Market study of L’Oréal
Kim Jiwon (Jessie) 11340696045
Wong Siew Fong 11340126053
Contents
 Market overview
 Chinese beauty market consumer behavior
 Company overview & Main business
 L'Oréal’s business model in china
 L'Oréal in China
 Situation & competitors in China (local & intl’)
 Challenges & problems
 Recommendation
Market overview
Global beauty market
Global beauty market
Compound annual
growth rate
3.4%
Premium Cosmetics
outperformed Mass
Cosmetics
(growth of 4.7%)
Personal Care Industry
Reaching $630billion
by 2017
Demand from Asia Pa
cific region generated
$21billion increment
al retail value
Chinese beauty market
China’s Beauty Market
• Retail sales increased by 17% year-on-year
• Foreign cosmetics enterprises captured about
80% market share in key cities
• Cosmetics sales growth relatively slower in tier
1 cities
18.3
11.3
Tier 1
Tier 2
Tier 3
ANNUAL GROWTH
21.4
China’s Beauty Market
• Shifting away from the traditional distribution
channels
Health and beauty retailers and Online retailers
replacing Grocery retailers and departmental stores
China’s Beauty Market:
Socioeconomic factors
• Lack of makeup culture: only 10%-15% of the market is
Makeup products
• Increasing recognition to Local brands
• TCM and Herbal Culture
Company overview
L'Oréal
• Started in French in 1909
• World’s largest cosmetics company, with worldwi
de sales of €22.5 billion in 2012
• In 130 countries on five continents
• Unrivalled portfolio of 27 brands
• 2 main divisions
- The Luxury Product Division (LPD)
- The Consumer Product Division (CPD)
L'Oréal China
• Started in 1997 in Hongkong with L’Oréal Paris
• Second largest beauty and skincare player in Chi
na: No.1 in the luxury segment
• Established a Research and Innovation Centre in
Shanghai, and manufacturing centres in Suzhou
and in Yichang
Product categories
L'Oréal Luxe
Lancôme
Giorgio Armani
Beauty
Biotherm
Kiehl’s
Shu Uemura
Helena
Rubinstein
Yves Saint
Laurent
Yue Sai
Yves Saint Laurent Beauté
Ralph Lauren
Cacharel
Clarisonic
Diesel
Viktor&Rolf
Maison Martin
Margiela
Urban Decay
Active
Cosmetic
Division
Vichy
La Roche-Pos
ay
SkinCeuticals
Innéov
Roger&Gallet
Sanoflore
Consumer
Product
Division
L’Oréal Paris
Garnier
Maybelline
NY
Mini Nurse
Softsheen.Carson
Createurs de beaute.co
m
Essie
Professional
Products
L’Oréal
Professional
Kérastase
Matrix
Redken
Pureology
Shu Uemura Art of Hair
Mizani
Essie
Product categories
Make Up
Hair
SkinCare
Skin Care
For Men
China grew from the 7th
largest market in 2008 to
the 3rd largest market
L'Oréal Market Share in China
16
14
12
10
8
6
4
2
0
2008
2011
2012
Market Share %
Business model
in China
Key
Activities
•
•
•
Production
Marketing
R&D
Key Partners
•
•
•
advertisement
agencies
Suppliers
distributors
Value
Propositions
•
•
•
Key
Resources
•
•
•
•
R&D
Production
plants
Employees
Marketing
Cost Structure
marketing, research costs, commission and
rentals (departmental stores), production
Prestige
Western
branding
Asian
branding
Customer
relationship
• Advertisement
• Consumer Caring
Center in Shanghai
Distribution
Channels
• Departmental
stores
• Beauty product
chains
• E shopping platf
orms
Revenue Streams
•
•
fixed pricing
e commerce
Customer
segments
•
•
Gender
Income
Gender
Female
Income
Prestige
Lancôme
Giorgio Armani Beauty
Biotherm
Kiehl’s
Shu Uemura
Helena Rubinstein
Yue Sai
Channels
•
•
Departmental Stores
Cosmetic Stores
•
•
Beauty product chains
E shopping platforms
Masstige
•
Male
L'Oréal Men Expert
• Garnier Men
Vichy
La Roche-Posay
SkinCeuticals
L’Oréal Paris
Garnier
Maybelline New York
Mini Nurse
Value
proposition
Asian
Origins
western
Chinese
Age
Young
Mature
Key
Activities
•
•
•
Production
Marketing
R&D
Key Partners
•
•
•
advertisement
agencies
Suppliers
distributors
Value
Propositions
•
•
•
Key
Resources
•
•
•
•
R&D
Production
plants
Employees
Marketing
Cost Structure
marketing, research costs, commission and
rentals (departmental stores), production
Prestige
Western
branding
Asian
branding
Customer
relationship
• Advertisement
• Consumer Caring
Center in Shanghai
Distribution
Channels
• Departmental
stores
• Beauty product
chains
• E shopping platf
orms
Revenue Streams
•
•
fixed pricing
e commerce
Customer
segments
•
•
Gender
Income
L'Oréal in China
International experience +
Adapting to the local market
Competitive
Advantages
“Because you’re
worth it”
“你值得拥有”
Strong R&D
capability
Local
Acquisitions
• 12.4 percent year-on-year growth in 2012
• 12.05 billion yuan ($1.94 billion) in China
• 12th consecutive year the company gained double-digit
annual growth
Chinese taste for Luxury
L’Oreal
Luxe
Huge
potential
from the next
generation
the brand for modern Chinese women.
