Morning, everyone, welcome to the UBS Global Consumer and Retail Conference here in New York City. My name is Peter Grom. I'm the U.S. Beverages and Household Products Analyst here at UBS, we are very excited to have joining us this morning as our keynote, Fabrizio Freda, President and Chief Executive Officer of Estée Lauder. Fabrizio has been the CEO for more than 13.5 years, and during that time, Estée Lauder has transformed into a company with industry-leading organic revenue growth, best-in-class margins, and arguably one of the best, if not the best or most attractive growth stories in all of global beauty.
Despite a strong track record and the likelihood that we're going to return to growth here, you know, there's been a significant amount of volatility in the industry that has impacted both Estée Lauder and just, you know, beauty growth more broadly. Before we start in Q&A, I am required to re-read a legal disclaimer. You know, as a research analyst, I'm required to provide certain disclosures relating to the nature of my own relationship and that of UBS with any company on which I express a view on this call today. These disclosures are available at www.ubs.com.backslash/disclosures. Alternatively, please reach out to me and I can provide them to you after the call. Fabrizio, thank you so much again for joining us. I kinda wanna, you know, start where I just kind of left off.
There's just been a lot of volatility in the industry over the last few years, COVID lockdowns, and I just would love some perspective on, you know, how that informs your view on the opportunities for growth in the beauty industry looking ahead.
Yeah. Good morning, everybody. We believe the fundamentals of the beauty category, particularly of the luxury and prestige beauty category, have not changed. If anything, they come out reinforced for the long term from the pandemic situation. The key drivers of the industry has been the middle class growth, and this is not changing. We see in the last 10 years over 500 million people, $79 billion potential extra dollar in the industry being developed, particularly in emerging markets like China, India, Brazil, but also in the U.S. and in Europe in part. We see the acceleration of the per capita consumption. To give an example, during the pandemic, the per capita consumption of prestige beauty in the U.S. has been 18% up, and in China, 150% up.
There is a lot of space to grow. When you compare emerging markets to U.S., the opportunity to grow is extraordinary in the next 10 years and so forth. When you look at beauty as a total, you separate prestige from mass. Prestige kept growing also during the pandemic, faster than mass globally on average. This is extraordinary. The growth of prestige as percentage of total in China has increased dramatically. Now, we believe it's at 46%. It was at below 20% just a few years ago in 2017 when we spoke last time. In the U.S., this is now 51% prestige. It was 49% before the COVID. There is also which consumer are going upgrading to high quality.
Interestingly, this has not changed as a trend, with higher inflation and with risk of recessions around the globe. Again, I'm speaking global averages on this topic. That's the fundamental of the market. The consumers during COVID started being even more sensitive to beauty. Obviously, this changed by category. In skin care, as you probably know, the consumer became much more familiar with different regimens, with wellness as a trend, and started using more skin care, actually. Same thing happened for fragrances. Fragrances have a tremendous positive trend, during the pandemic, is continuing after the pandemic. In the markets where the pandemic is finished earlier, is actually accelerating. Makeup was the category that was the hardest hit by the pandemic, we can talk it later.
My makeup obviously is coming back when we see the pandemic going down. Hair care is actually accelerating prestige hair care. Hair care is a very big business, been solid as a category since a long time. Prestige luxury hair care is on a strong acceleration, and this is the first years where this is really happening, also because of distribution choices. In total, the fundamentals are very strong. If anything, as I said, are accelerating. We see this industry continue the trend of the last 10 years. Probably, as you know, the last 10 years, the industry, the prestige luxury beauty industry been accelerating north of 5% a year. One of the fastest-growing segments of consumer goods in total.
We believe this as there are all the elements for this to continue in the next 10 years.
