L'Oreal's global expansion strategy and market leadership in cosmetics

Brand Comparison

Background of L'Oreal

In 2001 Business Wire explained that L'Oreal, the world's leading Cosmetics Company, was founded in Paris in 1907. Over the past ten years, L'Oreal has significantly strengthened its presence in the major international markets, and has some 48,000 employees in 150 countries. More than four-fifths of sales (85%) are now achieved outside France, and 50% outside Europe. L'Oreal worldwide consolidated sales amounted, in 2000, to 12.6 billion Euros

L'Oreal, one of the largest companies in France, is the world's largest manufacturer of high-quality cosmetics and perfumes, producing such well-known brands as Lancome, Ambre Solaire, and Cacharel. Its total sales are 2.4 billion ahead of those of its closest competitor, and more than double those of Revlon and Shiseido. Business Wire (2001) also explained that L'Oreal boasts a world-wide distribution network as well as the industry's highest research-and-development budget and the largest cosmetological laboratories in the world. In 1912, the company extended its sales to Austria, Holland and Italy and by 1920 its products were available in a total of 17 countries, including the United States, Brazil, Chile, Peru, Ecuador, Bolivia, and the Soviet Union, and in the Far East

. At this stage, L'Oreal consisted of three research chemists and ten sales representatives.

With 290 subsidiaries, more than 100 distributor's off-group and 42 plants, all spread out in about 130 countries, L'Oreal is the leader of the cosmetic industry

(Marketing Planet, n.d., para. 1). The group has begun its internationalization in 1912 by following three steps: first, commercialization of professional shampoos to hair-dressers via distributors in near Europe (Spain, Italy, Great Britain, Germany and Poland) and in the Americas "first landing," second, local firms are taken over for example in the U.S.A. (Redken 1993, Maybelline 1996 etc.), in Argentina (Miss Ylang 2000)"go native"; third, subsidiaries (production, research and development) are directly created (Greenfield investment) without any first passage via distribution. It is the case in Asia (Japan and Hong Kong) "globalization" (Newswire, 2009)

L'Oreal makes use of several different internationally-recognized Environmental, Occupational Health and Safety (EH&S) management systems including ISO 14000 and OHSAS 18000

CRS Wire (2009). L'Oreal is committed to an eco-responsible approach focused on understanding all the impacts of its business and considers all stages in the research process and selection and procurement of raw materials, from dialogue with the suppliers to the end of the life of the finished products. L'Oreal has an established track record of significant environmental achievements over the last several years. For these accomplishments and others, we have been recognized as one of the 100 most sustainable companies by Innovest and Corporate Knights in 2008 and 2009 (Newswire, 2009).

In New York, L'Oreal USA partnered, for the fourth year, with New York Cares to create 18 different service projects throughout the city, including the activities at East River Park and Corlears Hook Park. More than 600 L'Oreal employees fanned out across the city to spruce up parks, read with kids, paint murals, lead fitness activities with seniors, sort clothes to help homeless New Yorkers and much more. In addition, L'Oreal USA employees around the country dedicated their time and talents to a variety of other service projects such as preparing unemployed adults to re-enter the workforce, building children's bicycles and making meals at homeless shelters. At L'Oreal, we believe that sustainable growth can only be achieved when you act as a responsible corporate citizen. They stated that as a citizen of the world, they support projects that serve the wider community and which reflect the values we have upheld for almost a century (Newswire, 2009).

Lancome

Lancome Paris is a prestige cosmetics brand owned by L'Oreal under the Luxury Products, division which offers skin care, perfume fragrances, and makeup. The company began in 1935, when its founder, Armand Petitjean was exploring the ruins of a castle, Le Chateau de Lancosme, while vacationing in the French countryside

(Lancome History,2010). Petitjean's inspiration for the company's symbol, a golden rose, were the many wild roses growing around the castle. Lancome launched its first five fragrances in 1935 at the World's Fair in Brussels. The fragrances were: Tendre Nuit, Bocages, Conquete, Kypre and Tropiques. Lancome expanded its business into makeup and skincare products. One noteworthy product was Nutrix launched in 1936 which celebrated its 70th anniversary in 2006 (Lancome History, 2010).

