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INTRODUCTION

L’Oreal was founded in the year 1909 by Eugene Schueller, a French chemist who developed an
innovative hair color formula. Today, the L’Oreal Group is the world's largest cosmetics and beauty
company and it’s headquarter is in the Paris suburb of Clichy, France. It got its start from the hair
color business but soon it developed activities in the field of cosmetics, concentrating on skin care,
sun protection, make up, perfumes and hair care. L’Oreal main branches are Cosmetics, The Body
Shop and Dermatology. L'Oreal is active in the dermatological and pharmaceutical fields, however
Cosmetics is the key revenue generator (See Exhibit I). It is also the top nanotechnology patent-
holder in the United States. L’Oreal famous advertising slogan is "Because I’m worth it". It has
recently been replaced by "Because you're worth it". Its portfolio of brands includes the cosmetics
range of L'Oreal Paris and Maybelline NY, shampoo range Garnier, luxury products such as
Lancome and active cosmetics such as Vichy. Its closest global competitor in the premium make-up
segment is Revlon.

India’s contribution to the growth of the global cosmetics market is about 60 percent. The beauty
and the wellness sector in India are on a boom. L’Oreal started its operations in India thirteen years
ago. The share of the Indian market to L'Oreal's turnover of 15.8 billion is small, but is growing. It
operates in India through its wholly owned subsidiary, L’Oreal India has four divisions — consumer
products, professional products, active cosmetics and luxury products. The biggest contributor to
its revenue in India is the consumer products division led by its strongest brand in terms of sales -
Garnier.

L’Oreal India has recently setup its own manufacturing plant in Pune. It imports most of its
products from its facilities abroad and manufactures the rest in Pune. The Indian subsidiary headed
by Chief Operating Officer Dinesh Dayal, who has been with the company for 20 years, is one of the
key officials responsible for the formation and operations of L'Oreal India. The operations in India
are conducted through a judicial mix of global and local methods of advertising to appeal to the
Indian consumers.

L’Oreal advertising account is handled by Mccann Erickson. L’Oreal India has discovered over the
years, the behavior of the Indian consumers and has realized that the Indian consumer is not as
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price conscious as is portrayed. The brand is more expensive than the average FMCG, but offers a
true value for money. The company’s growth in India can be attributed to its innovation of new
products, supply chain management, systems and structure. Being the world’s second largest
cosmetics major, L’Oreal is planning to foray into the Rs 1,000-crore Indian herbal and ayurvedic
cosmetics industry. After identifying its targets, L’Oreal India is in advanced talks with Biotique and
VLCC to acquire herbal/ayurvedic cosmetics brands. The group is taking the acquisition route to
enter this niche sector. L’Oreal has thus identified India as one of its top five growing businesses
globally. L'Oreal's research facilities in France, the USA, and Japan bring together more than 3,000
scientists and research staff. Their discoveries are published in leading scientific journals. L’Oreal’s
innovations are patented, creating some 586 patents in 2004 alone.
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PRODUCT STRATEGY

L’Oreal operates in India through four main divisions: consumer products, professional products,
active cosmetics and luxury products. The biggest contributor to its revenue in India is the
consumer products division led by its strongest brand in terms of sales —Garnier.

L'Oreal

Consumer Professional Luxury Active

Consumer Products

Garnier fructice L’Oreal Paris Maybelline

Professional Products

L’Oreal Professional Kerastase Matrix Keraskin

Luxury Product

Giorgio Armani Diesel Lancome Ralph Laurel Keihl’s

Active Cosmetics

La Roche-Posay Vichy

In the hair color segment, Garnier operates in the mid-price and luxury segment. This has enabled it
to garner a 20 per cent share in a market dominated by local hair colorants and dyes. Garnier
attributes its performance to being the first player in India to introduce a cream-based hair color
below the price of Rs 100 (2002) and the first home-highlighting kit (2005).

