Leonard A. Lauder: In the Game — and Teaching It

Leonard A. Lauder shows no sign of slowing down.

At 85, the chairman emeritus of The Estée Lauder Cos. Inc. has more passion for new ideas than a 25-year-old. Make no mistake, Lauder is still in the game. Just mention a blooming indie brand ripe for the picking and his eyes will twinkle and he will reach for a pen and piece of paper.

“He’s got more energy than anyone in the room,” said Jerrod Blandino, cofounder and chief creative officer of Two Faced, a California-based company that Lauder acquired in 2016. Blandino’s partner, Jeremy Johnson, cofounder and head of brand strategy and innovation, added, “The passion that he has is overwhelming. He lives and breathes cosmetics. When he’s down in Yorba Linda [mall], he’ll tell you what his top stockkeeping units are. This is a man who has a flip phone and doesn’t have a computer on his desk. He knows everything about his company.”

This passion, and Lauder’s business acumen and more, are the reasons he has been named the recipient of WWD’s 2018 John B. Fairchild Honor for lifetime achievement, named after his friend and WWD’s legendary former publisher and editorial director.

After joining the family firm at age 25 in 1958, when it was generating $800,000 in sales, Lauder built an international reputation as the chief architect of marketing and merchandising prestige beauty products in department and specialty stores. He was in the forefront of those marketers defining and establishing the doctrine and lexicon of the modern global prestige beauty business. Lauder was a global thinker before globalism was really a term, and often described his worldwide strategy as playing a game of three-dimensional chess with his foreign competitors.

He was fixated on the world stage as early as 1960, when he was running the daily operations of his family’s fledgling firm, founded in 1946, as executive vice president. He was trying to convince his parents, Estée and Joseph, to borrow $25,000 to sustain the company and bankroll Estée Lauder International, allowing it to expand into Canada. There was a major opportunity beyond the U.S. border, he argued. But they wouldn’t budge. “They refused to sign the note because they said, ‘We don’t borrow money.’ So I had to sign it,” Lauder recalled in a prior interview. “But they gave me their bank books as collateral,” he said with a smile.

His mission was to build an international company driven by more than one brand. Today, The Estée Lauder Cos. markets 29 brands with a distribution reach of more than 150 markets. Total sales amounted to $13.6 billion at the end of the fiscal year on June 30.

Ground was broken when Lauder launched its prestige-priced men’s fragrance Aramis in 1964. A master stroke was made in 1968, when Clinique arrived with its modern, dermatological approach to skin care. It was a free-standing brand that did not bear the Lauder name.

“He became his own competition; who thinks like that?” exclaimed Blandino. “He is such an innovator.”

Speaking of Lauder’s creative juices, Blandino recalled sitting in meetings with the chief. “Sometimes when you are sitting among 75…you know…suits, Harvard educated, analytical — it comes down to the product and Leonard understands that. He’ll even kind of look at me and give me a wink, like ‘We are of the same kind. These amazing business people are necessary to grow our dream, but we are the dreamers, we are the makers.’ What started out as his mother’s dream became his legacy.”

His operating code, which became a gold standard during the department store heyday, involved innovative new products, a purity of distribution, an unshakable grasp of the consumer and aggressive in-store promotions.

Although that code may smack of “old religion” in this era of digital blowouts, empty stores and dying malls, his rules remain insightful and relevant.

“Leonard’s concept of selective distribution and matching brands to distribution for target consumer reach is the single most important thing he has contributed to the beauty industry,” said Fabrizio Freda, who has led the group as president and chief executive officer since 2009.

Lauder’s first successful designer fragrance license was with Tommy Hilfiger, and the designer still regards him as “a mentor, a father figure and one of the most important people in my life.”

