LOREAL : THE BIGGEST COSMETIC COMAPANY

…

Submitted In Partial Fulfillment Of The Requirements For BBA

(GENERAL) Semester VI Programme Of G.G.S Indraprastha University,

Delhi.

Submitted By

(Jatin Sukhija)

(BBA (General) – Semester –VI)

Enrl.No:0581241708

DELHI INSTITUTE OF RURAL DEVELOPMENT

NANGLI PUNA, DELHI -36

Declaration

I here by declare that the major project report , entitled “Loreal: The

biggest cosmetic comapany”, is based on my original study and has not

been submitted earlier for award of ant degree or diploma to any institute

or university.

Place: New Delhi Candidate signature

Date: 4th April 2011 name: Jatin Sukhija

Enrl.no: 0581241708

Countersigned

Name: Ashima Verma Name: Dr. J.P

Varshney

Supervisor Director

Delhi Institute Of Rural Development Delhi Institute

Of Rural Development

PREFACE

The L'Oréal Group is the world's largest cosmetics and beauty company.[3] With its registered office in Paris and head office in the Paris suburb

of Clichy, Hauts-de-Seine, France,[4] it has developed activities in the field

of cosmetics. Concentrating on hair colour, skin care, sun

protection, make-up, perfumes and hair care, the company is active in

the dermatological andpharmaceutical fields and is the

top nanotechnology patent-holder in the United States.

L'Oréal is a listed company, but the founder's daughter Liliane

Bettencourt and the Swiss food company Nestlé each control over a

quarter of the shares and voting rights.

L'Oreal's success is proof that when done right, global branding can speed

growth in mature consumer-products companies even when global markets

themselves are shaky. Asia's economy is a mess, Latin America is tottery.

Other worldwide marketers, such as Procter & Gamble Co., are suffering

partly as a result. 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 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.

I owe a great many thanks to a great many people who helped and

supported me during the writing of this book.

My deepest thanks to Lecturer, [Ashima Verma] the Guide of the

project for guiding and correcting various documents of mine with

attention and care. He has taken pain to go through the project and make

necessary correction as and when needed.

Jatin Sukhija

Enrolment number: 0581241708

CONTENTS

Title page

Declartion

PREFACE

INTRODUCTION

COMPANY PROFILE

PROFILE OF THE ORGANIZATION

OBJECTIVES & SCOPE OF STUDY

METHODOLOGY

LIMITATION

DATA AND ANALYSIS

FINDING AND RECOMMENDATIONS

BIBLOGRAPHY

Introduction

The L'Oréal Group is the world's largest cosmetics and beauty company.[3] With its registered office in Paris and head office in the Paris suburb

of Clichy, Hauts-de-Seine, France,[4] it has developed activities in the field of

cosmetics. Concentrating on hair colour, skin care, sun protection, make-

up, perfumes and hair care, the company is active in

the dermatological andpharmaceutical fields and is the

top nanotechnology patent-holder in the United States.

L'Oréal is a listed company, but the founder's daughter Liliane

Bettencourt and the Swiss food company Nestlé each control over a quarter

of the shares and voting rights.

History

In 1907, Eugène Schueller, a young French chemist, developed a hair dye

formula called Auréole. Schueller formulated and manufactured his own

products, which he then sold to Parisianhairdressers.

In 1909, Schueller registered his company, the Société Française de Teintures

Inoffensives pour Cheveux ("Safe Hair Dye Company of France" literally

"French Society of Inoffensive Hair Dyes"), the original L’Oréal. The

guiding principles of the company, which eventually became L’Oréal, were

research and innovation in the field of beauty.

In 1920, the small company employed three chemists. By 1950, the research

teams were 100 strong; that number reached 1,000 by 1984 and is nearly

2,000 today.

L’Oréal got its start in the hair-color business, but the company soon

branched out into other cleansing and beauty products. L’Oréal currently

markets over 500 brands and many thousands of individual products in all

sectors of the beauty business: hair color, permanents, hair styling, body and

skin care, cleansers, makeup and fragrances. The company's products are

found in a wide variety of distribution channels, from hair salons and

perfumeries to hyper - and supermarkets, health/beauty outlets, pharmacies

and direct mail.

L’Oréal has five worldwide research and development centers: two in

France: Aulnay and Chevilly; one in the U.S.: Clark, New Jersey; one

in Japan: Kawasaki, Kanagawa Prefecture; and in 2005, one was established

in Shanghai, China. A future facility in the US will be in Berkeley Heights,

New Jersey.

From 1988 to 1989, L'Oréal controlled the film company Paravision, whose

properties included the Filmation and De

Laurentiis libraries. StudioCanal acquired the Paravision properties in 1994.

L’Oréal purchased Synthélabo in 1973 to pursue its ambitions in the

pharmaceutical field. Synthélabo merged with Sanofi in 1999 to

become Sanofi-Synthélabo. Sanofi-Synthélabo merged with Aventis in 2004

to become Sanofi-Aventis.

On 17 March 2006, L'Oréal purchased cosmetics company The Body

Shop for £652 million.

The company has recently faced discrimination lawsuits in France related to

the hiring of spokesmodels and Institutional racism. In the UK, L'Oréal has

faced widespread condemnation from OFCOM regarding truth in their

advertising and marketing campaigns concerning the product performance

of one of their mascara brands.

A book by Monica Waitzfelder, published in French as L'Oréal a pris ma

maison and in English as L'Oréal stole my house!, details how L'Oréal, a

company claimed to be anti-Semitic by the author, took over the Waitzfelder

home in the German city of Karlsruhe (after the Nazis had engineered the

removal of the family) to make it its German headquarters. [citation needed]

L'Oréal's famous advertising slogan is "Because I'm worth it". In the mid

2000s, this was replaced by "Because you're worth it". In late 2009, the

slogan was changed again to "Because we're worth it" following motivation

analysis and work into consumer psychology of Dr. Maxim Titorenko. The

shift to "we" was made to create stronger consumer involvement in L'Oréal

philosophy and lifestyle and provide more consumer satisfaction with

L'Oréal products. L'Oréal also owns a Hair and Body products line for kids

called L'Oréal Kids, the slogan for which is "Because we're worth it too".

Protest group Naturewatch states that L'Oréal continues to test new

ingredients on animals.[5] The company states that no animal testing for

finished products has taken place since 1989 and that L'Oreal has invested

significantly in alternative methods for chemical safety testing,  [6], though

they implicitly acknowledge that they continue to perform animal testing of

ingredients.[7]

Following L'Oréal's purchase of The Body Shop, who continue to be

against animal testing, The Body Shop founder Dame Anita Roddick was

forced to defend herself against allegations of abandoning her principles

over L'Oréal's track record on animal testing. She declared that her belief in

the power of cosmetics to enhance female beauty was greater than any

concern over animal testing. As a result, calls were made for shoppers to

boycott The Body Shop.[8]

In 1987, L'Oréal and 3 Suisses founded Le Club des Créateurs de

Beauté specializing in mail order sales of cosmetic products.

February 2011: L'Oreal will has the largest factory in the Jababeka

Industrial Park, Cikarang, Indonesia with total investment of US$50 million

and it will be ready in October 2011. The production will be absorbed 25

percent by domestic market and the rest will be exported. In 2010 significant

growth occurred at Indonesia with 61 percent increase of unit sales or 28

percent of net sales.[9]

[edit]Business

L'Oréal Paris hair gel. Note thePiet Mondrian-esque design.

[edit]Corporate governance

[edit]Board of directors

Current members of the board of directors of L’Oréal are: Jean-Paul Agon,

Francisco Basco, Werner Bauer, Liliane Bettencourt, Françoise Bettencourt

Meyers, Peter Brabeck-Letmathe, Charles-Henri Filippi, Xavier Fontanet,

Bernard Kasriel, Marc Lacharrière, Jean-Pierre Meyers, Lindsay Owen-

Jones, Franck Riboud, Annette Roux and Louis Schweitzer.

[edit]Management committee

The management committee includes:

Jean-Paul Agon, Chief Executive Officer

Frederic Roze, Chief Executive Officer, L’Oréal USA

Béatrice Dautresme, EVP of Corporate Communications

Jean-François Grollier, EVP of Research and Development

Christian Mulliez, EVP of Finances

Jean-Jacques Lebel, President of Consumer Products

Nicolas Hieronimus, President of Professional Products

Geoff Skingsley, EVP of Human Resources

Marc Menesguen, President of Luxury Products

[edit]Stockholders

As at year end 2009:[2]

Breakdown of share ownership: 31.0% by the Bettencourt family, 29.8% by

Nestlé, 2.4% treasury shares, and the remaining 36.8% is public

[edit]Sales, profits, etc.

In 2003, L’Oréal announced its 19th consecutive year of double-digit growth.

Its consolidated sales was €14.029 bn and net profit was €1.653 bn. 96.7% of

sales derived from cosmetic activities and 2.5% from dermatological

activities. L’Oréal has operations in over 130 countries, employing 50,500

people, 24% of which work in France. 3.3% of consolidated sales is invested

in research and development, which accounts for 2,900 of its employees. In

2003, it applied for 515 patents. It operates 42 manufacturing plants

throughout the world, which employ 14,000 people.

Cosmetics sales by division breakdown: 54.8% from consumer products at

€7.506 bn, 25.1% from luxury products at €3.441 bn, 13.9% from

professional products at €1.9 bn, and 5.5% from active cosmetics at €0.749

bn.

Cosmetic sales by geographic zone breakdown: 52.7% from Western

Europe at €7.221 bn, 27.6% from North America at €3.784 bn, 19.7% from

rest of the world at €2.699 bn.

In 2007, L’Oréal was ranked 353 in the Fortune Global 500.[10] The company

had earned $2,585 million on sales of $19,811 million. There were 60,850

employees.[10]

[edit]Joint ventures and minority interests

L’Oréal holds 10.41% of the shares of Sanofi-Aventis, the world's number 3

and Europe's number 1 pharmaceutical company. The Laboratoires

Innéov is a joint venture in nutritional cosmetics between L’Oréal and

Nestlé; they draw on L’Oréal's knowledge in the fields of nutrition and food

safety. Galderma is another joint venture in dermatology between L'Oréal

and Nestlé.

[edit]Community involvement and awards

In 2008, L'Oréal was named Europe's top business employer by The

European Student Barometer,[11] a survey conducted by Trendence that

covers 20 European countries and incorporates the responses of over 91,000

students.

The L'Oréal-UNESCO Awards for Women in Science was established to

improve the position of women in science by recognizing outstanding women

researchers who have contributed to scientific progress.

The awards are a result of a partnership between the French cosmetics

company L'Oréal and the United Nations Educational, Scientific and

Cultural Organization (UNESCO) and carry a grant of $100,000 USD for

each laureate. [1]

The same partnership awards the UNESCO-L'Oréal International

Fellowships, providing up to $40,000 USD in funding over two years to

fifteen young women scientists engaged in exemplary and promising

research projects.[12]

L'Oréal organizes every year the L'Oréal Brandstorm, an acknowledged

business game for students in 43 countries. The game is related to marketing

and has a first prize of $10,000, a second prize of $5,000 and a third prize of

$2500.

[edit]Claims of racial discrimination in advertising, and other litigation

On August 11, 2005, the Supreme Court of California ruled that former

L'Oréal sales manager Elyse Yanowitz had adequately pleaded a cause of

action for retaliatory termination under the California Fair Employment

and Housing Act, and remanded the case for trial. [13] The case arose out of a

1997 incident in which Jack Wiswall, then the general manager for designer

fragrances, allegedly told Yanowitz to fire a dark-skinned sales associate

despite the associate's good performance. When Yanowitz refused, Wiswall

pointed to a "sexy" blonde-haired woman and said, "God damn it, get me

one that looks like that." Wiswall retired as president of the luxury products

division of L'Oréal USA at the end of 2006.

