L'Oréal Stratergy For Change
L'Oréal has never been so ready to attack
L'Oréal, the cosmetics and beauty company, predicts that the sectors in which it operates will see global sales remain flat this year, but also plans to "reinvent" itself to meet the challenges presented by the economic downturn.
The French firm, which owns brands including Lancôme, Garnier and Maybelline, is currently celebrating its centenary, but also posted its first ever quarterly sales loss in Q4 2008.
Like-for-like sales continued to decline in the first quarter of 2009, off by 4.3% in all, and the company identified five "strategic thrusts" which it hopes will return it to growth.
These include focusing on "accessible innovation", moving into new, fast-growing markets, cutting costs, and "ensuring sustained advertising and promotional investments."
A recent report by RBS said L'Oréal's "product mix and business model has been well suited for the economic environment of the last five years", but expressed concerns about the impact of "consumer deleveraging and weak discretionary spending."
Jean-Paul Agon, L'Oréal's ceo, similarly predicted that global cosmetic sales will be "zero or slightly positive this year" but could "improve over the next few quarters."
However, he also argued that "L'Oréal has never been so ready to attack," and would continue to benefit from offering a diverse range of products at a variety of price points.
While it has yet to introduce any low-cost brands, a strategy recently announced by Procter & Gamble, the Agon said the Clichy-based cosmetics giant will look to enter new categories, such as by making cosmetics solely from natural ingredients.
Emerging markets in Asia, Africa and the Middle East also still needed to be "conquered", and Agon added that while L'Oréal had the largest share of any operator in the global market, at 15.8%, that still "leaves 84.2 per cent to conquer."
This aim may be assisted, in one country at least, by Procter & Gamble's decision to stop selling its Max Factor cosmetics brand in the US, where sales have declined while its CoverGirl brand has grown.
Virginia Drosos, p
resident of global female beauty at P&G, argued that Max Factor remains the company's "fastest-growing" cosmetics brand, but that much of its revenues comes in markets like the UK and Russia, rather than America.
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