Hilfiger observed, “He unlocked the door to the cosmetics and beauty industry,” adding, “He took the beauty business to another level to in-store experiences, dynamic in-store advertising, creating multiple product lines and resonating with the consumer on a very high level. He was the first to enter into the affordable luxury market,” he said, referring to the flagship Lauder brand and describing it as “an affordable luxury product that the masses could afford but hold in high esteem.”

One of Lauder’s oldest friends — Robert Mettler, a retired chairman and ceo of Macy’s West — met Lauder 56 years ago when Mettler was a summer trainee at Jordan Marsh. “[Lauder] took what was a family business and made it a world-class business without destroying the family attitude and atmosphere. That is the hallmark of Leonard.”

Giving Estée her due, Mettler said, “His mother obviously had a great sense of product and people and how to motivate a sale. She was the best sales person I’ve ever met. But [Leonard] was perhaps the best executive I’ve ever met,” Mettler added, “Leonard had a sense of how things fit. How they played out. He never looked backwards. Leonard was always looking at the future.”

Just as he spent his career nurturing the business, Lauder also has tended to grooming the ranks of young executive recruits. In the last decade, he has taken mentoring to new heights by donning a new persona, “chief teaching officer,” and conducting brand equity classes within the company in an effort to pass on the knowledge he has gathered over the decades.

It has paid off, at least in terms of satisfaction.

Lauder refers to the people and careers he helped shape as “my proudest accomplishment.” Agreement has come from his brother, Ronald, chairman of Clinique Laboratories LLC. “Leonard has built the best and brightest team in the industry, which enables the Estée Lauder Cos. to keep jumping from one level to the next,” the younger Lauder said.

“Leonard is a professor,” Mettler observed, noting that Lauder never fails to offer needed advice and support.

Over the decades, Lauder has grown in stature, with his pronouncements taking on the gravitas of an industry oracle, not only in prestige cosmetics but in retail and business in general.

No one can pack a room like Lauder. When he received the first Visionary Award from WWD Beauty Inc in 2010, he received a standing ovation from the crowd at the Four Seasons before he even had a chance to say anything.

That was merely one of the gamut of industry awards he has collected over the years. But the honors didn’t stop there. He has been named an Officier de la Légion d’Honneur by France and recognized by the U.S. Navy Supply Corps Foundation with its Distinguished Alumni Award. The Lauder family received the 2011 Carnegie Medal of Philanthropy. He also received the Palazzo Strozzi Renaissance Man of the Year Award in 2013. In 2014, Lauder was cited as a Living Landmark by the New York Landmarks Conservancy.

His passions don’t stop with business and philanthropy. Lauder is just as zealous about collecting art as he is about building his business. He has long been in the leadership of the Whitney Museum of American Art, where he served as trustee, president and chairman. In addition to a $131 million gift to the Whitney’s endowment, he donated works by Jasper Johns, Roy Lichtenstein, Claes Oldenburg, Cy Twombly and Andy Warhol. Then, in April 2013, Lauder sealed his artistic legacy of a lifetime of collecting by donating to the Metropolitan Museum of Art his world-renowned Cubist collection of 78 works by Pablo Picasso, Georges Braque, Juan Gris and Fernand Léger. At the time, Lauder said, “I wanted to transform the Met.”

He picked the New York museum, from among a variety of institutions, because of the encyclopedic nature of its holdings. But its 20th-century collection was comparatively thin, and he hoped his gift — in concert with the opening of a Leonard A. Lauder Research Center for Modern Art — would inspire other collectors to step forward. Lauder said his generosity was motivated by “my love of art and my love of New York.” Above all, “I wanted to make it a gift to New York.” He added, “I was born in New York, went to grammar and high school here and it is the cultural capital of the world.”

Here, Lauder talks about the industry’s transformation, his proudest achievement, the so-called “death of brick and mortar” — and how “dumb is forever.”

WWD: Let’s start with your expansive career, which began with the buccaneering days, Charles Revson, and has stretched to influencers.

