L’Oréal Strongest In Beauty ‘Brand Impact,’ While Lauder Gaining Value Fastest
Executive Summary
L’Oréal is the most valuable beauty brand globally, according to consultancy Brand Finance’s annual report from its methodology ranking 50 most valuable brands in cosmetics, skin care, hair care and personal care. Estee Lauder ranked second.
L’Oréal is the most valuable beauty brand for the third year in a row with Estee Lauder a fast-growing runner up, according to brand valuation consultancy Brand Finance Company’s annual report ranking the 50 most valuable cosmetic, skin care, hair care or personal care brands.
The UK firm, which seeks to “bridge the gap between marketing and finance” within companies to help identify the true value of brands, found French firm L'Oreal SA’s namesake beauty brand the frontrunner worldwide with a value of $11.2bn, followed by the Estee Lauder Companies brand at $7.93bn (see table at end of article).
Brand Finance, noting that methodologies to gauge brand value vary among research firms, says it calculates value through its “Royalty Relief” methodology, which looks at multiple factors to determine the amount a company would be willing to pay to license its brand if it didn’t already own it, also referred to as “brand impact.”
The methodology includes multiplying the brand impact by the brand strength – determined by performance measures such as market share – to estimate a post-tax present value.
In its 2022 annual report, the firm noted L’Oréal’s brand value grew 10% over the past year as it bounced back from two years with slowing sales growth across the cosmetics sector during the COVID-19 pandemic.
Value in 2022 almost has returned to pre-pandemic levels, according to Brand Finance. In its 2020 annual report, which gauged pre-pandemic, values the consultancy firm found the L’Oréal brand had a value of $11.7bn.
The L’Oréal brand “continues to lead the global cosmetics industry on the back of its valuable brand portfolio, led by L’Oréal Paris brand,” the firm said in the report. The brand also includes the L’Oréal Professional range, targeted to the salon channel.
In its full-year earnings presentation in February, L’Oréal reported its L’Oréal Paris brand strengthened its position as the world’s top-selling beauty brand, with sales exceeding €6bn ($6.2bn).
Value Analysis Connects Marketing With Finance
In a foreword of the report, Brand Finance CEO David Haigh emphasized identifying a brand’s strength.
Haigh said most companies make huge investments in design, launch and ongoing promotion but “fail to go beyond that, missing huge opportunities to effectively make use of what are often their most important assets.”
Marketing teams often struggle to communicate the value of their work and company boards often underestimate the significance of a brand to a business.
“Skeptical finance teams, unconvinced by what they perceive as marketing mumbo jumbo, may fail to agree [to] necessary investments. What marketing spend there is, can end up poorly directed as marketers are left to operate with insufficient financial guidance or accountability. The end result can be a slow but steady downward spiral of poor communication, wasted resources and a negative impact on the bottom line,” Haigh said.
Brand Finance intends its work to connect companies to their bottom lines with “a mutually intelligible language for marketing and finance teams,” he added.
“Marketers then have the ability to communicate the significance of what they do and boards can use the information to chart a course that maximizes profits.”
Two years earlier, reporting on full year 2019 sales, the firm said the brand had its best year in more than a decade and was well positioned to accelerate even more “thanks to its unique positioning as accessible luxury and its mission of women’s empowerment.” (Also see "Drug Evaluations To Get "Peer Review" By CDER Quality Assurance Program" - HBW Insight, 5 Apr, 1999.)
Brand Finance says in 100 years of existence, L’Oréal Paris has built on “its significant history, value and tradition.”
Still, 2022 has been a year of change for the firm with CEO Jean-Paul Agon leaving after 15 years and succeeded by CEO Nicolas Hieronimus. (Also see "L’Oreal Names CEO To Follow Agon; ELC And Coty Appoint Digital Leadership; Executive News In Brief" - HBW Insight, 25 Oct, 2020.)
“Industry analysts believe that the promotion of key lieutenant Hieronimus from within represents an effort to build on the existing strategy to lead the brand out of the pandemic,” Brand Finance says.
Lauder Brand Value Grows 39.4%
Estee Lauder’s brand value represents a 39.4% increase from 2021, a jump from fifth to second place on the list as the fastest-growing of all beauty brands tracked by Brand Finance.
“Fresh from celebrating its 75th anniversary, Estee Lauder is investing significant effort in innovative technological developments focused on improved sustainability with a particular attempt to reduce the use of plastic and refined petroleum products,” Brand Finance said.
The Estee Lauder brand is performing well and was a major contributor to the firm’s fiscal year 2022 second-quarter (October-December) growth of 14% to $5.54bn (Also see "Lauder Raises FY 2022 Outlook As Sales Exceed Pre-Pandemic Levels" - HBW Insight, 5 Feb, 2022.).
However, with its FY2022 third-quarter report on 3 May, the firm cut in half its full-year net sales growth projection from an original target of 13% to 16% on a reported basis, due largely to COVID-19 related shutdowns in China. (Also see "Lauder Slashes FY 2022 Outlook On China Woes Despite ‘Makeup Renaissance’ In Other Regions" - HBW Insight, 3 May, 2022.)
Procter & Gamble’s Gillette shaving brand was third on Brand Finance’s list at $6.9bn, an 8.5% drop from 2021 as the brand slipped from second most-valued.
Brazilian Brand Top In ‘Strength’ Ranking
Brand Finance also ranks companies on a brand strength index (BSI) score up to 100, determined by looking at:
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marketing investments supporting future strength of the brand;
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equity real current perceptions sourced from market research and other data partners;
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“business performance,” brand-related performance measures such as market share.
Brand Finance found Natura, owned by Sao Paulo-based Natura & Co. Holding SA, is the strongest beauty brand, with a BSI of 91.5. The brand’s value was up 17% from 2021 to $2.4bn.
“The brand strength of Natura is boosted by South American stakeholders feeling a strong affinity to the brand,” the research firm says. “Natura benefits from both local patriotism and a belief amongst many consumers that the brand is caring sustainably for local natural heritage such a s the Amazon rainforest.”
The Estee Lauder brand ranked second in BSI at 87, and L’Oréal’s Lancôme was third with an 85.2 BSI.