In May 2007, L'Oréal was one of several cosmetic manufacturers ordered by

the Therapeutic Goods Administration in Australia to withdraw advertising

regarding the wrinkle removal capabilities of their products. [14]

In July 2007, the Garnier division and an external employment agency were

fined €30,000 for recruitment practices that intentionally excluded non-

white women from promoting its shampoo, "Fructis Style". [15] L'Oréal is

reported as saying the decision was "incomprehensible", [16] and would

challenge the measure in court.

In July 2007, the British Advertising Standards Authority attacked L'Oréal

for a television advert on its “Telescopic” mascara, featuring Penélope Cruz,

stating "it will make your eyelashes 60% longer." In fact, it only made the

lashes look 60% bigger, by separating and thickening at the roots and by

thickening the tips of the lashes. They also failed to state that the model was

wearing false eyelashes.[17]

[edit]Brands

Brands are generally categorized by their targeted markets, such as the

mass, professional, luxury, and active cosmetics markets. Garnier -

L'Oreal's product, reached the top 100 brands of The Brand Trust

Report published by Trust Research Advisory in India. Garnier was ranked

in the 61st position in the list of Most Trusted brands of India.

[edit]Head office

Centre Eugène Schueller, L'Oréal head office, in Clichy, France

L'Oréal Group has its head office in the Centre Eugène Schueller in Clichy,

Hauts-de-Seine, near Paris.[18] The building, constructed in the 1970s from

brick and steel, replaced the former Monsavon factory, and employees

moved into the facility in 1978. 1,400 employees work in the building. [19] The

building is often referred to as the "Beauty Factory" by the public. In 2005

Nils Klawitter of Der Spiegel said "the building, with its brown glazed

façade of windows, is every bit as ugly as its neighborhood." Klawitter

added that the facility "gives the impression of a high-security zone" due to

the CCTV cameras and security equipment. The world's largest hair salon is

located inside the head office building. As of 2005, 90 hairdressers served

300 women, including retirees, students, and unemployed people, per day;

the customers are used as test subjects for new hair colours. [20]

L'Oréal USA has its headquarters in New York City,[21] its New Jersey

headquarters is in Berkeley Heights

Review Of Literature

L’Oreal received a score of 58 out of a possible 100 in the latest (2008) Climate

Counts Scorecard. Climate Counts is a non-profit website based in New

Hampshire that was founded by Stonyfield Farm Organics (85% owned by

Groupe Danone).

L’OREAL’S PERFORMANCE 

L’Oreal has a relatively strong record on climate change, tying for second place

among the six companies in the "Household Products" sector reviewed by

Climate Counts. According to my method (see below), L’Oreal deserves a

rating of 58/20 = 2.9.

Climate Counts has this to say about L’Oreal:

“STRIDING – The best Climate Counts choice. These companies still have

work to do, but they’re beginning to hit their stride.”

“Score: 58. Change from 2007 score: +4.

“Review: 16/22 points. Climate Counts has found that L’Oreal has been

measuring its companywide impact on global warming since 2001.

“Reduce: 35/56 points. Climate Counts has found that L’Oreal has established

clear goals to reduce its energy use and has reduced its impact on global

warming (i.e., its greenhouse gas emissions or climate footprint).

“Policy Stance: 0/10 points. Climate Counts has found no public information to

suggest that L’Oreal supports public policy that addresses climate change.

“Report: 6/12 points. Climate Counts has found that L’Oreal has made some

public information available on its companywide efforts to address global

warming.”

PEER PERFORMANCE* 

Unilever. Climate Counts Score: 75/100. My rating = 3.75 

Procter & Gamble. Climate Counts Score: 69/100. My rating = 69/20 = 3.45 

Kimberly-Clark. Climate Counts Score: 58/100. My rating = 58/20 = 2.9 

L'Oreal. Climate Counts Score: 58/100. My rating = 58/20 = 2.9 

Colgate-Palmolive. Climate Counts Score: 44/100. My rating = 44/20 = 2.2 

Avon Products. Climate Counts Score: 29/100. My rating = 29/20 = 1.45 

The Clorox Company. Climate Counts Score: 15/100. My rating = 15/20 = 0.75

* I include here some major companies that could be considered peers, not just

those that are categorized in the same sector by Climate Counts. For example,

Climate Counts categorizes Unilever as “Food Products” and Procter &

Gamble as “Household Products,” while both companies compete directly on

personal and household products.

These honours were not just a 'cosmetic' eulogy; L'Oreal deserved them, for it

was the only company in its industry to post a double-digit profit for 18

consecutive years (refer Exhibit 1 for L’Oreal's key financials). L'Oreal, which

had operations in 130 countries in the world, posted a turnover of € 13.7 billion

in 2001. The company recorded a 19.6% and 26% growth in profit in 2001 and

2002 (half-yearly results), respectively. Commenting on L'Oreal's performance,

Jones said, "At L’Oreal, we are 50,000 people who share the same desire;

because it is not just about business but about a dream we have to realize,

perfection."

Known for its diverse mix of brands (from Europe, America, and Asia), like

L'Oreal Paris, Maybelline, Garnier, Soft Sheen Carson, Matfix, Redken,

L'Oreal Professionnel, Vichy, La Roche-Posay, Lancome, Helena Rubinstein,

Biotherm, Kiehl's, Shu Uemura, Armani, Cacharel, and Ralph Lauren, L'Oreal

was the only cosmetics company in the world to own more than one brand

franchise and have a presence in all the distribution channels of the industry

(refer Exhibit C.8.2 for a note on the global cosmetics industry). 

Background 

In 1907, Eugene Schueller (Schueller), a French chemist, developed an

innovative hair colour formula. The uniqueness of this formula, named

Aureole, was that it did not damage hair while colouring it, unlike other hair

colour products that used relatively harsh chemicals. Schueller formulated and

manufactured his products on his own and sold them to Parisian hairdressers.

Two years later, in 1909, Schueller set up a company and named it 'Societe

Francaise de Teintures inoffensives pour Cheveux’. 

From the very beginning, Schueller gave a lot of importance to research and

innovation to develop new and better beauty care products. By 1920, the

company employed three in-house chemists and made brisk business selling

hair colour in various countries like Holland, Austria, and Italy. Schueller used

advertising in a major way to market his products. He used promotional

posters made by famous graphic artists like Paul Colin, Charles Loupot, and

Raymond Savignac to promote his company's products.

In 1933, Schueller, created and launched a beauty magazine for women named,

Votre Beaute. In 1937, he started the 'clean children' campaign and created a

jingle 'Be nice and clean, smell good' for Dop shampoo, which went on to

become one of the most famous jingles in France. In the early 1940s, the

company's name was changed to L'Oreal, which was an adaptation of one of

the brands 'L' Aureole' (the halo). 

In 1957, after Schueller's death, Francois DaIle (DaIle), Shueller's deputy, took

over as the company's Chairman and CEO. During the 1950s, the company

pioneered the concept of advertising products through film commercials

screened at movie theaters. The first movie advertisement was for L'Oreal's

'Amber Solaire' (sun care cream) with the tagline, "Just as it was before the

war, Amber Solaire is back". 1

In 1963, L'Oreal became a publicly traded company. This posed a threat to its

existence as it could easily come under the state's control,2 which in turn could

affect its international growth plans. Dalle, therefore, began taking steps to

internationalize L'Oreal's ownership structure to prevent it from coming under

the control of the government. His efforts bore fruit a decade later in 1973,

when he persuaded Liliane Bettencourt (Bettencourt), Schueller's daughter and

the company's main shareholder, to dilute her majority stake. Later, half of

L'Oreal's stock was sold to Gesparal, a France-based manufacturer of personal

care products, while the other half was publicly traded. Later, 49% of

Gesparal's stock was sold to Nestle, the Swiss food products giant, while the

remaining 51 % was held by Bettencourt.

In 1972, the company launched the legendry advertisement campaign 'Because

I'm worth it' to promote the 'Preference' line of hair colour. The slogan

summed up the company's philosophy of providing the most innovative, high-

quality, and advanced products at an affordable price.

The campaign was considered as brilliant by many marketing gurus. The

slogan seemed to cleverly differentiate L'Oreal's products from others and

proved to be a 'winning' factor. 

In the cosmetics business, profit margins tend to be generally low as there was

not much differentiation between the products offered by various companies.

L'Oreal's decision to differentiate its products by attaching an emotional

quality to its brands thus worked very well. The emotional pitch, ''Because I'm

worth it", indirectly conveyed the message that ''I'm willing to pay more".

According to a article, it conveyed that, "I will prove that I value myself by

paying more than I have to." This translated directly into profits for the

company. Commenting on the campaign, an analyst stated, "The extra 50%

L'Oreal charges for nothing other than your warm glow of self-satisfaction,

goes from your pocket right to theirs, and everyone's happy. Genius." 

Over the next few years, the company's business expanded considerably. It

started distributing its products through agents and consignments to the U.S.,

South America, Russia, and the Far East. L'Oreal soon emerged as the only

cosmetics brand in the world that had products in all segments of the Industry,

that is, Consumer, Luxury, Professional, and Pharmaceutical. Although the

company started as a hair colour manufacturer, over the decades it had

branched out into a wide range of beauty products such as permanents, styling

aids, body and skincare cosmetics, and cleansers and fragrances over the

decades (refer Table 1 for product launches till the mid-1990s and Table 2 for a

segment wise break-up of sales for the year 2002).

On The Road To Fame

By the 1970s, L'Oreal's products had become quite popular in many countries

outside France. Jones’ entry in the late-1970s marked the beginning of a new

era of growth for the company. During 1978-81 Jones functioned as the head of

L'Oreal's Italian business. Due to his exceptional performance, Jones was given

the responsibility of looking after L'Oreal's US operations (the company's most

important overseas operation) during 1981-4. 

Managing the company's US operations was not an easy task. Jones' colleagues

argued that European brands such as Lancome (in the luxury cosmetics

segment) could never compete with established American brands like Estee

Lauder and Revlon.

In spite of their doubts and the reluctance of retailers to carry European

brands, Jones persuaded Macy's, one of the leading retail stores in the US, to

give Lancome the same shelf space that it gave to Estee Lauder. Not

surprisingly, Lancome's sales increased by 25% in the US in 1983.

Jones, a company insider with good management skills, succeeded DaIle as

L'Oreal's Chairman in 1988. He was aware that DaIle had begun the work of

internationalizing L'Oreal to prevent it from remaining as 'just a French

cosmetics company'. As he tried to continue Dalle's work, he realized that he

had to tackle the situation created by L'Oreal's image.

During the late 1980s and early 1990s, almost 75% of the company's sales were

in Europe, mainly in France. L'Oreal's image was so closely tied to Parisian

sophistication, it was difficult to market its brands internationally. Jones thus

decided to take a series of concrete steps to make L'Oreal a globally recognized

brand and the leading cosmetics company in the world. In what proved to be a

major advantage later on, he decided to acquire brands of different origins.

In the cosmetics industry, companies did not acquire diverse brands; they

generally homogenized their brands to make them acceptable across different

cultures. By choosing to work with brands from different cultures, Jones

deliberately took L'Oreal down a different road. Commenting on his decision,

Jones said, "We have made a conscious effort to diversify the cultural origins of

our brands." The rationale for the above decision was to 'make the brands

embody their country of origin'. The reason Jones had so much conviction in

this philosophy was his own multicultural background (he was born in Wale,

studied at Oxford and Paris, married an Italian, and had a French-born

daughter). Many analysts were of the opinion that Jones had turned what many

marketing gurus had considered a 'narrowing factor' into a 'marketing virtue'.

