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The recovery in China's prestige beauty market brings hope to EL, but its durability remains to be proven

Institution
Bernstein
Date
2026-07-24
Authors
Cristian Rios; Yolanda Zhang
Company
ESTEE LAUDER COMPANIES INC
Ticker
EL.US
Industry
Household & Personal Products
Rating
Market-Perform
NeutralLow confidenceThe report believes EL's recovery in China is showing positive signs, but market growth remains unstable and share gains have not yet been fully proven sustainable; therefore, it maintains Market-Perform; P&G is also rated Market-Perform.
AuthorsCristian Rios; Yolanda Zhang
Target price$82 for Estee Lauder; $156 for Procter & Gamble
Asset classesEquity
Business segmentsPrestige Beauty、Skincare、Color Cosmetics、Fragrances、Hair Care、SK-II
Research firm divisions/subsidiariesBernstein（Other）

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The recovery in China's prestige beauty market brings hope to EL, but its durability remains to be proven

Bernstein believes that Estee Lauder in Mainland China has shifted from decline to 9% growth in 2025, and that the prestige beauty market is recovering, but whether the recovery can last depends on market growth, continued brand share gains, and channel factors.

Estee Lauder is rated Market-Perform with a target price of $82; Procter & Gamble is rated Market-Perform with a target price of $156.
Estee LauderProcter & GambleChina prestige beautymarket shareEuromonitorSK-II
  • China's prestige beauty market grew 6% in 2025, reaching RMB186 billion, up from RMB138 billion in 2019.
  • EL in Mainland China grew 9% YoY in 2025, outpacing the market, and the recovery is consistent with the new CEO's direction of increasing media and innovation investment.
  • Chinese domestic brands account for 47% of total beauty sales, but their share in prestige beauty is below 10%, with multinationals still dominating the high-end market.
  • EL's share in fragrances rose from 11.7% in 2019 to 19.4% in 2025, the clearest and most extrapolatable recovery driver.
  • The report rebuts the narrative that a broad collapse of Chinese brands has driven multinational brands higher, arguing that in 2025 domestic brands did not significantly give up share to multinationals.

Report interpretation

Overview

This report is the first in Bernstein's research series on the sustainability of the China recovery for Estee Lauder and Procter & Gamble, focusing on analysis of the competitive landscape in China's beauty market, especially prestige beauty, using Euromonitor data. The report notes that Mainland China has become EL's fastest-growing division, shifting in 2025 from decline to a recovery near double-digit reported growth, making the key question whether this recovery is sustainable.

Core views

The report's core judgment is that EL's recovery in China shows genuinely positive signals, but the evidence remains mixed. The prestige beauty market rebounded in 2025, and both EL and P&G's SK-II outperformed the market; however, the pace of market growth is unstable, EL's share gains have not been continuously linear, and it is still difficult to judge whether the 2025 improvement of the Estee Lauder flagship brand came from media and innovation investment or from one-off factors such as travel retail and channel migration. Fragrance is EL's most resilient growth driver, while skincare and color cosmetics still need to prove that the flagship brand can continue to recapture share.

Analysis framework

Based on Euromonitor brand and category data, the report assesses the quality of the recovery across dimensions including market size, market share, category structure, competition between domestic and multinational brands, and differences between prestige and mass markets. The authors argue that a sustainable recovery requires three conditions: stable market growth, sustained share gains, and benefit from favorable subcategory trends.

Methodology notes

  • market_structure_analysisEuromonitor brand-level competitive landscape analysis

    Prestige beauty competitive landscape breakdown

    The report defines the prestige beauty sample at the brand level and analyzes market size, share changes, and category mix from 2019 to 2025 to judge whether the recoveries of EL and SK-II are sustainable.

  • turnaround_assessmentDurable turnaround test

    Three-factor test for recovery sustainability

    The report argues that a sustainable recovery should be supported jointly by an expanding stable market, continued share gains, and favorable subcategory trends; if the improvement mainly comes from channel switching or one-off events, sustainability is weaker.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