Leonard A. Lauder: The industry has changed dramatically, as we all know. In the earlier days, we were competing against founders. That was Charles Revson, Elizabeth Arden, Helena Rubinstein and others. And each of them had their own way of doing business.

But at the same moment, America was expanding dramatically. The post-World War period, in the Sixties, Seventies and Eighties, was a period of magnificent growth. They called it the Soaring Sixties. That’s the period that we were able to expand the company dramatically ourselves. Shopping malls were being built left and right. Although the downtown department stores were closing down, shopping malls were growing all over.

Each year, there would be maybe 100 or 200 major new regional stores opening somewhere. Growth was a given. I remember getting a call from David Farrell, chief executive officer of the May Company, who said, “I’m calling because I’m concerned. This month, your growth was only 24 percent.” [laughs]

But the thing is, we all expected growth. Growth was just part of our make up. Competition was fierce, yes, but the competition changed. As Helena Rubinstein, Elizabeth Arden and Revlon faded, they were replaced by the Europeans, who had their own way of doing business. I found it fascinating, because it’s like fighting a war and then, when you become the victor, the next day there’s another country and you have to start all over again. So this is a story that will never end.

WWD: But the tone changed. All these companies had different ways of doing business, and you also went up against the consumer goods conglomerates, like Proctor & Gamble and Unilever. Now, there are the dot-coms and the indie brands.

L.A.L.: Yes, nothing stops. I have a visual analogy: I was standing on the penthouse of a building on the East Side. I was able to look down First Avenue. It was night and there was a group of headlights heading north and they came to the red light and then passed, and then a few moments later came the next group of headlights and they passed. That’s how I’ve seen competition. It never ends and it keeps on coming and you have to be alert enough to understand the difference, this time from last time.

WWD: Recently you said the cosmetics industry is at a crossroads, like the fashion industry was when it went into fast fashion. What do you mean by that and what are the consequences?

L.A.L.: When we first started, we would have these great looks for spring and fall — for example, the apple country colors were one and the Greek island colors were another. Back then, it was every six months. Today, you’d be lucky to cope with every six minutes, because the ease of entry of the business has changed so dramatically. There are private label-makers who can turn on a dime and they become not only your suppliers, they become your competitors.

At the same time, it’s a unique experience having one of your major customers, Sephora, also be your competitor. I grew up in a world that if you developed a relationship with a retailer and you built your business every year by 20 percent, they were happy and you were happy. Now that doesn’t mean anything anymore, because it’s more of a transactional business. We’ve seen again and again how some of these stores will buy a brand, blow it out and then drop it the next year. That’s a new taste sensation, also.

WWD: So on the positive side, the business has accelerated and you’ve always got newness. What’s the downside?

L.A.L.: Brand burnout and creative burnout. I have to go out, as Shakespeare quoted, into the breach one more time.

WWD: Previously, you’ve touched on a war being waged between manufacturers and retailers over who owns the customer and the sales data. Is that still going on?

L.A.L.: When it comes to many retailers, they truly feel that they own the customer because they are paying the rent. It becomes perhaps a little bit of a battle as to who the customer really belongs to. And the data, also. This is a battle that simply has never been settled, and it goes on to this day.

WWD: What do you look for when you’re considering brands to buy?

L.A.L.: Will the brand help us around the world? Does it have attributes that we don’t have? Does the brand have a very good hold or position with particular ethnic or national groups? For example, when Puig made a decision to do a fragrance license with Carolina Herrera and launch it in both Spain and South America, that was the perfect example of picking the right brand for the right time in the right market.

WWD: How does the current crop of indies differ from the ones in the late Nineties?

L.A.L.: The late Nineties was just a blip. The indie revolution now is that they are growing. They are launching usually for a group of customers that has felt underappreciated or using a channel of distribution that has not been used before for that type of product. If they have one of those two attributes they’re going make it. But the difference is when we got started, every brand was, in their heart, a long-distance runner. Today, nine-tenths of the indie brands want to build it and sell out for a huge amount of money and move on. But in the earlier group, they were in it for the business.

