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STRATEGIES OF LOREAL

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TABLE OF CONTENTS

About loreal.

Introduction.

The Business..

Corporate strategies

Branding strategy.

The Complete Global Changeover.

SWOT Analysis

LOreal in India...

Conclusion

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Introduction

Eugene Schueller a young French chemist developed an innovative hair color formula,Aureole. He manufactured his own products and sold them to Parisian hairdressers. The

company was registered in 1909. The guiding principle from the beginning was researchand innovation in the interest of beauty.

By, 1950 had acquired 100 products and today they are 2000 product strong. From thebeginning Eugene was ambitious about his company and by 1912 the brands were foundin Holland, Austria and Italy. In a few years the company was distributed US, SouthAmerica , Russia and Far East. Today, LOral is present worldwide through itssubsidiaries and agents. Loreal started out in hair colour business but soon branched outinto other cleansing/beauty products.LOrals century long history is marked with successes. Today the 500 brands ofLOral provide diverse products from hair color, permanents, styling aids, body and skin

care, cleansers and fragrances.The distribution channels are diverse from hair salons to super markets and hypermarkets,health and beauty outlets and direct mail.In 1933, Voutre beaute a magazine devoted to beauty and well being of women waslaunched .The 1950s saw the advent of new and exciting advertising medium: themovies. LOreal made its onscreen debut with the campaign for Ambre Solaire, whichwas making a comeback on the market.

The Global Reach Of LOreal

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The Business

In the battle for global beauty markets, $12.4 billion L'Oreal has developed a winningformula: a growing portfolio of international brands that has transformed the Frenchcompany into the United Nations of beauty. Blink an eye, and L'Oreal has just sold 85products around the world, from Redken hair care and Ralph Lauren perfumes to HelenaRubinstein cosmetics and Vichy skin care. The report shall cover L'Oreals presence onthe world map as well as its position India since its inception.

L'Oreal caters to the market by following the underlined categorization and has differentstrategies for these product segments.

1.Global Strategies2.Strategies in India

The Product Categories

1. Consumer products

The Consumer Products Division is dedicated to offering all consumers its hightechnology products at competitive prices through mass-market retailing channels. TheDivisions brands develop haircare, skincare, make-up and perfume products that meetthe aspirations of all of its customers.

The Division's 5 international brands are L'Oral Paris, Garnier, Maybelline New York,Softsheen.Carson and Le Club des Crateurs de Beaut.

2. Professional products

The Professional Products Division is at the service of hairdressers worldwide. Ourcomplementary brands meet the requirements of salon professionals in colorants, haircare, texturing and styling formulas and provide salon customers with a wide range ofinnovative, high-performance products. The Professional Products Division of LOral ismade up of four different brands: L'Oral Professionnel, Krastase, Redken 5th AvenueNYC and Matrix.

3. Luxury products

The prestigious brands of the Luxury Products Division offer consumers top of the rangeproducts. Clients of selective retail outlets (department stores, perfumeries, travel retailoutlets, and the brands own boutiques) receive personalized advice at the point of sale,enabling them to choose the products best suited to their needs.

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Lancme, Helena Rubinstein, Biotherm, Shu uemura and Kiehls offer premium productsknown for their innovation, performance and quality. The Luxury Products divisionhouses also some of the world's top perfume brands: Giorgio Armani, Ralph Lauren,Cacharel, Paloma Picasso and Guy Laroche.

4. Active cosmetics

The Active Cosmetics Department designs and markets dermo-cosmetic skin care products that are sold in pharmacies and specialist retailers. These products offerconsumers proven safety and effectiveness supported by advice from pharmacists anddermatologists.

The Departments three brands, Vichy, La Roche Posay and Innov, offer skin care, suncare, and hair care and make-up products.

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Consumerproducts

LOreal

Professionalproducts

Active cosmeticsdepartment

VichyMaybelline New York,LOreal Paris, Garnier.

