L’Oreal – Introduction

History

In 1907, a French chemist Eugène Schueller developed a hair dye formula called Auréale. He

manufactured his products and then sold them to Parisian hairdresser. In 1919, Schueller

registered his own company named the Société Française de Teintures Inoffensives pour

Cheveux (Safe Hair Dye Company of France). The company’s name was eventually changed to

L’Oreal.

The portfolio of L’Oreal comprises brands like L’Oréal Paris, Garnier, Maybelline, Ralph

Lauren, Kiehl's, The Body Shop, Vichy etc.

L’Oreal operates in over 130 countries, employing 72,600 people, 24% of which of work in

France. It operates 42 manufacturing plants all over the world. L’Oreal has 515 patents.

Commitment to excellence; struggle for innovation and quality; seeking knowledge, imagination

and creativity are some organizational values passed to every employee of the organization.

Safety of the products is the highest priority of the company.

Global Presence

Present in 130 countries

27 international brands

72,600 employees worldwide

A turnover of 22.5 billion euros

Sales growth is 16% faster than global beauty market

3,817 researchers and employees in Research and Development worldwide

18,000 employees in operations worldwide

22 research centers and 17 evaluation centers worldwide

42 factories and 145 logistics sites worldwide

5 management development centers (training centers) worldwide

L'Oreal – Today

L’Oreal is a leading brand in the cosmetic industry. L'Oreal has been delivering excellence in the

cosmetic industry through its extensive Research and Development that leads to continuous

production of innovative and high quality products – the reason of L’Oreal’s unmatched success.

L’Oreal has a diverse range of products catering to the needs of millions of customers

worldwide.

L'Oreal Market Summary (April, 2012)Forbes Lists L'Oreal as:#25 World's Most Powerful Brands;#34 Innovative Companies (#26 in 2011);#209 Global 2000;#341 in Sales;#185 in Profit;#670 in Assets; and#92 in Market value.

With the recent recession, like majority of top brand L’Oreal has faced some tough times which

has lead the brand to make some tougher decision. There are four major concerns of that are to

be catered in the coming years to maintain the top brand status:

Consumer Awareness: the consumer of the 21st century is more aware regarding the

side-effects of the cosmetic products. The new key word in the cosmetic industry if

“organic products”. With the competition focusing on the developing the organic

products, it is a major objective of L’Oreal in coming years.

Going Green: ‘going green’ is making waves in all sectors of society especially politics.

With rising level of awareness, people are more conscious of their environment. They

prefer brands with who deliver the same message by using environment friendly

production methods.

Broadening Consumer Base: in the developing markets there is a 53% untapped

population. Catering them is a major step towards broadening of consumer base. The

target is to gain one billion new customers in these markets.

Restructuring: with the ever growing network globally, the network of L’Oreal has

loosened creating a massive distance between the higher management – the shareholders

and retailers – distributors. A compact and wee-linked structure is required.

Business Model

Four key aspects of beauty business model:

Universal

At L’Oreal, our operation HR, marketing and sales approaches are design to support

universalization. While we maintain global brand equity across countries, we are able to find

local developments and adapt to local distribution. Our daily challenges are to develop

unsurpassed knowledge of our consumers, to develop geo-cosmetics science, to identify geo-

cosmetics science, to identify local ideas with global potential and to conquer new territories.

Today, new markets account for 38.3% of our annual sales.

Innovative

Innovation is the DNA of our company. Every single function aims to innovate in their field. The

company structures itself to foster innovation. For example, we have created regional hubs in key

markets for Research & Innovation, Marketing Development and Operations to facilitate local

innovation and inspire global innovation.

Nimble

Beauty is a fast moving business. Trends change quickly. Our company is able to adapt and be

proactive in all fields: research, manufacturing, sales, marketing, HR… At L’Oreal we are

always on the lookout for new opportunities: new products, categories, markets, distribution, e-

business…

Entrepreneurial

To be high performing and nimble, our different brands are organized like a flotilla of speed

boats benefitting from the means of a giant cruiser. L’Oreal’s uniqueness is to cover all channels

of distribution, all beauty categories and all consumer segments, with dedicated brands. Each

business unit is autonomous and operates with different business model and with its own specific

profitability logic.

Product Categories

L’Oreal has divided its products to categories the large and diverse consumer-base it caters to.

