STRATEGIES OF LOREAL
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Introduction
Eugene Schueller a young French chemist developed an innovative hair color formula,
Aureole. He manufactured his own products and sold them to Parisian hairdressers. The
company was registered in 1909. The guiding principle from the beginning was research
and innovation in the interest of beauty.
By, 1950 had acquired 100 products and today they are 2000 product strong. From the
beginning Eugene was ambitious about his company and by 1912 the brands were found
in Holland, Austria and Italy. In a few years the company was distributed US, South
America , Russia and Far East. Today, LOral is present worldwide through its
subsidiaries and agents. Loreal started out in hair colour business but soon branched out
into other cleansing/beauty products.
LOrals century long history is marked with successes. Today the 500 brands of
LOral provide diverse products from hair color, permanents, styling aids, body and skin
care, cleansers and fragrances.
The distribution channels are diverse from hair salons to super markets and
hypermarkets, health and beauty outlets and direct mail.
In 1933, Voutre beaute a magazine devoted to beauty and well being of women was
launched .The 1950s saw the advent of new and exciting advertising medium: the
movies. LOreal made its onscreen debut with the campaign for Ambre Solaire, which
was making a comeback on the market.
The Global Reach Of LOreal
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The Business
In the battle for global beauty markets, $12.4 billion L'Oreal has developed a winning
formula: a growing portfolio of international brands that has transformed the French
company into the United Nations of beauty. Blink an eye, and L'Oreal has just sold 85
products around the world, from Redken hair care and Ralph Lauren perfumes to Helena
Rubinstein cosmetics and Vichy skin care. The report shall cover L'Oreals presence on
the world map as well as its position India since its inception.
L'Oreal caters to the market by following the underlined categorization and has different
strategies for these product segments.
1.Global Strategies
2.Strategies in India
The Product Categories
1. Consumer products
The Consumer Products Division is dedicated to offering all consumers its high
technology products at competitive prices through mass-market retailing channels. The
Divisions brands develop haircare, skincare, make-up and perfume products that meet
the aspirations of all of its customers.
The Division's 5 international brands are L'Oral Paris, Garnier, Maybelline New York,
Softsheen.Carson and Le Club des Crateurs de Beaut.
2. Professional products
The Professional Products Division is at the service of hairdressers worldwide. Our
complementary brands meet the requirements of salon professionals in colorants, hair
care, texturing and styling formulas and provide salon customers with a wide range of
innovative, high-performance products. The Professional Products Division of LOral is
made up of four different brands: L'Oral Professionnel, Krastase, Redken 5th Avenue
NYC and Matrix.
3. Luxury products
The prestigious brands of the Luxury Products Division offer consumers top of the range
products. Clients of selective retail outlets (department stores, perfumeries, travel retail
outlets, and the brands own boutiques) receive personalized advice at the point of sale,
enabling them to choose the products best suited to their needs.
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Lancme, Helena Rubinstein, Biotherm, Shu uemura and Kiehls offer premium products
known for their innovation, performance and quality. The Luxury Products division
houses also some of the world's top perfume brands: Giorgio Armani, Ralph Lauren,
Cacharel, Paloma Picasso and Guy Laroche.
4. Active cosmetics
The Active Cosmetics Department designs and markets dermo-cosmetic skin care
products that are sold in pharmacies and specialist retailers. These products offer
consumers proven safety and effectiveness supported by advice from pharmacists and
dermatologists.
The Departments three brands, Vichy, La Roche Posay and Innov, offer skin care, sun
care, and hair care and make-up products.
LOreal
Consumer Professional Active cosmetics
products products department
Maybelline New York, LOreal Vichy
LOreal Paris, Garnier. Profesionnel
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Corporate Strategies
True enough, its tough to succeed in a demanding economy.
It takes breakthrough innovation, breakneck speed, and naturally, the very best talent to
outthink and outmaneuver your competitors.
