ARKAPRAVA GHOSH

I use the most expensiveHair colour in the worldIt’s not that I care about moneyIt’s that I care about my hairIt’s not just the colour ,I expect great colourWhat’s worth more to meIs the way my hair feelsSmooth and silky but with bodyFeels good against my neckActually I don’t mind spending more for L’orealBECAUSE I’m WORTH IT

1st cosmetics group worldwide

23 international brands

17.5 billion euros of sale in 2009

Presence across 130 countries

2005 2006 2007 2008 2009

1453315790

17063 17542 17473

consolidated sales(euro millions)consolidated sales(euro millions)

15%

53%

25%

8%

Product division : market weightage(%)

professional consumerluxury active cosmetics

KEY MARKETS:

Western Europe & North America accounting for 43.3% & 23.4% of total sales respectively

Asia accounts for 13.2% of total consolidated sales

PROFESSIONAL PRODUCTS• L’OREAL PROFESSIONAL •REDKEN •KERATASE •MATRIX

LUXURY PRODUCTS • LANCÔME • GIORGIO ARMANI • YVES SAINT LAURENT •BIOTHERM • RALPH LAUREN • KIEHL ’S • SHU UEMURA • HELENA RUBINSTEIN • CACHAREL • DIESEL

CONSUMER PRODUCTS •L’ORÉAL PARIS • GARNIER •• MAYBELLINE NEW YORK • SOFTSHEEN .CARSON •

ACTIVE COSMETICS VICHY • LA ROCHE -POSAY •• INNÉOV • SKINCEUTICALS •

•Soft Sheen Products Inc., a leader in the black hair care industry, was founded in 1964 and acquired in 1998•In 2000, L’Oréal USA acquired Carson Products, another successful manufacturer of ethnic hair and skin care products• The two companies were successfully merged in that year to become SoftSheen-Carson

Overview of the black hair care market

1960-1970Johnson products was the largest in black business & the first oneTo be traded on the American Stock Exchange. Johnson was closely followed by Soft sheen and Pro-line

1980 Black skin & hair care market had approached $1 billion

1994 Black hair care market approached $2 billion , Only 1.5% of the black

disposable income was spent on hair care

African- Americans represented 12.3% of the nation’s population & contributed 34%

to the hair care market in the USHuge market potential & the need for growth & diversification led to l’oreal’s decision

1998 Carson Inc. acquired Johnson products from IVAX co. for $90 million

With its “Dark & Lovely” black hair products , Carson became the market leader in black hair-care products

2000 Carson could not survive the debt incurred by the purchase of Johnson products & Was sold out to L’oreal for $250 million & merged with “softsheen” brand

L’oreal now gained control over 3 of the top 5 selling hair care brands & 62% of the African-American hair market

2009SoftSheen·Carson confirmed its positionas No. 1 in the ethnic hair care products market,with new initiatives in three major categories

upgraded the Dark andLovely range with a more moisturising formula, richer in shea butter than the other hair relaxers on the market

Launch of ammonia-free Dark and Lovely Colour Confidence Haircolor

Diversified into the skincare market in South Africa with Dark and Lovely Body. A line of body milks enriched with vitamin E and glycerine, which provide longlasting hydration

Source:Constructing corporate America: history, politics, culture By Kenneth Lipartito, David B. Sicilia

THE JAPAN CASE : THINK LOCAL ACT GLOBAL

TARGET SEGMENT: HIP , YOUNG & TRENDY WOMEN OF JAPAN

•Japanese women have small mouths & the concept of “mother of pearl” is very popular there•This particular molecule created the effect of water giving the lipstick a wet look

After careful economic analysis , L’oreal caterd to this segment withTheir new offering “Maybelline Watershine Diamonds”

In space of a year , Maybelline was the market leader in the mass-makeup market in Japan

Following success there , L’oreal also launched the same product in US & Europe where it enjoyed a similar meteoric success

Source :The new strategic brand management: creating and sustaining brand equity By Jean-Noël Kapferer

Case of BRAND SUBSTITUTION:GEMEY PARIS – MAYBELLINE NEWYORK

In 1996, L’Oréal bought the American make-up brand Maybelline, decided to promote it to a global make-up brand & as a consequence to substitute it to the local make-up brands, as Gemey in France

Gemey, the leader in mass market (45.4% market share) was considered to be “a brand specialised in the different types of make-up targeting French middle class women”

Maybelline was defined as “an in-brand of make-up from New York, targeting young ladies”

VAST DISPARITY IN POSITIONING

1998 2000 2004 2010

Progression of the Gemey – Maybelline visual identity

Case of BRAND SUBSTITUTION:GEMEY PARIS – MAYBELLINE NEWYORK

Stage 1 : WARNING

The brand name Gemey-Paris became Gemey-Paris New York in 1998 and started to be associated with “Maybelline New York #1 in make-up in the USA” both on the packaging and in communication when launching new products. From 1999 onwards, the two brand names Gemey and Maybelline were more closely linked on the packaging but in communication only the Gemey slogan was used

Stage 2 : REPOSITIONING

began in the second half of 2000

Gemey and Maybelline have come together to offer you better technology

Integration of skyscrapers into thebackground of advertisements and sales outlet visuals, sponsoring by American TV series andslogans

Value Curves and Value Proposition

The Body Shop made clear decisions regarding:

– What factors could be reduced below the industry standard?