Consumer Products

L’Oreal has targets the general masses all around the globe through retail distribution; providing

them with high quality products with a diverse price range.The technology oriented approach of

L’Oreal brings innovative and reasonably priced products for the consumers through its retail

services. It includes hair colours, hair care products, skin care products, make-up and perfume

products available at the supermarkets, hypermarkets, and cosmetic stores. The Division's 5

international brands are L’Oreal Paris, Garnier, Maybelline New York, Softsheen.Carson, Essie

and Le Club des Créateurs de Beauté.

Professional Products

The Professional Product category caters to the professional hairdresser globally. These

professional products are designed to meet the requirements of professional treatments of saloon

customers. This division ensures providing the saloon professionals with latest technology

equipment and products with proper training. The Professional Products Division of L’Oreal is

made up of four different brands: L’Oreal Professionnel, Kérastase, Redken 5th Avenue NYC

Matrix, Pureology, Shu Umeura, Mizani and Essie.

Luxury Products (L'Oreal Luxe)

These prestigious brands have excellent and top products that are designed for the niche

customers. Clients of selective retail outlets (department stores, perfumeries, travel retail outlets,

and the brands own boutiques) receive personalized advice at the point of sale, enabling them to

choose the products best suited to their needs. Lancôme, Helena Rubinstein, Biotherm, Shu

Uemura and Kiehl’s offer premium products known for their innovation, performance and

quality. The Luxury Products division houses also some of the world's top perfume brands:

Giorgio Armani, Ralph Lauren, Cacharel, Paloma Picasso, YveSaintLaurent, Diesel, Victor &

Rolf, Clari Sonic and Guy Laroche.

Active Cosmetic

These are the dermocosmetics cosmetic products available at pharmacies, drugstores and medi-

spas. These products are tested and approved by health professionals – dermatologists and

cosmetic doctors. The Department’s these brands, Vichy, La Roche Posay and Innéov,

SkinCeuticals, Roger & Gallet, and Salnoflore offers skin care, sun care, and hair care and make-

up products.

Some information about L’Oreal Product Review* is listed below:

Professional Products Division Sales – Western Europe 35.5%, North America 36.2%, and

New Markets 28.3%;

Consumer Products Division Sales – Western Europe 38.5%, North America 22.7%, and New

Markets 38.8%;

Luxury Products Division Sales – Western Europe 32.9%, North America 22.6%, and New

Markets 37.5%;

Active Cosmetics Division Sales – Western Europe 54.3%, North America 9%, and New

Markets 36.6%.

*Henderson R.,

Johnson R.

Structure, Mission, Vision and Culture

Structure

L'Oreal Brands

Board of Directors

Executive Committee

Vision and Mission

Vision

“Ordinary to extraordinary”

Mission

L’Oreal, a brand symbolizing excellence (7), aims to continuously improve the quality of

cosmetic products (2) for its female customers (1) worldwide (3) by using innovative quality

enhancement techniques (4) thus gaining and maintaining the number one cosmetic brand status

(5). L’Oreal works for women empowerment (6) through its social ventures (8); stands for their

self-confidence; and strives to better their lives.

Organizational Culture

Entrepreneurial

At L’Oreal, managers are not just managers but they have much bigger role to play in the

organization and are given opportunities to become entrepreneurs by having full freedom to

explore new ideas, be innovative, implement creative strategies, take risks and be who they are.

Flexible

L’Oreal gives flexible environment to employees; which is necessary tool to achieve excellence

in their every action. In this dynamic industry, open-mindedness is the stepping stone for

innovation.

Passionate

L’Oreal nurtures a passionate attitude in employees towards its products. With passion,

employees aim to work more diligently towards their goals as believe in the product, job and

company. Every employees input matters; their ideas, strategies and objectives lead to acieve

objectives and goals of the company.

Strategic and Practical

L’Oreal is a platform that gives global exposure to its employees. At L’Oreal, every employee is

streamlined with the vision and mission of the company. They all know where they want to see

their brand and how to achieve that particular goal.

People-oriented

At L’Oreal there is support system within the company through which employees are inspired,

energized and facilitated. It helps them develop and nurture their personalities and play their part

in building L’Oreal image and network.

Open

Employees are encouraged to talk freely about their projects and ideas even with the top

management. People usually are not comfortable doing it in an informal setting but the

environment provided to them is friendly which puts them at ease.

Focused

L’Oreal has loose structure and job description so employees need to prioritize their work and

have to say no to upcoming projects. Employees have to be fully focused towards the projects

and products they take up. They are required to put in all their effort and energy and make them

happen.

