Cosmetic Brands Case Studies

Part
01
of three
Part
01

Cosmetics Case Study - MAC: The Business

Since its founding in 1984, MAC Cosmetics has grown to be one of the most popular cosmetic suppliers in the world. They have used this platform to encourage inclusion and social progress. Below, we have provided information on the companies business strategy, marketing strategy, drivers of success, current ownership structure and current company issues.

Business strategy

MAC Cosmetics was founded in Toronto in 1984 and opened its first US store in 1991. Frank Angelo and Frank Toskan started MAC. They made four promises to their customers that are still focused on today: a guarantee that the brand will be distinctive, valued, consistently delivered, and kept over time.

From the beginning, MAC products have only been sold in department stores and on the web. The focus of MAC Cosmetics has always been to cater to the customer only and not worry about what other brands are doing. MAC's business strategy is to ensure that everyone feels welcome to use their products. This is proven by their mission statement, which is "All Races, All Sexes, All Ages."

Marketing strategy

MAC chooses to market their products only through word of mouth. Another unique strategy is to send a special package to customers who sign up for their mailing list, which includes a note and QR code that can be scanned to unlock videos with tips on how to use MAC's products.

Numerous celebrities have endorsed MAC's products in recent years as well. The celebrities they have collaborated with include Madonna, Lady Gaga, Pamela Anderson, Nicki Minaj, Rihanna, Lorde, Prabal Gurung, and Proenza Schouler. MAC's makeup was also used by Natalie Portman in the 2010 movie Black Swan. Other recent projects by MAC include Star Trek and Disney themed collections.

On Instagram, MAC Cosmetics has more followers than any other makeup brand, with 17.8 million. Top competitor Anastasia Beverly Hills has just 16.4 million followers. In a report that compared cosmetics brands based on how and where they interact with customers on social media and online, MAC was considered better than other popular cosmetics brands such as L'Oreal Chanel, and Maybelline. This shows that MAC has become a very respected and popular company in the cosmetics industry.

Drivers of success

The main product that has helped drive success is the Viva Glam products. Viva Glam lipstick was created in 1994. All the money made from this product goes toward the MAC AIDS Fund. In the nearly 24 years that Viva Glam has been available, over $400 million has been raised to help fight AIDS. Many celebrities have helped to promote this cause, including the ones previously listed along with Elton John, Ricky Martin, Miley Cyrus, and Sia. Along with donating profits, the Viva Glam fund also provides services such as counseling for HIV+ women, safer sex kits, diabetically sound meals, and school shoes for children orphaned by AIDS.

Another driver of success is the global popularity MAC has achieved. Throughout Canada, the US, and Europe, there are 108 locations where MAC products are sold as of 2010. 53 of these stores were in the UK, and 8 were MAC's flagship stores. This number has most likely gone up since then, but the exact number of recent stores was not found. Regardless, the international success of MAC Cosmetics has propelled it to the top of the beauty industry.

Ownership structure

The current CEO is John Demsey. Demsey began working at MAC in 1998, when Estee Lauder acquired full ownership of the company. He has been key in getting many celebrities to endorse Viva Glam and the entire MAC brand. Outside of the Lauder family, Lal Family Corp, Fidelity Management and Research Company, and Vanguard Group Inc. are three of the top shareholders. These three groups are the only ones outside of the Lauder family to hold at least 4% ownership.

MAC Cosmetics currently has at least 10,944 employees and a revenue of $188.1 million.

Current Issues

In China, MAC products have been tested on animals in recent years. Once this news came to light, MAC made sure that customers knew that this was not their idea or intention. They even partnered with the Institute For In Vitro Sciences to find better ways to test products. MAC also made it known that they will not stop offering their products in China because of this, since their mission statement advocates for the inclusion of all people.

