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Kline Analysts Say Clinique-Allergan Deal Sets Beauty Industry Precedent in Channel Diversification

-- Smart Strategy Capitalizes on Growing Trend in Professional Skin Care --
LITTLE FALLS, NJ, January 28, 2008 – Beauty industry analysts at worldwide consulting and research firm Kline & Company are calling Thursday’s announcement by Estée Lauder to marry its powerhouse Clinique brand with specialty pharmaceutical company Allergan a shrewd diversification strategy by the cosmetics maker. The strategy will allow Estée Lauder to gain a foothold in the booming medical distribution channel. It will also position the Clinique brand for growth through cross-channel marketing and help balance the overall lackluster performance in the prestige beauty market, according to Kline.

“Estée Lauder has always been innovative and aware of the value in diversifying their channel mix,” says Carrie Mellage, director of the Consumer Products practice for Kline’s market research group. “With low, single-digit growth in the prestige skin care market, the Clinique brand has suffered somewhat, along with the rest of the market. Meanwhile, the medical channel is growing fast, posting a 16.5% jump in 2007. It’s no surprise that Estée Lauder would see the opportunities here and tap into this outlet.”

Estée Lauder is set to begin manufacturing and distribution of its new Clinique-branded line of skin care products, to be marketed by Allergan and sold only through doctors’ offices, in the fall. The new line will be designed to complement in-office procedures, a product strategy that has surged in popularity over the last year, according to Kline’s research. The deal will also bolster Allergan’s position in the medical channel, where it already has a solid presence with its Botox, M.D. Forte, and Prevage brands. There will likely be other cross-channel benefits for the Clinique brand as well.

“The medical channel is actually a drop in the bucket compared to the overall Clinique reach, so this move is not likely a purely sales-driven strategy,” says Karen Doskow, project manager for Kline’s Consumer Products practice. “It’s also about brand extension––a marketing play to extend the Clinique brand, similar to the way Dove, Aveeno, and Neutrogena have used doctors as a marketing channel by asking them to recommend their products to patients. It builds credibility, and it’s an opportunity to grow outreach efforts across all channels.”

Doskow also points out that one reason for the unprecedented growth in the medical channel is the surge in the number of physicians dispensing skin care products to their patients. According to data from Kline’s in-depth report Professional Skin Care 2007, due to be published later this month, dermatologists and plastic surgeons are now being joined by a new category of “other” physicians, which includes general practitioners, gynecologists and obstetricians, and even dentists.

“We’ve seen a 36% jump in the number of ‘other’ medical specialties now dispensing skin care products to their patients,” Doskow says. “Dermatologists and plastic surgeons are losing their market share to other specialists who are now treating patients for conditions like adult acne and age spots.”

“This all adds up to a potentially greater market share for the Clinique brand and underscores the value of diversification across multiple channels in order to achieve optimum market reach.”

For more information about Professional Skin Care 2007, go to www.klinegroup.com/reports/y562ghijk.asp.

About Kline
Kline is a worldwide consulting and research firm dedicated to providing the kind of insight and knowledge that helps companies find a clear path to success. The firm has served the management consulting and market research needs of organizations in the chemicals, materials, energy, life sciences, and consumer products industries for nearly 50 years. For more information, visit (www.klinegroup.com)

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