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 Analysis
1. 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 Analysis
1. 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,
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 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 in
Paris, 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-
edge
technology with a portfolio of well-known brands that answer all beauty needs and
are
distributed 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
benefit
from formulas specifically adapted to the needs of men and women worldwide,
within each
market or distribution circuit that is present.
L'Oréal India has over 600 employees and has a strong track record with consistent
double
digit 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 euros
Finance
- 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
after
minority interest.
(2) Dividend to be proposed to the Annual General Meeting of Shareholders on
April 27th
2009
Operations
 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 INDIA
Total beauty care market Beauty
services
Rs 5,070 crores 87%
Current Annual growth rate
25%
 L’Oreal currently markets L’Oreal professional, Matrix and kerastase all three
offering
hair care products. It covers over 15000 salons, with L’Oreal professional having
tieups
with 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
no
exclusive partnerships.
 During next three years, L’Oreal will target entering 30000-40000 salons as India
is
the fastest growing market.
CUSTOMER BASED BRAND
EQUITY
BUSINESS STRATEGY
their strategy for leadership is based on continuous investment in rigorous scientific
research
and development. This enables the brands to deliver products which are innovative,
highly
effective, practical and pleasant to use, and which are manufactured to the most
demanding
standards of quality and safety. L’Oreal aim for excellence, and constantly challenge
ourselves and our methods. They place great value on honesty and clarity: their
consumer
advertising is based on proven performance and scientific data. L’Oreal are
committed to
building strong and lasting relationships with their customers and our suppliers,
founded on
trust and mutual benefit. L’Oreal do business with integrity: L’Oreal respect the laws
of the
countries 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
against
corruption. L’Oreal deliver long-term, sustained shareholder value by protecting and
making
the most effective use of company assets.
ETHICS
THE CODE OF BUSINESS ETHICS
Our 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 Business
Ethics applies to all employees of the L'ORÉAL Group and its subsidiaries
worldwide. It also
concerns all Officers and Directors of the L'ORÉAL Group and its subsidiaries. Each
employee
receives a personal copy.
The Code of Business Ethics was drafted with the help of employees from 22
countries who
took 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 and
women around the world realise that aspiration, and express their individual
personalities to
the full. This is what gives meaning and value to our business, and to the working
lives of our
employees.
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 you
build a strong brand?’ To answer these questions, this section introduces the
customer-based
brand equity (CBBE) model. This model incorporates theoretical advances and
managerial
practices in understanding and influencing consumer behaviour. Although useful
perspectives
concerning brand equity have been put forth, the CBBE model provides a unique
point of view
as to what brand equity is and how it should be built, measured and managed. The
CBBE
model approaches brand equity from the perspective of the consumer – whether this
be an
individual or an organization. Understanding the needs and wants of consumers and
organizations and devising products and campaigns to satisfy them are at the heart of
successful marketing. In particular, two fundamental questions faced by marketers
are: ‘What
do different brands mean to consumers?’ and ‘How does the brand knowledge of
consumers
affect their response to marketing activity?’
The basic premise of the CBBE model is that the power of a brand lies in what
customers
have learned, felt, seen and heard about the brand as a result of their experiences. In
other
words, the power of a brand lies in what resides in the minds of customers. The
challenge for
marketers in building a strong brand is ensuring that customers have the right type of
experiences with products and services and their accompanying marketing
campaigns so that
the desired thoughts, feelings, images, beliefs, perceptions and opinions become
linked to the
brand. Customer-based brand equity is defined as the differential effect that brand
knowledge
has on consumer response to the marketing of that brand. A brand is said to have
positive
customer-based brand equity when consumers react more favourably to a product
and the
way it is marketed when the brand is identified than when it is not (eg, when the
product is
attributed to a fictitious name or is unnamed). Thus, a brand with positive customer-
based
brand equity might result in consumers being more accepting of a brand extension,
less
sensitive 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
negative
customer-based brand equity if consumers react less favourably to marketing activity
for the
brand 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, then
the brand name product is essentially a commodity. Competition, most likely, would
then be
based on price. Second, these differences in response are a result of consumers’
knowledge
and experience of the brand. Thus, although strongly influenced by the marketing
activity of
the 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 in
perceptions, preferences and behavior related to all aspects of the marketing (eg,
choice of a
brand, recall of copy points from an ad, actions in response to a sales promotion or
evaluations of a proposed brand extension). Brand Briefing 2.5 provides a detailed
account of
these. The simplest way to illustrate what is meant by customer-based brand equity
is to
consider some typical results of product sampling or comparison tests. For example,
with
blind taste tests, one group of consumers samples a product without knowing which
brand it
is, 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 same
product. For example, Larry Percy reports the results of a beer-tasting that showed
how
discriminating consumers could be when given the names of the well-known brands
of the
bee
The following table depicts our product-mix width and product-line length:
PRODUCT-MIX WIDTH
SKIN CARE HAIR CARE SUNSCREEN
Product- 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 brown
shades of colorant will not be two of them . We will look into a future introduction
when a
reformulation for extra reflections and lightening effects is more feasible.