Conclusion

In conclusion, MAC Cosmetics has grown to be a top company in the beauty industry due to their unique and inclusive marketing and business strategies. They have helped those in need through their Viva Glam products since 1994. While the product has run into controversy in recent years after testing products on animals in China, they have ended this practice and continue to offer products globally.
Part
02
of three
Part
02

Cosmetics Case Study - MAC Financials

While there is no pre-existing information to fully answer your question, we've used the available data to pull together key findings: Parent company Estee Lauder has not released the financials for M·A·C Cosmetics into the public domain, and the available sources are both limited and contradictory. Nevertheless, we triangulate M·A·C 's revenue grew at a CAGR of 6.5-10% from $1 billion in 2012 to between $1.37 billion and $1.61 billion in 2017. By 2012, M·A·C had 1,700 stores, [10] and grew from an estimated 10,000 employees in 2006 to 20,000 employees today.
Below you'll find an outline of our research methodology to better understand why information you've requested is publicly unavailable, as well as a deep dive into our findings.

METHODOLOGY

As a privately-owned subsidiary of Estee Lauder Companies, M·A·C (henceforth, simply MAC) does not produce a separate financial report, so we started by looking at Estee Lauder's annual reports instead. However, neither the annual reports nor the quarterly earnings reports provided details on specific subsidiaries, instead simply discussing "subsidiaries" as a group. The fact that MAC's sales figures are not made public by Estee Lauder has resulted in confusing and conflicting information in the available sources, as explained below.
We next researched the suggested sources, but this did not provide the requested information. While Happi does sporadically mention revenues for some of the cosmetic companies that it tracks, we could find no mention of MAC's revenues for any year. While WWD accepted the login provided, this did not open up access to all articles, as shown in this screenshot. Consequently, it is possible that there is more information there than we can access, though Google's search previews do not suggest that MAC's revenue figures for past years is among them. Coresight Research (formerly Fung Global Research) likewise did not provide any revenue figures for MAC.
We therefore broadened our search to other sources, including articles both written from within and without the cosmetics industry. From these, we will attempt to triangulate an answer, but we must emphasize that we can only provide very rough estimations due to confusion in the available data. We should also note that due both to the paucity of recent sources and the request for data on sales growth (or decline) over time, we have deliberately utilized several sources older than our usual criteria of 24 months.

THE AVAILABLE DATA

Some of the most detailed, and credible, information publicly available comes from a Fast Company article from 2006. This article notes that MAC had about 1,000 stores and 10,000 employees at that time, and that "sales from MAC’s Small Eye Shadow, Studio Fix, Lustreglass, and Pro Longwear Lipcolour products alone contributed $70 million in revenue." This article was credible enough that many of its data points were used verbatim in a Prezi slideshow ten years later. Prezi states that the number of stores had risen to 1,500 across 83 countries, but still gave the number of employees as 10,000. It also states that MACs overall worth is $1.3 billion but estimated its revenue at $7.32 billion and net sales at $10.8 billion. These revenue figures appear to be for Estee Lauder as a whole, which reported $11.82 billion in sales in 2017. MAC itself states that it employs 20,000 makeup artists around the world today, far more than Prezi's estimates.
Other interesting data points from the 2006 Fast Company article (quoted verbatim) include:
2.6 | Average number of products customers actually buy when they come to buy one item
$45 | Average amount each customer spends per visit
83% | Percentage of new customers who are referrals
250,000 | Number of brides-to-be each year who come to MAC for their wedding makeup
We were unable to find more recent figures on any of the above statistics.
Another source (translated from French) states that in 2012, MAC had 1,700 stores worldwide and an estimated $1 billion in sales, and had been growing at a steady CAGR of 10% over the previous fifteen years. A 2016 article still cited the $1 billion in sales number. This is almost certainly just information taken from the 2012 source.
We understand the above correlations to mean that Estee Lauder only rarely allows MAC's revenue figures and number of stores to enter the public domain, and as a result, outdated figures continue to circulate in articles unchanged for years after they have been released. We were unable to locate any public source written in the last 24 months which contains updated information, and therefore must triangulate an answer using the older sources.
We were also unable to locate any public source indicating how much of MAC's revenues are from the US vs. their global revenues. While MAC offers a store locator on their site, it would require searching city in the over 120 countries in which MAC operates to determine how many stores are in the US vs in other countries. Such a search would be outside of the scope of a single Wonder request, and so was not undertaken.
Just as Estee Lauder has not released MAC's sales figures to the public, neither have we found a public source which gives a complete list or numbering of MAC's SKUs or a breakdown of sales by branded stores vs. department and specialty stores.