L'Oreal thus works on a three point guide for meeting with competition:
Innovate by successfully conceiving of and launching a new concept or
technology
Differentiate their products and services through pragmatic marketing strategies
Dominate in their market and build brand equity and profitable growth
The Strategist
For the first time this year, TIME, the American magazine, published a ranking of the 100
most influential people in the world, in a range of categories (politics, economics,
science, arts, etc). Among them, Mr. Owen-Jones, LOrals CEO, is part of the worlds
20 Builders and titans.
When questioned on the possible risks of market saturation in a business like beauty care,
Mr. Owen-Jones replied, When I began, we sold to women from 20 to 50. Today, we sell
to women from 15 to 75. Tomorrow, we will undoubtedly have customers from 13 to 93.
Lindsay Owen-Jones feels that the cosmetics industry has a promising future, and not
only because of its constant quest for innovation and quality. ...considering that the
men's market is just beginning to develop and that emerging countries represent a
gigantic reservoir of potential consumers, the market is far from saturated.
Initial Strategy
One of Owen-Joness first moves at LOral was to bring more focus to the company
through a huge pruning of brands and activities. The company focused on five core
businesses and technologies -- hair color, hair care, skin care, color cosmetics, and
fragrances. Then we concentrated on 10 global brands, which now make up 85% of sales.
A whole list of brands has disappeared. It's focus and then extreme drive on the
remaining products to take them global.
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Mergers And Acquisitions
LOral, the worlds largest beauty company, announced that it has signed an agreement
to acquire SkinCeuticals, a professional skin care company. Founded in 1994 and
headquartered in Dallas, Texas, SkinCeuticals, a privately held company, is one of the
largest and fastest growing brands in the professional premium skin care market in the
U.S. Through a strong and specialized distribution network, the company sells to
dermatologists, plastic surgeons, and high end spas. SkinCeuticals sales in 2004
amounted to 35$M.
The acquisition of SkinCeuticals allows LOral to strengthen its position in high-
performance professional skin care, said Lindsay Owen-Jones, Chairman and CEO of
LOral. This market, in which SkinCeuticals is a leading player, is a particularly
promising one with high international potential.
The company entered the Chinese market by acquiring the Chinese brand Mininurse in
December 2003.This was followed by an agreement to acquire the Chinese make-up and
skincare brand Yue-Sai on 26th January 2004. "After Mininurse at the end of last year,
this new acquisition confirms our determination to step up the pace of our growth on this
strategic market", commented Mr. Lindsay Owen-Jones, Chairman and Chief Executive
Officer of L'Oral.
On 9th May 2001 The L'Oral Group and the CosMedic Concepts Company have just
signed an agreement. According to the terms of the agreement, the CosMedic Concepts
Company yields its BioMedic brand and range of products to L'Oral.
"This acquisition will strengthen L'Oral's product portfolio in the dermocosmetics and
will accelerate our expansion in this rapid growth market," indicated Guy Peyrelongue,
President and CEO of L'Oral U.S.A.
"The acquisition of the leading American brand of cosmetics designed for use by
dermatologists and plastic surgeons, in association with L'Oral research, will provide
L'Oral with a powerful position in this potentially strong market throughout the world,"
stated Laurent Attal, managing director of L'Oral's Active Cosmetics department
As the competition intensifies, Owen-Jones is likely to continue making acquisitions. He
has purchased five companies in six years. The company is actively exploring acquisition
targets elsewhere in Asia. Already huge in established markets such as Europe and the
U.S., L'Oreal is venturing further afield. Last year, the company acquired Soft Sheen, a
U.S. line of hair-care products aimed at African-American women. Owen-Jones intends
eventually to use it as a springboard for expanding into Africa. L'Oreal is expanding
rapidly in India since it introduced its L'Oreal Excellence line of hair color in 1997--the
first time a company dared sell any color other than black. In Mexico, L'Oreal ranks No.