LOrealProfesionnel

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Corporate Strategies

True enough, its tough to succeed in a demanding economy.

It takes breakthrough innovation, breakneck speed, and naturally, the very best talent tooutthink and outmaneuver your competitors.

L'Oreal thus works on a three point guide for meeting with competition:

Innovate by successfully conceiving of and launching a new concept ortechnology

Differentiate their products and services through pragmatic marketing strategies Dominate in their market and build brand equity and profitable growth

The Strategist

For the first time this year, TIME, the American magazine, published a ranking of the 100most influential people in the world, in a range of categories (politics, economics,science, arts, etc). Among them, Mr. Owen-Jones, LOrals CEO, is part of the worlds20 Builders and titans.

When questioned on the possible risks of market saturation in a business like beauty care,Mr. Owen-Jones replied, When I began, we sold to women from 20 to 50. Today, we

sell to women from 15 to 75. Tomorrow, we will undoubtedly have customers from 13 to93.Lindsay Owen-Jones feels that the cosmetics industry has a promising future, and notonly because of its constant quest for innovation and quality. ...considering that themen's market is just beginning to develop and that emerging countries represent agigantic reservoir of potential consumers, the market is far from saturated.

Initial Strategy

One of Owen-Joness first moves at LOral was to bring more focus to the company

through a huge pruning of brands and activities. The company focused on five corebusinesses and technologies -- hair color, hair care, skin care, color cosmetics, andfragrances. Then we concentrated on 10 global brands, which now make up 85% of sales.A whole list of brands has disappeared. It's focus and then extreme drive on the remainingproducts to take them global.

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Mergers And Acquisitions

LOral, the worlds largest beauty company, announced that it has signed an agreementto acquire SkinCeuticals, a professional skin care company. Founded in 1994 and

headquartered in Dallas, Texas, SkinCeuticals, a privately held company, is one of thelargest and fastest growing brands in the professional premium skin care market in theU.S. Through a strong and specialized distribution network, the company sells todermatologists, plastic surgeons, and high end spas. SkinCeuticals sales in 2004amounted to 35$M.

The acquisition of SkinCeuticals allows LOral to strengthen its position in high-performance professional skin care, said Lindsay Owen-Jones, Chairman and CEO ofLOral. This market, in which SkinCeuticals is a leading player, is a particularlypromising one with high international potential.

The company entered the Chinese market by acquiring the Chinese brand Mininurse inDecember 2003.This was followed by an agreement to acquire the Chinese make-up andskincare brand Yue-Sai on 26th January 2004. "After Mininurse at the end of last year,this new acquisition confirms our determination to step up the pace of our growth on this

strategic market", commented Mr. Lindsay Owen-Jones, Chairman and Chief ExecutiveOfficer of L'Oral.

On 9th May 2001 The L'Oral Group and the CosMedic Concepts Company have justsigned an agreement. According to the terms of the agreement, the CosMedic ConceptsCompany yields its BioMedic brand and range of products to L'Oral.

"This acquisition will strengthen L'Oral's product portfolio in the dermocosmetics and

will accelerate our expansion in this rapid growth market," indicated Guy Peyrelongue,President and CEO of L'Oral U.S.A.

"The acquisition of the leading American brand of cosmetics designed for use bydermatologists and plastic surgeons, in association with L'Oral research, will provide

L'Oral with a powerful position in this potentially strong market throughout the world,"

stated Laurent Attal, managing director of L'Oral's Active Cosmetics department

As the competition intensifies, Owen-Jones is likely to continue making acquisitions. Hehas purchased five companies in six years. The company is actively exploring acquisitiontargets elsewhere in Asia. Already huge in established markets such as Europe and theU.S., L'Oreal is venturing further afield. Last year, the company acquired Soft Sheen, aU.S. line of hair-care products aimed at African-American women. Owen-Jones intendseventually to use it as a springboard for expanding into Africa. L'Oreal is expandingrapidly in India since it introduced its L'Oreal Excellence line of hair color in 1997--thefirst time a company dared sell any color other than black. In Mexico, L'Oreal ranks No.1, with a 28% spurt in sales last year.