May Be? No, It 'Is' Maybelline

One of the first brands that L'Oreal bought in line with the above strategy was

the Memphis (US) based Maybelline.3 The company acquired Maybelline in

1996 for $ 758 million. Buying Maybelline was a risky decision because the

brand was well known for bringing out ordinary, staid colour lipsticks and nail

polishes. In 1996, Maybelline had a 3% share in the US nail enamel market.

Maybelline was not a well-known brand outside the US. In 1995-6, only 7% of

its revenues ($350 million) came from outside the US. L'Oreal decided to

overcome this problem by giving Maybelline a complete makeover and turning

it into a global mass-market brand while retaining its American image.

The first thing that L'Oreal did was to move Maybelline's headquarters to New

York, a city known for fast and sophisticated lifestyles. Commenting on this

decision, Jones said, "Memphis just did not quite fit the sort of profile for

finding some of the key people we needed." Then L'Oreal aggressiveness

promoted the US origins of Maybelline by attaching the tagline 'Urban

American Chic' to it. The company also attached 'New York' to the brand

name in order to associate Maybelline with 'American street smart'.

In 1997, the company launched Maybelline's new make-up line called 'Miami

Chill' with bold colours like yellow and green. This gave the brand a new look

and targeted it at spirited and lively teenagers and middle-aged women. It also

renamed Maybelline's 'Great Finish' line of nail polish 'Express Finish,'

because the nail enamel dried within one minute of application. The company

positioned it as a product used by the 'urban woman on the go'.

This revamp was very successful: Maybelline's market share in the US

increased to 15% in 1997 from just 3% in 1996. In addition, Maybelline's sales

rose steeply from just over $320 million in 1996 to $ 600 million in 1999. In

1999, buoyed by the success of Maybelline in the US, L'Oreal acquired the

Maybelline brand in Japan from Kose Corporation, the brand’s Japanese

distributor, thus gaining world rights to Maybelline. 

L'Oreal introduced its new line of Maybelline lipsticks and nail polishes in the

Japanese market. However, Maybelline's 'Moisture Whip' (a wet look lipstick)

did not do well in Japanese markets as it dried quickly after application.

L'Oreal gave the lipstick a makeover by adding more moisturizers to it. The

new Japanese version of 'Moisture Whip' was given a new name-'Water Shine

Diamond'. Water Shine-Diamonds became a runaway success in Japan.

Commenting on the success of the brand, Yoshitsugu Kaketa, L'Oreal's

Consumer-Products General Manager (Japan), said, "It was so successful in

Japan that we started to sell Water Shine in Asia and then around the world." 

By the end of 1999, Maybelline was being sold in more than 70 countries

around the world. While in 1999 50% of the brand's total revenues came from

outside the US, by 2000 the figure increased to 56%. Maybelline became the

leading brand in the medium priced makeup segment in Western Europe with a

20% market share. Commenting on the company's superior brand

management framework, an August 2000 article stated, "L'Oreal achieved sales

growth of nearly 20% by developing new products, expanding into key

international markets, and investing in new facilities, all the while

concentrating on increasing the reach of the group's top 10 brands."

Cashing in on the Maybelline Formula

Maynelline's success proved Jones' philosophy of creating successful cosmetic

brands by embracing two different yet prominent beauty cultures (French and

American). Commenting on this, Guy Peyrelongue, head of Maybelline,

Cosmair Inc., 4 US Division, said, "It is a cross-fertilization." L'Oreal followed

this strategy for the other brands it acquired over the years, such as Redken

(hair care), Ralph Lauren (fragrances), Caron (skin care and cosmetics),

SoftSheen (skincare and cosmetics), Helena Rubenstein (luxury cosmetics), and

Kheil's (skin care) (refer Table 3).

L'Oreal acquired the above relatively unknown brands, gave them a face lift,

and repackaged and marketed them aggressively. The US-based hair care firms

Soft Sheen and Carson were acquired in 1998 and 2000 respectively. Both these

brands catered to African-American women. Jones merged these two brands as

SoftSheen-Carson and used them as a launch pad to aggressively promote itself

outside the US - specifically Africa. As a result, the brand derived over 30% of

its $ 200 million revenues in 2002 from outside the US, most of it from South

Africa.

L'Oreal firmly believed in the strategy of promoting all its brands in different

nations. Even though it had brands originating in different cultures, it sold all

its different lines in all countries. However, L'Oreal promoted only one brand

aggressively in a country. The brand to be promoted was selected on the basis

of the local culture. Thus, for people who preferred 'American products,

L'Oreal promoted Maybelline, and for those who preferred 'French' products,

the L'Oreal brand was promoted. Similarly, the company promoted Asian and

Italian brands for customers who preferred them.

Jones also encouraged competition between the different brands of the

company. For instance, L'Oreal acquired Redken, a US-based hair care brand

in 1998, and introduced it in the French market, where it would have to

compete with L'Oreal's Preference line of hair care products. Analysts were

skeptical of this move as they thought introducing new brands in the same

category would cannibalize L'Oreal's own established brands. However, Jones

took a different point of view; he argued that the competition would inspire

both the Redken and Preference marketing teams to work harder.

Since self-competition was encouraged at L'Oreal, teams had ample freedom to

innovate and develop better products. This kind of competitive spirit from

within allowed L'Oreal to beat competition from other players in the market.

Commenting on this, Jones said, "The only way to favour creativity in large

corporations is to favour multiple brands in different places which compete

with each other." 

To encourage competition and nurture creativity, L'Oreal operated two

research centres - one in Paris and the other in New York. These centres helped

Jones maintain L'Oreal's image as the 'scientific' beauty company. The

company spent around 3% of its revenues on research every year, which was

more than the industry average of less than 2%. L'Oreal employed 2700

researchers from all over the world and had 493 patents registered in its name

in 2001, the largest ever for any cosmetic company in one year. 

L'Oreal made sure that each of its brands had its own image and took care that

the image of one product did not overlap with the image of another product. A

cosmetics industry analyst, Marlene Eskin, said; "That is a big challenge for

this company-to add brands, yet keep the differentiation." 

One of L'Oreal's most radical experiments was the makeover and re-launch of

the Helena Rubinstein skin care and cosmetics brand. Originally positioned in

the luxury segment, Helena Rubinstein had the image of a product used by

middle aged-women. In 1999, L'Oreal relaunched the brand and targeted it at a

much younger and trendier audience than the brand's typical luxury customers

(middle-aged women). Now, the target users were women aged between 20-30

years, living in urban centres like London, Paris, New York, and Tokyo. The

company also opened a Spa 5 in New York to promote the brand (the first

instance of a company attempting to run a retail operation as part of a

promotional package).

L'Oreal also made use of 'dramatic' advertisements to promote the brand. In

one of its advertisements, the model sported a green lipstick and white eye

shadow. Many analysts even thought that such advertising for a traditional

luxury brand was incoherent. However, Jones argued that industry observers

who held this opinion had not taken into account how fast the market was

changing. He said, "Is it incoherent for younger people to buy luxury

cosmetics? Why? Perhaps it was 10 years ago when luxury was equated to the

middle-aged customer. But sorry, the biggest luxury consumers in all of Asia,

which is one of the strongest luxury markets in the world, are between 20 and

25. This is why the Guccis and Pradas have taken the luxury-goods market by

storm." 

Jones also said, "The worldwide luxury consumer no longer equates to a

middle-aged lady. She can be. But she can also be young and trendy. So the

whole idea that it is incongruous for Helena Rubinstein to be cutting edge in

terms of image and makeup is out of date by about 10 years. On the contrary, it

is very good, original positioning for Helena Rubinstein to be the coolest of the

traditional luxury brands." Thus, L'Oreal cleverly positioned Helena

Rubinstein as a luxury brand for a younger audience without overlapping its

image with that of other luxury brands like Biotherm, Lancome, and Shu

Umeura.

L'Oreal attached a tinge of glamour to its brands to make them more appealing

to customers. The company liberally used celebrities from various fields of life,

from all parts of the world, for promoting its brands. Some of the well-known

personalities featured in L'Oreal's promotional campaigns included Claudia

Schiffer, Gong Li, Kate Moss, Jennifer Aniston, Heather Locklear, Vanessa

Williams. Milla Jovovich, Diana Hayden, Dayle Haddon, Andie MacDowell,

Laeticia Casta, Virginie Ledoyen, Catherine Deneuve, Noemie Lenoir, Jessica

Alba, Beyonce Knowles, and Natalie Imbruglia.

L'Oreal’s brand management strategists believed that good brand management

was all about hitting the right audience with the right product. Commenting on

the company's brand portfolio management strategies, Jones said, "It is a very

carefully crafted portfolio. Each brand is positioned on a very precise segment,

which overlaps as little as possible with the others."

Future Prospects

L'Oreal's efforts paid off handsomely. The company posted a profit of € 1464

million for the financial year 2002, as against € 1236 million for the financial

year 2001. Its overall sales grew by 10% in 2002, and much of this increase was

attributed to impressive growth rates achieved in emerging markets like Asia

(of the 21 % increase in sales volume, China contributed 61 %), Latin America

(sales grew by 22% with sales in Brazil increasing to 50%), and Eastern Europe

(sales grew by 30% with sales in Russia increasing by 61 %).

Industry observers noted that L'Oreal was much ahead of its competitors in

terms of profitability and growth rate. L'Oreal's rival in the luxury segment,

Estee Lauder, had reportedly posted a 22% drop in profits in August 2002. The

company had also announced a cost-cutting programme. Even Revlon,

L'Oreal's competitor in the mass-market segment, had posted nine consecutive

quarterly losses since late-2001.

Not all competitors were in such bad shape though; rival companies like

Beiersdmf (a Germany based company that owns the globally popular brand

Nivea), Avon, and Procter & Gamble had been performing quite well. However,

industry analysts agreed that no other cosmetics player matched L'Oreal's

combination of 'strong brands, global reach, and narrow product focus'.

In March 2003, L'Oreal ventured into new businesses that were closely related

to its core activities. One such initiative was Laboratoires Inneov, L'Oreal's

joint venture with Nestle. Through Inneov, L'Oreal entered the market of

cosmetic nutritional supplements. Analysts observed that this would mark the

beginning of 'neutraceutical6 development. A research analyst at Frost and

Sullivan (US based leading provider of strategic market and technical

information), commented, "The Inneov business will draw on both the growing

demand for skin products designed to retain youthfulness and the growing

market for dietary supplements." 

L'Oreal expected the cosmetics market to grow at 4-5% per annum in the

future. Looking at the future with optimism, Jones said, "No other consumer

products group has grown as quickly as we have. The prospects for the next

three to four years seem promising to me. L'Oreal has the good fortune of being

involved in a business that is a bit less sensitive than others to economic cycles.

When, the economic climate is bleak, you might put off buying a new car, but

you will still buy a tube of lipstick that lets you 'take a different sort of trip' for

a much smaller price.

In March 2003, the company entered the prestigious list of the world's fifty

most admired companies compiled by leading business magazine, Fortune, for

the first time. This was yet another indicator of the fact that L'Oreal seemed to

be going from strength to strength each year. If the strategists at the helm of

affairs continued focusing on enhancing stakeholder value year after year, the

future would continue to be rosy for the company that sold millions of women

the dream of living a 'beautiful' life.

COMPANY PROFILE

L'Oréal's success is built on a strong foundation. The world's largest beauty

products company, it creates makeup, perfume, and hair and skin care items.

Its brands include L'Oréal and Maybelline (mass-market), Lancôme (upscale),

and Redken and SoftSheen/Carson (retail and salon). L'Oréal, which owns

Dallas-based SkinCeuticals, also conducts cosmetology and dermatology

research. With more than 50% of sales generated outside Europe, L'Oréal has

focused on acquiring brands in those markets. L'Oréal also owns the UK-based

natural cosmetics retailer The Body Shop International, which numbers some

2,550 stores worldwide. The firm's dermatology branchGalderma is a joint

venture between L'Oréal and Nestlé.