No, that's really helpful. You know, I kind of want to shift and talk about balance and thinking about top- line growth, but also, you know, bottom- line. This is a bit more of a conceptual question rather than necessarily how Estée is thinking about the next 18 months. But clearly both top and bottom- line performance have been impacted by a number of external factors, COVID, inflation. As you think about kind of this return to normal or a more normalized environment. You know, and some of these headwinds become tailwinds. Like, how do you think about the balance of, you know, reinvestment for continued long-term growth versus the potential for outsized, you know, margin recovery or, you know, earnings growth?
you mean in the next 18 months?
Yeah. Like, you know.
Yeah
... just more, you know, more conceptually over as, you know, inflation comes in and maybe, you know, the COVID pressures kind of dissipate, how do you think about the balance, right? Because a lot of these things have impacted your performance.
Yeah
... they should become tailwinds. you know, do you want to let them flow to the bottom- line, or do you kind of want to say, "Look, we should step up reinvestment and continue to drive growth"?
We were impacted by many, many different elements. The pandemic, the lockdowns, the difference, the stock levels in particularly in travel retail, and the skin care being more impacted than other category in our portfolio. The moment you impact a lot China, travel retail Asia, you impact more skin care than other category on average. All of these, as you said, should bounce back because those are not dependent from consumer fundamentals, they are dependent by the specific situation. We do believe that part of the recovery of the margin will be driven by normalization of the trend.
For example, the comeback on the travel retail as a mix, in the mix, the mix between category, the comeback of skin care growth, the continuous sustained strengths of online, particularly the strengths of direct-to-consumer businesses for us, which is freestanding stores and Brand.com and third party like Tmall. All these China as a region, all these elements are margin accretive, the comeback of this part of our business will accelerate the margin recovery. Obviously, there is one part of the margin hit that was currency. This one, I suspend my judgment also depending how the banking situation evolved between U.S., Europe, and the rest, how the currency movement will go. Apart the currency with the rest will be recovered somehow in part by the mix.
Our focus will remain on building market share. That's why your word is correct, is balance. We are looking for balance. We want to use the recovery period to build market share. We will focus on growth and how investing in advertising, particularly, there are so many new advertising opportunity which are frankly have high return and very efficient. Like the working well in TikTok around the world, is having very high returns, working well with the new way to manage creators, influencers, dynamics.
we have invested a lot during the pandemic in our ability to produce the right quantity of asset to participate to this new social media boom, which is happening in every country of the world, particularly in emerging markets, that require different quantity of asset produced, a different way to interact between the marketing people of any company and the world of influencer and creators. All these needed a change in organizations. Frankly, during COVID, we took the time to accelerate and further reinforce. We invested in creative studios in the key markets of the world. We have our office at the creative studio inside, so a lot of great evolution. We are increasing our ability to use these of effective social media in every country of the world, so investing into that. We are investing in innovation.
Our innovation will continue to grow and will continue to support growth. During the pandemic, about 25% of our yearly sales have been in new products, meaning product launched in that year. This will continue, and we have all an extraordinary pipeline of innovation for the next year. We will continue to invest in innovations. By the way, those innovations have a very important role in attracting new consumers. As part of the balanced growth, you want the growth to be in part new consumers that we bring into the brand. Innovation has a big role in doing that. In part, we want to continue to reinforce our repurchase rate, level of loyalty.
That's a very important element because it makes the growth more stable, when are done by product which are so good in performance that people repurchase them regularly. We are doing this via investment in research and development, R&D. During COVID, we invested a lot on new capabilities in many areas. We are much better also in data, in user data, in CRM, particularly in Asia, in omnichannel, meaning linking the online with the omnichannel. This obviously a completely changed of the level of importance during COVID and will foster more growth because the online penetration has increased dramatically, as we discussed already in the past. The online penetration has increased, and now the freestanding stores are coming back roaring. In the last quarter, we were growing double-digit around the world on freestanding store.