Product Positioning Statement
Plenitude "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 12.95
Recital 14.95
Synergie 9.95 to 19.95
Plentitude 11.95 to 21.95
Ambre Solaire 10.95
The marketing research for Belle Couleur shows buying intention generally
increased after the
participants were told the price. We have kept the suggested pricing as indicated in
the study.
Certainly buy
(5)
Don’t know(3)
Certainly
not(1)
0
10
20
30
40
50
60
Belle Couleur Buying Intentions
Price Unaware
Price Aware
10
[STYLE PREFERENCE: I GENERALLY FEEL THAT THREE DIMENSIONAL
GRAPHS
ARE MORE CONFUSING THAN TWO D. SIDE BY SIDE BARS MIGHT BE
BETTER OR
LINES AS YOU HAVE BELOW. IT IS, HOWEVER, A VERY GOOD IDEA TO
PLOT TO
SHOW 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.
Promotion
We will use a pull marketing strategy directed at end users. We will market the
benefits of the
products 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 is
40% of the Dutch population and they are the heaviest consumers of cosmetics and
toiletries. In
this competitive market it is very difficult to persuade women to switch brands, so
we want to
ensure our future by targeting the young buyer to use the Synergie and Bell Couleur
products
specifically [FOR THEIR FIRST USE OF THESE PRODUCT CATEGORIES. WE
DON'T
HAVE ANY INFORMATION ABOUT WHO INFLUENCES THEIR FIRST
PURCHASE -
MOTHER, FRIENDS, OR RETAIL CLERKS?] .
Advertising
We 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
Garnier
Institute. "No longer should consumers question which Company to buy skin care or
hair
coloring products from, now they just have to decide which L'Oreal product to
purchase!" [I
GUESS YOU WOULDN'T OBJECT TO HIRING AN AD AGENCY AND USING
THEIR
COPY WRITERS?]
2. Plenitude and Recital will focus on consumers over 25 years of age. Advertising
will begin
to 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 new
introduction of products to inform people of how L'Oreal is growing and changing to
meet their
needs. Billboards, television, radio, and display signs will be primary vehicles for
this. About
two weeks before introduction, our ads will change from stressing our company
image to
stressing product line imaging. We will run specific ads for Synergie, Belle Couleur,
and Ambre
Buying Intentions Moisturizing Cream
3
3.5
4
4.5
5
5.5
6
After trial
price not
known After use
price not
known
After tiral
price
known
After use
price
known
All Pariticpants
Pleniturde
Df.Vd Hoog
Other Brand
Buying Intentions Antiaging Daycream
3
3.5
4
4.5
5
5.5
6

After trial
price not
known
After use
price not
known
After trial
price
known
After use
price
known
All Pariticpants
Pleniturde
Df.Vd Hoog
Other Brand
11
Solaire stressing their benefits to the consumers. This specific part of the campaign
will
primarily use magazines, radio, and other mediums targeted at the under 25 aged
crowd. After
product 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
SHARE
FOR EXISTING PRODUCTS. CENTRAL THOUGH IS YOUR RESULTING
OVERALL
MARKETING SHARE VERSUS ANY INCREASED COSTS. THIS CANNOT BE
EVALUATED WITH CASE FACTS.]
