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Estée Lauder Doubles Distribution Capacity to Supply $4.5 Billion Travel Retail Channel

June 19, 2022
June 19, 2022
Estée Lauder

Estée Lauder Companies (ELC) has chosen Galgenen, Switzerland, for a dedicated distribution facility to service its global travel retail business whose sales in fiscal 2021 rose to $4.54 billion, just under 30% of the US beauty house’s $16.2 billion revenue that year.

Travel retail—which covers mostly duty-free environments at airports, downtown locations, airlines, cruise ships, and border shops—is one of the company’s highest-growth channels and serves three billion consumers in a typical year.

The new 300,000-square-foot facility adds to the company’s existing distribution footprint in Switzerland, but its scale means that it doubles output capacity. The new unit is modular and therefore equipped to support continued “dynamic growth” of travel retail. It is also more sustainable with, for example, solar panels on the roof generating 1,600 kilowatts at peak performance (kWp).

High expectations

Earlier this year, leadership changes at the very top of travel retail gave BeautyMatter the impression that ELC was preparing for a boom as airport travel picked up, and China’s duty-free island of Hainan continued to prosper.

This was confirmed by ELC’s president and CEO Fabrizio Freda. He came in person to the opening ceremony on Tuesday, June 7, underlining the importance of the project. Freda said, “Travel retail continues to demonstrate resilience, driving tremendous growth over the last decade. We remain extremely confident in the channel for the long-term, especially as travel restrictions ease globally and people start traveling again.”

He added: “The opening of our new Galgenen distribution center will enable us to adapt even better to ever-changing retail needs and growth opportunities for the channel.”

ELC claims its travel retail division has the biggest market share in the channel for total beauty (skincare, makeup, fragrance, and haircare) ahead of L’Oréal Group. This is based on figures from Generation Research which, in 2019 before the pandemic started, estimated the entire channel (across all categories) was worth just over $86.4 billion. In 2020, the market collapsed to $44 billion largely due to the pandemic impact at airports, but beauty thrived in downtown duty-free locations like Hainan.

ELC has also pushed forwards with strong activations to recruit new consumers and build brand awareness for its portfolio of luxury brands, which includes Jo Malone London, La Mer, and Tom Ford.

Thirty years of travel retail

Israel Assa, ELC’s new Global President, Travel Retail Worldwide, was unable to attend the opening due to COVID, but in a statement he said, “As we mark the 30th anniversary of The Estée Lauder Companies’ travel retail business, we are incredibly proud of our track record ... and having made the channel an integral engine of growth for ELC. By investing in these capabilities (in Galgenen), and with our retailers, we can capture the next generation of growth in this prestige marketplace.”

On the center itself, ELC’s Executive Vice President, Global Supply Chain, Roberto Canevari, commented, “Galgenen will serve as a cornerstone of (our) global fulfillment network. This distribution center will not only significantly enhance our capacity but enable operational efficiencies, speed-to-market and resiliency through highly automated equipment and technologies.”

ELC is the fifth-largest employer in the canton of Schwyz having opened an affiliate office in Switzerland more than 55 years ago, and its first manufacturing plant more than 45 years ago. Switzerland is also home to ELC’s EMEA and travel retail supply chain management hub in Wollerau.

On the sustainability front, as well as roof solar panels, Galgenen’s building design is based on the newest standards to reduce energy and water consumption; features total LED lighting; and a comprehensive waste management system.

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