How Estée Lauder was plunged into a Succession-style crisis

“I love family,” Leonard Lauder, the son of beauty giant Estée, told an interviewer in 2014. “They say you can’t choose them, but if I had the chance, I’d choose them all again.”

Over the past decade, however, his sentiments might have become less rosy. Having been president, CEO and chair of the board of directors for almost half a century, the now 91-year-old’s exit last year has prompted a Succession-style crisis, with tumbling sales and nosediving share prices driving the family apart.

This week, a letter leaked to the Wall Street Journal revealed that Jane Lauder, the youngest of Estée’s four grandchildren, had privately implored board members to oust its long-time executive chair, William – her cousin.

The current CEO, Fabrizio Freda, announced he would be stepping down earlier this year. Once 51-year-old Jane, who joined the family firm in 1996, lost her bid to succeed him, she relinquished her executive vice president role – and sent a missive accusing William of destroying the company. It was ultimately decided that Stéphane de La Faverie, an executive within the firm – crucially outside of the Lauder bloodline – would take up the reins next year.

Jane’s letter came after a year of fallouts over the company’s future direction, and who should lead it. Estée’s dynasty – many of whom are among the firm’s largest shareholders – have seen shares drop more than 50 per cent this year, shaving more than $25 billion off its market value.

“The last couple of years, the focus on who’s next and what’s next has been such a distraction for everyone, and this other drama that’s unfolding is yet another distraction,” a current Lauder executive told the Line Sheet, a newsletter from Puck News, this week. “Everyone is over this.”

It is hardly the future Estée imagined. Born Josephine Esther Mentzer in 1908, she began dabbling in skincare as a child when her uncle, a chemist, came to stay. What began as potion-making in the kitchen graduated to a stable behind the family house, which they turned into a lab. Throughout the 1930s and 1940s she began selling concoctions those early forays had inspired, pioneering the idea of free samples and carrying out facials on women in hair salons as they sat beneath the dryers.

By 1946, she had built momentum enough to launch her eponymous brand, leading it to multi-million dollar success in 1953 on launching its Youth-Dew bath oil. Fifty thousand bottles of the rose, jasmine and patchouli blend that doubled as perfume were sold that year; 150 million had been shifted by 1984. It turned Lauder’s brand into a household name; her success story the American Dream writ large.

More brands – Clinique, Origins, Aramis, Prescriptives and Lab Series – followed, while the company swelled to 60,000 global staff.

Accolades piled up. Lauder received the French Legion of Honour in 1978, became the only woman named on the 20 most influential business people of the 20th century list from Time magazine in 1998, and was awarded the Presidential Medal of Freedom in 2004. She, along with her husband and sons, became fixtures of the New York socialite circles she had aspired to, her brand a juggernaut that would go on to acquire the likes of Mac, La Mer, Jo Malone and the Ordinary, Le Labo, Frédéric Malle perfumes, and many more. With help from campaigns fronted by Liz Hurley, Kendall Jenner, Gwyneth Paltrow, Paulina Porizkova and Karlie Kloss, it became an $89 billion success story.

Estée Lauder “was the first truly global premium beauty brand,” says Millie Kendall, the CEO of the British Beauty Council, adding that it “inspired a lot of fashion brands to evolve in the beauty space. Its impact has been tremendous and really has defined the past 40 to 50 years of beauty.”

Leonard became CEO in 1982 (his mother retired in 1995, the same year Estée Lauder Companies – ELC – went public). She died in 2004, three months prior to Leonard’s son William beginning his rocky tenure, triggering the first succession battle to cast its shadow over the company. In 2008, it was decided that Freda, a former Procter & Gamble executive, would become the first non-Lauder to be given permanent keys to the kingdom when he was appointed president and chief executive officer.

At the time, William, now 64, gave an interview airing his frustration at being forced to relinquish the role he had been groomed for; the result, he said, of relatives with diverging agendas. The company, it seemed, was no longer immune from the family dramas that have plagued – and felled – numerous dynasties; the father keeping close tabs on his empire, the son desperately trying to live up to expectations.

All the while, Jane was rising through the ranks, though Ronald – William’s uncle – was cautious about his daughter one day taking the top job. “I don’t know if I’d wish it on her,” he said in 2008.

But the company’s falling fortunes seemingly galvanised her to step in. While Freda’s reign was profitable for his first decade largely thanks to betting big on China, that well has dried up. The company’s affection for US department stores has fallen flat too, with flagging performance piling on the pressure behind closed doors.

“The company used to be known for listening to changing consumer tastes and responding effectively,” says Milton Pedraza, the CEO of the Luxury Institute. “Today it is seen as slow to listen and to respond effectively to its different generations and customer tastes, needs and wants. It has lost its way in its premium and luxury brands and credentials.” Its brands, including Estée Lauder, Clinique and La Mer, “have not delivered new and innovative benefits,” Pedraza says. “They feel dated. They are not resonating with consumers globally. You can blame China only so much.”

The right kind of leadership is vital to ensuring the firm returns to its glory days, he adds – but trying to make business decisions in the midst of a family maelstrom is no small task. Pedraza adds that “succession battles within family-controlled companies often happen when results are poor. This is a story of a great company but with failed leadership and failed opportunities”. Blame and conflict, he says, are the inevitable conclusion.

Last year Leonard gave up his board seat over disagreements with his son, according to the Wall Street Journal (he remains chairman emeritus). He was unimpressed by Freda; while William, who joined the company in 1986, wanted him to orchestrate a revival plan. When Freda announced that he would retire, it was decreed that de La Faverie would take over.

That point next year will also mark the first time in decades that neither Jane nor William, who has stepped aside as executive chair, will be involved in the day-to-day running of the 78-year-old company their grandmother built. Last week, they sat side-by-side on a Zoom shareholder meeting (formerly gala-esque affairs held overlooking Central Park, with attendees feasting on gourmet platters and leaving with goody bags packed with creams and lipsticks), assuring those present that they were “deeply invested” in upholding family values. William promised that they would “continue to champion a culture that inspires the entrepreneurial spirit of our grandmother”.

This apparent show of togetherness – despite the turmoil behind the scenes – struck a more conciliatory note than he had 16 years earlier, when he was ousted the first time around. “Leading a public company is a sentence,” he said, “but leading a publicly held, family-controlled business is a life sentence.”