Before the facial cosmetics, L’Oreal was known as a hair-colorformula developed by French chemist Eugene Schueller in 1907. It was then known

as"Aureole". Schueller formulated and manufactured his own productswhich were sold to Parisian hairdressers. It was only in 1909 thatSchuellerregistered his company as "Societe Francaise de Teintures Inoffensives pourCheveus,"the future L’Oreal. Scheuller began exporting his products, which was then limited to hair-coloring products. There were 3 chemists employed in 1920. In 1950, the research teams increased to 100 and reached 1,000 by 1984. Today, research teams are numbered to 2,000 and are still expected to increase in the near future. Through agents and consignments, Scheuller further distributed his products in the United States of America, South America, Russia and the Far East. The L’Oreal Group is present worldwide through its subsidiaries and agents. L’Oreal started to expand its products from hair-color to other cleansing and beauty products. The L’Oreal Group today markets over 500 brands and more than 2,000 products in the various sectors of the beauty business. Such includes hair colors, permanents, styling aids, body and skincare, cleansers and fragrances. Indeed, the L’Oreal Group have reached the peak that all cosmetic brands sought after. Many factors contribute to the success of the Company. These will be discussed further in the proceeding parts of this study. 

L’Oreal SWOT Analysis

 

A. Internal Analysis1. Strengths           The ongoing success of the L’Oreal Group is without if not for the ingenuity of the concept of their vision as a team. L’Oreal Chairman and CEO Lindsay Owen-Jones considers passion as the key to the well-renowned accomplishment of the said Company. The primary strength of the Company is the continuing research and innovation in the interest of beauty which assures

that the L’Oreal Cosmetics offers the best to their consumers. Their dedication to their continuous research makes them the leader in the growing cosmetics industry despite the competition in the market.          Another strength of the L’Oreal Groups is the developed activities in the field of cosmetics as well as in the dermatological and pharmaceutical fields in order to put more concentration in their particular activities. The cosmetics activities of L’Oreal are divided to five groups. First is the Consumer Product Division which encompasses all the brands distributed through mass-market channels, ensuring that L’Oreal quality is available to the maximum number of consumers. The Luxury Products Division includes the prestigious international brands selectively distributed through perfumeries, department stores and duty-free shops. The Professional Products Division offers specific haircare products for use by professional hairdressers and products sold exclusively through hair salons. The Active Cosmetics Department creates and markets products for selective distribution through pharmacies and specialist health and beauty outlets. The L’Oreal Group’s dermatological activities are linked with Galderma, which is basically a dermatological firm that contributes to the innovation of the L’Oreal Group’s products. The pharmaceutical activities of L’Oreal are also handled by Sanofi-Aventis. These divisions and subdivisions ensure the quality that the L’Oreal Group offers to its customers. To further add to the enumerated strengths of the company, L’Oreal’s advertising strategy also plays a major part to its growth. Through adapting to the culture of their target market as the main tool of their advertisement, the Company brought L’Oreal products within reach of other women from different parts of the world.2. Weaknesses         Perhaps one of the weaknesses that a big company faces is the decentralized organizational structure. This is also part of the difficulties that L’Oreal is facing. Due to the many subdivisions of the Company, there is also the difficulty in the control of L’Oreal. This slows down the production of the Company because of the need of giving reference to the other Board members and directors of the Company. L’Oreal will also have a difficulty in finding out what division is accountable for the possible pitfalls of the Company. Another weakness that L’Oreal faces is their profit. The profit margin of L’Oreal is comparably low than that of the other smaller rivals. While L’Oreal projects certain rise in digits as their profit, the result does not usually meet the expectations (Sang, 2003). Perhaps, this is also due to the high-end advertising and marketing as well as the width of the Company. Finally, the coordination and the control of the activities and image in the worldwide market are also viewed as a weakness in the part of L’Oreal. Due to its worldwide marketing strategy, there are also dissimilarities brought about in the campaign of L’Oreal products as to what image they are to project.

 

B. External Analysis1. Opportunities          The L’Oreal Company concentrates on cosmetic products that enhance women of all ages. The growing demand for beauty products gives L’Oreal the opportunity to focus in their field of specialization, particularly on hair styling and color, skincare, cosmetics andperfumeries. Being the leading cosmetic brand gives them the edge for their well-known image. Opportunity also emanates from their growing market that ranges from the affluent, the aging and also the masses of the developed countries. Another opportunity that L’Oreal must take advantage of is their greater market share because of the numerous patents registered by the Company. This enables them to have the top of the line products only to their name and therefore would lead costumers only to them for they could not find any of the said cosmetics in other brands.2. Threats        A threat to the L’Oreal group is also the growing competition within the field of cosmetic brands. Due to the ongoing addition to the field of cosmetics, there is still the danger that other brands could surpass the profit of L’Oreal. Another threat to the Company is the economic downturn that is quite evident in other countries. Such could thus hurt the possibility of higher profit for the company. Most products of L’Oreal are within the reach of the citizens of developed countries, but L’Oreal may have problems reaching out even to the average people from the underdeveloped countries. Also a threat to the L’Oreal Group is the spending habits of consumer and the economic crunch that most countries are experiencing as of present. While the L’Oreal Group may be producing the best of its line, people may find that their products are not of their basic needs and would skip buying L’Oreal products. However, with the growth of the market, the damage could be far from taking place. 

Company Marketing Strategies A. Customer Satisfaction (Product; Price)          The L’Oreal Group is known for their continuous innovation in order to improve the quality of their products and the services they have to offer to their consumers. Part of their strategic plan is to cater to the best interest of their costumers, in other words, costumer satisfaction. Through giving a wide variety of products, consumers have a whole gamut of products and services that they can choose from and which best serves their preference. The range of their prices caters to the demands of women, from the younger ones to the aging, from the affluent to those with lower budget for cosmetic products. Through constant research and passion for innovation, the L’Oreal Group best caters to the demands of women of different cultures. The Company also sees to it that they know the latest trend, or better yet, set the trend in the market as to

attract more consumers.B. Control of the Company     A very vital aspect in the success of a company is how their leaders handle and run the business. In fact, the L’Oreal Group is very particular in the governance of the Company. The Board directors and the Board members are well aware of all of their duties required by their respective functions and of their collective mission, for it is in their hands that the Company’s future depends on. The Board members are also obliged to act with due care and attention to their duties in order to carry out their responsibilities. Also expected from the Board is the strategic orientation of the control and correct running of the Company. Any transaction of the Board Members may directly affect the L’Oreal groups and so they are expected to act according to what’s expected of them.C. Worldwide Marketing (Place of Distribution; Promotion)          Part of the L’Oreal Group’s strategic plan is the marketing of their products worldwide. From the bloom of L’Oreal during its primary stage, the Company already catered to the demands of women worldwide. In line with this, they are also well aware of the diversities of women around the world. Part of this strategy is to formulate products that suit other women from other parts of the world. Through research and development of their products, the L’Oreal group has already covered most parts of the globe and still got high approval ratings from their clients. Just recently, the L’Oreal Groups received the Diversity Best Practices 2004 Global Leadership Award for embracing diversity, not only in their employees, but also in their consumers (Anonymous, 2004). The Company’s taking consideration of women of color is especially appreciated by its consumers for they are also being given the chance to enhance their features and embrace their diversity without having to conform with the traditional concept of beauty, particularly that of the white Caucasian women. The L’Oreal Group also has employees who are considered minorities, such as the women and people of color. Valuing of the people’s culture and ideas is important to the L’Oreal Group, in order to best serve the interest of the consumers, the employees and the Company.D. Impeccable Advertising (Promotion)          During the early days of advertising, L’Oreal commissioned promotional posters from various graphic artists to publicize the Company’s products. The 1950s brought about a new advertising medium, particularly the movies. L’Oreal made its on-screen debut during this period and in 1953 won an award advertising Oscar, the first in a long series of awards. Today, L’Oreal takes on actresses or different personalities of all ages that best exudes the vision of the Company. Famous personalities enable average individuals to relate to their personal lives, that they can look as good, and so ensures higher sales. 

Ethical Issues     There are two ethical issues that will be the particular concern of this analysis. The first to be addressed is the advertisements and promotion of the L’Oreal Group using the image of the traditionally beautiful women. The issue here is whether or not the advertisements of L’Oreal groups, while it does attract many consumers, affect the purchaser’s view of beauty and what he/she must do to achieve this level of beauty. Blair (1994) stated that in the context of advertising, the female viewer is continually forced to look at herself through traditionally male eyes, to fit her personal history and her body into that money-making construct known as "woman." An analysis of advertisements for and about women shows that femininity continues to be one of consumer capitalism's most marketable commodities, selling as well as cars, cigarettes, and alcohol, though certainly the image of the female body is used to sell these products as well. The more beautiful the woman is, the more people will respond to the ad. There is greater possibility that a female consumer will respond to an ad with an attractive model because, as mentioned earlier, the belief that at some point she will achieve the same glowing skin or flawless complexion just like the celebrity or model in the ad. The ad then serves as an image of the positive response to her beauty, most especially by the opposite sex. Through achieving a beautiful physical appearance, just like the advertisement, women will gain more love, respect and power. This poses as a possible problem for the L’Oreal Group. While it is inevitable that the Company use the concept of the beautiful women, they should also start thinking about being more ethically responsible for what they are coming up with. Perhaps, this is shown in one of their ads where they depicted women of all age to pose for their products. From this view,L’Oreal could be said to be making effort in defying the concept of beauty as young, instead conceptualizing beauty as ageless. It would thus be helpful to quote Moore (2004) as a reminder to advertisers: "Advertising is not just about the things we buy. It’s how we feel about things, including ourselves. That’s what makes it interesting." Also, L’Oreal makes an effort to avoid common view on women by awarding women in the field of science. Five women were awarded by L’Oreal-UNESCO for Women in Science Awards whose distinguished careers in the material sciences have contributed greatly to advancing our understanding of the world and how it works. L’Oreal’s shot on giving women more place in the field dominated by men is clearly an effort on their part to change the image of women as more than objects of beauty. Another ethical issue that may be raised is on animal testing. Despite high regard for quality, L’Oreal is the fifth

to cosmetics company that has decided to halt animal experimentation. It ceased this practice in October 1993 (Emert, 1994). L'Oreal abandoned animal testing after four years of letter-writing, demonstrations and advertisements aimed at the company. People for Ethical Treatment of Animals (PETA) is locked in quiet negotiations with a number of companies that may be rethinking their testing policies since Paris-based cosmetics giant L'Oreal agreed to an animal test ban in October. This shows the influence of L’Oreal on the ethical decision of other companies. Also, the L’Oreal Group’s decision would uplift their image and even attract more consumers. Perhaps, L’Oreal has indeed been a successful company. There are a few fall backs that have been mentioned such as the low profit margins, a decentralized organizational structure and even the growing competition in the cosmetic market. L’Oreal must then place more effort in being able to reach out to their consumers. The Company has shown endurance and perhaps it would be risky but rewarding to try a more diverse approach in their advertising, showing real women in their promotions. Also, it would be helpful to widen their advocacies for the minorities and oppressed group of people.

L’ORÉAL brands

Consumer Brands:

• L'ORÉAL Paris

• Garnier

• SoftSheen-Carson

• Maybelline New York

• Le Club de Createurs

Professional Products:

• Kérastase

• L'ORÉAL Professional

• Matrix

• Redken

Strategy Analysis of L'Oreal

Strategy analysis focuses on the long-term objective generating alternative

strategies, and selecting strategies to pursue. The firm’s present strategies,

objectives and mission, couple with the external andinternal audit information,

provide a basis for generating and evaluating feasible alternative strategies

(David 200).L’Oreal has numerous competitors. To have an advantage on

competition, L’Oreal has to apply some strategies that include internal audit

information and external opportunities that will make the company stronger.

