The case discusses in detail the brand

management strategies of the global cosmetics

industry leader, L'Orèal, over the years. L'Orèal's
brand portfolio included brands from different
cultural backgrounds like Europe, America and
Asia.

The case explores L'Orèal's expansion of its

business through the acquisition, makeover and
worldwide marketing of relatively unknown
brands from different countries. In addition, the
case takes a look at the way in which the company
consciously worked towards straddling all the
segments of the cosmetics business and building
successful brands in each of these segments.

Issues:
• The brand management strategies of a large cosmetics company with a global presence and a
large portfolio of brands.

1.

In November 2002, L'Oréal, the France-based

leading global cosmetics major, received the
'Global Corporate Achievement Award 2002,' for
Europe by 'The Economist Group.'

Awarded by the publisher of the world's leading

weekly business and current affairs journal 'The
Economist,' the honor was given in appreciation
and recognition of the 'depth, breadth, and
diversity of L'Oréal's management team.'

In the same month, L'Oréal's Chairman and CEO,

Lindsey Owen Jones (Jones) was honored with
the 'Best Manager of the Last 20 Years' title by
the French Minister of Finance and Economy,
Francis Mer.

This award instituted by the leading French business publication, Challenges, was in recognition
of Jones' outstanding achievements in transforming L'Oréal from a French company into a global
powerhouse.

Jones also received the prestigious 'Manager of the Year 2002' award from the French Prime
Minister, Jean-Pierre Raffarin. Jones was the first foreign head of any French company to receive
this award, which was sponsored by the leading French business publication, Le Nouvel
Economiste.

These honors were not just a 'cosmetic' eulogy; L'Oréal deserved them, for it was the only
company in its industry to post a double-digit profit for 18 consecutive years (Refer Exhibit I for
L'Oréal's key financials).

L'oréal Makes Waves Contd...

L'Oréal, which had operations in 130 countries in the world, posted a turnover of € 13.7 billion1
in 2001. The company recorded a 19.6% and 26% growth in profit in 2001 and 2002 (half-yearly
results), respectively.

Commenting on L'Oréal's performance, Jones

said, "At L'Oréal, we are 50,000 people who share
the same desire; because it is not just about
business but about a dream we have to realize,
perfection." Known for its diverse mix of brands
(from Europe, America and Asia), like L'Oréal
Paris, Maybelline, Garnier, Soft Sheen Carson,
Matrix, Redken, L'Oréal Professionnel, Vichy, La
Roche-Posay, Lancôme, Helena Rubinstein,
Biotherm, Kiehl's, Shu Uemura, Armani, Cacharel
and Ralph Lauren, L'Oréal was the only cosmetics
company in the world to own more than one brand
franchise and have a presence in all the
distribution channels of the industry (Refer
Exhibit II for a note on the global cosmetics
industry).

Background Note
In 1907, Eugene Schueller (Schueller), a French chemist, developed an innovative hair color
formula. The uniqueness of this formula, named Aureole, was that it did not damage hair while
coloring it, unlike other hair color products that used relatively harsh chemicals. Schueller
formulated and manufactured his products on his own and sold them to Parisian hairdressers.

Two years later, in 1909, Schueller set up a company and named it 'Societe Francaise de
Teintures inoffensives pour Cheveux.' From the very beginning, Schueller gave a lot of
importance to research and innovation to develop new and better beauty care products...
Fame
By the 1970s, L'Oréal's products had become
quite popular in many countries outside France.
Jones' entry in the late-1970s marked the
beginning of a new era of growth for the
company.

During 1978-1981, Jones functioned as the head

of L'Oréal's Italian business. Due to his
exceptional performance, Jones was given the
responsibility of looking after US operations (the
company's most important overseas operation)
during 1981-1984. Managing the company's US
operations was not an easy task...

May Be? No, It 'Is' Maybelline

One of the first brands that L'Oréal bought in line with the above strategy was the Memphis (US)
based Maybelline. The company acquired Maybelline in 1996 for $ 758 million.

Buying Maybelline was a risky decision because

the brand was well known for bringing out
ordinary, staid color lipsticks and nail polishes.

In 1996, Maybelline had a 3% share in the US nail

enamel market. Maybelline was not a well-known
brand outside the US.

In 1995-96, only 7% of its revenues ($350

million) came from outside the US.

L'Oréal decided to overcome this problem by

giving Maybelline a complete makeover and
turning it into a global mass-market brand while
retaining its American image...
Maybelline's success proved Jones' philosophy of
creating successful cosmetic brands by embracing
two different yet prominent beauty cultures
(French and American). Commenting on this, Guy
Peyrelongue, head of Maybelline, Cosmair Inc.,
US Division, said, "It is a cross-fertilization."
L'Oréal followed this strategy for the other brands
it acquired over the years, such as Redken (hair
care), Ralph Lauren (fragrances), Caron (skin care
and cosmetics), SoftSheen (skin care and
cosmetics), Helena Rubenstein (luxury cosmetics)
and Kheil (skin care) (Refer Table III).

L'Oréal acquired the above relatively unknown brands, gave them a facelift, and repackaged and
marketed them aggressively...

Future Prospects
L'Oréal's efforts paid off handsomely. The
company posted a profit of € 1464 million for the
financial year 2002, as against € 1236 million for
the financial year 2001.

Its overall sales grew by 10% in 2002, and much

of this increase was attributed to impressive
growth rates achieved in emerging markets like
Asia (of the 21% increase in sales volume, China
contributed 61%), Latin America (sales grew by
22% with sales in Brazil increasing to 50%) and
Eastern Europe (sales grew by 30% with sales in
Russia increasing by 61%)...

Exhibits