Packaging for Plenitude and Recital will remain the same. The packaging for
Synergie and Belle
Couleur will be bold and trendy to attract our younger segment. Ambre Solaire will
also
leverage the packaging ideas from these products. We will trademark our new
Garnier Institute
logo with the words "From the Garnier Institute of L'Oreal".
From the
Garnier
Institute
Of
L’Oreal
This logo will be used on packaging, labeling, etc. for the Synergie, Belle Couleur,
and Ambre
Solaire products. For our television and radio advertisements, we are considering
using a short
audio jingle to better brand these products [WHY ISN'T IT INCLUDED HERE?
CAN'T YOU
SING FOR YOUR GRADE?]. This would be similar to the angle that Intel is using
for their
Pentium chips.
Sales Promotions
One of our most important promotions is the point-of-purchase display. They will
entice people
to our products and excite our distributors. In addition, we will offer the following
sales
promotions: [COULD RELATE THIS AND PREVIOUS PLAN MORE
DIRECTLY TO THE
CUSTOMER PURCHASE PROCESS - AWARENESS - TRIAL - REPEAT -
LOYALTY]
1. A contest will be held where the winner and a companion will spend a romantic
week in
France, the country where L'Oreal was founded [AT A BEAUTY SPA?]. To be
eligible, you
must purchase a L'Oreal product and fill out the accompanying postage-paid card.
The card
will ask two simple questions: did you like this product? Why or why not? This card
will
not 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 of
Ambre Solaire. If a person purchases Belle Couleur, we can enclose a mail in
certificate for
a free container of Synergie facial cream. (Again, we could use the mail in as an
opportunity
to do more market research).
3. In magazines and newspapers, we will offer coupons for Belle Couleur, Synergie,
and Ambre
Solaire products.
Public Relations
We 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 Dutch
market. We will include key facts including our additions to the employment rolls
and
charitable contributions (see item number three below).
12
2. We will look to host and/or sponsor events that appeal to our target markets. For
our more
mature 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, we
will look into sponsoring events that will appeal more to them - something along the
lines of
a home and/or garden show. We also are excited about creating Cosmetics Shows
geared
towards 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 a
mall, 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
towards
skin-cancer research. This will be displayed on all advertisements associated with
the Ambre
Solaire product.
Sales Force
We 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
COST
PROHIBITIVE IN THIS SMALL MARKET.]
The sales force will continue to sell and promote all L'Oreal product lines to our
distributors and
maintain our point-of-purchase displays.
The sales force will primarily help to achieve the marketing objectives detailed
above. In order
to provide extra motivation, we will tie financial incentives for the sales force to
meet the
objectives.
Distribution
We feel that the key components of this plan will align with our distributor's
expectations of
previous successful L'Oreal product launches. We are introducing the Garnier name,
but are
promoting these products under the L'Oreal brand. We also have documented
evidence of
consumer 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 Cream
and 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 they
used the product. [STYLE COMMENT: PIE CHARTS ARE CAN OFTEN BE
REPLACED
Belle Couleur Buying Intentions After Use
29%
30%
9%
11%
21%
Certainly buy (5)

Probably buy (4)

Don’t know(3)
Probably not (2)
Certainly not(1)
Moisturizing Cream
3
3.5
4
4.5
5
5.5
6
All Pariticpants
Pleniturde
Df.Vd Hoog
Other Brand
After trial price not
known
After tiral price
known
After use price not
known
After use price
known
Antiaging Cream
3
3.5
4
4.5
5
5.5
6
All Pariticpants
Pleniturde
Df.Vd Hoog
Other Brand
After trial price not
known
After use price not
known
After trial price
known
After use price
known
13
BY A SINGLE, STRONG SENTENCE. 'FIFTY-NINE PERCENT ARE LIKELY
TO
PURCHASE.']
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 to
drugstores and supermarkets. [USEFUL TO ADD COLUMNS FOR SPECIFIC
PRODUCT
CATEGORIES - TABLES TWO AND THREE ANALYZED.]
Today One-Year Projection
Supermarket 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 media
26*    How do you know about L'Oreal Paris? (Can choose more than one option)
1. Magazines
2. 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