They will also prevent competitors to have an advantage over L’Oreal.This

report will be based upon the effectiveness of current strategies of L’Oreal, a

real global leader in every segment of the industry.L’Oreal encounters threats

and opportunities and they have weaknesses and strengths. It is known as the

TOWS matrix. It is an important matching tool that helps managers develop

four types of strategies: SO Strategies, WO Strategies, ST Strategies and WT

Strategies. Theexternal opportunities and threats were identified earlier (see

part 1) by developing the “External Factor Evaluation Matrix” and

“Competitive Pro

"LtmOreal: The Beauty of Global Branding" Business Week. Exchange rate

fluctuations, still positive at 0. With the global expansion, new innovations and

the Internet strategy, it will definitely increase the sales and automatically more

profits. It has adapted to every particular environment.

INPLEMENTATIONL"tmOreal has opened the last door to the world. To

achieve that, they provide training for employees throughout the world that

joins them. ST StrategiesST strategies use a firm"tms strengths to avoid or

reduce the impact of external threats. EFFECTIVENESS OF

STRATEGIESL"tmOreal capitalize on opportunities in the global market.

That makes L"tmOreal competitors more hustling to catch up. file Matrix" is

important for the current strategies development. In 2001, the group made two

acquisitions: BioMedic, which specializes in skin care products to accompany

dermatological and plastic surgery treatments, and Colorama, a Brazilian

mass-market make-up brand. 

PROFILE OF THE ORGANIZATION

L'Oréal.

In 1912, the company extended its sales to Austria, Holland and Italy and by

1920 its products were available in a total of 17 countries, including the United

States, Brazil, Chile, Peru, Equador, Bolivia, and the Soviet Union, and in the

Far East. At this stage, L'Oréal consisted of three research chemists and ten

sales representatives.

Schueller's timing had been singularly fortunate. The end of World War I was

celebrated by the Jazz Age, when short hairstyles became fashionable, with a

new emphasis on shape and color. By the end of the 1920s, there were 40,000

hair salons in France alone and L'Oréal's new products O'Cap, Imédia Liquide,

and Coloral captured the growing market. In 1928 the company made its first

move toward diversification, purchasing the soap company Monsavon.

In the 1930s and 1940s, platinum-haired screen idols such as Jean Harlow and

Mae West made blond hair especially popular and bleaches such as L'Oréal

Blanc sold well. L'Oréal was quick to make use of both old and new media to

promote its products. In 1933, Schueller commissioned famous artists of the

time to design posters and also launched his own women's magazine, Votre

Beauté. Dop, the first mass-market shampoo, was promoted through children's

hair-lathering competitions at the highly popular French circuses and by 1938

L'Oréal was advertising its hair products with radio jingles.

During this period L'Oréal demonstrated its ability to meet new consumer

demands. When the Front Populaire won the 1936 elections and introduced the

first paid holidays for French workers, L'Oréal's Ambre Solaire was ready to

capture the new market for suntan lotions. Meanwhile the company's sales

network was expanding on both a national and an international scale. Products

began to be sold through pharmacies and perfumers and new Italian, Belgian,

and Danish subsidiaries were established between 1936 and 1937.

Even the outbreak of World War II in 1939 failed to curb the company's

growth. At a time of strict rationing, women permed their hair and bought

cosmetics to boost their morale. L'Oréal launched the first cold permanent

wave product, Oréol, in 1945. At the same time the company continued to

expand; by the end of the war there were 25 research chemists and distribution

had been extended to the United Kingdom, Argentina, and Algeria.

During this period, Francois Dalle and Charles Zviak joined the group, both

recruited by Monsavon at a time when the cosmetics industry held far less

attraction for graduate chemical engineers than the atomic-energy or oil

industries. Both men would play an important role in the company's future; by

1948, Dalle had already been appointed joint general manager of L'Oréal.

The consumer boom of the 1950s and the arrival of new blond screen idols

Marilyn Monroe and Brigitte Bardot (originally a brunette) meant further

expansion for L'Oréal. By 1950, a research-and-development team of 100

chemists had created further innovative products, including the first lightening

tint, Imédia D, introduced in 1951, and the first coloring shampoo, Colorelle,

introduced in 1955, which answered an increasing demand for subtlety. The

company advanced further into the field of skin care, entering into

technological agreements with the company Vichy, in 1954. Vichy was to

become part of the L'Oréal group in 1980.

Eugène Schueller's promotional talents were recognized in 1953 when he was

awarded an advertising Oscar. Schueller died in 1957 and Francois Dalle took

over as chairman and CEO at 39 years of age.

The 1960s were years of revolution, both cultural and commercial. As music

and fashion became increasingly teen-oriented, there was a growing interest in

conserving--or simulating--youthful looks. At the same time hundreds of new

boutiques, supermarkets, and chain stores sprang up to supply this rapidly

growing market. L'Oréal made a growing commitment to capital investment. In

1960 a new research-and-production center was established in Aulnay-sous-

Bois, bringing the number of research staff up to 300. In 1963 and 1964 the

company opened new cosmetological and bacteriological facilities, evidence of a

highly scientific approach to skin care. Another production unit, Soprocos,

opened in St. Quentin in 1965, and over the decade new distribution outlets

were established in Uruguay, Algeria, Canada, Mexico, and Peru. L'Oréal was

listed on the French stock exchange in 1963, during a period of restructuring

within the group. In 1962, owing to the boom in hair-product sales, L'Oréal

sold Monsavon in order to concentrate on its core business. At the same time it

bought the hair-hygiene specialist Cadoricin. In 1964 L'Oréal bought Jacques

Fath perfumes and a year later Lancôme, thereby gaining a significant entry

into the high-quality skin-care, make-up, and perfume market and gaining

increased access to perfumery outlets. Garnier, a hair-product company, and

Laboratoires d'Anglas were also added to the group. In 1968 the company took

major stakes in Golden in the United Kingdom and in Ruby, a personal hygiene

and household products manufacturer. In the same year, L'Oréal bought the

fashion and perfumes house, André Courrèges.

With increased resources and expertise, L'Oréal launched a number of

successful products, many of which are market leaders to this day. These

included the hair spray Elnett, Récital hair dyes, and the perfume Fidji. Fidji

was launched under the Guy Laroche brand name.

In 1969, L'Oréal recruited a young Welshman, Lindsay Owen-Jones, from the

prestigious Fontainebleau business school INSEAD. An Oxford languages

graduate, he would go on to become the fourth chairman and managing

director of L'Oréal. At the age of 25 he became general manager of L'Oréal's

public-products division in Belgium and turned around unprofitable

subsidiaries in France and Italy, before going to the United States to take

charge of L'Oréal's distributor, Cosmair Inc., in 1980.

L'Oréal benefited from the emphasis on health and fitness in the 1970s. From

this time onwards, L'Oréal's earnings outstripped those of any other French

blue chip and grew twice as fast as the cosmetics-industry average. L'Oréal's

success permitted further commitment to research and development; the

number of research staff rose from 500 in 1970 to 750 in 1974. New production

facilities were opened in France and in 1979 the International Centre for

Dermatological Research was established at Sofia-Antipolis, in the South of

France, for the treatment of skin disorders and aging.

Over the decade, structural and tactical changes were made within the group,

based on the findings of the 1969 management study done by McKinsey & Co.

The year 1970 saw the establishment of new operational divisions and

management structure. A few years later, the company began to speed up the

process of internationalization, with particular emphasis on New Zealand,

Australia, Japan, and Hong Kong. In 1976 L'Oréal signed a technical-assistance

contract with the Soviet Union.

Expansion into overseas markets--particularly Japan--was aided greatly by the

company's new alliance with the Swiss foods giant Nestlé, to whom Eugène

Schueller's daughter, Madame Liliane Bettencourt, sold nearly half of her

L'Oréal stock in 1974. The two allies established a French holding company,

Gesparal, which is 51 percent-owned by Bettencourt and 49 percent-owned by

Nestlé. Gesparal controls 72 percent of L'Oréal's voting rights. Bettencourt is

the largest individual shareholder of Nestlé, holding roughly five percent.

Throughout the 1970s, L'Oréal continued to make purchases within the

cosmetics and hair-care industry: Biotherm in 1970; Gemey, Ricils, and Jeanne

Piaubert in 1973; and Roja in 1975. The latter merged with Garnier in 1978.

This was also a time for diversification for L'Oréal. In 1973 it took a controlling

stake of 53.4 percent in the pharmaceutical company Synthélabo, a specialist in

the production of cardiovascular drugs and hospital materials, followed in 1979

by the purchase of Metabio-Joullie, manufacturer of aspirins, over-the-counter

drugs, veterinary, cosmetic, and dietary items. Metabio-Joullie and Synthélabo

were merged in 1980 under the latter's name. In 1977 L'Oréal ventured into

another complementary field, magazine publishing, taking stakes in Marie-

Claire Album and Interedi-Cosmopolitan.

Meanwhile in the new division Parfums et Beauté International, several of

L'Oréal's most successful products were launched--Vichy's moisturizer Equalia

and the Cacharel perfume Anaïs Anaïs, now reckoned to be the world's best-

selling perfume. In addition, the well-known Kérastase hair products were

redesigned.

The 1980s were particularly favorable for L'Oréal. Francois Dalle won the post

of first vice president on Nestlé's administrative council, the title of Man of the

Year in the chemicals and cosmetics sector from the Fragrance Foundation of

the United States, and title of Manager of the Year from the Nouvel

Economiste. In 1984, he gave up the leadership of L'Oréal, although he

continued to act as chairman of the group's strategic committee. The position of

chairman and CEO went to Charles Zviak. Lindsay Owen-Jones became vice

president and Marc Ladreit de Lacharrière, joint vice president, soon to take

control of the company's financial policy.

This event was followed by some restructuring within the group; in 1985 the

Parfums et Beauté division was split into three

departments--Lancôme/Piaubert, perfumes, and active cosmetics--and five

geographical areas. At the same time the new management clearly felt it

necessary to centralize control of the company's finances, and in 1987 a

financial bulletin was issued announcing the creation of L'Oréal Finances,

which would implement the financial strategy established approximately ten

years before.

In 1986, L'Oréal's shares were distributed to investors outside France for the

first time when the company raised FFr 1.4 billion through a one-for-ten rights

issue, offering new shares to stockholders. This was followed, in 1987, by a one-

for-five stock split.

At this time L'Oréal began to play an increasingly active role in the

management of Synthélabo, which, after merging with Metabio-Joullie, had

become France's third-largest pharmaceutical company. Synthélabo's research-

and-development budget was increased considerably, allowing the company in

1982 to become the first private laboratory to participate in the World Health

Organization's project for research and education in neuroscience. During the

1980s Synthélabo enhanced its international status, setting up joint marketing

affiliates in the United States and Britain with the U.S. company G. D. Searle,

and establishing joint ventures in Japan with Fujisawa and Mitsubishi Kasei.

The company also took controlling stakes in Kramer of Switzerland, in 1982,

and LIRCA of Italy in 1983. Nevertheless Synthélabo continued to report poor

sales figures, owing to difficulty in updating its product line and unfavorable

market conditions in France. L'Oréal subsequently reiterated its commitment

to Synthelabo, keeping restructuring to a minimum and increasing its holding

from 63 percent to 65 percent after October 1987's Black Monday when the

shares fell considerably. L'Oréal saw that the solution to Synthélabo's problems

lay in extending its overseas sales, thereby offsetting unfavorable domestic

pricing and reimbursement policies. By the end of the decade, profitability had

improved and some promising new drugs were ready to be approved for

marketing in the 1990s.

Meanwhile, L'Oréal's research-and-development facilities continued their

steady growth, with research staff reaching 1,000 by 1984. L'Oréal's enormous

commitment to research resulted in the success of products such as Lancôme's

Niosôme, launched in 1986, one of the few anti-aging creams found to be

effective by independent dermatologists.

