LOral

When it comes to globalize beauty, no one does it better than LOral. The company was founded in Paris more than 100 years ago by a young chemist, Eugene Schueller, who sold his patented hair dyes to local hairdressers and salons. By the 1930s, Schueller had invented beauty products like suntan oil and the first mass-marketed shampoo. Today, the company has evolved into the worlds largest beauty and cosmetics company, with distribution in 130 countries, 27 global brands, and more than $30.8 billion in sales.

Much of the companys early international experience is credited to Sir Lindsay Owen-Jones, who transformed LOreal from a small French business into an international cosmetics phenomenon with strategic vision and precise brand management. During his almost 20 years as CEO and Chairman, Owen-Jones divested weak brands, acquired ethnically diverse brands, and expanded into markets no one had dreamed of, including China, South America, and the former Soviet Union. His quest was to achieve diversity and meet the needs of men and women around the globe, and make beauty products available to as many people as possible.

Today, LOreal focuses on five areas of beauty expertise: skin care, hair care, makeup, hair coloring, and perfume. Its brands fall into four different groups: (1) Consumer products (52% of sales, includes mass-marketed brands like Maybelline and high-technology products sold at competitive prices through mass-market retailing chains), (2) LOreal Luxe (27% of sales, includes prestigious brands like Ralph Lauren perfume that are available only in premium stores, department stores or specialty stores), (3) Professional Products (14% of sales, includes brands such as Redken designed specifically for professional hair salons), and (4) Active Cosmetics (7% of sales, includes dermo-cosmetics products sold at pharmacies, drugstores, and medi-spas).

LOreal believes precise target marketing hitting right audience with the right product and message at the right place is crucial to its global success. Owen-Jones explained, Each brand is positioned on a very precise [market] segment, which overlaps as little as possible with the others.

The company has built its portfolio primarily by purchasing local beauty companies all over the world, revamping them with strategic direction, and expanding the brand into new areas through powerful marketing arm. For example, LOreal instantly became a player (with 20% market share) in the growing ethnic hair care industry when it purchased and merged the US companies Soft Sheen Products in 1998 and Carson Products in 2000. LOreal believed the competition had overlooked this category because it was fragmented and misunderstood. Backed by a deep portfolio of brands and products, SoftSheen-Carson is now the market leader in the ethnic hair care industry.

LOreal also invests significant money and time in its 22 local research centers around the world. The company spends 3.5% of annual sales on R&D, more than one percentage point above the industry average, researching and innovating products that meet the local needs of each region.

Understanding the unique beauty routines and needs of different cultures, climates, traditions, and physiologies is critical to LOreals global success. Hair and skin greatly differ from one part of the world to another, so LOreal listens to and observes consumers across the globe to gather a deep understanding of their beauty needs. LOreal scientists study consumers in laboratory bathrooms and in their own homes, sometimes achieving beauty milestones.

In Japan, for example, LOreal developed Wondercurl mascara specially formulated to curl Asian womens eyelashes, which are usually short and straight. Within three months, Wondercurl mascara had become Japans number-one selling mascara, and young women lined up outside stores to buy it. LOreal continued to research the market and develop nail polish, blush, and other cosmetics aimed at this new Asian generation.

LOreal believes its future lies in emerging areas such as Asia, Africa, and Latin America, where it expects to find millions of new customers over the next few years. Marc Menesguen, LOreals managing director-strategic marketing, explained, Our projection for 2020 is that 50% to 60% of sales will be coming from [emerging] markets. As a result, new research centers have popped up in these countries, and the company is working aggressively on understanding these consumers needs and developing beauty products to satisfy them.

Well known for its 1973 advertising tagline Because Im Worth It LOreal is the leader in beauty products around the world. The company spends approximately $5 billion in advertising each year, making it the third-largest advertiser. As Gilles Weil, its head of luxury products explained, You have to be local and as strong as the best locals, but backed by an international image and strategy.

1. What role have local and global marketing, smart acquisitions, and R&D played in growing those portfolio brands?
2. What are the keys to successful local product launches like Maybellines Wondercurl in Japan?
3. What is next for LOreal on the global level? If you were CEO, how would you sustain the companys global leadership?