Now we can connect them with technology, having a one seamless consumer experience that in the past was not possible. This will further accelerate growth. We will invest in growth in summary, with our key drivers advertising, innovation, new capabilities in data, CRM, and obviously, the continuous distribution increase globally of our brands that will continue to increase distribution in every channel of the world, and we can talk more in detail about this in the next part of our conversation. At the same time, we will benefit from the coming back of the right mix to grow margin. We believe we can grow both margin and sales at the same time in this recovery part.
The end results of this recovery moment will be that we would like to go back to our normal algorithm. We believe that our historic algorithm of 6%-8% growth and 0.5 margin point per year would result in double-digit EPS per year. That algorithm then will be our landing space. From there, we'll continue to grow on our historic algorithm.
Okay. you know, that's really helpful. you know, thinking about, you know, this recovery period that you were just alluding to, I, I would just love to get your perspective on kind of the shape of the recovery, particularly in China. We've, we've seen other markets around the world that are emerging or have already emerged from this, from the pandemic. How does that shape your expectations over the next 18 - 24 months?
The shape of the recovery, we have seen it where the market has recovered, say, the U.S. or in Europe or in other parts. The shape of the recovery is that there is a consumer goes back to brick-and-mortar, so first by channel, and the online we see it as stabilizing. Meaning during the COVID period, the online was accelerating, obviously, brick-and-mortar were empty. In the recovery, you could expect that or be concerned that online may go down dramatically. It's not happening. Online stop may be growing in % of total, a brick-and-mortar comes back, but the online habits stays. Why is that? It is interesting. Before COVID, the younger people were already online. They were already buying online.
During COVID is what we call the ageless consumer, so us that went into buying online more and more and more. And we liked it. And so we stayed. We don't go back to buying only in brick-and-mortar. The people that before were buying online continue to buy online. The people that learned how to buy more online during COVID go to a new mix. This new mix is different by country, by kind of person, but it's a mix between brick-and-mortar and online. In total, online reinforcement stay strong. Second, there is an acceleration of sales. We have seen this in every market after recovery. This is particularly true in certain categories. Makeup bounced back in the recovery period out of COVID.
You see, for example, the makeup is based on usage occasion. Women use makeup in different occasion, in, you know, going to work every day or going in the evening to a restaurant or going to a party, a weekend moment. Depending on the usage occasion, the kind of makeup is very different. During COVID, these usage occasions were different or were absent because there was a period where we're in our homes. In makeup comes back as usage occasion comes back. There is a complete correlation between these. Also, makeup has been the hardest hit category, as I was saying, because it's the most sensitive to scale of the sales in every single door, because makeup has a lot of services. Like take our brand M·A·C, where there is makeup artists in the store.
There are people which are supporting the sale in every aspect. Obviously, if the traffic is very reduced, all these fixed costs become very high. Makeup profitability is also the hardest hit during COVID. That's why we expect a comeback of sales, gradual comeback of profitability also in the makeup category. This is part of the acceleration. Our M·A·C brand in the last quarter was growing double-digit globally, which was super exciting to see the M·A·C brand back. It's a big brand for us, so very, very important. Good news for the future. The last thing I want to say on the shape of the recovery is, we saw by channel, we spoke about no, sorry, I don't want to forget fragrances.
As part of the recovery, fragrances are playing a very important role. In the fragrance market, it's happening that the high-end fragrances, so what we call artisanal fragrances, collections of fragrances like our brands like Jo Malone London , TOM FORD, LE LABO , Frédéric Malle, all these fragrances, KILIAN, really accelerated, but double-digit, amazing percentages of growth. The entire fragrance industry is doing well, but the top of the pyramid, the collections, the more sophisticated juice are doing much better. Why is that? First of all, as I said, in the entire beauty industry, people are going from mass experiences to more luxury experiences. Also, the number of fragrances in the home of every consumer are increasing. I don't know about you, but my father had one fragrance all his life. I still remember it.