PRODUCT EXTENSION: - Garnier mainly produces hair care products, including the Fructis line, and
most recently, skin care products under the name, Nutritioniste, that are sold around the world.
One of their key ingredients is a fruit concentrate used in all their products. It is a combination of
fruit acids, vitamin B3, B6, fructose and glucose. Garnier, the L'Oreal- owned brand that shook up
the US hair care market with the introduction of Fructis in 2003, now has plans to bring over its
skin care collection too. While L'Oréal was focusing on hair color market in the initial stages of its
launch, Maybelline was in the premium color cosmetic segment while Garnier in the "naturals"
segment.
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In 2000 L’Oreal launched its range of cosmetics in to Indian market. Garnier concentrated on the
Natural Hair care market with the main USP of strong hair. The brand positioned as a Unisex
brand mainly used its international campaigns in India to appeal to the Indian consumer.
Garnier believes in beauty through nature. Scientifically developed and enriched with
selected natural ingredients, its products help look healthy and feel good every day.

LINE EXTENSION: - As mentioned above L’Oreal has been experimenting with their products a lot
and they spend a lot on R&D (SEE EXHIBIT II), they have done a huge line extension in their
product line up. Garnier itself has five different varients in its hair care segment (Shampoo),
named as Fructis, Fructis Oil Repair, Fructis Blonde, Fructis Men & Fructis Wave Definition.
Similarly L’Oreal Paris has six variants, named as Elvive, Elseve Absolute repair Shampoo, Elseve
Vitamin Shampoo, Elseve Renuitrition, Vive Pro Thickening & Vive Pro Nutri Gloss. Similarly, there
are many more variants of other brands too.

BRAND EXTENTION: - Acquiring influential and well positioned brand is an important strategy of
L'Oreal in developing its brand architecture. It achieves rapid growth by acquiring brand in same or
related business and is continually seeking these opportunities in the worldwide scope. L'Oreal
expanded its brand architecture by acquiring Maybelline brand in 1996, which was a very
successful transaction. The Maybelline’s image was enhanced by branded L'Oreal while L'Oreal got
complementary in its brand architecture. Recent years in Asia, it acquired the third skincare brand
Mininurse in China and Japanese top luxury brand Shu Uemura. This shows that L’Oreal is very
aggressive in building the brand architecture by acquiring other influential brands.

PRODUCT DIFFERENTIATION: - L’Oreal came with a product name Elvive Full Restore 5 which has
differentiated itself from the other products of L’Oreal. Initially L’Oreal came up with brands like
Elvive Smooth-Silk Light, Elvive Anti-Dandruff, Elvive Damage care etc. but after lauching Elvive
Full Restore 5 they made it clear that this product is superior to the other as it includes all the
important features for which a customer was using different products.

PACKAGING STRATEGY: - Most L'Oreal makeup products aren't bubble-wrapped on cardboard like
Artmatic and Wet & Wild - both serviceable products. L'Oreal displays are elegant. , who get up
close and personal with their sister-viewers, confiding that, yes, L'Oreal DOES cost a little more ...
"but I'm worth it.". This creates Consumer Affluence and hence customers are willing to pay a little
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extra for its product. The packaging strategy of Garnier products create a brand image in the mind
of consumers, whenever a consumer sees the bright green packaging in hair care segment they
relate it to Garnier.

Garnier, L'Oreal and Maybelline, the three brands of L’Oreal have been defined by their price
segments and positioning. The company has been steadily increasing its product portfolio in the
Indian market especially in the hair care segment. Its skin care brand of Garnier has been extended
to a shampoo and hair conditioner under the Fructis brand, in spite of the presence of Garnier's
Ultra Doux shampoo and hair conditioner. Its hair coloring portfolio has also been given a boost and
the company has decided to rope in Kareena Kapoor as its new brand ambassador for its hair color
brand of Garnier Nutrisse. Garnier concentrated on the Natural Hair care market with the main USP
of strong hair. The brand positioned as a Unisex brand mainly used its international campaigns in
India to appeal to the Indian consumer.