TRIANGULATION OF REVENUE AND STORES

If we assume that MAC continued to grow at a rate of 10% after 2012 (when it reached the $1 billion mark), it would reach $1.61 billion in sales by 2017. This would accord reasonably with MAC's estimated valuation of $1.3 billion in 2016 and provides a useful upper bound.
If we assume that the number of employees corresponds to the amount of overall sales, starting with 10,000 in 2006 and growing at a CAGR of 10% would result in a total of over 28,000 employees, not the 20,000 that MAC itself reports. However, when we consider the possibility that online purchases are a significant factor in MAC's sales (though we could find no public source to confirm this) and the fact that MAC has tried to offset a slowdown in mall traffic in the US by allowing its products to be sold in competitors' stores, it seems reasonable that the number of employees would not have kept pace with the revenue growth of the company.
However, for the sake of providing a lower bound for our triangulation, let us assume that the number of employees is indicative of MAC's growth since 2006. In this case, a growth from 10,000 employees in 2006 to 20,000 today suggests a 6.5% CAGR from 2006-2017. Applying this to the $1 billion in revenue in 2012, this would give us a lower bound of $1.37 billion in revenue in 2017. This again accords well with an estimated overall valuation of $1.3 billion in 2016.
As a final note in our triangulation, Gustavo Andriani, MAC’s senior vice president and general manager for North America, states that 8% of MAC's store revenue "comes from makeup services that we offer." We take these "makeup services" to be included as part of MAC's sales revenue and have not attempted to separate it from MAC's overall revenue.

CONCLUSION

Though hampered by the lack of official revenue information by MAC's parent company, Estee Lauder, we triangulate that MAC's revenue grew at a CAGR of 6.5-10% from $1 billion in 2012 to between $1.37 billion and $1.61 billion in 2017. By 2012, MAC had 1,700 stores, and today has 20,000 employees. We are unable to determine the number of stores either globally or in the US as of 2017, nor MAC's US revenue at any point in recent history, from public sources.
Part
03
of three
Part
03

Cosmetics Case Study - MAC Products, Distribution, Customers

MAC Cosmetics has over 1,000 branded stores internationally with additional offerings at department stores such as Macy's, Dillards, Saks Fifth Avenue, Harrods, Hudson's Bay, and Brown Thomas. Their product categories include lip, eye, face, professional products, makeup tools and brushes. Some of MAC's hero products include Lipglass, In Extreme Dimension 3D Black Lash Mascara, and Strobe Cream. MAC Cosmetics' target market comprises women in their 30s and 40s in relatively high-income households, though marketing efforts tend to target millennials.

DISTRIBUTION

The MAC Cosmetics store locator does not provide a total count for store locations, instead requiring visitors to enter a specific location. Therefore, I searched for some major cities worldwide, as well as consulting sources such as WWD and other beauty industry sources for qualitative accounts.

An undated article suggests that there are over 1,000 freestanding MAC Cosmetics branded stores worldwide, while WWD states that 200 of those are in the US. Another 2014 article on the company's history states that it had over 1000 stores worldwide at that time.

According to WWD, MAC Cosmetics is primarily sold through department stores in the US. Using the brand store locator, I entered a zip code for New York to find store names I might further research. In the 10001 zip code, there are 70 locations selling MAC Cosmetics, including MAC branded stores, Macy's, Saks Fifth Avenue, Bloomingdale's, Nordstrom, and Ulta. A search for Los Angeles locations indicates the same department store names, plus freestanding stores, with 65 total locations.

I also looked at several large international cities:
Buenos Aires has 14 branded stores, while Sidney Australia offers 18 locations in branded stores, as well as Myer and David Jones department stores.
Rio de Janeiro, Brazil has 14 branded stores, while Paris, France has 16.
Athens, Greece has 15 stores, including both freestanding and department store locations.
London has 53 locations, including both freestanding and department store locations.
Madrid, Spain has 15 branded stores.
Berlin, Germany has eight stores, both branded and department stores.
Beijing, China has ten branded stores.
Toronto, Canada has 51 stores, both branded and department stores.
Accra, Ghana has two branded stores.
New Delhi, India has nine branded stores.
Jerusalem, Israel has eight branded stores.
Mexico City, Mexico has 25 stores, both branded and department stores.