Cross-fertilization:

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L'Oreal's work with Maybelline is a prime example. In 1996, L'Oreal acquiredMaybelline for 758 million and began a complete makeover of the brand, includingmoving the headquarters from Memphis, Tenn., to New York City. The key: figurativelystamping ''urban American chic'' all over Maybelline products to promote their U.S.

origins. In 1997, for example, Maybelline rolled out a radical new makeup line, heavy onrisky colors such as yellow and green, dubbing it Miami Chill. And when L'Orealmarketers discovered that the moderately successful Great Finish nail enamel dried in oneminute, they changed the name to Express Finish--and sold it heavily as a product usedby urban women on the go. The makeover was a hit. Maybelline's share of the nail-enamel market in the U.S. has climbed from 3% to 15% since 1996. Altogether, over thepast three years, Owen-Jones has almost doubled Maybelline's sales, from $320 million to$600 million, and pushed the brand into more than 70 countries. Sales outside the U.S.market now make up 50% of total revenues.

New Geographic Areas

In the battle for global beauty markets, $12.4 billion L'Oreal has developed a winningformula: a growing portfolio of international brands that has transformed the Frenchcompany into the United Nations of beauty. Blink an eye, and L'Oreal has just sold 85products around the world, from Redken hair care and Ralph Lauren perfumes to HelenaRubinstein cosmetics and Vichy skin care.

India is one of LOrals fastest growing markets. To meet ever-rising demand, the Groupopened a new manufacturing plant near the city of Pune, a state-of-the-art facility with a production capacity of up to 100 million units per year.

2003 saw LOral grow by 33.4% in India, and the new factory in Pune is the latest stepin the Groups rapid development on the subcontinent. The high-tech plant willmanufacture hair care; hair color and skin care products for the Indian market as well asfor export to neighboring countries. It shall practice World Class Standards in Hygiene.The Pune site is one of the first within the Group to implement LOrals newest GHP orGood Hygiene Practices.

L'Oreal is surging in markets stretching from China to Mexico. Its secret: conveying theallure of different cultures through its many products. Whether it's selling Italianelegance, New York street smarts, or French beauty through its brands, L'Oreal isreaching out to more people across a bigger range of incomes and cultures than just aboutany other beauty-products company in the world. That sets L'Oreal apart from one-notemarketers such as Coca-Cola Co., which has just one brand to sell globally.But L'Oreal is surging in markets stretching from China to Mexico. Its secret: conveyingthe allure of different cultures through its many products. Whether it's selling Italianelegance, New York street smarts, or French beauty through its brands, L'Oreal isreaching out to more people each day.

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Research and Development

Since it was founded in 1907 by the chemist Eugene Schueller, the L'Oral Group hascontinued to invest in cosmetic research with one clear aim: to improve the quality and

efficacy of its products through scientific innovation. Each year the Group devotes morethan 3% of its turnover to Research and Development.

Laboratories in France, the United States and Japan employ over 2,900 scientists andsupport staff from over 30 disciplines: chemistry, biology, medicine, physics, toxicology,etc. Research findings are published in numerous international scientific journals and in2004 LOreal applied for 586 patents. LOreal believes in the strength for long termgrowth and sustenance.

Entering New Business

LOreal has announced the first men's anti-aging product line to hit mass market retailersacross America. Up to now, men's cosmetic has been a small niche market, but L'Oreal'slead could start the ball rolling.

Exploring New Opportunities

To sell the new Helena Rubinstein line, L'Oreal has opened a New York spa--the firsttime L'Oreal has tried to run a retail operation. And the target market is younger andtrendier than L'Oreal's typical luxury customers. It's not clear how well the company willbe able to manage its ever-growing stable of upscale beauty brands while mixing it withstreet-wise new products. But that's the thrill of being in the beauty business--what's hotis always changing, and only the savviest of sellers can keep up with the trends.

