HEG

2. HEG Hung Duy Elwin Kusumaningtyas Goran Adam Gasparac

3. China’s cosmetics market • The second largest in Asia Pacific after Japan and the eighth largest in the world. • The total retail sales of cosmetics in the country is estimated to top RMB 70 billion in 2006. • National Bureau of Statistics (NBS) China’s middleclass household is expected to grow from 5% in 2005 to 45% in 2020. The cosmetics market is set to benefit enormously with the middle class, particularly the high-income office ladies, being the major spender of cosmetics.

4. L’oreal in China Market • To reach a wider audience, L’Oréalhas announced plans to bring 4 middle-range brands including L’Oréal Paris, Mininurse, Garnier and Maybelline to hypermarkets and supermarkets in China • The products will initially be test-marketed in foreign-owned hypermarkets and supermarkets such as Carrefour and Wal-mart, before extending to locals such as Lianhua and Hualian. • L’Oréal, on the other hand, has introduced four product groups including generic products, professional products, luxury products and medicated products.

5. Multi-brand strategy of L’oreal  High-end products  For consumers looking for mid-level quality of products.  All products that target the mass market Garnier Each of diversified brands with different tiers of sales channels has a distinguished personality-Maybelline is fashion driven, Garnier is regarded as a natural brand, and L'Oreal Paris is known for a high-performance technology brand. 

6. Local Acquisitions • L'Oréal China acquired Mini-Nurse (Chinese mass-market skin care brand) in late 2003 and Yue-Sai (a local make-up and skin care brand) in early 2004.  • Mini-Nurse with forecast sales of Euro40 million (HK$377.6 million), was distributed in 280,000 outlets across China, and held a large share of the low-end market at that time. • The acquisition enabled L'Oréal to access mass-market consumers that have never been able to access the products before as well as securing local distribution/operation knowledge to L'Oréal. • Nearly 60% of the company's sales in China come from the bottom base of L'Oréal's brand pyramid (i.e. local brands and mass-market products).

7. Question 1 • Was the Mininurse acquisition really worth the wait and the effort for L’Oréal ?

8. No • Even they got many benefits • Distribution network (280,000 outlets) • Marketing network • Manufacturing facility • Local research

9. But • The brand market share decreased from 5.1 % in October 2003 to 3.5% in 2005 • So they did not earn as much profit as they hoped since they bought Mininurse

10. Question 2 • What might have been the drivers behind Mininurse’s market share drop? • Was the Mininurse-Garnier co-branding a strategic mistake?

11. the drivers behind Mininurse’s market share drop 1. A decision was made to buy a local brand, Mininurse was found, and a deal was done. 2. A gleeful announcement was made that this acquisition would open up the 2nd and 3rd tier cities through Mininurse’s distribution infrastructure  to L’Oreal’s own brands. 3. A glum L’Oreal found that the distribution channels  smooth and were complex, multi-layered beasts, with no direct connection between the top and bottom layers. 4. L’Oreal dumped the strategy and the brand and came up with a totally new one: GarnierMininurse. “…in other words, they changed the brand, the packaging, the formula, the position, and the distribution channel…all at the same time”. 5. The “hybrid brand (Garnier is international while Mininurse is rural China)” did not go down well, and no amount of promotion through modern channels helped. 6. Mininurse strategy has been unsuccessful, and they plan to go back to the original channels in which Mininurse was strong”.

12. Mininurse-Garnier co-branding • It’s not totally a mistake because L’oreal can introduce it own brand, garnier brand to mass market in china, which has a similar product positioning to Mininurse. • In the other hand, mininurse seems to be fading away in the Chinese market and lose their popularity.

13. Question 3 • What is your description to revitalize Mininurse ? Should L’Oreal discard the Garnier endorsement ? Should the brand be responsible ?

14. Solution • Find out weaknesses ( from brandsor products ) Brand • Re-positioning the brand, which depends on customers’ awareness • Research new marketing campaigns • Increase budget for marketing campaigns Products • Improve, or even re-design their products to be suitable with customers’ demands • Should improve first because of cost • Increase budget for product research

15. Garnier • L’Oreal should discard the Garnierendorsement, because of customers’ awareness • Should develop brands independently • Mininurse should focus on original customers, which were interested of Mininurse’s products • Garnier should prove that they are the good brand drom L’Oreal (France) • L’Oreal should be responsible to switch it to the right way

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