Based on a review of the MAC Cosmetics store locator, entering a variety of the largest cities worldwide, the brand is sold in:

Macy's - US and Canada

MAC Cosmetics launched in 100 Ulta Beauty stores and on China's online Tmall in 4th quarter of 2017 to their excitement of many makeup fans.

PRODUCT CATEGORIES

MAC Cosmetics offers a wide selection of professional and consumer products. Launch dates were largely elusive, but I have provided the few references I could find. The first product offered upon MAC Cosmetics' launch in 1982 was a lipstick inspired by a Crayola crayon called Flamingo. They expanded to 23 additional crayon-inspired colors, as well as pencils, powders, and blushes.

The MAC Cosmetics website makes it difficult to provide a specific link representing all categories. When you click on products, it brings up a menu and you must select a specific category, therefore, I can't provide a link to one product listing. But hovering over the products link shows the following categories, which I've provided screenshots for in the attached Google document.

Makeup:
Lips: lipsticks, glosses, pencils, and kits
Their Russian Red lipstick launched in 1990 when Madonna requested a special lipstick that would last throughout her performances on her Blonge Ambition tour.
In 1994, they launched their VIVA GLAM lipstick line, the proceeds of which all supports the M.A.C. AIDS Fund.
Eyes: shadows, liners, mascara, brow, lash, and primers
Face: foundations, power, blush and bronzer, concealer, face primer, highlighting and contouring, multi-use products, and face palettes and kits.

• Primers
Lipcare and primer
• Removers and cleansers
• Moisturizers

• Eye, lip, face, pro palettes, containers, applicators, accessories, bag, and kits

They also offer a line of pro products, including airbrush makeup kits, lip palettes, acrylic paints, sculpting powder, skin correctors, airbrush cleaning products, and more.

HERO PRODUCTS

The launch of MAC Cosmetics at Ulta stores provides a glimpse into some of the most popular brand products. The store began stocking some favorites online even before the official brand launch. Some of those products, according to Allure, included "Lipglass, the volumizing In Extreme Dimension 3D Black Lash Mascara, the illuminating Strobe Cream" and others.

The bestsellers at the MAC Cosmetics website include Padma Lipstick, Padma Cremesheet Glass, Powder Blush Duo in melon pink, 70's Sunset eye shadow, Lo-Fi eye shadow x 29 kit, and the Hyper Real Glow Palette.

TARGET CUSTOMER

MAC Cosmetics began as a resource for makeup artists and still counts them among their clientele. According to a 2017 survey by Hitwise, the brand has grown to have a strong consumer following, especially among women in the 35-44 age group. About a third of their clientele comprises men, who use their personal grooming products. Some 47% of MAC loyalists shop via their mobile website and are likely to purchase items they see advertised via mobile channels. MAC consumers are also likely (53%) to use social media to promote the brand. The MAC Cosmetics YouTube channel is its top social media destination before going to the company website with Facebook, Pinterest, Twitter, and Tumblr following. MAC consumers are environmentally, ethically, and socially conscious shoppers.

A 2015 academic paper offers some additional insight into MAC Cosmetics' target market. While I was unable to navigate to the original sources, due to library access restrictions, I've chosen to include this information since the original sources are cited and seem quite legitimate, such as data from MRI Reporter, which appears to have changed its name and requires registration.

According to this paper, women in the 18-49 age range make up the largest consumer segment with company marketing primarily targeting millennials. Women make up 51.8% of the target market, while men make up 48.2%. It notes that the company targets those of every sexual orientation. Some 42.6% of MAC Cosmetics consumers did not attend college, though 28.9% have a college education or beyond. Household incomes for 28.7% of MAC consumers are in the $75,000 — $149,000 range, and they make up the largest income group. In terms of US consumers, 37.5% of MAC consumers live in the southern regions, while 22.7% are in the western portion of the country.

CONCLUSION

In conclusion, MAC Cosmetics can be found in over 1,000 branded stores and department stores globally, offering a wide variety of lip, eye, face, and professional products. Its target market is high-income women in their 30s and 40s, though millennials are a sought-after demographic. Favorite MAC products include Lipglass, In Extreme Dimension 3D Black Lash Mascara, and Strobe Cream.
Sources
Sources

From Part 03