1, with a 28% spurt in sales last year.
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Cross-fertilization:
L'Oreal's work with Maybelline is a prime example. In 1996, L'Oreal acquired
Maybelline for 758 million and began a complete makeover of the brand, including
moving the headquarters from Memphis, Tenn., to New York City. The key: figuratively
stamping ''urban American chic'' all over Maybelline products to promote their U.S.
origins. In 1997, for example, Maybelline rolled out a radical new makeup line, heavy on
risky colors such as yellow and green, dubbing it Miami Chill. And when L'Oreal
marketers discovered that the moderately successful Great Finish nail enamel dried in one
minute, they changed the name to Express Finish--and sold it heavily as a product used
by urban women on the go. The makeover was a hit. Maybelline's share of the nail-
enamel market in the U.S. has climbed from 3% to 15% since 1996. Altogether, over the
past three years, Owen-Jones has almost doubled Maybelline's sales, from $320 million
to $600 million, and pushed the brand into more than 70 countries. Sales outside the U.S.
market now make up 50% of total revenues.
New Geographic Areas
In the battle for global beauty markets, $12.4 billion L'Oreal has developed a winning
formula: a growing portfolio of international brands that has transformed the French
company into the United Nations of beauty. Blink an eye, and L'Oreal has just sold 85
products around the world, from Redken hair care and Ralph Lauren perfumes to Helena
Rubinstein cosmetics and Vichy skin care.
India is one of LOrals fastest growing markets. To meet ever-rising demand, the Group
opened a new manufacturing plant near the city of Pune, a state-of-the-art facility with a
production capacity of up to 100 million units per year.
2003 saw LOral grow by 33.4% in India, and the new factory in Pune is the latest step
in the Groups rapid development on the subcontinent. The high-tech plant will
manufacture hair care; hair color and skin care products for the Indian market as well as
for export to neighboring countries. It shall practice World Class Standards in Hygiene.
The Pune site is one of the first within the Group to implement LOrals newest GHP or
Good Hygiene Practices.
L'Oreal is surging in markets stretching from China to Mexico. Its secret: conveying the
allure of different cultures through its many products. Whether it's selling Italian
elegance, New York street smarts, or French beauty through its brands, L'Oreal is
reaching out to more people across a bigger range of incomes and cultures than just about
any other beauty-products company in the world. That sets L'Oreal apart from one-note
marketers such as Coca-Cola Co., which has just one brand to sell globally.
But L'Oreal is surging in markets stretching from China to Mexico. Its secret: conveying
the allure of different cultures through its many products. Whether it's selling Italian
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elegance, New York street smarts, or French beauty through its brands, L'Oreal is
reaching out to more people each day.
Research and Development
Since it was founded in 1907 by the chemist Eugene Schueller, the L'Oral Group has
continued to invest in cosmetic research with one clear aim: to improve the quality and
efficacy of its products through scientific innovation. Each year the Group devotes more
than 3% of its turnover to Research and Development.
Laboratories in France, the United States and Japan employ over 2,900 scientists and
support staff from over 30 disciplines: chemistry, biology, medicine, physics, toxicology,
etc. Research findings are published in numerous international scientific journals and in
2004 LOreal applied for 586 patents. LOreal believes in the strength for long term
growth and sustenance.
Entering New Business
LOreal has announced the first men's anti-aging product line to hit mass market retailers
across America. Up to now, men's cosmetic has been a small niche market, but L'Oreal's
lead could start the ball rolling.
Exploring New Opportunities
To sell the new Helena Rubinstein line, L'Oreal has opened a New York spa--the first
time L'Oreal has tried to run a retail operation. And the target market is younger and
trendier than L'Oreal's typical luxury customers. It's not clear how well the company will
be able to manage its ever-growing stable of upscale beauty brands while mixing it with
street-wise new products. But that's the thrill of being in the beauty business--what's hot
is always changing, and only the savviest of sellers can keep up with the trends.