I went to two, and I was an innovator. Today, my children have seven fragrances, and they use one for summer, one for winter, one for an evening, one for going to work. The portfolio of fragrances has completely changed in the home of the consumers. This has increased during COVID. These numbers continues to go up. You see all these collection brands growing much better, because when was one fragrance or one designer for many years in my life, the market was done in a certain way, and you were waiting for this fragrance to be discounted to stock it, and then you were done. On the contrary, it's about collection and penetrating a brand, having an experience, the game is changing completely.
This is a very exciting game because in this, what I call the pyramid of fragrances, where at the bottom there are the every designer has a fragrance, every retailer can discount it kind of market, and at the top, there are more sophisticated artisanal brands, the percentage of profitability is much higher at the top. This top of this pyramid is doing what I call the inversion of the pyramid, particularly in profitability, because the more this part grows, the total profit in the category grows, and the profitability of that part of the industry, on which today we have 50% market share, that part of the industry will grow and will continue to take a lot of the profitability of the industry.
The shape of recovery in fragrancy, in fragrances is very exciting, all over around the world.
That's super helpful. I guess I'm more of a retro guy. I only have one fragrance.
You have only one?
Only one.
Okay.
I guess this is, you know, sticking with China...
Now I'm at five, and so you should as well.
Room to grow. Anyway, you know, maybe just sticking with China, and this is kind of a bigger picture, multi-part question. I guess, how do you see the category and competitive dynamics evolving in China as you look out over the next three to five years? I guess if you were to fast-forward, you know, three to five years from now, you know, how would you define success for Estée Lauder in China? What would that look like from a growth perspective, and what would that look like from a share perspective?
Let's start from this point. Success in China for us is to grow market share in a growing market again. China is a market which is going to come back to growth, and then could be high single-digit growth in certain moments, will be double-digit growth in other moment, depending on the economy in the country, depending... The fundamentals of demographic fundamentals, the consumption fundamentals, will lead China into double-digit growth. The economy may create some up and down and volatility, but the market potential remain extraordinary for many, many years to come. First is the growth of the middle class. I was saying before, the numbers, the global numbers in China, the numbers also very exciting.
You can imagine next year, probably 300 million new middle class, and most importantly, a continuous elevation, within the middle class to the high-end middle class that in China are our biggest customers. That part of the middle class is increasing. The second thing which is very relevant in China is, as I said before, if you make the beauty industry 100, the prestige part of the industry that now has reached 46%, 47% will continue to grow. We are a pure play in that part of the industry, so in the fastest-growing part of the industry in China. The consumption per capita, as I said, just increased 150% during COVID, and there is a lot to go.
We're still very much below the U.S., obviously, but even below Korea, below other market in Asia. The consumption per capita will continue to accelerate. This fundamental are there. The market will grow. How are we going to grow market share in this market? First of all, we have an extraordinary portfolio of brands. Estée Lauder is very strong. La Mer in the high-end luxury. Estée Lauder is composed by one prestige part offer, which is we call the Blue Line, but is also like Advanced Night Repair, if you are familiar with the brand, but also a high-end line, which is called Re-Nutriv, which is growing enormously. It's very relevant to the Chinese consumers.
We have an extraordinary fragrance portfolio, because in China, different from the West, the high-end fragrances, what I before was calling the artisanal part of our collection, are the biggest part of the market and the fast-growing. Brands for us like Jo Malone London , TOM FORD are really doing super well. We have the beginning of us playing in hair care, where we didn't have, we just launched Aveda in China very recently, and that's a complete new category that we will be able to grow. We have new brands that we will launch in China. In China, we don't have yet brands like LE LABO , which is our fastest growing brand in the company in total. By the way, if you have not tried LE LABO fragrances, I really suggest you look at them. They are extraordinary brand.
We don't have The Ordinary or DECIEM company yet in China, which is the highest growth unit brands in this moment in every country where it's been launched. A lot of new brands portfolio increase. Cities. Our most distributed brand in China is Estée Lauder. Estée Lauder is in 150 cities. That's it. Now, each of these cities have million and millions of inhabitants, but it's 150. We sell online via Tmall, JD, and others, in 650 cities, the Estée Lauder brand. You have still 500 city to go in brick-and-mortar distribution before we get really the coverage of the existing consumption, let alone future growth of consumption.
