L'Oral in China

MARKETING STRATEGIES FOR TURNING AROUND CHINESE LUXURY

COSMETIC BRAND YUE SAI
Topics Of Discussion

Specific topics discussed include:

1. Functional vs. emotional branding.
2. Effects of country of origin, national pride, traditions
and cultural beliefs in today's China.
3. Marketing "masstige" (affordable luxury) brands. How
to leverage brand heritage while staying current and
relevant in a fast-moving market.
Global Beauty Market

Theglobal beauty market is usually divided into five main business

segments: skincare, haircare, color (make-up), fragrances and
toiletries.

In recent years as Generation Y has really entered the job market,

they have become abig driver of the cosmetics market; especially in
the United States.

Blemish Balm or Beauty Balm (BB) and Color Correcting (CC) creams
grew in popularity over the past few years for this very reason they
provide both cosmetic and skin care benefits.

Estimated to Reach ~$600 Billion by 2020

Case Synopsis

Yue Sai is L'Oreal's troubled Chinese luxury brand.

Alexis Perakis-Valat, the new CEO of L'Oral China, has made it a

point of honor to turn the brand around. He has asked Stphane
Wilmet, the brand's new general manager, to come up with a
turnaround plan that will restore L'Oral's reputation in China as
the world's best cosmetic marketer. Stphane Wilmet and
Ronnie Liang, Yue Sai's marketing director, must reconsider
everything from Yue Sai's value proposition down to its media,
price, product, and distribution strategies.
Skin care market is 35% of global cosmetics market
TCM Traditional Chinese Medicine
Chinese Cosmetics Market
Attitudes and Usage of Cosmetic Products

For decades cosmetics was considered as counter revolutionary.

Chinese women grew up without even learning about cosmetics from
their mothers.
1992 Yue Sai had to educate Chinese consumers about beauty
products and routines.
It also created an open minded male market for consumers: Chinese
male were more open for skin care then women 70% sales of Loreal
men expert line is from China.
Chinese women are least interested in color cosmetics and perfume
was purchased for gifts.
China is primarily skincare market, make up comprises only 10-15% of
cosmetics market.

Chinese consumer feels pride on its heritage, culture and traditions.

Cultural beliefs pertaining to food, health and medicine had never been
lost.
Rising Chinese Confidence

Rapid industrialization has caused smog, polluted air and

water due to which consumers have started using skin
care products.
Consumers started taking interest in Japanese beauty
brands like Shiseido (and its Chinese brands like Aupers
and Urara)
With recent developments, Chinese consumer is proud of
its nation, taking interest in local brands and heritage.
Consumer of T1 cities associated foreign brands with
luxury while it was unclear to how to position brands toT2
and T3 cities.
Shang Xia a Chinese brand of Hermes focusing local heritage and
craftsmanship is considered a milestone in Chinese brands.
L'Oral China

L'Oral in China is the second largest beauty and skin care player after P&G.
L'Oral is present in China with almost all of its brands except Body Shop as
Chinese regulation requires cosmetics to be tested on animals.
In 2008 China was the 7th largest market for L'Oral,and now it is 3rd largest.
Lancome and Maybelline are number 1 in their respective categories.

L'Oral

Luxury Consumer
Product Product
Division Division

Maybellin
Rubinstei Shu Georgio L'Oral
Lancome Biotherm Helena Kiehls e New Garnier Yeu Sai
n Uemera Armani Paris
York
Yue Sai

First cosmetic brand of China Yue Sai was

founded in 1992 by Madam. Yue Sai Kan, a tv host,
socialist and entrepreneur.
Her insights were beauty standards of China are
different of other countries.
She wrote a first book ever published in modern China,
trained beauty advisors and soon red lip stick became
icon for Yue Sai.
Yue Sai sold her brand to Coty, the new York based
fragrance brand.
In 2004 L'Oral acquired Yue Sai
Post Acquisition Time

Post acquisition years were less smooth as anticipated.

Yue Sai had wide distribution (more than 1,000

stores across different channels)
Strong sales
Historical track record
Factory and R&D facility

Old aged consumer base

Sales started to fade
Lost its innovation
How to fit into Yue Sai into L'Oral portfolio

Strategy
Because of its strong distribution and moderate prices, Yue Sai was placed in Consumer Product
Division (CPD)
CPD tried to apply marketing strategy that has proven record world wide: technology and
celebrity endorsement.
The Luxury Division Years (2006-2010)

Chinese Loreal Paris strategy did not produce the intended results for
Yue Sai.
Brand was constantly losing sales and awareness
In 2006, Yue Sai was transferred to Luxury Product Division.
LPD immediately started promoting Yue Sai with a famous Taiwanese
movie star, Shu Qi
Loreal China research center focused on producing products for
Chinese skin care.
New campaign was launched Modern Chinese Women featuring
Chinese super model Du Juan - tagline I hold my future in my
hands
To strengthen the luxury image Yue Sais prices were notched higher
than L'Oral Paris.
Product availability at cosmetic stores like Sephora.
Yue Sais lackluster performance was spoiling the picture,
from 2005 to 2010 its sales barley improved.
31 Million in 2005 to 31 Million in 2010

1. Keep its life style positioning of modern Chinese

woman?
2. Position as Chinese brand emphasizing local
culture and heritage?
3. Adopt a more affordable positioning?
Cosmetic Counters in Departmental Stores

Shanghai

Hefei
Cosmetic Brands in Multi Brand Beauty
Chains

Watson

Sephora
Small Stores Carrying Cosmetic Brands
Five Facts On Indian Beauty Market -
L'Oral
1. DRIVEN BY CULTURAL TRADITIONS AND BOLLYWOOD
Indians are incredibly interested in beauty and personal care. LOral first entered the
Indian market in 1994, offering premium products to urban clientele that could afford it.
By the year 2020, LOral aims to have a client base of over 150 million people in India
four times more than what it is now.

2. INDIAS MASS RETAIL MARKET PRESENTS TONS OF POTENTIAL

High-end cosmetic retailers have taken notice, but switching from premium to mass
market wont occur overnight, even if a brand is already recognizable within the country.
For most, expanding out of urban areas will be a strategic maneuver using mass market
brands and lower price points.

3. LOCALIZED PRODUCTS ARE ATTRACTIVE TO INDIAN CONSUMERS

LOral was able to grow 70-80 percent in the beauty industry. Creation of products that
satisfy local flavors allows direct entry into new markets here.

4. INDIAN COSMETIC MARKETS STILL HAVENT BEEN TAPPED

5. BEAUTY EDUCATION IN INDIA IS INCREASING

Indian Beauty Market