech, data personalisation, AI and all of that. Sometimes it may sound complex and cold, but I am a big believer that it will step-change the way it can be humanised. AI can be made way more personal and that’s what consumers also expect. The say don’t talk to me how everyone would talk to everyone, it needs to be personalised as per my needs, concerns and skin tone. Technology will help us leapfrog in the way we are engaging and communicating with our consumers.

You talked about your ‘Beauty Reimagined’ vision. Can you take us through that?

‘Beauty Reimagined’ is built on five action pillars. We always talk about four Cs – categories (we are playing in skincare, make up, fragrance and prestige haircare), country (we are a global company and we need to be relevant in every country), channels and consumer. The strategy is we need to be where the consumer is. You may say everyone says that… we were always present in prestige channels, but today there is no prestige channel, there is only prestige positioning. We need to understand where the consumer is and be where she is, and it opens up from a red sea thinking to a blue ocean thinking type. The consumer may shop on TikTok, or Amazon, or other online and offline channels where we may have never been present. This opens up a huge opportunity in accelerating consumer reach. That’s a key focus.

The second pillar is innovation. Every generation wants new innovation and to be faster on trends. Innovation is important even in our supply chain, as to how we develop products faster as well as go to market with speed and how we bring it. It feels imported with a global campaign that is not locally relevant. It is important to be authentic. You need someone talking about it who actually matters to the local consumer.

The third is boosting consumer-facing investments, and say what matters to the consumer. We invest in the right innovation, but it is also important that it is in the right media, in the right events and in right communities where she not only shops, but also spends her life. That’s a big focus to increase consumer-facing investments across the board.

We believe we need to change our operating model to increase speed and agility. We have a flatter organisation, with a new focus on emerging markets. This also helps us ring-fence specific needs for emerging markets, which are different from the western markets.

The fifth pillar is challenging ourselves about the way we are getting ready to capture AI within the company and beyond so that we can make sure we are on the journey to modernise marketing, because there is so much more that can be done. AI already defines our processes in the supply chain, but it also thinks about being creative. In the creative process you will have the global campaign which can’t be executed in the Middle East, for instance, because there is too much shoulder. In the past we used to do separate photoshoots, now AI does it in minutes. This speeds up the process and also costs less. It helps us invest more where we need to.

Will AI take away marketing jobs?

No. Why would it? What we need is to bring in more creativity. The local team needs to sign up with right influencers and Bollywood stars – that’s what we need to double down upon. What we need to change is make marketing more strategic and less transactional. Everything that is not value-added can be done faster and in a more cost-efficient way. Marketing is at the core. We are training and upskilling our people on what marketing needs to be. If you look at the Indian market, we are the first ones who went with local campaigns. So, you need to have the talent and the right creative people for that. 

How different are emerging markets?

Emerging markets are very different in terms of local relevance. The Indian woman uses kajal better than any one does. We came here and beauty consultants told us we need the real kajal. So, we developed it and were sold out in no time. It was such a hit that it was launched in the U.S. and across the world. We do locally inspired innovations, which is not India for India, but India for the world.

Supply chain and regulations are different than what it they are in the western world. South East is different than India, Turkey is different than Middle East. If we want to win in each marketplace, we have to understand the market place, we need to have our people. We need to ring-fence it in a way that we are even more agile.

As international global brands we had to double down on local relevance. The product innovation, say in the U.A.E., may not be too different from India, but the people endorsing them are local. This has become table-stakes.

India has a plethora of local D2C brands entering the market and since they are homegrown, they have a fairly good understanding of consumer needs. Won’t these brands put you at a disadvantage?

Are we afraid of competition? Absolutely not. We believe these brands are educating consumers in prestige beauty, but does it get fragmented? Absolutely. Do we need to bring in more points of differentiation? Yes, absolutely. It also challenges us to innovate. We can’t be complacent. For us the interest is to continue to build the prestige beauty market, it can be so much bigger. The forecast is it will grow 20-60% over the next few years, and that’s attractive.

You are one of the first global brands which started selling prestige products online by partnering with Nykaa. Can you tell us how the strategy helped?

We started with Shoppers Stop 20 years ago, today we have more than 70 direct-to-consumer free standing stores. We are in almost 400 points of sale. In 2016, we were the first beauty company which entered with Nykaa to build prestige. Falguni (Nayar) built Nykaa with mass and masstige, so we said, yes, we will do prestige together. That started in 2016 and since then we have launched all our brands with Nykaa. For the first year, it was pure-play and has given us and them, access in Tier II, III and IV cities. It helped us understand where the business actually is so that we can actually go with brick and mortar. That’s when they started to open stores. Consumers like to go to stores, explore and try and take pictures with their make-up. We are also working with Tira.