Corporate Social Responsibility
UNESCO and LOreal Professional Products signed an agreement under which they will
work together on an HIV/AIDS prevention education programme.
Another example of LOreals commitment to philanthropy and serving disadvantaged
communities is the Group's continued support over the past 15 years, to the Look Good
Feel Better programme. This initiative helps put a smile back on the faces of cancer
patients through skin care and make up workshops. LGFB is an original project from the
cosmetic industry, which demonstrates just how beneficial cosmetics can be to
individuals well being.
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This programme will offer courses adapted to the cultures of the countries concerned. It
will be part of the programme already put in place by LOreal in Africa, which has thus
far provided for 170,000 training days. The hairdressers serve to further the campaign by
relaying their knowledge to clients in their salons, veritable places of exchange and
dialogue across the continent.
After the mass scale destruction due to tsunami in India LOreal participated in the
international relief effort, LOreal contributed 1 million.
LOreal realized the need of women in science and in 1998, the LORAL-UNESCO
FOR WOMEN IN SCIENCE Award was designed This collaboration, illustrates how the
private sector and an intergovernmental institution can pursue joint projects to support
women of science, encourage the advancement of knowledge and enhance development
on a global scale. Five remarkable women physicists receive the LOreal-UNESCO for
women in science award for 2005, the world year of physics.
Achievements
LOral ranks first in the 2005 survey of the reputation of Frances CAC 40 companies.
The study was conducted by the Observatoire de la Rputation and the European strategic
intelligence leader, Datops.
According to the survey, LOrals outstanding reputation is largely due to its
attractiveness as a company and its good financial health. LOral was the company
most often mentioned under the headings good financial health, quality of products,
desirable products, attractiveness, desirable place to work, and desirable company
to invest in.
LOral decided to link up with the Cit des Sciences Museum in Paris to launch the
worlds first exhibition on hair in 2001. After a highly successful three-year European
tour, LOrals Decoding Hair exhibition heads to Central America and opens in
Mexico on December 9th, 2004.
LOrals firm commitment to promoting diversity among its employees, customers and
suppliers, and the Groups overall culture of inclusiveness has earned it the very first
Diversity Best Practices Global Leadership Award. LOrals CEO, Mr. Lindsay Owen-
Jones has long been a fervent proponent of diversity and feels his companys success is in
large part due to the culture of inclusion he and his teams have worked hard to promote.
LOral USA was recently chosen by the US magazine Occupational Hazards as one of
the sixteen safest companies in the United States. The distinction rewards the Groups US
subsidiarys commitment to and achievements in occupational safety.
LOral was named Packager of the Year in 2003 by CPC Packaging, an American
trade journal for the cosmetics and personal care industry. An award that underlines the
Groups capacities in meeting the consumers needs by using the most sophisticated
technologies in packaging.
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A Complete Global Changeover
In just a decade, LOral has undergone a complete changeover. Ten years ago, 75% of
LOrals $5.5 billion annual sales came from Europe, mostly on the French market.
LOrals image seemed to be indelibly linked to Parisian sophistication. Last year, the
European market represented only 49% of the Groups 13.7 billion dollar revenues, while
the American market accounted for 32% of sales (a doubling of the American market
share the company had in the early nineties). LOral Paris, the Groups leading brand, is
now sold the world over without having lost one iota of its image of French chic.
How were these important changes brought about? The first important reason highlighted
by Fortune Magazine was the Groups brand development strategy, brilliantly formulated
and led to fruition by an international expert. One such outstanding success story is
Maybelline. This formerly "Middle America" brand was bought in 1996. In just a few
years, its image has now become trendy in such far away places as Japan or China. Its
new "international and sexy" look has won over the worlds most stylish teenagers.
Adding "New York" to the brands name has made it a huge international success.
