The case discusses in detail the brandmanagement strategies of the global cosmeticsindustry leader, L'Orèal, over the years. L'Orèal's brand portfolio included brands from differentcultural backgrounds like Europe, America andAsia.The case explores L'Orèal's expansion of its business through the acquisition, makeover andworldwide marketing of relatively unknown brands from different countries. In addition, thecase takes a look at the way in which the companyconsciously worked towards straddling all thesegments of the cosmetics business and buildingsuccessful brands in each of these segments.
Issues:
The brand management strategies of a large cosmetics company with a global presence and alarge portfolio of brands.
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In November 2002, L'Oréal, the France-basedleading global cosmetics major, received the'Global Corporate Achievement Award 2002,' for Europe by 'The Economist Group.'Awarded by the publisher of the world's leadingweekly business and current affairs journal 'TheEconomist,' the honor was given in appreciationand recognition of the 'depth, breadth, anddiversity of L'Oréal's management team.'In the same month, L'Oréal's Chairman and CEO,Lindsey Owen Jones (Jones) was honored withthe 'Best Manager of the Last 20 Years' title bythe French Minister of Finance and Economy,Francis Mer.This award instituted by the leading French business publication, Challenges, was in recognitionof Jones' outstanding achievements in transforming L'Oréal from a French company into a global powerhouse.Jones also received the prestigious 'Manager of the Year 2002' award from the French PrimeMinister, 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 NouvelEconomiste.These honors were not just a 'cosmetic' eulogy; L'Oréal deserved them, for it was the onlycompany in its industry to post a double-digit profit for 18 consecutive years (Refer Exhibit I for L'Oréal's key financials).
L'oréal
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L'Oréal, which had operations in 130 countries in the world, posted a turnover of ¼ 13.7 billion
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in 2001. The company recorded a 19.6% and 26% growth in profit in 2001 and 2002 (half-yearlyresults), respectively.Commenting on L'Oréal's performance, Jonessaid, "At L'Oréal, we are 50,000 people who sharethe 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'OréalParis, Maybelline, Garnier, Soft Sheen Carson,Matrix, Redken, L'Oréal Professionnel, Vichy, LaRoche-Posay, Lancôme, Helena Rubinstein,Biotherm, Kiehl's, Shu Uemura, Armani, Cachareland Ralph Lauren, L'Oréal was the only cosmeticscompany in the world to own more than one brandfranchise and have a presence in all thedistribution channels of the industry (Refer Exhibit II for a note on the global cosmeticsindustry).
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In 1907, Eugene Schueller (Schueller), a French chemist, developed an innovative hair color formula. The uniqueness of this formula, named Aureole, was that it did not damage hair whilecoloring it, unlike other hair color 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 deTeintures 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...
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By the 1970s, L'Oréal's products had becomequite popular in many countries outside France.Jones' entry in the late-1970s marked the beginning of a new era of growth for thecompany.During 1978-1981, Jones functioned as the headof L'Oréal's Italian business. Due to hisexceptional performance, Jones was given theresponsibility of looking after US operations (thecompany's most important overseas operation)during 1981-1984. Managing the company's USoperations was not an easy task...
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One of the first brands that L'Oréal bought in line with the above strategy was the Memphis (US) based Maybelline. The company acquired Maybelline in 1996 for $ 758 million.Buying Maybelline was a risky decision becausethe brand was well known for bringing outordinary, staid color lipsticks and nail polishes.In 1996, Maybelline had a 3% share in the US nailenamel market. Maybelline was not a well-known brand outside the US.In 1995-96, only 7% of its revenues ($350million) came from outside the US.L'Oréal decided to overcome this problem bygiving Maybelline a complete makeover andturning it into a global mass-market brand whileretaining its American image... Maybelline's success proved Jones' philosophy of creating successful cosmetic brands by embracingtwo different yet prominent beauty cultures(French and American). Commenting on this, GuyPeyrelongue, head of Maybelline, Cosmair Inc.,US Division, said, "It is a cross-fertilization."L'Oréal followed this strategy for the other brandsit acquired over the years, such as Redken (hair care), Ralph Lauren (fragrances), Caron (skin care
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