Yue Sai
- L'Oréal’s Local Brand
traditional
Chinese
medicine
Bought in
ingredient
2004,
targeting
mass-market
Struggle for
successful
marketing
the brand for
modern
Chinese
women
Competition in China :
Situation & Competitors
(Local & Intl’)
Local competitor
– Shanghai Jahwa (上海家化)
• Established in 1898
• leading and largest Chinese company of beauty and
personal care products
• doubled its revenue in the past 5
• Liushen, Herborist, Maxam and GF
• blending traditional Chinese herbal medicine with modern
biotechnology.
• several international partnership like Coty Adidas
and Sephora
Jahwa
Target group
Masstige/ low end segments
Product
positioning
Local brand vs. International brand
L'Oréal
Luxe market
Masstige/ mass market vs. Prestige market
Younger market vs. Mature market
Strength
Owns the most extensive distribution
network in china
Specialized in luxe
brands
Use of herbal ingredients and
traditional Chinese Medicine
Prestigious: trustworthy
image
Consistent strategy development as
local brands
Internationally diverse
portfolio
International competitor
– P&G
• Established in 1837
• , the world’s largest consumer products company
• First multinational to enter China’s beauty and
skincare market in 1988
• 6% of the firm's worldwide sales in China
• 250 brands in six main categories
• Beauty products ; Olay, SK-II, Pantene, Head&Shoulders,
Safegaurd, Gillette
P&G
Emphasis
Beauty and Hair care products
L'Oréal
Beauty and cosmetics
Target group
Usually mass and rural
consumers
Luxe market
Brand image
Amiable international brand
Luxury European brand
Flexible marketing strategy (esp.
in rural areas)
Specialized in luxe brands
strength
Prestigious: trustworthy image
Diverse portfolio (whole
product categories)
Prestigious: trustworthy
image
Diverse portfolio
(cosmetics and skincare
products)
Market Share
Challenges & Problems
• Limited consumer market for makeup
products
• Competition with local brands and natural
products
• Conflicts of Animal testing
China:
EU’s rule:
only major
sales
forbidden for
market which
animal tested
require
products in
animal
testing
- Threats of alienating
consumers in markets where
public sentiment demands
humane treatment of animals
- Companies would need to
reformulate their wares for the
two markets
EU
Suggestion : What are the
next steps for L'Oréal?
Competition
with local
brands
(natural
products)
Maintain luxe image
Strengthen local brands like
Yue sai
Connecting the long heritage
with safety and luxury image
Suggestion : What are the
next steps for L'Oréal?
China
requiring
Animal
testing
- Invested €900 million in international
research on alternatives, such as
reconstructed tissues and tissue models.
Finding alternative methods
- 5.7 billion L’Oréal products are sold
to year
testing
per
which are free from animal
testing
- Less than 1 percent of its total safety
Keep talking to local
testing on cosmetics ingredients involve
authorities to ease the
animals
* regulations
Produces 130 000 reconstructed skin
models per year in France
* The facility in Pudong (China)
produces close to 30 000 skin models
Suggestion : What are the
next steps for L'Oréal?
Limited
consumer
market for
makeup
product in
China
Word of Mouth marketing
Samples for makeup
products(color)
Make-up Campaigns &
Workshop
Thank you