Corporate Social Responsibility

UNESCO and LOreal Professional Products signed an agreement under which they willwork together on an HIV/AIDS prevention education programme.

Another example of LOreals commitment to philanthropy and serving disadvantagedcommunities is the Group's continued support over the past 15 years, to the Look GoodFeel Better programme. This initiative helps put a smile back on the faces of cancerpatients through skin care and make up workshops. LGFB is an original project from thecosmetic industry, which demonstrates just how beneficial cosmetics can be toindividuals well being.

This programme will offer courses adapted to the cultures of the countries concerned. Itwill be part of the programme already put in place by LOreal in Africa, which has thusfar provided for 170,000 training days. The hairdressers serve to further the campaign by

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relaying their knowledge to clients in their salons, veritable places of exchange anddialogue across the continent.

After the mass scale destruction due to tsunami in India LOreal participated in theinternational relief effort, LOreal contributed 1 million.

LOreal realized the need of women in science and in 1998, the LORAL-UNESCOFOR WOMEN IN SCIENCE Award was designed This collaboration, illustrates how theprivate sector and an intergovernmental institution can pursue joint projects to supportwomen of science, encourage the advancement of knowledge and enhance developmenton a global scale. Five remarkable women physicists receive the LOreal-UNESCO forwomen in science award for 2005, the world year of physics.

Achievements

LOral ranks first in the 2005 survey of the reputation of Frances CAC 40 companies.

The study was conducted by the Observatoire de la Rputation and the European strategicintelligence leader, Datops.According to the survey, LOrals outstanding reputation is largely due to itsattractiveness as a company and its good financial health. LOral was the companymost often mentioned under the headings good financial health, quality of products,desirable products, attractiveness, desirable place to work, and desirable companyto invest in.

LOral decided to link up with the Cit des Sciences Museum in Paris to launch theworlds first exhibition on hair in 2001. After a highly successful three-year Europeantour, LOrals Decoding Hair exhibition heads to Central America and opens inMexico on December 9th, 2004.

LOrals firm commitment to promoting diversity among its employees, customers andsuppliers, and the Groups overall culture of inclusiveness has earned it the very firstDiversity Best Practices Global Leadership Award. LOrals CEO, Mr. Lindsay Owen-Jones has long been a fervent proponent of diversity and feels his companys success is inlarge part due to the culture of inclusion he and his teams have worked hard to promote.

LOral USA was recently chosen by the US magazine Occupational Hazards as one ofthe sixteen safest companies in the United States. The distinction rewards the Groups USsubsidiarys commitment to and achievements in occupational safety.

LOral was named Packager of the Year in 2003 by CPC Packaging, an Americantrade journal for the cosmetics and personal care industry. An award that underlines theGroups capacities in meeting the consumers needs by using the most sophisticatedtechnologies in packaging.

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A Complete Global Changeover

In just a decade, LOral has undergone a complete changeover. Ten years ago, 75% ofLOrals $5.5 billion annual sales came from Europe, mostly on the French market.LOrals image seemed to be indelibly linked to Parisian sophistication. Last year, theEuropean market represented only 49% of the Groups 13.7 billion dollar revenues, whilethe American market accounted for 32% of sales (a doubling of the American marketshare the company had in the early nineties). LOral Paris, the Groups leading brand, isnow sold the world over without having lost one iota of its image of French chic.How were these important changes brought about? The first important reason highlightedby Fortune Magazine was the Groups brand development strategy, brilliantly formulatedand led to fruition by an international expert. One such outstanding success story isMaybelline. This formerly "Middle America" brand was bought in 1996. In just a fewyears, its image has now become trendy in such far away places as Japan or China. Itsnew "international and sexy" look has won over the worlds most stylish teenagers.

Adding "New York" to the brands name has made it a huge international success.

