Market study of L’Oréal

1. Market study of L’Oréal Kim Jiwon (Jessie) 11340696045 Wong Siew Fong 11340126053

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 Personal Care Industry Reaching $630billion by 2017 Compound annual growth rate 3.4% 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'OréalLuxe Lancôme Giorgio Armani Beauty Biotherm Kiehl’s ShuUemura Helena Rubinstein Yves Saint Laurent YueSai Yves Saint Laurent Beauté Ralph Lauren Cacharel Clarisonic Diesel Viktor&Rolf MaisonMartin Margiela Urban Decay L’Oréal Professional Kérastase Matrix Redken Pureology ShuUemura Art of Hair Mizani Essie Vichy La Roche-Posay SkinCeuticals Innéov Roger&Gallet Sanoflore L’Oréal Paris Garnier Maybelline NY Mini Nurse Softsheen.Carson Createursde beaute.com Essie

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

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

16. Business model in China

17. Key • Activities • Production • Marketing • R&D • Customer segments • Gender • Income • Customer • relationship • Advertisement • Consumer Caring Center in Shanghai • Key Partners • advertisement agencies • Suppliers • distributors • Value • Propositions • Prestige • Western • branding • Asian • branding • 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. Channels Income Gender Prestige Lancôme Giorgio Armani Beauty Biotherm Kiehl’s ShuUemura Helena Rubinstein YueSai • 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 • Activities • Production • Marketing • R&D • Customer segments • Gender • Income • Customer • relationship • Advertisement • Consumer Caring Center in Shanghai • Key Partners • advertisement agencies • Suppliers • distributors • Value • Propositions • Prestige • Western • branding • Asian • branding • 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. 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. Chinese taste for Luxury Huge potential from the next generation L’Oreal Luxe

24. the brand for modern Chinese women. YueSai - 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. Competition in China : Situation & Competitors (Local & Intl’)

26. 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. 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. 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. Threats of alienating • consumersin 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 Yuesai • 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 130 000 reconstructed skin models per year in France * The facility in Pudong (China) produces close to 30 000 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