– What factors could be eliminated that the industry had taken for granted?

– What factors should be raised beyond the industry standard?

– What factors should be created that the industry had never offered?

In so doing, The Body Shop created a unique business model, brand and position that ensured an sustainable competitive advantage

The Body Shop’s robust business model and unassailable position was evidenced by L’Oreal’s acquisition of it in 2006

Despite being an established, extremely well-resourced competitor L’Oreal had been unable to compete against The Body Shop’s values and positioning…..whether The Body Shop’s values were compromised by its acquisition, however, is a different matter!

The Body Shop - Illustrative Example

Price Packaging &

Advertising

Hi-Tech

Scientific

Image

Glamorous

Image

Natural

Ingredients

"Ethical"

Concerns

PARAMETERS

PE

RF

OR

MA

NC

E

The Body Shop

Cosmetic’s Industry

BRAND EVOLUTION1978-1993Greasy & rocksolid

1993-2000Quirky urban fashonistas

2000-presentConscious hedonism

Reason for being Dress the tough guys Make people feel different & provocative

Help people carry a more pleasant experience

Value proposition Stylish jeans & workwear with a used worn out look

Affordable fashion urban street wear

Fun , imaginative & colourful fashion

Differentiation Worn out look Urban street wear Happy & colourful clothing

Persona Tough , wild , adventurous

Extravagant , critical Witty , culture conscious

Associations Rebels , women , cigarettes , gas stations , leather

Political issues , religion , sexuality , fashion

Youth , vitality , happiness

Product range Jeans & workwear Jeans , clothing , shoes , fragrances

Jeans , clothing , sunglasses , watches , shoes , bags , fragrances

Audience Tough guys wannabes

Intelligent urban fashionistas

Hipsters

Emotional connect Pal that gives advice to be tough & brave

Uncommonness - to make your life more exciting

Ego & mood booster

1978-1993 1993-20002000-

PRESENTOriginal motto “only the brave” charectizes their first eraDifferentiated themselves by selling jeans that looked wornJeans came pre washed and with holes on themInitially consumer perception related to defective jeans on shelvesCommunication changed to tight fitting jeans & mohawk logoT shirts with the mohawk logo soon became a hit

Communication shifted to odd messages & unexplainable “how to” guidesThis branding redirection was exemplified using models & non models in the same pictureThe aim was to get people to remember their campaigns by creating a “mismatch buzz”“people in jeans drownedunderwater with a stone attached at their feet” which was very controversial in Argentina since many people during the dictatorship was murdered that way“being a man” ad portrayed 2 gay sailors kissing

Communication changed to individual itself , their passions , fears & motivation for lifeWith the consolidation of Internet and the explosion of free fashion magazines they realize that their consumers are really smart and they decide to change their strategy and gear their brand towards very informed people, intelligent, more individualistic and most important that want to be treated intelligently creation of campaign specific web sites that provide a moreintimate relationship with their audience

1976•First body shop opened at a small street in brighton•sold only about a dozen inexpensive ‘natural’ cosmetics, all herbal creams and shampoos, all in simple packaging

Differentiated business model Why should anyone not have the freedom on the quantity they buy?With this in mind , body shop offers customers only the required amount of cosmetics specified by them be it skincare or haircare

Offering totally natural products , against testing on animals

Business model could easily be copied by competitorsLack of finance with founders for rapid expansion of brand

Developed the idea of franchising

Selected partly with their fit on “body shop ideals” a head franchisee was granted exclusive rights as user of the trade mark, distributor and, after an initial trial of running a few shops themselves, the right to sub-franchise

OVERVIEW

Key advantage of franchising

All “Body shop” built upon local market knowledge thus minimizing loss of risks and cultural clashes

1984Company gets listed on the stock market while still maintaining the franchisee model

Key strategies followed•Own warehousing & distribution network wherein products were delivered within 24 hrs.•Started manufacturing with the trade not aid policy

Body shop gained popularity worldwide mainly due to its sustainable development programmes

establishing direct trading links with producer communities in developing countries so that they can sustainably finance their own social and economic development

sourcing ingredients and accessories from disadvantaged communities around the world

OVERVIEW

2006:ACQUISITION OF BODY SHOP BY L’OREAL

STRATEGIC RATIONALE

Body shop contribution to l’oreal

Naturally oriented natural cosmetics with strong identity & values

Distribution expertise and access to direct producer channels

A leading british brand to complement L’oreal UK

L’oreal contribution to the body shop

Access to R&D practices , improved product development for body shop

Leverage L'Oreal's marketing expertise while respecting body shop identity

Established 2004 , a joint venture between L'Oreal & Nestle

2004 also saw new haircare developments: by launching Innéov Hair Mass, a product aimed at a wide range of women affected by low hair mass