Today, Water Shine Diamonds lipstick by Maybelline is a symbol of how global LOralhas become. This successful product is the result of an initial setback: Moisture Whiplipstick felt too dry to Japanese lips. Thus, the product was sent back to the laboratory,Lindsay Owen-Jones insisted on giving it a new name and Water Shine lipstick was born.After having conquered the Japanese market, it was exported everywhere in Asia and,eventually, throughout the world. Today, it is so popular in Russia that certain colors areout of stock. the trick will be staying ahead in the game as his powerful rivals seek to play the globalbranding game. From giant P&G to niche players such as Los Angeles-based cosmetics

maker Stila, L'Oreal's competitors are hustling to catch up. in the emerging markets likeJapan L'Oreal still trails behind.

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Brand confusionPositioning in the myriad brands

Presence remains underdeveloped inemerging markets.

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StrengthsBrand imageWorld No.1Research & development-586 patentsInnovationon IN productsRange of portfoliodiversity of productsGlobal brandpresence in 130 countriesStrong Corporate Social Responsibility policy

Emerging markets of developingcountriesGrowing cosmetic and groomingmarketNewer acquisitionsmore range ofproducts

New channels on the electronic mediaLocal players in the new market expansionsBrand cannibalization

Weakness Opportunities

Strengths

Threats

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L'Oreals Journey in India

With liberalization L'Oreal sensed the opportunity in the Indian market and came to India

with the hopes of a growing market. One of the early players the company had to take theagency route for selling their products.

Following its global strategy of bringing the country-of-origin formula to new markets,L'Oreal came to India with GARNIERrange of products from the low-end brand of theirinternational portfolio. GARNIER became a wholly owned subsidiary in 1994.

Expansion of the product line started early with the introduction of skin care range ofSYNERGIE.

L'Oreal entered India with Excellence crme in 1996, the first brand signed as L'Oreal

Paris.

Transiting from the Consumer Product segment to their Professional Products range,LOreal set up the Professional Product division in 1997. This division required adifferent handling and L'Oreal set two development centers in New Delhi and Mumbai totrain the salon owners and professional hairdressers. This also marked the entry ofMajirel Hair Color in India.

Market grew and L'Oreal also introduced their skin care and make up offerings in India.The rise was also reflected in the change of the subsidiary in India from Indelor toLOral India Private Limited.

L'Oreal in India was looking at widening their portfolio along with deepening the productlines. In 2002, a significant development was the launch of VICHY that marked theintroduction of Active Cosmetics Department. This is a very niche, premium productfrom L'Oreal. In fact, over the three years of its presence its coverage is just 80 chemistsall over India.

The latest from the L'Oreal quiver are the brands-MATRIX and KERASTASE.These are also part of the professional division. However, while KERASTASE is asuper premium product, MATRIX caters to the lower segment demand.

Thus we see that L'Oreal in India has followed a two-pronged strategy:

having awide portfolio with the range of products for both premium and middleand lower segments in each of their product divisions

reinforcing their brand image through promotion of the premium brands even atlow demand.

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The main threat that L'Oreal face s in India comes from not just its direct competitors likeRevlon, P&G, Nivea etc. but also from the traditional wisdom prevailing. So L'Oreal isfighting to bring in a whole new lifestyle here that requires a change in the way the Indianwomen think of grooming and also about the expenditure on it.

L'Oreal products in India are marketed in a variety of distribution channels namely : massmarket, pharmacies and salons.The efforts have paid off and L'Oreal today is present in over 300 Indian cities accessing

7 international portfolio brands. Registering a blisterin double digit growth L'Oreal looksset to capture the Indian market in the coming years.

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Conclusion

LOrals core business is peoples well being, and their ambitions go far beyondfinancial performance.

The Group has confirmed its determination to link economic growth with strong ethicalprinciples and a real awareness ofits responsibilities to the community.

Their markets can be represented as follows:

Thus, an immense market to cater to with a mind-blowing range of products spells hardwork fro L'Oreal.

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