Garnier has been able to establish itself firmly in the Indian market and has clearly defined its
target market which is the middle class and the upper middle class segment. Garnier has very
effectively designed its promotional strategies by adapting to the changing customer demand. It has
penetrated firmly in the Indian market both in skin care as well as hair care products covering a
wide range from shampoos, conditioners, to gels, serums, hair mousse, anti-acne ointments, anti-
wrinkle creams etc.

Two main natural ingredients of L’Oreal skin products are Fructose and Glucose. The role of
Fructose and Glucose in nourishing hair is demonstrated in vitro culture of hair follicles. Fructose
and Glucose are fuel for hair. The main ingredients are-Fruit AHA (Alpha Hydroxy Acids), Green Tea
Extract, Caffeine, Anti Storage Gingko, Grape Seed Oil, Vitamins B3 and B6 & Fruit Oils.
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PLACE STRATEGY

To run a company in profit the place factor out of the 4p’s of marketing mix plays a very crucial role.
This includes decisions about where to sell the product or concerns about where the customers are,
and how to get to them. It also includes the "channel of distribution" - meaning, all the different
middlemen a company use to get the product out to the customer. L’Oreal’s success in the cosmetic
industry is due not only to their high quality, but also to the corporation’s marketing efforts to make
sure their various brands have a strong market presence. In past 100 years that it has expanded, it
has supplied to 130 countries with offices in 58 different countries. To make its presence feel in
different parts of the world L’Oreal has acquired many different companies like “The Body Shop
International plc”, known as The Body Shop, which has over 2,000 stores in more than 50 countries.

As stated above in the Product strategy L’Oreal believes in Brand extention its acquisitions
represent L'Oreal’s ambition to capture Asian market. They have the same product business with
L'Oreal. In China the acquisition will enhance L'Oreal’s market position in skincare and acquire
distribution channels Mininurse had. It is also a preparation for the future expansion in the most
fast-growing market China. By acquiring Shu Uemura, L'Oreal want to use this Japanese brand to
compete with SK-…¡which was a competitor in the same level, in order to meet the trend of
prevalence of Japanese cosmetic brand in Asia. This is considered to be an effective and cost-
efficient strategy which is consistent with L'Oreal’s overall brand architecture

As we know the brand loyalty of L’Oreal is very high and hence L’Oreal follows a pull strategy.
Customers of L’Oreal goes directly to the outlets and buy the products.

DISTRIBUTION CHANNEL: - Second Level Consumer Marketing Channel

Manufacturer Wholesaler Retailer Consumer

ANALYSIS OF INDIAN MARKET

Garnier being an important brand of L’Oreal in both hair care and skin care is available all round
the globe easily. In Indian market the hair care products of garnier like “garnier fructis”, “ultra
doux” etc is available in both organised and unorganized retail shops in India. The high end skin
care products like “Nutritionsite” are available only in selected retail outlets in country. In India
Garnier manufactures its products in Pune whereas it’s registered office is in Mumbai. To
popularize its product line L’Oreal has occupied brand corners in many big malls and retail outlets
in which garnier products get a major chunk. L’Oreal has tie ups with many big beauty salons and
parlors who can promote and sell its products. Over the past decade the company has trained more
than 30,000 hairdressers in India in the use of its products. And it has helped to establish about 300
salons in the past five years. The theory is simple: If there is no natural demand for your goods,
stimulate it. “We have created a profession and a market,” Didier Villanueva, L’Oréal India’s country
manager, said. “If you train people they will use your products.” Its sales in India, where it is No 2
behind Unilever, are growing at 35 per cent a year. This year, they are about €100 million (£71
million). Although L’Oréal’s professional products division represents only 17 per cent of total
revenues, hair color was the Paris-based group’s genesis and remains the creative heart of the
business. Money-spinning mass-market brands such as Garnier are being pushed hard in India,
where the company estimates there is a market of 50 million. Garnier products are easily available
for sale on many websites in India.
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PRICE STRATEGY