WWD: Going back further — Clinique was a breakthrough. What was your thinking in launching that?

L.A.L.: The impetus may come as a surprise. Estée Lauder, by the mid-Sixties, was the hottest brand in the business. Hot, hot, hot. And what was happening was that our retailers felt that they were on drugs with the Estée Lauder growth. They kept on saying, “We want more promotions, we want more growth. We want more and we want to take your brand and put it into all of our stores, even though you think it’s wrong.” What was on my mind was how can we widen our base so that I can protect the Estée Lauder brand from the demands of our retailers. That was the initial reason.

WWD: What are you most proud of? What do you think is your most important achievement?

L.A.L.: Probably my proudest achievement has been the people we’ve brought up and who are running the company today, like [group president] Jane Hertzmark Hudis and [executive group president] John Demsey. These are the people who really started at a much lower level and they grew and grew and grew. The people are my proudest accomplishment. The wealth of a company is its people and we are a very wealthy company.

WWD: The last interview that I did with you, you said your goal was to make Estée Lauder the greatest company in the world. How do you define greatest?

L.A.L.: The greatest people, the greatest products, the greatest brands, the greatest consistency. I used to be a runner, a long-distance runner. I could never be a sprinter. When you run for a long time, you know how to harbor your energy and use it when you really have to. To me, the cosmetics industry today is still maintained by the long-distance runners. Those who think they can do it in 24 hours or 24 months, maybe they will, but essentially the industry is still dominated by the long-distance runners. I admire Chanel. I admire Puig and Shiseido. They’re long-distance runners.

WWD: Where do you get the energy and the passion? You’re in your 80s and you’re more passionate than the next 50 guys.

L.A.L.: People say I’m sharper now than I was five years ago. When you’re excited and want to fight, you release the adrenaline and my adrenaline high pumps blood everywhere. The idea of coming up with a great idea and seeing a great brand and a great product launch is fabulous for me.

WWD: What’s the big idea now? What really has your blood pumping?

L.A.L.: There are three or four areas that you have to look at. Firstly, who is selling? Is the big idea online? Amazon? Is the big idea specialty multi? Is the big idea trying to keep the department stores alive? Freestanding stores? Direct to consumer? Or, in my view, it’s all of the above.

There’s no one big idea now. There’s a multiplicity of them and it’s like making a fine stew. You have to add everything and understand what you’re adding to the mixture.

However, there is a slight difference, also. If you are, for example, a department store or have your own freestanding stores, your job is to increase your business each year. If you’re a specialty multi outlet, your commitment to long-range growth may be somewhat modified because your model is built on what’s new. And if you don’t have newness every time, every day, every week, every month, you slow down.

WWD: Are there any decisions you look back on and would like to reconsider?

L.A.L.: Not decisions, but maybe one or two things that I wanted to do, companies that I wanted to buy that I missed, that I lost for one reason or another.

WWD: You’re a master at recruiting talent and mentoring. What do you look for in an executive?

L.A.L.: We have a very strong culture about doing the right thing all the time. Every time I’m meeting someone, I ask myself “Can they grow into a great leader?”

But going back to the question about regrets. My only big regret is not what I didn’t buy. My big regret is this: I have such a good sense of people, I have an intuition. I can look into their eyes and I see tomorrow.

I would travel, go to an affiliate or to a territory in the U.S. or somewhere, and see someone who doesn’t have it and I would know in an instant. If I brought it up to their boss and they said, “Give them a chance,” I always regret that I didn’t push harder. I wanted to let the managers be the ones to say, “Let’s do it.” But if you wait three or four years and the person still hasn’t produced, you’ve lost three or four years.

I gave a speech some time ago to a group of people at Macy’s in California, and I spoke to them about this and ended with the phrase — “Just remember this, dumb is forever.”