The innovative feature of the product is the taurine-basedformulation, which specifically targets the bulb where the hair is made to produce clinically-proven improvements in the number, volume and quality of hair follicles

Diversification into the market of cosmetic nutritional supplements

This brand marked the launch of “nutraceutical development”

Key strategy•Capture growing demand for skin products to retain youthfulness•Tap the growing market for dietary supplements

ranges target cellulite, wrinkles, and hair loss, as well as a product that claims to help protect the skin against UV rays

The market for nutricosmetics was practically empty & unexploredExcept for a few competitors like “IMDEEN”

strong degree of relevance in the associations and skills the two brands bring to the alliance

BRAND FIT

Nestlé’s reputation as leading and competent nutrition brand is highly relevant when making a diet supplement. L’Oréal image as a beauty expert is just as relevant when making a diet supplement meant to improving the quality of your skin and hair

L’OREAL USA purchased Kiehl’s in 2000 as a part of a carefully planned acquisition strategy

The US buildup was critical to the globalization of its business

By adding brands such as redken , maybelline , kiehl’s , softsheen-carson , L’oreal had created an international brand portfolio with wide range of incomes & tastes in 140 countries

Kiehl’s skin care , body care , fragrance & hair care products were renowned for their high quality , effectiveness & cult following among celebrities

Customer base was loyal and young

No advertising at all , only through

celebrities touting their products

Little expansion , most business came from a singe neighborhood store in New

York

Unable to meet rising demand , sold itself to L'Oreal

Foray into INDIAN MARKET

india indonesia china brazil USA germany

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10.9

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Per capita consumption of skin cleans-ing

US$/year

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Penetration in India %penetration %

Skin care in India is the most sought after personal care category by both local and global consumer majors given significant head room for growth (23% penetration, growing at 20% p.a.) with an estimated size of Rs25bn

Rising consumer awareness and interest, increasing income levels and favorable demographics (growing share of working women) are driving growth for the category

With a GDP of 1.9 trillion $ & rising per capita incomes India offers a lot of market potential to tap

L’oreal in indiaCame to India in 1991 with its Ultra Doux range of shampoos through its agentLaboratories garnier

1994 – laboratories garnier becomes 100% subsidiary of l’oreal

2000 – l’oreal launches its range of products in the cosmetic market

Biggest contributor to the Indian revenue - GARNIER

HAIR CARE SKIN CARE

Fructis Nutritioniste

•Garnier mainly operates in the mid price & luxury segment•In 2000, ganier garnered a 20% share in the hair colourant & dyes market

Performance is mainly attributed to being the first player in india to launch a

hair based colour below the price of Rs 100(2002)

Home highlighting kit(2005)Technological breakthrough :

Usage of fruit concentrate in all their products (combination of fruit acids , vitamin B3 . B6 , fructose & glucose

USP : strong hair

Caters mainly to the natural segment ; beauty through nature

The core brand values of " Green " and the tagline " Take Care " can be used across multiple categories without any dilution to the core brand positioning

The name “Laboratories Garnier” was changed to “Garnier” in 2001 to facilitate the brand’sacceptance in all the 5 continents it operates

Shampoo market in India generally caters to men & women ; kids & teens categoryIs totally absent

COMPETITION: PARACHUTE STARZ• Garnier as a brand is slowly targeting the entire personal care market• Adopting a segment by segment targeting strategy

The launch of Garnier Fructis kid's shampoo is expected to revive the kid's personal care category in India. The kid's hair care market is dominated by HUL's Clinic Plus brand and the other players being Parachute Starz. But recently the activities in this category has been minimal.

The entry of Garnier into the kid's segment may have been to catch them young.The new generation kids have a mind of their own and they are brand conscious. So tapping them with a variant makes sense. Moreover mothers feel that young hair /skin needs special care and adults products may be too strong for the kids.

Entry in the men’s fairness segment

FMCG companies have been increasingly focusing on catering to men’s grooming products Men’s fairness segment is currently estimated to be around Rs4.1bn and is growing ahead of overall skin care market in India

Emami entered the men's fairness cream segment in 2005 with the launch of 'Fair & Handsome' which still dominates the space with 63% share

Hindustan Unilever in 2007 launched 'Menz Active' in this sub-category, but the product has not been able to garner much share

46%

22%

3%2%

11%

4%

12%

Segmentation of Indian skin care market (%)

fairness moisturizer anti-ageing anti-marksbody care sun care others

Garnier saw a potential in the men’s fairness market& also realized the gap in the moisturizing market

With that in mind, garnier men's light & power active were launched which along with fairness also catered to “face wash” and “moisturization” instead of just offering “fairness” as the core benefit

Diversification into 2 categories with a single brand extension

STRATEGY/DIFFERENTIATION