STRATEGIES OF L’OREAL

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TABLE OF CONTENTS

Introduction………………………………………………………………….3

The Business……………………………………………………………………………..5

Corporate strategies…………………………………………………………………….7

The Complete Global Changeover…………………………………………………….12

SWOT Analysis…………………………………………………………………………13

L’Oreal in India………………………...………………………………………………14

Conclusion………………………………………………………………………………16

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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, L’Oréal is present worldwide through its subsidiaries and agents. Loreal started out in hair colour business but soon branched out into other cleansing/beauty products.L’Oréal’s century long history is marked with successes. Today the 500 brands of L’Oréal 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. L’Oreal made its onscreen debut with the campaign for Ambre Solaire, which was making a comeback on the market.

The Global Reach Of L’Oreal

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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'Oreal’s 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 Strategies2.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 Division’s 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'Oréal Paris, Garnier, Maybelline New York, Softsheen.Carson and Le Club des Créateurs de Beauté.

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 L’Oréal is made up of four different brands: L'Oréal Professionnel, Kérastase, 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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Lancôme, Helena Rubinstein, Biotherm, Shu uemura and Kiehl’s 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 Department’s three brands, Vichy, La Roche Posay and Innéov, offer skin care, sun care, and hair care and make-up products.

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Consumer products

L’Oreal

Professional products

Active cosmetics department

VichyMaybelline New York, L’Oreal Paris, Garnier.

L’Oreal Profesionnel

Corporate Strategies

True enough, it’s 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, L’Oréal’s CEO, is part of the world’s 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-Jones’s first moves at L’Oréal 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

L’Oréal, the world’s 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 L’Oréal to strengthen its position in high-performance professional skin care,” said Lindsay Owen-Jones, Chairman and CEO of L’Oréal. “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'Oréal. On 9th May 2001 The L'Oréal 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'Oréal.

"This acquisition will strengthen L'Oréal's product portfolio in the dermocosmetics and will accelerate our expansion in this rapid growth market," indicated Guy Peyrelongue, President and CEO of L'Oréal U.S.A.

"The acquisition of the leading American brand of cosmetics designed for use by dermatologists and plastic surgeons, in association with L'Oréal research, will provide L'Oréal with a powerful position in this potentially strong market throughout the world," stated Laurent Attal, managing director of L'Oréal'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 L’Oréal’s 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 L’Oréal grow by 33.4% in India, and the new factory in Pune is the latest step in the Group’s 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 L’Oréal’s 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'Oréal 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 L’Oreal applied for 586 patents. L’Oreal believes in the strength for long term growth and sustenance.

Entering New Business

L’Oreal 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 L’Oreal Professional Products signed an agreement under which they will work together on an HIV/AIDS prevention education programme.

Another example of L’Oreal’s 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 individual’s 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 L’Oreal 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 L’Oreal participated in the international relief effort, L’Oreal contributed € 1 million.

L’Oreal realized the need of women in science and in 1998, the L’ORÉAL-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 L’Oreal-UNESCO for women in science award for 2005, the world year of physics.

Achievements

L’Oréal ranks first in the 2005 survey of the reputation of France’s CAC 40 companies. The study was conducted by the Observatoire de la Réputation and the European strategic intelligence leader, Datops.According to the survey, “L’Oréal’s outstanding reputation is largely due to its attractiveness as a company and its good financial health.” L’Oréal 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.”

L’Oréal decided to link up with the Cité des Sciences Museum in Paris to launch the world’s first exhibition on hair in 2001. After a highly successful three-year European tour, L’Oréal’s “Decoding Hair” exhibition heads to Central America and opens in Mexico on December 9th, 2004.

L’Oréal’s firm commitment to promoting diversity among its employees, customers and suppliers, and the Group’s overall culture of inclusiveness has earned it the very first Diversity Best Practices’ Global Leadership Award. L’Oréal’s CEO, Mr. Lindsay Owen-Jones has long been a fervent proponent of diversity and feels his company’s success is in large part due to the culture of inclusion he and his teams have worked hard to promote.

L’Oréal 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 Group’s US subsidiary’s commitment to and achievements in occupational safety.

L’Oréal 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 Group’s capacities in meeting the consumer’s needs by using the most sophisticated technologies in packaging.

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A Complete Global Changeover

In just a decade, L’Oréal has undergone a complete changeover. Ten years ago, 75% of L’Oréal’s $5.5 billion annual sales came from Europe, mostly on the French market. L’Oréal’s image seemed to be indelibly linked to Parisian sophistication. Last year, the European market represented only 49% of the Group’s 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). L’Oréal Paris, the Group’s 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 Group’s 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 world’s most stylish teenagers. Adding "New York" to the brand’s name has made it a huge international success.

Today, Water Shine Diamonds lipstick by Maybelline is a symbol of how global L’Oréal 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 confusionPositioning in the myriad brands

Presence remains underdeveloped in emerging markets.

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Strengths

Brand image—World No.1Research & development-586 patentsInnovation on IN productsRange of portfolio—diversity of productsGlobal brand—presence in 130 countriesStrong Corporate Social Responsibility policy

Emerging markets of developing countriesGrowing cosmetic and grooming marketNewer acquisitions—more range of products

New channels on the electronic mediaLocal players in the new market expansionsBrand cannibalization

Weakness Opportunities

Strengths

Threats

L'Oreal’s 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 crème in 1996, the first brand signed as L'Oreal Paris.

Transiting from the “Consumer Product” segment to their “Professional Products” range, L’Oreal 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 “L’Oréal 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

L’Oréal’s core business is people’s 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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