WWD: What was the best lesson you’ve learned as a leader and as ceo and chairman?

L.A.L.: You can’t learn anything with your mouth open all the time. If you’re a good listener and you can quickly process what you’ve heard, that’s what’s needed. Listen, listen, listen. You’ll be amazed, if you are willing to listen, what you can learn.

WWD: This intuition you have for spotting talent in people, do you have any idea where it came from?

L.A.L.: I think I inherited it from Estée. She had a great instinct. And, by the way, it’s not all intuition. You learn. For example, early on, when I was interviewing people, someone would say, “I’ll try.” To me that’s a signal. If they don’t burn and say, “I’ll do it,” if they simply say, “I’ll try,” I don’t want them.

If someone comes to me at age 25 and wants to know what the retirement benefits are I say, “Oh my God.”

WWD: Your mother, Estée, was larger than life, a true legend in her lifetime. What was she like to work with on a daily basis?

L.A.L.: She was very insightful and very funny. One of her favorite sayings was, “When sex goes out of business, so will we!” Now think about this. We had a fragrance that we were working on that the team wanted to call Signature. We launched it as Sensuous, about 10 years ago. Estée is very much in our blood today.

WWD: Was it difficult working with her?

L.A.L.: Always loving and challenging. I would walk into a room, where there were a bunch of executives sitting there. She would jump up, go over to me and arrange my hair, and say, “Don’t any of you forget who the boss is.” She didn’t say it, but by that little gesture, she said it.

WWD: What was one lesson you learned from her?

L.A.L.: “Always be quick to send a thank you note. Don’t wait a day, do it right away.” And she said, “If you are going out, if you are going to someone’s home for dinner, always send flowers before you go. If you send flowers after you were there, it means, ‘So long…I’ll never see you again.'”

WWD: You’re also known for mentoring. Is that intuitive or learned?

L.A.L.: When I got out of college, most of my friends were being drafted into the Army and they all became clerk typists. I decided to enlist in the Navy, because I was going to go to Officer Candidate School. I didn’t want to be a typist for three years. I wanted to learn something. I found that the people who were my mentors were the people who were my superior officers and wanted me to succeed because I wasn’t a competitor to them, because the Navy doesn’t allow you to stay in a place for more than two or three years. They were truly interested in helping me.

A lot of the mentoring I’ve done is with people who either used to work for us or are doing something else right now. I talk to a lot of people who are independent retailers and they’re getting started, I love talking to them and helping them, because they’re young and they love to hear new ideas. The most frustrating thing to me is when I deal with someone, whoever that may be, who hates new ideas.

WWD: What essential skills does a ceo have to have and how have they changed?

L.A.L.: You have to have many traits to be ceo, but the key thing is you’ve got to be fair, demanding and willing to take responsibility for your actions.

WWD: You not only mentor your people but, when some of them leave, you keep in touch with them. You don’t seem to have hard feelings when they leave. How do you avoid bitterness?

L.A.L.: Here’s how: I remember one in particular was Pamela Baxter [now a founder of Bona Fide Beauty Lab] who was heading up Prescriptives and she got a job offer from Christian Dior to head up their U.S. business. Not cosmetics business, the whole U.S. business. And I said, “Pamela, I can’t try to talk you out of it because that’s an opportunity I can’t give you because you’ll have both cosmetics and you’ll have ready-to-wear and accessories all under you. That’ll be life expanding for you. All I can do is wish you well.” And I gave her a good-bye kiss.

I’ve rarely, rarely felt betrayed. Once or twice I have but those were rare instances.

WWD: This business is in your blood, but when you were young, did it ever cross your mind you might want to go into another field?

L.A.L.: When I was [still] in the Navy, I was wondering should I keep this as my career? Because when I went into the Navy, Estée Lauder was doing about $200,000. But anyway, I decided yes, I’d go to Estée Lauder.

