CHAPTER-1

INTRODUCTION
1.1 INTRODUCTION

L’Oréal SA engages in the manufacture and sale of beauty and hair products. It operates
through the following segments: Professional Products, Consumer Products, L’Oréal Luxury,
and Active Cosmetics. The Professional Products segment manufactures products which are
used and sold in hair salons. The Consumer Products segment offers beauty and care products
for men and women which are sold in mass market retail channels. The L’Oréal Luxury
segment markets high-end skin care and beauty products in selective retail outlets such as
department stores, perfumeries, and travel retail. The Active Cosmetics segment offers dermo
cosmetic skincare products which are sold in pharmacies and specialist sections of
drugstores. The company was founded by Eugène schueller in 1909 and is headquartered in
Paris, France.

In 1909, Eugène schueller, a young French chemist, developed a hair dye formula

called Auréale. Schueller formulated and manufactured his own products, which he then sold
to Parisian hairdressers. On 31 July 1919, Schueller registered his company, the Société
Française de Teintures Inoffensives pour Cheveux (Safe Hair Dye Company of France). The
guiding principles of the company, which eventually became L’Oréal, were research and
innovation in the field of beauty. In 1920, the company employed three chemists. By 1950,
the teams were 100 strong; that number reached 1,000 by 1984 and is nearly 2,000 today.

Schueller provided financial support and held meetings for La Cagoule at L’Oréal
headquarters. La Cagoule was a violent French fascist-leaning and anti-communist group
whose leader formed a political party Movement Social Révolutionnaire (MSR, Social
Revolutionary Movement) which in Occupied France supported the Vichy collaboration with
the Nazis. L’Oréal hired several members of the group as executives after World War II, such
as Jacques Corrèze, who served as CEO of the United States operation. This involvement was
extensively researched by Michael Bar-Zohar in his book, Bitter Scent.

L’Oréal got its start in the hair colour 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 colour,
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 worldwide research and development centres:

 France: Aulnay and chevilly

 United states: clark
 New jersey
 Japan: Kawasaki
 China: shanghai
 India
From 1988 to 1989, L’Oréal controlled the film company Paravision, whose properties
included the Filmation and De Laurentiis libraries. Studio Canal 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 £562 million.

L’Oréal’s famous advertising slogan is at “Because I’m worth it”. In the mid 2000’s, 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”.

In 1987, during the growth years of the mail order business, L’Oréal and 3 Suisses founded
Le Club des Créateurs de Beauté for mail-order sales of cosmetic products, with brands
including Agnès b., Cosmence and Professeur Christine Poelman among others. In March
2008, L’Oréal acquired 3 Suisse’s stake, taking sole control of the company. In November
2013, L’Oréal announced that Le Club des Créateurs de Beauté would cease activity in the
first half of 2014.

In November 2012, L’Oréal inaugurated the largest factory in the Jababeka Industrial Park,
Cikarang, Indonesia, with a total investment of USD$100 million. 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.

On 11 February 2014 it was announced that L’Oréal has sealed a deal worth €3.4bn to buy
back 8% of its shares from Swiss consumer goods giant Nestle. As a result of the deal,
Nestle’s stake in L’Oreal will be reduced from 29.4pc to 23.29pc while the Bettencourt
Meyers family’s stake will increase from 30.6pc to 33.2pc. Nestle has owned a stake in
L’Oreal since 1974 when it bought into the company at the request of Liliane Bettencourt, the
daughter of the founder of L’Oreal and world’s richest woman, who was trying to prevent the
French state’s intervention in the company. On 20 February 2014, Shiseido agreed to sell its
Carita and Decléor brands to L’Oréal for €227.5 million (USD$312.93 million (2014)). On
18 June 2014, L’Oréal agreed to acquire NYX Cosmetics for an undisclosed price, bolstering
its makeup offer in North America where its consumer-products unit has faltered.”

1.2 INDUSTRY PROFILE:

Cosmetics Market (makeup or beauty products) are mixture of chemical generally used to
enhance the appearance or odour of the human body. Sun care, skin care, hair care,
deodorants, makeup and colour cosmetics, and fragrances are some of the cosmetics products
that are predominantly available and used by individuals. Retail stores including
supermarkets, exclusive brand outlets, and specialty stores amongst others are the major
distribution channels, with online channels gaining popularity among consumers.
There is a considerable rise in disposable incomes over the past decade. The growth in global
economies, changing lifestyles, rising demands of skin and sun care products due to varying
climatic conditions encourages the growth of the market for cosmetics. A shift of preference
towards natural and organic beauty products, particularly in U.S. and European countries,
 fosters the growth of the cosmetics market. Rising demand for natural, herbal and organic
beauty products creates potential opportunities for manufacturers to innovate and develop
new products in accordance to consumer preferences.

1.3 SEGMENT OVERVIEW:

The global cosmetics market is segmented based on category of cosmetics, mode of sale, gender
and geography. The category segment includes skin & sun care products, hair care products,
deodorants, makeup & colour cosmetics and fragrances. Among these products, skin & sun care,
and hair care products are majorly used by individuals and hold considerable amount of
percentage share in global cosmetic products category market. The mode of sale comprises retail
and online sale, where retail mode of sale is further classified into general departmental store,
supermarkets, drug stores and brand outlets. Customers for buying cosmetic products majorly
prefer the retail mode of sale. However, online medium for the purchase of cosmetic product is
observed as a rising trend among customers. Geographically, the global cosmetics market is
bifurcated into North America, Europe, Asia-Pacific and LAMEA.

