Why are big global brands raising prices? Estée Lauder raises prices in China again this year

From 1 July 2024, Estée Lauder Group will increase the recommended retail prices of some of its brands in China, citing factors such as raw material prices, production and operating costs, and transportation and warehousing expenses. This marks Estée Lauder’s second price increase this year. Since February, other brands like L’Oréal owned Kiehl’s, YSL (Yves Saint Laurent), and Armani have also raised prices on certain products.

In China, some of Estée Lauder’s high-end brands have seen substantial price hikes. For instance, a Tom Ford perfume that sold for 1,350 RMB (186 USD) in 2023 has risen to 1,950 RMB (268.8 USD) this year, according to in-store consumers. January and February price adjustments have become routine for international make-up giants, with luxury groups following the trend. Chanel’s beauty line also adjusted prices on 20 February, increasing lipstick prices by about 50 RMB (6.89 USD) and high-end skincare products by about 500 RMB (68.9 USD).

Bai Yunhu, founder of Yiyoumei digital supply chain platform and daily chemical expert, explains that beyond raw material costs, the price increases are driven by performance growth pressures in the Chinese market. With total sales volume growth stagnating, brands are turning to price hikes to drive sales growth. Additionally, as national Chinese brands trend towards high-end products, international brands need to raise prices to maintain a perceived value gap and prevent consumer defections.

Recent financial results from L’Oréal, Estée Lauder, and Shiseido revealed a stark contrast in global performance. L’Oréal saw a 5.4% growth in mainland China last year, while Shiseido’s net sales in China fell 4% year-on-year. However, Shiseido expects a 5% sales growth in China this year as the impact of Japan’s radioactive wastewater incident recedes. Estée Lauder’s Asia-Pacific revenues declined by 8% year-on-year, but the company anticipates sales in China to return to growth in the second half of the 2024 financial year and plans to continue investing in the Chinese market.

Looking ahead, several make-up giants have emphasised ‘Winning in China’ in their financial reports. Shiseido plans to reduce price promotions, expand official marketing channels, and optimise the number of physical shops. Estée Lauder will implement a profit recovery plan in the 2024 financial year, which includes reducing global positions by about 3-5%. However, the group stated there are no major adjustments planned for the Chinese market, and the profit recovery plan aims to empower the Chinese team to better adapt to market developments.

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