• The Wall Street Journal, Wednesday, February 27, 2008 12:15 PM

On Monday, Estée Lauder will hand the post of president to Fabrizio Freda, a Procter & Gamble executive who is expected to eventually succeed William Lauder, scion of the third generation, as CEO. In two generations, the Lauder family has turned a skin-cream line into one of the best-known names in beauty, but cracks surfaced on the family's famously united front as business turned south.

A seismic shift occurred less than a year into William's tenure as CEO. For decades, Estée Lauder had used the strength of its brand names to control department-store display space and even the timing of promotions. Then, in February 2005, Federated Department Stores agreed to buy May. The new Goliath shuttered dozens of outlets and began squeezing suppliers like Estée Lauder.

Long concerned about the company's dependence on department stores, William had earlier pushed the company to develop a chain of stores specific to the Origins line. As CEO, he developed Internet retail sites, opened more one-brand stores and sought acquisitions. But his father, Leonard, who had established Estée Lauder's strong relationship with department stores, wasn't keen to alienate the retailers who were essential supporters in the company's early days.

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