1.4 MARKET SEGMENT:

The global cosmetics market is segmented as:

1.5 HISTORY OF COSMETICS:

When examining the ancient roots of cosmetics, the most prominent image that appears is that of
Egyptian figures in tombs or on sarcophagi wearing heavy make-up around their eyes. This has
been referred to as ‘kohl’ and is very similar to modern-day eyeliner. Kohl is created from
Galena, an ore that is also used to make lead. Yet, this wasn’t the only cosmetic product that the
Egyptians manufactured. They wore paint on their eyes made from green malachite and
made make-up brushes out of local trees. The elite were believed to have worn chalky powders
as pale skin was a sign of nobility.

Elizabethan cosmetic era is famous for glorifying the pale pallor of skin. If you had pale skin,
then this was a sign of nobility and superiority. Rich people used a compound called Ceruse
made from white lead and vinegar, which was actually poisonous. Queen Elizabeth, I was
well-known for wearing this. In addition to Ceruse, women often applied makeup to their
cheeks to show they were healthy. All of this make-up took its toll on the women that wore it,
resulting in spots and wrinkles, as well as scarring and even death from lead poisoning.
Advancements in industry, chemistry and medicine in 18th and 19th century brought
significant advancements in cosmetics. They were still not accepted fully, but new Victorian
style that arose in 19th century brought the cosmetic-centric fashion that demanded that all
“ladies” must present themselves as beautiful and fragile, with elaborate clothes and precisely
defined facial features. For that purposes, eye shadows, lipsticks, nail polish and other
products started gaining traction.

Early 20th century was without a doubt dawn of the modern cosmetic industry. Rise of film,
photography, fast communications, countless innovators, and support from large industrialists
managed to introduce cosmetic products to every household in the western world. During
first few decades of 20th century, cosmetic companies (many who would soon become
international powerhouses) introduced solid lipsticks, lip gloss, mascaras, eyeliners
(propelled to mass popularity by the incredible discoveries beneath Egyptian pyramids),
suntans, hair colours, gels and powders of all types. With such advancements, it was not
strange to see that old Victorian styles were soon forgotten. New international fashion moved
rapidly after 1930s, introducing new styles with each passing decade.

Large departure from traditional styles happened in 1960s and 70s with the introduction of
hippie movement (natural-looking cosmetic), punk (darker and sinister style that aimed to
shock) and glam (extravagant and colourful style). From them, many new styles emerged that
have changed and moulded fashion to its current state.

1.6 THE INDIAN COSMETIC INDUSTRY SCENARIO:

The Indian cosmeceutical and cosmetics industry has an overall market standing of about
USD 6.5 billion from a global market of USD 274 billion. The rising awareness of beauty
products, increasing premium on personal grooming, changes in consumption patterns and
lifestyles and improved purchasing power among women are expected to boost the industry.
The market will maintain healthy growth due to rising preference for specialised cosmetic
products such as organic, herbal and ayurvedic products. Principal areas that are expected to
grow include colour cosmetics, fragrances, specialised skin care and make-up cosmetics. The
Indian industry is growing rapidly at a rate of 13-18 percent, more than that of US or
European markets.

The Indian cosmetics market which traditionally a stronghold of a few major Indian players
like lakme and ponds has seen a lot of foreign entrants to the market within the last decade.
India has a very price sensitive market and the cosmetics and personal care product
companies, especially new entrants have had to work out new innovative strategies to suit
Indian preferences and budget to establish a hold on the market and establish a niche market
for them.

1.7 PRESENT STATUS

Market scenario:

Cosmetic is designed to be used or applied to enhance the beauty and physical appearance of
an individual. Cosmetic products are of several types, such as skincare, hair care, nail care,
colour cosmetics, and more. Primarily, cosmetic products are manufactured from artificial
sources. However, increasing consumer acceptance of naturally derived sources has enforced
the manufactures to use natural materials in the production of cosmetic products. The Global
Cosmetic Products Market size is estimated to reach USD 365.27 billion and record a CAGR
of 5.75% by the end of 2024.
The global cosmetic products market is anticipated to be driven by several factors. Rising
consumer focus towards grooming and personal appearance is considered to be a significant
factor for the rising growth of cosmetic products at a global level. Rapid urbanization,
increasing per capita disposable income of the consumers are also considered vital drivers in
the global cosmetic products market.
The global cosmetic products industry has witnessed massive growth over the last few years.
The cosmetic manufacturers are collaborating with E-commerce companies in order to reach
maximum customers to increase the customer base. Apart from that, key players in the
cosmetic products market are emphasizing in the innovative marketing strategies in order to
improve consumer awareness regarding the new product launches. Additionally, the demand
for organic cosmetic products has been rising at a high pace in the developed economies
owing to the increasing consumer awareness regarding the adverse effects of synthetic
ingredients. The growing trend of organic cosmetic products has turned out to be a significant
factor for the high growth of the global cosmetic products market.

CHALLENGES FOR COSMETIC INDUSTRY:

 More options for the customer

 Stress on the quality

 Price plays important role in mass market

 Need for cost effectiveness

 Innovative packaging