If this was the age of high-tech skin care, it was also the era of designer brands;

in 1980 a new distribution company, Prestige et Collections, was created for

Cacharel, whose perfume Loulou, launched in 1987, wet on to become a best

seller. In 1984, Nestlé took over Warner Cosmetics of the United States on

behalf of L'Oréal's U.S. agent Cosmair, thereby acquiring for the group the

prestigious names of Ralph Lauren, Paloma Picasso, and Gloria Vanderbilt. At

this stage, however, L'Oréal was interested only in the perfumes and cosmetics

divisions of the designer brands. In 1983, the company sold its 49.9 percent

stake in the couture house Courrèges to Itokin of Japan, although it retained

100 percent of Courrèges Parfums.

A further addition to the L'Oréal group was the Helena Rubenstein skin-care

and cosmetics range. In 1983, L'Oréal began by taking major stakes in Helena

Rubenstein's Japanese and South American subsidiaries, the former integrated

with Lancôme in the new Japanese affiliate, Parfums et Beauté, in 1984. In

1988, L'Oréal bought Helena Rubenstein Inc., a U.S. company that was in

financial difficulties as a result of the sharp drop in sales following the

founder's death. It would not be an easy matter to bring the company back into

profit. Bought in the same year, Laboratoires Goupil, a dental-care-products

manufacturer whose toothpastes held over 90 percent of the French market,

was also unprofitable, but it was felt that L'Oréal's skillful marketing could

remedy the situation. L'Oréal's last acquisition of the 1980s was the skin-care

specialist Laboratoires Roche Posay.

While making acquisitions, L'Oréal also took the opportunity to sell off

unwanted components of the group. These included the personal hygiene and

comfort products of Laboratoires Ruby d'Anglas and Chiminter, which were

felt to be too far outside the group's main area of interest and not in accord

with L'Oréal's policy of internationalization.

L'Oréal was keen to diversify into communications. In 1984 the company took a

10 percent stake in the French pay-TV company, Canal Plus, with the stake

raised to 10.4 percent in 1986. In 1988, L'Oréal took a 75 percent stake in

Paravision International, an organization charged with the creation,

production, and distribution of audiovisual products for an international

audience. The following year, L'Oréal entered by way of Paravision into a joint

venture with the U.S. company Carolco Pictures Inc., to handle foreign

television-distribution and programming rights.

In 1988, Lindsay Owen-Jones became the new chairman and chief executive of

L'Oréal at the age of 42. Marc Ladreit de Lacharrière became director and

executive vice president while Charles Zviak moved on to the chairmanship of

Synthélabo. Zviak died the following year, having been one of the few chemists

to attain leadership of a major French company. The end of the decade was

marked further by rumors of L'Oréal's involvement in a proposed joint

takeover bid for the French luxury-goods company Louis Vuitton Mo¨t

Hennessy, together with Vuitton's head, Monsieur Racamier, and

Paribas/Parfinance. Although the existence of such a plan was denied by

L'Oréal, the company joined with Orcofi, a Vuitton-controlled holding

company, to buy 95 percent of the perfume and couture house Lanvin.

L'Oréal explained that although Vuitton owned Dior and Givenchy,

competitors in the perfume and cosmetics market, L'Oréal had no Vuitton

shares and no intention of attacking the company. On the contrary, the Vuitton

alliance would give L'Oréal an entrée into the field of luxury goods. Although

Lanvin lost money since L'Oréal's acquisition, company officials remained

optimistic, declaring that the experience gained from running a luxury boutique

is valuable in itself.

In 1991 L'Oréal found itself embroiled in a bitter dispute with Jean Frydman, a

former director of Paravision. Frydman--who holds dual Israeli-French

citizenship--had filed suit against the company, charging it with "fraudulent

behavior and racial discrimination," stemming from the 1989 sale of the

Frydman family's 25 percent share of Paravision--L'Oréal's film distribution

division--after being pressured by Francois Dalle. Frydman alleged that

L'Oréal violated a 1977 French law prohibiting companies from participating

in an Arab boycott against Israel when the company forced his resignation and

the sale of the family's stake at an unfair price because of his business ties to

Israel. The ensuing investigation created a minor scandal in France by digging

up unsavory facts about founder Eugène Schueller's anti-Semitic, fascist

politics during World War II. Later that year, however, Frydman dropped the

suit in exchange for a letter of apology from Dalle.

The cosmetics industry is still growing, but there is increasing rivalry. While

L'Oréal's alliance with Nestlé should protect it from corporate marauders, it is

still vulnerable to competition in Western markets from Japanese competitors.

Shiseido and Kao--although 90 percent of the turnover of both companies come

from their home market--and from Unilever, following the latter's takeover of

Elizabeth Arden and Fabergé.

In the years following his appointment as chairman and CEO, Owen-Jones set

about making L'Oréal a genuinely international company. He began cultivating

an integrated international team of top managers, enabling the company to

quickly respond to and capitalize on consumer trends worldwide. Owens-Jones

also supported greater cooperation between L'Oréal's numerous brand names

and divisions. After Lancôme Niosôme was developed in 1986, L'Oréal then

translated the new technology into a mass market L'Oréal skin care line sold

under the name Plentitude. Plentitude was launched in Europe and Australia in

the late 1980s, and within two years of its U.S. launch in 1989, it had captured a

10 percent share of the market.

It was precisely this kind of synergy between subsidiaries, analysts say, that led

to L'Oréal's 15 percent overall profit growth in the 1980s. In the boom years of

the 1980s, high-end lines such as Lancôme, and Helena Rubenstein performed

extremely well. When the prestige market slumped in the early 1990s, such

mass market lines as L'Oréal were poised to pick up the slack.

L'Oréal has said that it sees opportunities for further profit growth in the

United States, which represents one-third of the world market. Currently,

despite having full control of strategy, management, and marketing in this

region, L'Oréal reaps only 5.5 percent from the profits of its sole U.S. agent

Cosmair Inc. One advantage of this system for L'Oréal has been protection

from the weakness of the U.S. dollar and from high marketing costs--Cosmair

handles a sales volume of over &Dollar;1 billion that provides the company

with the flexibility to launch new products which can ten be transferred to

L'Oréal affiliates worldwide. Other markets targeted for expansion include

Japan.

L'Oréal was one of the first western companies to set up shop in the former

Soviet Union, forming Soreal, a joint-venture with the Russian chemical

company Mosbytchim. L'Oréal invested &Dollar;50 million in the venture to

produce approximately 40 million units of deodorant, perfume, shampoos, and

hair sprays annually. Soreal products were sold in 1992 at a mere 100 outlets in

Moscow and at an additional 10 throughout Russia. Hard currency was

difficult to come by as banks either collapsed or were unaccustomed to dealing

with Western businesses. In order to obtain the equipment necessary to

upgrade production, Soreal created Maroussia, a women's fragrance that was

imported to Western Europe in exchange for machinery and materials.

L'Oréal's structure remains unchanged, with the group consisting of a

federation of competitive companies, including 147 production and distribution

facilities worldwide, divided into five divisions. Only research and development

facilities and overall management control are centralized.

There has been speculation as to the fate of L'Oréal when Bettencourt, in her

mid-60s in 1990, relinquishes her corporate involvement. The French

government is taking a strong interest in the issue. French government

agreements restrict foreigners from taking over French companies before 1994.

Should she decide to sell, Nestlé will have first option to purchase.

As consumers became more environmentally aware, L'Oréal fell under

increasing pressur4e to conform to new standards of product safety. The

company has been forced to phase out the use of chlorofluorocarbons which are

said to be harmful to the ozone layer. L'Oréal has also come under attack from

the animal-rights lobby, which accuses the company of subjecting laboratory

animals to inhumane tests, although L'Oréal claims that animal testing of new

products is down to 5 percent from 50 percent in 1985.

As L'Oréal entered the mid-1990s, the company found itself engaged in a battle

with rivals Proctor & Gamble and Unilever for worldwide domination of the

mass cosmetic and fragrance markets. L'Oréal seemed determined to remain

the leader, hiking its advertising budget by as much as 50 percent for some

products, and creating a whole new image for most of its color cosmetics. The

company was also reaching out to customers by repackaging its merchandise

and making display cases more accessible and user-friendly. L'Oréal also

planned to expand into the mass-market fragrance business, introducing at

least two new fragrances by 1995. Owen-Jones seemed to have laid the

groundwork necessary to support such an expansion , and L'Oréal appeared

well prepared to defend its number one position, fortified by a strong research

and development base, sharpened marketing skills and a sound balance sheet.

OBJECTIVES & SCOPE OF STUDY

Effective supplier relations are essential for sustainable development and

L’Oréal has set itself key objectives in this area.

We will:

Continue to increase, develop and formalise our business exchanges with

suppliers:

Increase coverage of business reviews to all categories and regions,

Measure progress against specific environmental and SD KPIs,

Conduct a supplier satisfaction survey to identify critical issues and

areas of improvement,

Ensure ongoing feedback to suppliers following Invitations to Tender.

Continue promoting internal awareness of sustainable development issues

among purchasing teams:

Organise specific workshops on SD across the categories and regions,

Continue training buyers on good purchasing practices (Purchasing

Strategy & Practices training) to achieve a rate of 90%.

Carbon Disclosure Project (CDP) Supply Chain:

Monitor progress of the 26 first suppliers of L’Oréal that are

participating in the CDP Supply Leadership Project,

Integrate new suppliers into the CDP Supply Leadership Project, from

Latin America and Asia.

Encourage suppliers to achieve FSC certification and reduce their

packaging and energy consumption,

Continue the social audits programme with the objective of 400 audits in

2010,

Pursue the deployment and further development of the "L’Oréal Buy &

Care"programme,

Increase the visibility of supplier innovations and facilitate access to

L’Oréal decision-makers in Research & Innovation and marketing.

Social data scope, indicators, reporting method and systems

Review report by one of the statutory auditors on the procedures used to

compile certain social data published in the Group sustainable development

report.

General Direction 

L’Oréal Group 

14, rue Royale 

75008 Paris

Further to your request and in our capacity as Statutory Auditor of the L’Oréal

Group, we have performed a review designed to enable us to express moderate

assurance on the procedures used to compile certain social data published in

the L’Oréal Group sustainable development report and identified by the sign (

).

These procedures, together with the data published in the Group sustainable

development report, were prepared under the responsibility of the Human

Resources Executive Management in accordance with the Group's internal

reporting standards. These standards are available on the Group's website.

Our responsibility is to express a conclusion on the procedures for compiling

the selected social data, based on our review.

Nature and scope of our work

We performed the work according to The Compagnie Nationale des

Commissaires aux Comptes (CNCC) professional doctrine related to this

review.

We performed the work described below in order to obtain moderate assurance

as to whether procedures used to compile the selected social data are free of

material misstatement. A higher level of assurance would have required more

extensive procedures. Moreover, our review is not intended to express, and we

do not express, a conclusion on the accuracy of the figures published.

We performed the following work:

At headquarters level: 

For each of the areas reviewed, we met with various representatives from

the departments listed below responsible for organizing the reporting

procedures as well as for the consolidation of social data at Group level: the

Labor Relations Department, HR Information Systems Department,

Corporate HR Support Services, Corporate Learning for Development

Department.

Based on interviews with these representatives and reviews of documents

(Group consolidation manuals and subsidiary reporting schedules), we

obtained assurance as to the:

existence of instructions concerning definitions of the data to be

compiled and the related calculation methods;

existence of reporting and consolidation procedures;

consistency of the data published with the scope set for such data;

due and proper inclusion of the social data obtained from the reporting

systems in the consolidation packages, assessed on a test basis.