Channels of Distribution

Business Wire (2001) reported that since 2001, Lancome has made strides to utilize digital marketing. The company that the conglomerate has chosen to work with is Avenue A, Inc. (Nasdaq:AVEA), a digital marketing services and technology company, announced that Lancome, Paris, in the United States had selected the company's New York-based digital marketing agency, Avenue A/NYC as its digital marketing agency of record. Avenue A/NYC is helping Lancome, a division of the multi-billion dollar L'Oreal USA Corporation, market its entire line of cosmetics, skin care and fragrances by developing a comprehensive digital marketing strategy designed to drive sales and registrations to the company's web site. Avenue A/NYC is providing Lancome with a mix of digital marketing solutions, including targeted web advertising and e-mail marketing, to help Lancome develop its web site into an effective customer acquisition and retention channel.

Maybelline

Demographics of Consumers

Alexa (2010) explains that Maybelline has a three-month global Alexa traffic rank of 383,684

. The site belongs to the "Abbigliamento" category. Visitors to this site spend about 32 seconds on each page view and a total of three minutes on the site during each visit, and visitors to the site view 3.6 unique pages each day on average

. Compared with the overall internet population, Maybelline users are disproportionately childless, and they are disproportionately women browsing from home who have incomes under $100,000.

Ethnicity -- a mix with a focus on women of color.

Promotion Mix

Utilizes online marketing, television ads as well as printed materials, Maybelline also utilizes sales and coupons associated with core products. A large facet of Maybelline's strategy to combat Cover Girl is its new print and TV advertising campaign which broke in March 1988. The ads highlight the words "smart" and "beautiful." While the setting and mood vary for each of the ads, the focus is either on a single product, such as Sleek Cheeks blush or Slim Elegance lipstick, or a line shot of several of the company's mascaras. Sophisticated women are featured in the print ads and on the TV spots. In addition to a strong ad campaign and in-store promotions, Maybelline has also incorporated aspects of the treatment business into its products (Wood, 2010).

Maybelline estimates that black women now spend $600 million or more on cosmetics and says that they have made Maybelline their eye makeup of choice

. But, black consumers, according to company research, are not completely satisfied with much of the face makeup available in mass market stores. It is this perceived need that Maybelline will address with it Shades of You line, which consists of lipstick, concealer, powder blush, pressed powder, oil-free liquid makeup and oil-free souffle makeup (a creamy foundation in a jar). Altogether there are 58 SKUs, including 12 foundation shades and 18 lipstick shades (Racher Press, 1991).

Pricing Mix

Maybelline's pricing strategy is a definite boon in the current environment of rising prices. "Maybelline's ability to not only keep up with the trends, but also offer them to our customer at a reasonable price is one of the reasons we are doing so well, " (Tode, 2010) adding that there are no plans to introduce higher-price items. Or those not willing to drop down to the mid-priced brands, more and more drugstores are trying to help ease the effect of rising prices by employing tactics such as money-back guarantees and heavy couponing. Tode (2010) went further to state that Yanke noted that Medic has offered a money-back guarantee in cosmetics for eight years and that it promotes the category heavily with advertising and coupons, but that it can't afford dedicated beauty specialists.

"Consultants wouldn't do that much in drugstores," she noted. Such efforts appear to be appreciated by consumers, at least the ones who responded to the Makeup Alley poll. "Drugstore prices are getting steeper and steeper, but you can find great sales at stores like CVS and Harmon Drug. (Tode, 2010)

Channels of Distribution

Wood (2010) indicates that a $50 million advertising campaign, a focus on treatment qualities for its color cosmetics, and a strong determination to usurp Cover Girl's number one position in the mass market makeup business will propel Maybelline into the Nineties, according to Gary Mulloy, its executive vice president. Current annual worldwide volume for the Memphis-based cosmetics company is roughly $400 million, said Mulloy. Of that total, Maybelline's North America division had approximately $280 million in sales last year

. Maybelline's parent company, Schering-Plough Corp. recently sold its two European color cosmetics businesses -- Rimmel International, Ltd., of the United Kingdom and Chicogo GmbH of West Germany -- to Unilever NV. That sale is not expected to have an impact on sales of Maybelline. Internationally, Maybelline is distributed in more than 30 countries, with strong representation in Japan, Australia and Central America (Wood, 2010).