The target segment for any product is that homogeneous group of people which is purported to be
the most potential customer for the product. The market follows the Pareto Principle, which says
that 80 per cent of the sales come from 20 per cent of the people. Thus, for any product, one of the
major tasks of marketers is to identify the group of 20 per cent that gives 80 per cent revenue of
that product’s sale to the company. No surprise then that major marketing efforts of companies
attempt to attract the most potential group. In the present stage of immense competition,
companies are required to effectively plan their pricing strategies to not only retain current
customers but to also expand the customer base by targeting new segments with an aim to convert
them into loyal customers.

Trying to strike a balance in its pricing strategy for the Indian market, `L'Oreal India Private Ltd
believes that by introducing more stock keeping units (SKU's) it will be able to tide over the steep
pricing of its products.

L'Oreal is looking at pricing in the Indian context and there is a kind of balance they have struck.
Considering the large number of SKU's that they already have worldwide, they are planning to
market the products at an almost comparable pricing.

Considering the company has set up its manufacturing facilities in Pune and has also been sub-
contracting its products, it has been easier for it to control its prices in the Indian market.

For aspirational products Garnier has adopted an international pricing strategy, which may not be
the case for the rest of the products. However there is no hard and fast rule. Besides, the company
has also been customizing its products for the Indian market and there is expected to be a blend of
both international as well as Indian formulations for its products. For instance its Garnier brand of
Color Naturals is an `Indianised' product.

L'Oreal’s innovations always start from its luxury brands then penetrate to the brands in different
price level and different markets eventually implemented in its consumer brands. The innovations
based on the same technology platform will reduce the cost. The knack for L'Oreal to create the
advantages is to spread around strategic investment by sharing the production of innovation
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between different product divisions. L'Oreal not only focuses on the single brand but also pays
attention to the technology relevancy in the series of brands. For example, L'Oreal first introduced a
break through anti-aging composite by using Lancôme brand. Subsequently, it was implemented in
Vichy brand and brought into the consumer product division eventually. The broad distribution
channel of consumer products was used to promote this technology at last. In term of same
products in the different market, L'Oreal also exerts the technology platform to meet the specific
needs of consumers. From L'Oreal’s experiences, the core technology platform is a key component
to the success of an international company with complicated brand house. Without leveraging the
resources between brands, it will cause increase of operational cost and waste of resources and will
be very hard to manage the L'Oreal’s sophisticated brand architecture. Other than building the
brand structure according to the product identity, L'Oreal relied on distribution channel to carry
out its strategy of brand structure. There are four product departments in L'Oreal’s structure. Every
department has several brands and each brand has many names. They are conspicuously different
in packages and with distinct image and advertising. The different brands share the resources of
distribution channel and have high integration effect on management. The luxury brands of L’Oreal
are sold in strictly selected distribution channel like department store, perfumeries and tax free
shop. Professional products are provided to the hairdressers. Active cosmetic products are sold in
pharmacists. The most important sector consumer products are distributed through mass
consumption channel like department store and supermarket.

L'Oreal has formed a brand matrix with great power of integration. Any new brand merged into the
relevant channel will fully utilize the resources in existing channel as well as expand L'Oreal’s
whole distribution channel by integrating its original channel. The dissemination of brand will
improve company’s overall influential power.

L'Oreal recognized the leverage effect of it brand and focus its propagandas on brand rather than
propagandas on particular product. It is dedicated in building the relationship between its brand
and the market. It aims to enhance brand power by maintaining the good image in publicities.
L'Oreal’s efforts were also embodied on its marketing strategy. It always concentrates on
supporting those brands which can mostly represent its advantages and leverage resources to
those premium products. Firms that aim to expand internationally or strengthen market position
tend to acquire new brand into the brand architecture.
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L’Oreal also follows the bundling strategy to increase its sales. They come up with a customized
make up kit and sell it at a discounted rate. By discounting such products, L’Oreal taps the potential
buyers easily.