Our work was based on the following indicators: total cost of the retirement

programmes, % of countries which complete local social security and

mandatory programmes, number of employees per gender, data taken from

the management database of executives' profiles and careers (nationalities,

number of executives by gender, number of women amongst the

management committee for instance), number of employees and executive

staff trained, amount allocated to the WPS program, number of employees'

representatives, absenteeism rate.

At subsidiary level: 

Additional tests were carried out to ensure the understanding and correct

application of Group reporting procedures by the subsidiaries. These tests

were carried out at country consolidation level, on a selection of five

countries (Denmark, Finland, Norway, Sweden, and Spain) and in respect

of the aforementioned indicators, except for the two specific indicators

related to retirement (total cost of the retirement programmes, % of

countries which complete local social security and mandatory programmes)

performed for all countries at headquarters level.

Our work was based on interviews with the individuals responsible for

reporting at country level as well as with other people involved in the data

collection and reporting procedures.

The tests involved assessing:

the understanding and application of Group data definitions and data

collection procedures at country and subsidiary level;

the consolidation procedures at country level and exhaustiveness of the

scope;

the existence and appropriateness of internal control procedures at

country level with a view to ensuring compliance with such procedures

by the subsidiaries.

We were assisted in our work by Sylvain Lambert, Partner in charge of our

Sustainable Development Practice.

METHODOLOGY

Climate Counts says they “use a 0-to-100 point scale and 22 criteria to

determine if companies have: 

• MEASURED their climate “footprint” 

• REDUCED their impact on global warming 

• SUPPORTED (or suggest intent to block) progressive climate legislation 

• Publicly DISCLOSED their climate actions clearly and comprehensively

“GreenOrder, a leading sustainability strategy firm, provided strategic

guidance on the Climate Counts program, assisted in the development of the

scoring system, and verified the scoring results for accuracy.”

Of the 104 companies on the Climate Counts website, the highest score is 82

(Nike) and most (67) of the scores are below 50. So there’s a lot of room for

improvement across the board.

In addition to the 0-to-100 point scale, Climate Counts categorizes companies as

“Stuck” (red), “Starting” (yellow) or “Striding” (green). Climate Counts

appears to be considering more than the raw score in assigning these

categories; potential factors include prior performance and peer performance.

For example, Starbucks is labeled as “Striding” (green) for a score of 49 in the

pitiful Food Services sector, whereas Dell is labeled as merely “Starting”

(yellow) for the same score of 49 in the climate-conscious Electronics sector.

As the methodology for assigning the three Stuck/Starting/Striding categories

was not clear, I decided to ignore them and simply divide the raw Climate

Counts score (0-100) by 20 to create my Citizens Market rating from 1-5.

L’Oreal – Building a Global Cosmetic Brand

“It is a strategy based on buying local cosmetics brands, giving them a facelift

and exporting them around the world."

-- One Brand at a Time: The Secret of L'Oreal's Global Makeover, August 12,

2002.

L’Oreal Makes Waves

In November 2002, L'Oreal, the France-based leading global cosmetics major,

received the 'Global Corporate Achievement Award 2002’, for Europe by 'The

Economist Group'. Awarded by the publisher of the world's leading weekly

business and current affairs journal The Economist, the honour was given in

appreciation and recognition of the 'depth, breadth, and diversity of L'Oreal's

management team.

In the same month, L'Oreal's Chairman and CEO, Lindsey Owen Jones (Jones)

was honoured with the ‘Best Manager of the Last 20 Years' title by the French

Minister of Finance and Economy, Francis Mer. This award instituted by the

leading French business publication, Challenges, was in recognition of Jone’s

outstanding achievements in transforming L'Oreal from a French company

into a global powerhouse. Jones also received the prestigious 'Manager of the

Year 2002' award from the French Prime Minister, Jean-Pierre Raffarin. Jones

was the first foreign head of any French company to receive this award, which

was sponsored by the leading French business publication, Le Nouvel

Economiste. 

LIMITATION

Because of time constraint sample size was the scope of this project is limited

to areas in New Delhi only.

The estimates are done on average basis.

The project had scope for future research, which was beyond my resource

due to time constraint and work pressure.

Because of time constraint sample size was restricted on 100.

Some of the respondents did not respond due to lack of time.

Some were biased towards their brand, which might not be giving them good

service.

DATA AND ANALYSIS

L’Oréal India Private Limited is a wholly owned subsidiary of L’Oréal S.A. Headquartered inParis, L’ORÉAL is the global leader in cosmetics with 5 key expertise in hair care, hair color,skin care, make-up and fragrances. L’Oréal’s leadership is achieved through cutting-edgetechnology with a portfolio of well-known brands that answer all beauty needs and aredistributed in all channels.Each brand benefits from considerable investments in research made by the L'Oréal Group.The Group's research efforts, unique in the beauty industry, permit each brand to benefitfrom formulas specifically adapted to the needs of men and women worldwide, within eachmarket or distribution circuit that is present.L'Oréal India has over 600 employees and has a strong track record with consistent doubledigit sales growth yearly.Group profile A century of expertise in cosmetics € 17.5 billion consolidated sales in 2009 23 global brands* 130 countries 64 600 employees 674 patents filed in 2009.o These brands' annual sales are superior to 50 million eurosFinance- Sales: € 17.5 billion- Operating profit: € 2.5 billion- Net earnings per share (1): € 3.42- Dividend (2): € 1.55

(1) Diluted net earnings per share based on net profit excluding non-recurrent items afterminority interest.(2) Dividend to be proposed to the Annual General Meeting of Shareholders on April 27th2009Operations 38 factories around the world 4,9 billion units manufactured in 2009 97% of factories are ISO 14001and OHSAS 18001 or ISO 14001 and VPP certified 100% of L'Oréal's industrial sites audited with standard SA 8000.PRESENT SCENARIO IN INDIATotal beauty care market Beautyservices

Rs 5,070 crores 87%Current Annual growth rate25% L’Oreal currently markets L’Oreal professional, Matrix and kerastase all three offeringhair care products. It covers over 15000 salons, with L’Oreal professional having tieupswith over 600 salons. All kerastase salons are exclusive since it’s a luxury brand. Matrix is most widely distributed brand with most accessible pricing , there are noexclusive partnerships. During next three years, L’Oreal will target entering 30000-40000 salons as India isthe fastest growing market.CUSTOMER BASED BRANDEQUITYBUSINESS STRATEGYtheir strategy for leadership is based on continuous investment in rigorous scientific researchand development. This enables the brands to deliver products which are innovative, highlyeffective, practical and pleasant to use, and which are manufactured to the most demandingstandards of quality and safety. L’Oreal aim for excellence, and constantly challengeourselves and our methods. They place great value on honesty and clarity: their consumeradvertising is based on proven performance and scientific data. L’Oreal are committed tobuilding strong and lasting relationships with their customers and our suppliers, founded ontrust and mutual benefit. L’Oreal do business with integrity: L’Oreal respect the laws of thecountries in which L’Oreal operate and adhere to good corporate governance practices.L’Oreal maintain high standards in accounting and reporting, and support the fight againstcorruption. L’Oreal deliver long-term, sustained shareholder value by protecting and makingthe most effective use of company assets.ETHICSTHE CODE OF BUSINESS ETHICSOur Code of Business Conduct is the reference document for ethics within L'ORÉAL and helps

employees implement THE L’ORÉAL SPIRIT in their day-to day activity. The Code of BusinessEthics applies to all employees of the L'ORÉAL Group and its subsidiaries worldwide. It alsoconcerns all Officers and Directors of the L'ORÉAL Group and its subsidiaries. Each employeereceives a personal copy.The Code of Business Ethics was drafted with the help of employees from 22 countries whotook part in international working groups in Asia, Europe, North America and Latin America.The Code was then validated by 50 internal experts and reviewed by each Country Manager,Human Resources Manager and local legal counsel.MISSION:At L’ORÉAL, L’Oreal believe that everyone aspires to beauty. Our mission is to help men andwomen around the world realise that aspiration, and express their individual personalities tothe full. This is what gives meaning and value to our business, and to the working lives of ouremployees.L’Oreal are proud of our work.Customer- based brand Equity pyramid:Two questions often arise regarding brands: ‘What makes a brand strong?’ and ‘How do youbuild a strong brand?’ To answer these questions, this section introduces the customer-basedbrand equity (CBBE) model. This model incorporates theoretical advances and managerialpractices in understanding and influencing consumer behaviour. Although useful perspectivesconcerning brand equity have been put forth, the CBBE model provides a unique point of viewas to what brand equity is and how it should be built, measured and managed. The CBBEmodel approaches brand equity from the perspective of the consumer – whether this be an

individual or an organization. Understanding the needs and wants of consumers andorganizations and devising products and campaigns to satisfy them are at the heart ofsuccessful marketing. In particular, two fundamental questions faced by marketers are: ‘Whatdo different brands mean to consumers?’ and ‘How does the brand knowledge of consumersaffect their response to marketing activity?’The basic premise of the CBBE model is that the power of a brand lies in what customershave learned, felt, seen and heard about the brand as a result of their experiences. In otherwords, the power of a brand lies in what resides in the minds of customers. The challenge formarketers in building a strong brand is ensuring that customers have the right type ofexperiences with products and services and their accompanying marketing campaigns so thatthe desired thoughts, feelings, images, beliefs, perceptions and opinions become linked to thebrand. Customer-based brand equity is defined as the differential effect that brand knowledgehas on consumer response to the marketing of that brand. A brand is said to have positivecustomer-based brand equity when consumers react more favourably to a product and theway it is marketed when the brand is identified than when it is not (eg, when the product isattributed to a fictitious name or is unnamed). Thus, a brand with positive customer-basedbrand equity might result in consumers being more accepting of a brand extension, lesssensitive to price increases and withdrawal of advertising support or more willing to seek the

brand in a new distribution channel. On the other hand, a brand is said to have negativecustomer-based brand equity if consumers react less favourably to marketing activity for thebrand compared with an unnamed or fictitiously named version of the product.There are three ingredients to this definition:• differential effect;• brand knowledge;• consumer response to marketing.First, brand equity arises from differences in consumer response. If no differences occur, thenthe brand name product is essentially a commodity. Competition, most likely, would then bebased on price. Second, these differences in response are a result of consumers’ knowledgeand experience of the brand. Thus, although strongly influenced by the marketing activity ofthe firm, brand equity ultimately depends on what resides in the minds of consumers. Third,the differential response by consumers that makes up the brand equity is reflected inperceptions, preferences and behavior related to all aspects of the marketing (eg, choice of abrand, recall of copy points from an ad, actions in response to a sales promotion orevaluations of a proposed brand extension). Brand Briefing 2.5 provides a detailed account ofthese. The simplest way to illustrate what is meant by customer-based brand equity is toconsider some typical results of product sampling or comparison tests. For example, withblind taste tests, one group of consumers samples a product without knowing which brand itis, whereas another group samples the product knowing which brand it is. Invariably,differences arise in the opinions of the two groups even though they are consuming the sameproduct. For example, Larry Percy reports the results of a beer-tasting that showed howdiscriminating consumers could be when given the names of the well-known brands of thebee

The following table depicts our product-mix width and product-line length:PRODUCT-MIX WIDTHSKIN CARE HAIR CARE SUNSCREENProduct- Plenitude Recital Ambre Solaire*Line Synergie* Belle Couleur*Length* Will carry a tag line of "From the Garnier Institute of L'Oreal"Belle Couleur will be introduced with a depth of 15 formulations and blond and chestnut brownshades of colorant will not be two of them . We will look into a future introduction when areformulation for extra reflections and lightening effects is more feasible.Product Positioning StatementPlenitude "Trust us for a more natural, beautiful you"Synergie "The alliance of nature and beauty to look and feel better"Belle Couleur “ Natural color for the new you!”Ambre Solaire "Protect yourself for the Future"Recital "Naturally, the leader in hair coloring"Price (in Guilders)Belle Couleur 12.95Recital 14.95Synergie 9.95 to 19.95Plentitude 11.95 to 21.95Ambre Solaire 10.95The marketing research for Belle Couleur shows buying intention generally increased after theparticipants were told the price. We have kept the suggested pricing as indicated in the study.Certainly buy(5)Don’t know(3)Certainlynot(1)01020