WWD: One of the most momentous decisions you made was to take the company public. Did you ever have second thoughts about that?

L.A.L.: Second thoughts are useless. If you’ve done it, you’ve done it. It has turned out to be a good thing. But there is no such thing as a perfect good thing. I loved the idea of being my own boss and having no shareholders to keep happy. Now we have shareholders to keep happy. If they’re happy, I’m happy. But at the same time, we can’t take chances that I would love to take. Because I’m really a gambler.

WWD: You’ve amassed an incredible art collection. With all the collecting that you do, have you ever dreamed of running a museum?

L.A.L.: Every time I go anywhere, because I am who I am, I am always dreaming of running that. When I go to the New York Philharmonic, I dream of running the Philharmonic. Once, when I was the chairman of the Whitney, I was being interviewed by someone from the New York Times, and I said the job I’d really love to have is director of the Whitney some day. I should never have said that. Never.

WWD: Why?

L.A.L.: Because every director who came along felt threatened by me.

WWD: Who do you think is the best artist in the world today? If you were young and starting all over again, who would you buy?

L.A.L.: Jasper Johns. He is creative and a great artist and he has everything that we could ever want to have.

WWD: You’re not only a great art collector, you’re a fantastic traveler. From the beginning, you’ve taken an international approach with the business, starting with entering Canada with your own loan. There’s been a lot of talk about China eclipsing the U.S. Do you think that is going to happen?

L.A.L.: They are a challenger to the predominance and the preeminence of the U.S. The best way to be the best is to take that seriously and fight to keep your position as number one. You weren’t born to be entitled to be number one. You have to fight for it.

WWD: Where do you think is going to be the next big bucket of growth in this industry? Is it going to be wellness, something else? Is it going to be geographic or a product category?

L.A.L.: What I did was I looked at the growth statistics of different states and different cities. Some were going ahead, some were going behind. The best way I can predict this is to say keep ahead of you in your mind the word growth. We as Americans have built our lives on growth and growth will set you free.

Now my worry is that with our current immigration policy, if we stop growing as a nation, then we have a problem. And that growth in population is our future. And while I can’t tell you whether it should be wellness or whatever it is, if you have a growing population, we’ll figure it out. If the population is stable, or static rather, it won’t happen.

WWD: What is your feeling about this popular notion that brick-and-mortar is dead because nobody wants to be bothered going to a mall.

L.A.L.: Well, it depends. You go to California, you go to Costa Mesa and see the shopping mall there — huge shopping mall, fabulous, you can’t ever find a parking space there. People are buying everything because it’s an experience for them. However, you go to another mall and there is no traffic at all.

What’s really wrong? Number one is that our real estate was so cheap here that stores went to these malls. Suddenly they got so overstored. Now you go to Madison Avenue, everything is for rent. Now why is that? Because when we first moved into this apartment [in the Upper East Side] there was a shoemaker there and there was a Gristedes there, a food market, etc. The rents were low. As Madison Avenue got very chic, the rents went up and up. Suddenly you couldn’t make it with all those rents. Along came Amazon and you didn’t have to go to Madison Avenue to [shop]. Add it up and one plus one always equals two. Don’t try to change the math.

WWD: A lot of the talk in the industry in the last few years is basically centered around the specter of Amazon and Tmall. Do you think platforms like this are going to have a dramatic effect on traditional retailing?

L.A.L.: Yes, but you can’t put Amazon and Tmall in the same breath. Why? Amazon is an online retailer. They buy your product at a price and they sell it at a price that they choose. Tmall is really a mall. They have a location for you and you take your space, you buy your space, and you can sell anything you want in that space.

But I think they’re different. For example, you can build a brand on Tmall. Amazon is a bit more transactional. I’m not trying to take anything away from either of them.

WWD: Are you more comfortable with Tmall because it gives you more control?

L.A.L.: Well, I love the word “control.” Why do you think I like my own freestanding stores?

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