Today, Water Shine Diamonds lipstick by Maybelline is a symbol of how global LOral
has become. This successful product is the result of an initial setback: Moisture Whip
lipstick felt too dry to Japanese lips. Thus, the product was sent back to the laboratory,
Lindsay Owen-Jones insisted on giving it a new name and Water Shine lipstick was born.
After having conquered the Japanese market, it was exported everywhere in Asia and,
eventually, throughout the world. Today, it is so popular in Russia that certain colors are
out of stock
. the trick will be staying ahead in the game as his powerful rivals seek to play the global
branding game. From giant P&G to niche players such as Los Angeles-based cosmetics
maker Stila, L'Oreal's competitors are hustling to catch up. in the emerging markets like
Japan L'Oreal still trails behind.
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Brand imageWorld No.1
Research & development-586 patents
Innovation on IN products
Range of portfoliodiversity of products
Strengths
Global brandpresence in 130 countries
Strong Corporate Social Responsibility policy
Strengths
Emerging markets of developing
countries
Brand confusion Growing cosmetic and grooming
Positioning in the myriad brands market
Newer acquisitionsmore range of
Presence remains underdeveloped in products
emerging markets.
Weakness Opportunities
New channels on the electronic media
Local players in the new market expansions
Brand cannibalization
Threats
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L'Oreals Journey in India
With liberalization L'Oreal sensed the opportunity in the Indian market and came to India
with the hopes of a growing market. One of the early players the company had to take the
agency route for selling their products.
Following its global strategy of bringing the country-of-origin formula to new markets,
L'Oreal came to India with GARNIER range of products from the low-end brand of their
international portfolio. GARNIER became a wholly owned subsidiary in 1994.
Expansion of the product line started early with the introduction of skin care range of
SYNERGIE.
L'Oreal entered India with Excellence crme in 1996, the first brand signed as L'Oreal
Paris.
Transiting from the Consumer Product segment to their Professional Products range,
LOreal set up the Professional Product division in 1997. This division required a
different handling and L'Oreal set two development centers in New Delhi and Mumbai to
train the salon owners and professional hairdressers. This also marked the entry of
Majirel Hair Color in India.
Market grew and L'Oreal also introduced their skin care and make up offerings in India.
The rise was also reflected in the change of the subsidiary in India from Indelor to
LOral India Private Limited.
L'Oreal in India was looking at widening their portfolio along with deepening the product
lines. In 2002, a significant development was the launch of VICHY that marked the
introduction of Active Cosmetics Department. This is a very niche, premium product
from L'Oreal. In fact, over the three years of its presence its coverage is just 80 chemists
all over India.
The latest from the L'Oreal quiver are the brands-MATRIX and KERASTASE. These
are also part of the professional division. However, while KERASTASE is a super
premium product, MATRIX caters to the lower segment demand.
Thus we see that L'Oreal in India has followed a two-pronged strategy:
having awide portfolio with the range of products for both premium and middle
and lower segments in each of their product divisions
reinforcing their brand image through promotion of the premium brands even at
low demand.
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The main threat that L'Oreal face s in India comes from not just its direct competitors like
Revlon, P&G, Nivea etc. but also from the traditional wisdom prevailing. So L'Oreal is
fighting to bring in a whole new lifestyle here that requires a change in the way the
Indian women think of grooming and also about the expenditure on it.
L'Oreal products in India are marketed in a variety of distribution channels namely : mass
market, pharmacies and salons.
The efforts have paid off and L'Oreal today is present in over 300 Indian cities accessing
7 international portfolio brands. Registering a blisterin double digit growth L'Oreal looks
set to capture the Indian market in the coming years.
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Conclusion
LOrals core business is peoples well being, and their ambitions go far beyond
financial performance.
The Group has confirmed its determination to link economic growth with strong ethical
principles and a real awareness of its responsibilities to the community.
Their markets can be represented as follows:
Thus, an immense market to cater to with a mind-blowing range of products spells hard
work fro L'Oreal.
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