  • ESTEE LAUDER COMPANIES INC (EL.US)
    Primary subject of research; the report evaluates the quality and sustainability of its recovery in China's prestige beauty market.
    Strengths
    Mainland China returned to growth in 2025, prestige fragrance share continued to rise, La Mer performed steadily, and the Estee Lauder flagship brand showed signs of reversal in 2025.
    Weaknesses
    Share improvements in skincare and color cosmetics have been non-continuous, the sustainability of the flagship brand's recovery is unproven, and the U.S. department store channel structure still weighs on the broader growth outlook.
    Comparison
    EL outperformed China's prestige beauty market in 2025; domestic brands still have low share in the prestige market, and multinational brands retain a clear advantage.
    Risks
    Unstable growth in the China market, unsustainable channel migration factors, consumer pressure, share losses, and fluctuations in product costs and exchange rates.
  • Procter & Gamble Co (PG) / SK-II
    Comparison subject; the report evaluates whether SK-II's rebound in China's prestige beauty market is sustainable.
    Strengths
    SK-II stabilized and gained share in 2025 after multiple years of share decline; P&G has a diversified portfolio, helping sustain low-single-digit organic sales growth.
    Weaknesses
    SK-II's share still fell from 4.0% in 2019 to 3.3% in 2025, having previously been heavily affected by consumer sentiment toward Japanese brands.
    Comparison
    Similar to EL, SK-II's rebound in 2025 needs to be assessed as either the start of a new trend or a one-off improvement.
    Risks
    Consumer sentiment, category competition, private-label pressure, challenges from smaller competitors in categories such as diapers, and EPS growth coming in below expectations.

Key data

  • EL Mainland China 2025 growth9% YoYEuromonitor data show that after weakness in 2023 and decline in 2024, EL resumed growth in Mainland China in 2025.
  • China prestige beauty market growth in 20256%It rebounded after declining in 2024, and both EL and P&G's SK-II outperformed this market in 2025.
  • China prestige beauty market sizeRMB186bn in 2025It was RMB138bn in 2019, equivalent to about US$27bn in 2025.
  • Prestige beauty as a share of total beauty sales44% in 2025 vs 37% in 2019Prestige beauty has outperformed mass beauty and the overall market since 2019.
  • 2019-2025 prestige beauty CAGR5.1%Over the same period, mass beauty was basically flat, while the overall beauty market grew about 2.0%.
  • Domestic brand share of total beauty47%Domestic brands have become important competitors in overall beauty.
  • Domestic brand share of prestige beautyless than 10%Prestige beauty is still dominated by multinationals, and in 2025 domestic brands did not materially cede share to multinationals.
  • 2025 prestige beauty category mixSkincare 69%, Color Cosmetics 21%, Fragrance 7%, Hair Care 4%Skincare remains the largest category, followed by color cosmetics, while fragrance and hair care are smaller in share but enjoy more favorable growth.
  • EL prestige fragrance share11.7% in 2019 to 19.4% in 2025Driven by Jo Malone London, Tom Ford, and Le Labo, it is regarded by the report as the most reliable recovery driver.
  • EL overall prestige market share16.9% to 18.7%The report notes that the improvement was mainly seen in 2020 and 2025, rather than being a stable gain that is easy to extrapolate.
  • P&G SK-II prestige market share4.0% in 2019 to 3.3% in 2025It remained under pressure after 2021, with stabilization and share rebound appearing in 2025.

Impact & implications

In terms of investment implications, the recovery of EL's China business increases the credibility of the turnaround story, but it is still insufficient to prove that growth will continue to accelerate. If media investment, innovation, and fragrance category expansion continue to drive share gains, EL's China recovery could become a multi-year positive driver; if the recovery mainly comes from channel migration, travel retail normalization, or a one-off low base, future growth could become volatile again. For P&G, SK-II's rebound in 2025 likewise needs follow-up verification from channel and consumer sentiment data.

Risks

  • The growth pace of China's prestige beauty market is unstable, and another weak year is just as possible as a strong year.
  • The 2025 rebound of the Estee Lauder flagship brand may have come from travel retail diversion or channel factors rather than sustainable returns from media and innovation.
  • Skincare and color cosmetics are EL's highest-share categories, but they are slower-growing, creating a category mix headwind.
  • Domestic brands are highly competitive in mass and masstige markets, with prices typically 20%-40% lower than multinational prestige brands.
  • Macro pressure, inflation, and unemployment may weaken consumer demand.
  • Product cost and exchange-rate fluctuations may affect profits and valuation.
  • P&G's SK-II may still be affected by shifts in consumer sentiment toward Japanese brands.

What to watch

  • The next report in the series for a breakdown of China channel dynamics and the impact of travel retail.
  • Whether the Estee Lauder flagship brand can continue to gain share in skincare and color cosmetics in 2026.
  • Whether the share gains of Jo Malone London, Tom Ford, and Le Labo in fragrance can continue.
  • Whether China's prestige beauty market can sustain its 2025 recovery rather than turning volatile again.
  • Price and share changes of domestic prestige brands such as MGPIN, Florasis, Winona versus multinational brands.
  • Whether P&G SK-II's 2025 rebound continues into a new trend.
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