L’oreal: The Making of an International Super-Organization
Essay title: L’oreal: The Making of an International Super-Organization
LOreal: The Beauty of Global Branding (intl edition)
The French giant stays on top by selling cultural cachet as well as cosmetics
Its a sunny afternoon outside Parksons department store in Shanghai, and a marketing battle is raging for the attention of Chinese women. Tall, pouty models in beige skirts and sheer tops pass out flyers promoting Revlons new spring colors. But their effort pales in comparison with LOreals eye-catching show for its Maybelline brand.
To a pulsing rhythm, two gangly models in shimmering lycra tops dance on a podium before a large backdrop depicting the New York City skyline. The music stops, and a makeup artist transforms a models face while a Chinese saleswoman delivers the punch line. This brand comes from America. Its very trendy, she shouts into her microphone. If you want to be fashionable, just choose Maybelline.
Few of the women in the admiring crowd realize that the trendy New York Maybelline brand belongs to French cosmetics giant LOreal. In the battle for global beauty markets, $12.4 billion LOreal has developed a winning formula: a growing portfolio of international brands that has transformed the French company into the United Nations of beauty. Blink an eye, and LOreal has just sold 85 products around the world, from Redken hair care and Ralph Lauren perfumes to Helena Rubinstein cosmetics and Vichy skin care.
Thanks to this strategy, masterminded by LOreal Chief Executive Lindsay Owen-Jones, the French company has not only enjoyed a decade of double-digit growth but has pioneered new ground rules for staying on top in a fiercely competitive industry. LOreals net profits rose 12% in 1998, to $768 million, while its stock has soared 900% in the 90s.
LOreals success is proof that when done right, global branding can speed growth in mature consumer-products companies even when global markets themselves are shaky. Asias economy is a mess, Latin America is tottery. Other worldwide marketers, such as Procter & Gamble Co., are suffering partly as a result. But LOreal is surging in markets stretching from China to Mexico. Its secret: conveying the allure of different cultures through its many products. Whether its selling Italian elegance, New York street smarts, or French beauty through its brands, LOreal is reaching out to more people across a bigger range of incomes and cultures than just about any other beauty-products company in the world. That sets LOreal apart from one-note marketers such as Coca-Cola Co., which has just one brand to sell globally.
LOreals strategy positions it beautifully to profit even further when the middle class begins to grow again in emerging markets. Says Veronique Adam, analyst at J.P. Morgan Securities Inc. in Paris: LOreal is the only real global leader in every segment of the industry.
For Owen-Jones, the trick will be staying ahead in the game as his powerful rivals seek to play the global branding game. From giant P&G to niche players such as Los Angeles-based cosmetics maker Stila, LOreals competitors are hustling to catch up. We want to become more of a global company like LOreal, says Yoshikuni Miyakawa, a general manager of the cosmetics-marketing division of Shiseido Co., Japans No. 1 cosmetics company. Already, Shiseido is dominant at home and now expanding around the world. Meanwhile, the French company is No. 10 in Japan, trailing rivals such as Clinique and Estee Lauder.
ELECTRONIC THREAT. As Owen-Jones races to expand international sales of his products, he must be careful that his brands dont blur together for consumers. Yet another threat may come from the electronic world. An Amazon.com of the beauty business could shake up the industry in unexpected ways–just when LOreal is experimenting with its own retail formats.
Owen-Jones knows the risks–the 53-year-old CEO is always asking himself what aggressive marketer, what hot fragrance could steal share from LOreal. Glancing at shelves in his Paris office lined with LOreals latest products, he notes: Im never satisfied and never convinced we are winning. I try to convince my people we might not be.
That healthy doubt is just one of the ways LOreals chief has kept his company on top. Known by his rivals as a marketing whiz, he loves to prowl the aisles of department stores, quizzing customers and salespeople alike on every aspect of the beauty business. On his latest visit