March 5 (Bloomberg) -- When Estee Lauder Cos. opened a store selling M.A.C. makeup in Lagos, Nigeria, this month, it didn’t have much company.
Going where rivals aren’t is standard operating procedure for the 29-year-old cosmetics line. M.A.C. has long courted various ethnic groups, including American blacks, and Estee Lauder sees the brand as the key to unlocking emerging markets.
M.A.C. is already the best-selling high-end makeup in India, Brazil, South Africa and Turkey, according to the company. The brand’s tony stores are a revelation in nations such as Nigeria, where Western-style retailers are so scarce that wealthy shoppers are forced to search out upmarket brands on trips overseas. Once M.A.C. has a foothold in a market, Estee Lauder sends in its other brands such as Clinique and Aveda.
“The biggest play for the corporation, period, in terms of market development today, is the M.A.C. brand,” group president John Demsey said in an interview at the brand’s base in New York’s Soho neighborhood. “It is the singular biggest source of growth for the company.”
Estee Lauder’s sales in the U.S. slowed after the recession as consumers traded down to less pricey brands such as Revlon and Procter & Gamble Co.’s CoverGirl. While Estee Lauder’s U.S. sales have recovered in the past two years, the New York-based company is increasingly focused abroad, where it generated 63 percent of its revenue in fiscal 2012. Estee Lauder had revenue of $9.71 billion in fiscal 2012; it doesn’t break out M.A.C. sales.
In the past five years, Estee Lauder has more than tripled, compared with a 40 percent gain for the Standard & Poor’s 500 Consumer Staples Index. The shares are trading at a 48 percent premium to the index on a price-to-earnings basis. Estee Lauder rose 1.5 percent to $65.85 at the close in New York.
In 1984, Frank Toskan, a makeup artist, and Frank Angelo, who ran a chain of hair salons, founded M.A.C. in Toronto. The brand, which stands for Make-Up Art Cosmetics, was originally created for professional make-up artists. Estee Lauder bought a majority stake in 1994, acquiring the rest four years later.
M.A.C.’s mission statement is “All Races, All Sexes, All Ages,” and it has long courted minority women who couldn’t find makeup that complemented their skin tone. M.A.C. is the top seller of high-end makeup to American blacks, according to Estee Lauder, with its products making up half of the sales in that category.
The brand “speaks to multiethnic consumers,” Estee Lauder Chief Executive Officer Fabrizio Freda said in a telephone interview.
The company introduced the brand to Brazil in 2002 and took over distribution there three years ago and began opening stores. M.A.C. global brand president Karen Buglisi calls Brazil “our China.” Sales took off when soap opera star Isis Valverde began using M.A.C. makeup. Estee Lauder plans to open five free-standing stores there this year and will have 30 by the end of April.
In 2008, M.A.C. opened a store in Paris’s Strasbourg St. Denis, near a cluster of West African beauty supply-stores frequented by African immigrants. Typically Estee Lauder sells its products in more upscale precincts of Paris.
“No one in the prestige business in their right mind had ever considered doing such a thing,” Demsey said of setting up shop in Strasbourg St. Denis.
Still, it wasn’t long before wealthy Nigerian travelers discovered the M.A.C. store in Paris. The location became one of the company’s top stores in France and, as in Brazil, the brand became popular in Nigeria.
To help attract shoppers, the Lagos M.A.C. store is hosting appearances and performances by celebrities from the country’s thriving film and music industries, including the singer Tiwa Savage. It’s also sponsoring lessons for local make-up artists and demonstrations for customers. A second store is planned for later this year.
The brand’s AIDS charity, and its donation of 100 percent of sales from its Viva Glam lipstick to the fund, may also resonate in a country where HIV is endemic. The charity has raised $280 million since its founding in 1994.
Nigeria is not Brazil. While M.A.C. sells what it calls “entry-level prestige” products at its Lagos store, 68 percent of Nigerians live on $1.25 or less a day, according to the World Bank. A lack of infrastructure, along with corruption and counterfeiting, also pose challenges, said Fflur Roberts, the head of global luxury goods at Euromonitor International.
Still, “it’s definitely worth their while,” said Roberts, who is based in London. “It’s just a question of how long it will take.”
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