1. Market study of L’Oréal
Kim Jiwon (Jessie)
Wong Siew Fong

2. 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

3. Market overview
Global beauty market

4. Global beauty market
Compound annual
growth rate
3.4%
Personal Care Industry Reaching $630billion by 2017
Demand from Asia Pacific region generated $21billion incremental retail value
Premium Cosmetics outperformed Mass
Cosmetics
(growth of 4.7%)

5. Chinese beauty market

6. 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

7. China’s Beauty Market Shifting away from the traditional distribution
channels
Health and beauty retailers and Online retailers
replacing Grocery retailers and departmental stores

8. 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

9. Company overview

10. L'Oréal Started in French in 1909
World’s largest cosmetics company, with worldwide 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)

11. L'Oréal China Started in 1997 in Hongkong with L’Oréal Paris
Second largest beauty and skincare player in China: No.1 in the luxury segment
Established a Research and Innovation Centre in Shanghai, and manufacturing centres in Suzhou and in Yichang

12. Product categories Active Cosmetic Division Consumer Product Division
Professional
Products
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
L’Oréal
Professional
Kérastase
Matrix
Redken
Pureology
Shu Uemura Art of Hair
Mizani
Essie
Vichy
La Roche-Posay
SkinCeuticals
Innéov
Roger&Gallet
Sanoflore
L’Oréal Paris
Garnier
Maybelline NY
Mini Nurse
Softsheen.Carson
Createurs de beaute.com
Essie

13. Product categories
Make Up
Hair
SkinCare
Skin Care For Men

14. largest market in 2008 to the 3rd largest market
China grew from the 7th
largest market in 2008 to the 3rd largest market

16. Business model
in China

17. Key Customer Activities Value relationship Propositions
Key Partners
advertisement agencies
Suppliers
distributors
Key
Activities
Production
Marketing
R&D
Value
Propositions
Prestige
Western
branding
Asian
Customer
relationship
Advertisement
Consumer Caring Center in Shanghai
Customer segments
Gender
Income
Distribution
Channels
Departmental
stores
Beauty product chains
E shopping platforms
Key
Resources
R&D
Production plants
Employees
Marketing
Cost Structure
marketing, research costs, commission and rentals (departmental stores), production
Revenue Streams
fixed pricing
e commerce

18. Gender Income Channels Prestige Lancôme Giorgio Armani Beauty Biotherm
Kiehl’s
Shu Uemura
Helena Rubinstein
Yue Sai
Departmental Stores
Cosmetic Stores
Female
Beauty product chains
E shopping platforms
Masstige
Vichy
La Roche-Posay
SkinCeuticals
L’Oréal Paris
Garnier
Maybelline New York
Mini Nurse
Male
L'Oréal Men Expert
Garnier Men

19. Value
proposition
Asian
western
Origins
Chinese
Age
Young
Mature

20. Key Customer Activities Value relationship Propositions
Key Partners
advertisement agencies
Suppliers
distributors
Key
Activities
Production
Marketing
R&D
Value
Propositions
Prestige
Western
branding
Asian
Customer
relationship
Advertisement
Consumer Caring Center in Shanghai
Customer segments
Gender
Income
Distribution
Channels
Departmental
stores
Beauty product chains
E shopping platforms
Key
Resources
R&D
Production plants
Employees
Marketing
Cost Structure
marketing, research costs, commission and rentals (departmental stores), production
Revenue Streams
fixed pricing
e commerce

21. L'Oréal in China

22. Competitive Advantages “Because you’re worth it”
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

23. Huge potential from the next generation
Chinese taste for Luxury
Huge potential from the next generation
L’Oreal Luxe

24. Yue Sai - L'Oréal’s Local Brand Struggle for successful marketing
the brand for modern Chinese women.
Yue Sai
- L'Oréal’s Local Brand
Struggle for successful marketing
traditional Chinese medicine ingredient
Bought in 2004, targeting mass-market
the brand for modern Chinese women

25. Situation & Competitors
Competition in China :
Situation & Competitors
(Local & Intl’)

26. – Shanghai Jahwa (上海家化)
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

27. Jahwa L'Oréal Product positioning Strength Target group
Masstige/ low end segments Luxe market
Local brand vs. International brand
Masstige/ mass market vs. Prestige market
Younger market vs. Mature market
Owns the most extensive distribution network in china
Use of herbal ingredients and traditional Chinese Medicine
Consistent strategy development as local brands
Specialized in luxe brands
Prestigious: trustworthy image
Internationally diverse portfolio

28. 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

29. P&G L'Oréal Emphasis Target group Brand image strength
Beauty and Hair care products Beauty and cosmetics
Usually mass and rural Luxe market
consumers
Amiable international brand Luxury European brand
Flexible marketing strategy (esp. in rural areas)
Prestigious: trustworthy image
Diverse portfolio (whole product categories)
Specialized in luxe brands
Prestigious: trustworthy image
Diverse portfolio (cosmetics and skincare products)

30. Market Share

31. Challenges & Problems Limited consumer market for makeup products
Competition with local brands and natural products
Conflicts of Animal testing

33. only major market which require animal testing
China:
only major market which require animal testing
EU’s rule: sales forbidden for animal tested products in EU
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

34. 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

35. Suggestion : What are the next steps for L'Oréal?
- Invested €900 million in international research on alternatives, such as reconstructed tissues and tissue models.
- 5.7 billion L’Oréal products are sold per year which are free from animal testing
-  Less than 1 percent of its total safety testing on cosmetics ingredients involve animals
* Produces  reconstructed skin models per year in France
* The facility in Pudong (China) produces close to skin models
China requiring Animal testing
Finding alternative methods to testing
Keep talking to local authorities to ease the regulations

36. 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

37. Thank you