Imagine that in China, if you are in one of these 450, 500 cities where there is the desire of the Lauder brand, but there is not yet physical distribution, you can only buy it either traveling, so in travel retail, or online. That's why in China you see that online is already 50% of the total business. You see that travel retail is actually booming because frankly, some consumer don't have the alternative. To understand this phenomenon, because this will be also linked, if we will talk emerging markets to other emerging markets, the very interesting phenomenon I want to explain is, the China is also one of the most productive market per store.
In the world of luxury, the productivity per store is a very important driver of profitability. Why is the most productive market? Because in China, we started online in the cities, as was explained, 450 city, you buy online or when you travel. There is no brick-and-mortar. We opened the brick-and-mortar when our online CRM data tell us that in that city, there is enough demand to justify a very productive store. We go open the store. So the store is productive day one and is also very productive. Look at the West in general, U.S., even Europe, the way this was built was different. We all built a huge distribution in brick-and-mortar, online arrived and took out of the brick-and-mortar 35%-40% of the business.
The market didn't grow 30%, 40% in the same years. The reality, the entire brick-and-mortar became less productive. The arrival of brick-and-mortar first, online after, make brick-and-mortar less productive. In the emerging markets, online first, brick-and-mortar only where you need it, make everything very productive. This simple explanation explain why in our industry, emerging markets tend to be, for sure, after certain years of investment, more profitable than developed markets, which normally many other industry is the opposite. That is why I believe that the opportunity in China in the future remains extraordinary. By the way, that what I call the China model, exported to India, Brazil, Southeast Asia, et cetera, is making all this market grow profitably rather than having years of investment before becoming profitable. It's basically the phenomenon of the online penetration before the brick-and-mortar penetration.
The last thing I want to say on China is the excitement of some other things which happened. During COVID, Hainan has become an extraordinary place for sales. Hainan is obviously in our travel retail business, and the development of Hainan is here to stay. During COVID, when the Chinese consumer could not travel the world, Hainan has been extraordinarily popular. More recently, has been a problem because with the close up and the lockdowns, has been very difficult with very high stocks. A transition that has been difficult, the future will remain brilliant.
Sometimes I get asked the question, "Do you think that now that the borders are opening and Chinese will start traveling again, will Hainan go down?" I just want to remind that less than 20% of Chinese have a passport. So there are still 80%-85% of people that can only go to Hainan for having the experience that Hainan provide. By the way, I'm leaving for Hainan early next week, after three years, finally, I'm going back. Any one of you that have not seen it and not been yet been there, I was there before COVID, but I've not seen yet the after COVID physically, although my team with the cameras show me since a long time to see exactly what's happening.
If you go, you will see it's one of the most exciting vacation places of the world, particularly if you, on top of beautiful beaches, great hotels, things like that, you like shopping as an entertainment, is an extraordinary place. This is there to stay. The development of the online platforms in China is very strong. It will continue. There is more competition between these online, that has been in the past, where Tmall was the first very big. Now there is a very competitive environment that however attract more and more consumers every day.
In summary, when you combine the growth of the fundamentals, middle class, together with the expansion of our portfolio of brands over time, together with the penetration of more cities for sales. Together with the creation of internal travel retail business, Hainan, that before was not existing. Then you add on all of this, the opening of the borders and again, the Chinese consumer traveling around the world, that will bring, at least in certain destination areas like Tokyo, Paris, London, this can be 10% of the total business if it goes back to where it was in 2019, et cetera. You put all this together, the future with Chinese consumers is very exciting. Just to add one part to your question, you asked our market share in China. We see this as market share with the Chinese consumers.
We internally coordinate and look at what we sell to Chinese consumer in domestic China, what we sell in the travel retail China, and what we sell around the world when they have tourism, and we look internally, we estimate the market share of the Chinese consumers. This market share will continue to grow, and we will focus on it, globally.