30405060Belle Couleur Buying IntentionsPrice UnawarePrice Aware10[STYLE PREFERENCE: I GENERALLY FEEL THAT THREE DIMENSIONAL GRAPHSARE MORE CONFUSING THAN TWO D. SIDE BY SIDE BARS MIGHT BE BETTER ORLINES AS YOU HAVE BELOW. IT IS, HOWEVER, A VERY GOOD IDEA TO PLOT TOSHOW DIFFENCES.] For Synergie, the buying intentions dropped when the price was known.We will introduce the products at a slightly lower price to deal with this response.PromotionWe will use a pull marketing strategy directed at end users. We will market the benefits of theproducts to our target segments: new, younger clientele and present established client base.The target segment for Garnier tagged lines will be Dutch females who are under 25. This is40% of the Dutch population and they are the heaviest consumers of cosmetics and toiletries. Inthis competitive market it is very difficult to persuade women to switch brands, so we want toensure our future by targeting the young buyer to use the Synergie and Bell Couleur productsspecifically [FOR THEIR FIRST USE OF THESE PRODUCT CATEGORIES. WE DON'THAVE ANY INFORMATION ABOUT WHO INFLUENCES THEIR FIRST PURCHASE -MOTHER, FRIENDS, OR RETAIL CLERKS?] .AdvertisingWe will roll out a coordinated advertising campaign to emphasize the following points:1. L'Oreal is getting better, with a new and refurbished line of products from our GarnierInstitute. "No longer should consumers question which Company to buy skin care or haircoloring products from, now they just have to decide which L'Oreal product to

purchase!" [IGUESS YOU WOULDN'T OBJECT TO HIRING AN AD AGENCY AND USING THEIRCOPY WRITERS?]2. Plenitude and Recital will focus on consumers over 25 years of age. Advertising will beginto refocus these products as being classy, upscale, and successful.3. Synergie, Belle Couleur, and Ambre Solaire will focus on consumers' 25 years and under.We will promote that these products are "new", hip, and fashionable.4. We will use our positioning statements as appropriate in all mediums.We will use print and broadcast ads in women-oriented mediums several weeks before the newintroduction of products to inform people of how L'Oreal is growing and changing to meet theirneeds. Billboards, television, radio, and display signs will be primary vehicles for this. Abouttwo weeks before introduction, our ads will change from stressing our company image tostressing product line imaging. We will run specific ads for Synergie, Belle Couleur, and AmbreBuying Intentions Moisturizing Cream33.544.555.56After trialprice notknown After useprice notknownAfter tiralpriceknownAfter usepriceknownAll PariticpantsPleniturdeDf.Vd Hoog

Other BrandBuying Intentions Antiaging Daycream33.544.555.56

After trialprice notknownAfter useprice notknownAfter trialpriceknownAfter usepriceknownAll PariticpantsPleniturdeDf.Vd HoogOther Brand11Solaire stressing their benefits to the consumers. This specific part of the campaign willprimarily use magazines, radio, and other mediums targeted at the under 25 aged crowd. Afterproduct introduction, will run advertising to persuade and remind consumers of our new

products. [YOU WILL BE VERY LIKELY TO TAKE A HIT ON THE MARKET SHAREFOR EXISTING PRODUCTS. CENTRAL THOUGH IS YOUR RESULTING OVERALLMARKETING SHARE VERSUS ANY INCREASED COSTS. THIS CANNOT BEEVALUATED WITH CASE FACTS.]Packaging for Plenitude and Recital will remain the same. The packaging for Synergie and BelleCouleur will be bold and trendy to attract our younger segment. Ambre Solaire will alsoleverage the packaging ideas from these products. We will trademark our new Garnier Institutelogo with the words "From the Garnier Institute of L'Oreal".From theGarnierInstituteOfL’OrealThis logo will be used on packaging, labeling, etc. for the Synergie, Belle Couleur, and AmbreSolaire products. For our television and radio advertisements, we are considering using a shortaudio jingle to better brand these products [WHY ISN'T IT INCLUDED HERE? CAN'T YOUSING FOR YOUR GRADE?]. This would be similar to the angle that Intel is using for theirPentium chips.Sales PromotionsOne of our most important promotions is the point-of-purchase display. They will entice peopleto our products and excite our distributors. In addition, we will offer the following salespromotions: [COULD RELATE THIS AND PREVIOUS PLAN MORE DIRECTLY TO THECUSTOMER PURCHASE PROCESS - AWARENESS - TRIAL - REPEAT - LOYALTY]1. A contest will be held where the winner and a companion will spend a romantic week inFrance, the country where L'Oreal was founded [AT A BEAUTY SPA?]. To be eligible, youmust purchase a L'Oreal product and fill out the accompanying postage-paid card. The cardwill ask two simple questions: did you like this product? Why or why not? This card

willnot only register them for the trip, it will provide valuable marketing research for us.2. Cross-product promotions. In a bundle of Synergie products, we can offer a free bottle ofAmbre Solaire. If a person purchases Belle Couleur, we can enclose a mail in certificate fora free container of Synergie facial cream. (Again, we could use the mail in as an opportunityto do more market research).3. In magazines and newspapers, we will offer coupons for Belle Couleur, Synergie, and AmbreSolaire products.Public RelationsWe will pursue the following public relations oriented programs:1. We will put together a press kit showing L'Oreal's commitment to grow and serve the Dutchmarket. We will include key facts including our additions to the employment rolls andcharitable contributions (see item number three below).122. We will look to host and/or sponsor events that appeal to our target markets. For our moremature audience with increased dispensable income, we will sponsor a "Women in Business"seminar. Women in key roles in L'Oreal can be presenters. For those women at home, wewill look into sponsoring events that will appeal more to them - something along the lines ofa home and/or garden show. We also are excited about creating Cosmetics Shows gearedtowards the younger and first time consumers. The Shows will focus on education of terms,etc. and actual hands-on training. They can be arranged on a small scale, e.g. a booth at amall, to a larger event at a local hall with many booths.3. We will donate a portion of sales of the new Ambre Solaire from Garnier Institute towardsskin-cancer research. This will be displayed on all advertisements associated with the AmbreSolaire product.Sales ForceWe will add three positions: a Belle Couleur product manager, a Synergie product manager, and

a sales account manager responsible for the Garnier tagged products. [COULD BE COSTPROHIBITIVE IN THIS SMALL MARKET.]The sales force will continue to sell and promote all L'Oreal product lines to our distributors andmaintain our point-of-purchase displays.The sales force will primarily help to achieve the marketing objectives detailed above. In orderto provide extra motivation, we will tie financial incentives for the sales force to meet theobjectives.DistributionWe feel that the key components of this plan will align with our distributor's expectations ofprevious successful L'Oreal product launches. We are introducing the Garnier name, but arepromoting these products under the L'Oreal brand. We also have documented evidence ofconsumer acceptance.Consumer acceptance was documented on a 7 point scale with 7 being most likely to buy.Overall response showed 39% of all participants would certainly buy the Moisturizing Creamand 24% of all participants would certainly buy the antiaging cream.A good percentage of the respondents of the Belle Couleur study said they would buy after theyused the product. [STYLE COMMENT: PIE CHARTS ARE CAN OFTEN BE REPLACEDBelle Couleur Buying Intentions After Use29%30%9%11%21%Certainly buy (5)

Probably buy (4)

Don’t know(3) Probably not (2)Certainly not(1)Moisturizing Cream33.544.555.56All PariticpantsPleniturdeDf.Vd HoogOther BrandAfter trial price notknownAfter tiral priceknownAfter use price notknownAfter use priceknownAntiaging Cream33.544.555.56All PariticpantsPleniturdeDf.Vd HoogOther BrandAfter trial price notknownAfter use price not

knownAfter trial priceknownAfter use priceknown13BY A SINGLE, STRONG SENTENCE. 'FIFTY-NINE PERCENT ARE LIKELY TOPURCHASE.']Lastly, we are supporting this product launch with the appropriate advertising and promotion.As with previous successes, we will support our retailers with strong in-store merchandising.Through the strong presell program detailed above, we expect more product to be distributed todrugstores and supermarkets. [USEFUL TO ADD COLUMNS FOR SPECIFIC PRODUCTCATEGORIES - TABLES TWO AND THREE ANALYZED.]Today One-Year ProjectionSupermarket 25% 30%Independent Drugstore 35% 25%

Drugstore Chain 40% 45%

Conclusion

• L’ORÉAL is the world market leader in cosmetics

• They are very innovative and invest a lot of money in

research and development

• Products are positioned in the high-priced segment because

of their high quality

• They offer well coordinated products for different target

groups

• To keep their strength alive they have to observe their competitors

Recommendations

Observation of the market

• Competition analysis

• Using competitive intelligence to achieve strategically

competitive advantages

• Early market entry

• Growing competition

to ensure the long-term economic success at the market

Bibliography

Websites

www.loreal.com/

en.wikipedia.org/wiki/L'Oréal

www.business-standard.com › Home › The Strategist

www.lorealacademy.com/

www.loreal.co.in/_hi/_in/cosmetic-products.aspx

L'Oreal Paris Skin-Care Products Survey

Part 1

1*    Have you ever used L'Oreal Paris products in the last 1 year?

Yes

2*    How frequent do you use L'Oreal Paris product?

Weekly

3*    In general, how satisfied are you with L'Oreal Paris products?

Neither satisfied nor dissatisfied

4*    Which series of products do you consume the most?

Men Expert

5*    What items of the brand being selected in Question 4 do you use? (Can

choose more than one option)

1. Cleanser

2. Moisturizer

Part 2 Overall comments on competitive advantages and weaknesses of

L¡¯Oreal Pari

How important are the following concerns in selecting a skin care product?

6*    Brand image

Somewhat important

7*    Product Quality

Very important

8*    Product functions

Very important

9*    Price

Very important

10*    Popularity

Somewhat important

11*    What kinds of skin problem you would like to improve? (Can choose

more than one option)

1. Enlarged Pores

2. Acne& Acne Scarring

12*    Do you think the L'Oreal Paris products are able to help you solving the

skin problem selected in previous Question?

No

13*    What made you first purchase L'Oreal Paris skin care products? 

(can choose more than one option)

1. Reasonable price

Do you agree the following items are the main attractiveness of using L'Oreal

Paris products?

14*    Good quaility

Neither agree nor disagree

15*    Offer you a sense of luxury brand value

Somewhat Agree

16*    Products are safe and reliable

Somewhat Agree

17*    Functional

Somewhat Agree

18*    Reasonable price (not too expensive)

Somewhat Agree

Do you agree L'Oreal Paris should improve the following items?

19*    Brand image

Somewhat Agree

20*    Product quality

Somewhat Agree

21*    Product variety

Somewhat Agree

22*    Product promotion

Somewhat Agree

Part 3 Identifying the market positioning of L’Oreal Paris

23*    How do you perceive L'Oreal Paris?

Premium product

24*    Thinking of similar skin care products offered by other companies, how

would you compare L'Oreal products with them?

Somewhat better

25*    What other brands do you prefer when you are choosing the skin care

products?

nivea

Part 4 Questions of identifying the effectiveness of the media26*    How do you know about L'Oreal Paris? (Can choose more than one option)

1. Magazines2. Free Newspaper

27*    Do you think the spokespersons of L'Oreal are representative? Revitalift (Gong Li 鞏俐)White Prefect (Michele Lee 李嘉欣)Derma Genesis (Lee Bingbing 李冰冰)No

28*    Do the spokespersons of L'Oreal motivate you to buy the products?No