Marketing

L’Oreal is drawing up strategies to sustain its growth momentum in India and Pakistan. To reach

out to a wider audience, L’Oreal is now sharpening its focus on mass market strategy in

competitive markets. The emergence of a large middle class is obvious. L’Oreal is creating

smaller packs to go deeper in India and Pakistan. At affordable prices, consumers can now get

high-end products. The company has introduced its brand ‘Garnier Colour Naturals’ in small

economy packs and single use packs.

Over the years L’Oreal has aimed to encourage women to view beauty in a fun, affordable and

generous manner. L’Oreal now targets the young affluent middle class females (as mentioned in

the ‘opportunities’ of EFE and SWOT), especially those with graying hair; and also maintains

some effort in targeting the masses. It saw a need to target this new untapped market for

maximum profits as it not only possessed the purchasing power that masses lacked, but more

critically a modernized mentality that made these people more receptive to purchasing L’Oreal’s’

more luxurious and expensive products. While retaining their core values of thriftiness, the

young middle class were more willing to spend on luxuries and formed the heart of

transformation of consumer spending in India and Pakistan.

L’Oreal also target women that sought benefits from using its products. Since there was

previously no product that solved women’s hair graying problems, L’Oreal introduced

Excellence: Crème that promised additional benefits apart from just dying of hair. It did not

damage hair like henna or ammonia but even promised to strengthen it. The young middle class

fit into this segment well because unlike their older predecessors, who did not mind using

products that damaged their hair as long as they were cheap due to monetary problems, these

women were more educated and concerned for the need to have healthy beautiful hair, as well as

more equipped with the purchasing power to do so. Cheap harmful products would not appeal to

them as much as high quality L’Oreal products which justified their higher price with higher

benefits.

The four words "Because You're Worth It" have revolutionized the way women think about

themselves over the past four decades. Reflecting an extraordinary journey that has accompanied

women's empowerment over the past four decades, this legendary signature remains, more than

ever, modern, inspiring and faithful to all women's aspirations. L'Oreal partnered with Femina to

host the very first L'Oreal Femina Women Awards in May 2012, which honored the most

accomplished women in the fields of art, music, education, business, social activism and cinema

for their talents, grace and ability to inspire. Brand ambassadors L’Oreal Paris Sonam Kapoor

and Aishwarya Rai Bachchan graced the event and truly believes that, whatever your age,

gender, ethnicity or look, "you're worth it".

Competition

Revlon

Revlon is a global color cosmetic, hair color, beauty tools, fragrances, skincare, anti-perspirant

deodorants and beauty care Products Company whose vision is Glamour, Excitement and

Innovation through high-quality products at affordable prices. Revlon® is one of the strongest

consumer brand franchises in the world. Revlon’s global brand portfolio includes Revlon® color

cosmetics, Almay® color cosmetics, SinfulColors® color cosmetics, Pure Ice™ color cosmetics,

Revlon ColorSilk® hair color, Revlon® beauty tools, Charlie® fragrances, Mitchum®Anti-

perspirant deodorants and Ultima II® and Gatineau® skincare.

Revlon competes with beauty product companies such as L'Oreal, Avon products and Wella.

The company has a highly leveraged balance sheet and much lower annual turnover compared to

its competitors, and this constrains it from spending more on R&D and marketing, leading to an

adverse impact on its market share.

Wella

Wella is a German company, and one of the world’s largest cosmetics suppliers. Founded in

1880 by Franz Stroher, with its headquarters in Darmstadt, Germany, the company is represented

in over 150 countries. It directly owns three business divisions - Professional, Consumer,

Cosmetics and Fragrances.

Industry Analysis

L’Oreal is a leading player in the beauty and skin care market and competes with companies like

Revlon, Avon, Proctor & Gamble and Estee Lauder. With its global presence and a broad

portfolio of brands ranging from professional salon brands such as Kerastase, Redken; mass

retail brands such Garnier, L’Oreal Paris and Maybelline; and luxury brands such as Lancome

and Biotherm; L’Oreal is well placed to benefit from the gradual recovery in macroeconomic

conditions. Moreover it is in a great position to gain from rising income levels and double-digit

growth rates in emerging economies such as China, Pakistan and India. Within hair care, the

second largest segment with beauty care, L’Oreal (at 22%) market share comes a close second to

Procter & Gamble, with double the share of Unilever, the third largest player in the segment.

L’Oreal spends the most on R&D at 3.5% of its revenue compared to Revlon at 1.7%. Since,

launching new and innovative products is crucial to growing or even maintaining its share in

beauty care, L’Oreal is outspending its competitors such as Revlon, Avon and Wella among

others, ensures its leadership in cosmetics market.