No, that's very, very helpful. I mean, maybe sticking with, you know, the travel retail, which you were just kind of alluding to. I mean, a few months back, Fabrizio, I think you kind of mentioned that you thought travel retail was one of the biggest opportunities from a channel perspective. I guess I just would be curious, and you touched on, the Hainan versus, you know, international travel intersection. I mean, I guess beyond just the traffic component, I mean, how have the channel dynamics changed, you know, versus pre-COVID?
Yeah. Travel retail, First of all, travel was also hit enormously during COVID because the airports were closed for a long time. The dynamic has been kind of weird because you had a certain moment just when you look 2020, 2021, 2022, when the West closed, China reopened. In May 2020, the airports in the West were closed, and we had big travel retail business there. This was obviously painful. June, I remember the first week of June 2020, the Chinese government announced that Hainan was declared a duty-free place and made it practically the biggest travel retail place of the world in few months. When the rest was closed, something opened. Now, we had seen this coming.
We were ready. I remember that when last time I visited there before COVID, I asked my team to be ready with all our brands, at least the ones that were available in China, positioned because this is going to be amazing. If you go there, you understand immediately this is going to be amazing. Frankly, we didn't anticipate that COVID was arriving and would have been even faster the growth because it would have been the only option for travel to China in that period. June 2020 was open. Our office in New York closed in March 2020. Our office in China reopened every day of the week, May 2020, and never closed till the recent lockdown, meaning the recent, a year ago, March, a year ago now, big lockdown of Shanghai.
The moment the West was closed, China was open and marching, and that frankly boost our business in a fantastic way during this period and offset it. Now, we just come from a year, the perfect storm, apart from inflation, all the other things that happened. The West started reopening and China closed. The opposite happened. Now we are in front a period that we hope that both will be opened. That could be exciting if we manage this correctly in the next couple of years. It's important to look at the timing to understand the dynamics. Travel retail has been very volatile for the reason I just described. Travel retail remain, in my opinion, one of the most exciting channels. First, is a beautiful trial channel. The large amount...
The biggest number of new trials, new customer acquisition, happens in travel retail. The consumer go and try for the first time a product, then they go back home and repurchase this product in their country of origins. That's a big phenomenon. Second, is today the channel where from our data is the biggest equity building. If you go to the airport of, you name it, Heathrow, or you go to the airport of Tokyo, or you go to Hainan, you see the quality of the... you see is just extraordinary. Why the quality? Why all companies, most companies, for sure, Estée Lauder, we have our best counters, our most modern design, our latest design in Hainan or in certain airports around the world, now they are reopening.
The answer is the productivity of these stores is so high that allow a change of the investment, the renovation of the counters. If you look in a good airport every year, if you go to Hainan, you could every two weeks for the level of productivity. You have always the best counters. You're always the best positioned. You're always a lot of people that serve you because the traffic in these places is extraordinary. Travel retail is great for trial, great for equity building, and is one of the most productive, just traffic per store, places in the world in our industry. I said before, productivity is the key driver of profitability. That's why travel retail is so attractive, because it's extraordinarily productive. That channel is growing. The number of people traveling are growing. The people interested now to travel after COVID even more.
Every one of us, I don't know about you, but I'm happy to go to China next week and to travel again and to see our business there and spend time with the team finally. Is going to be exciting. Many people will go back. Said this, December international travel was + 80% versus the year before, but was still 25% below 2019. It just started. Still a lot to go and a lot to recover also because there are not enough airplane, there are not enough places, particularly in Asia. It will be a gradual recover, but will be a long-term recover of the travel around the world, in our opinion.
Last thing I want to say on travel retail is travel retail is an industry which is driven by traffic, as we just explained, but also by conversion. Before COVID, 15% of the people traveling, entering an airport would buy anything. 15%. This is increasing, particularly now. By the way, this has been increasing when the safety protocols have increased in airports. We all start spending more time in airports. This has driven the conversion up. What is driving the conversion up is what is called pre-tail, meaning the possibility when you have a ticket to buy online your beauty or whatever, or your alcohol before going to the airport and then finding it in the airport, getting it when you are in the airport, which is mainly today in China and Korea. Pre-tail, double conversion.
Imagine now the next 10 years that this online, basically travel retail online, the invention of travel retail online, start being available everywhere, US, Europe, et cetera. You have the potential to imagine a very big bump of conversion. If the conversion goes from 15% to 30%, it's like doubling the entire travel retail business with one move. Will this happen? I don't know, because for the moment, as I said, pre-tail is significant only in China and Korea, but there is no reason why this technology should not travel the world. Definitely, we are going to support it wherever this will be happening. The travel retail business. Traffic will be back and conversion will be increasing, and this will drive the industry for a long time and is an accretive. I explain why it's accretive, because it's extremely productive.
It's an accretive part of the business and is a high potential for equity and trial.
Great. Maybe continuing on the regional you know, performance here. I wanted to get some views on the Americas, but specifically the United States. I think you said, you know, highlighted on the last call some exciting initiatives that you're kind of, you know, deploying right now. Can you maybe just, you know, talk about those strategies here in the U.S.? I guess I just would be curious, would holding share be viewed as a success?
In this moment, yes. Let me explain what's happening. First of all, we have very high market share, still the market. We still have a very high market share. We have the brands which are winning in the market. CLINIQUE is still the market leader in skin care. M·A·C is the market leader in makeup. The Ordinary, which is our latest new brand, is now become the market leader in skin care in units. It's still smaller than CLINIQUE in value. It is an extraordinary brand which is winning in units all over. Our fragrance portfolio that was explaining before, Jo Malone London , LE LABO , TOM FORD , are really doing super well. They will do better and better over time. In fragrance, we have a smaller market share.
Our total market... Sorry, I should say hair care with Aveda and Bumble and bumble is doing well. Is only two brands in a very big category. We are at the beginning of this function in this category, but our two brands are very strong, and particularly Aveda is a very strong brand with critical mass in the U.S. Is a big brand. We have a great portfolio brand. Most of them are number one or two of the category they operate. Very strong fundamentals. We are still readjusting our portfolio coverage of this. Our market share is the biggest in makeup and was the lowest in fragrance. Now we are going to change all of this in the future, but gradually.
When you look at our total market share, that's why I'm saying would be good to hold. In a moment where fragrance is growing and makeup was collapsed by the COVID situation and the gather recovery, that was not helpful to the mix impact on market share. Hair care, which has been getting into prestige very heavily. Our brands is still a lot professional hair care in salons. This has been obviously not helpful on the total market share. There are elements of mix which are not helping. We are re-managing the mix. We are making the distribution balance. For example, we are growing very well in freestanding stores again. They were very important for us because we are the company in the U.S. with the biggest amount of freestanding stores.
The comeback of this is helping and will continue to help even more. You don't read this number necessarily in the numbers which are official. Then Brand.com is going to continue to recover. Together with freestanding stores, we give to the U.S. a very unique position where we will have probably 25% of our business direct-to-consumer, but where we control everything, including the data and all the strengths that will continue to accelerate. Our goal in the U.S. is to go back to regular, sustainable market share growth. For the moment, we are improving the gap, meaning we are every time growing closer to market, but we are not yet ahead of market. That's the aim, and we are gradually getting there.
By the way, the last thing I want to say, we have an extraordinary innovation pipeline. That's the other big driver, which will help us going back to growth on market share. That's the goal. We will get there. Gradually, but we'll get there.
Okay. Well, we have about a minute left, why don't we just leave it there. Fabrizio, on behalf of UBS, those in the audience and those listening, thank you so much for being with us today. I wish you nothing but the best of luck moving forward.
Thank you very much. Thank you.