Maybelline and Garnier have taken up residency in many Chinese bathrooms since international cosmetics group L’Oréal first arrived in the country in 1996. Alongside the L’Oréal brand itself, these two labels – as well as established local names Yue Sai and Mininurse, which L’Oréal acquired – are mainstays of China’s consumer products industry. In total, 14 of the 19 brands owned by L’Oréal worldwide – encompassing hair and skin care, make-up, perfumes and pharmaceuticals – are available in China. L’Oréal recorded sales of US$802 million in China last year, up 30% on 2006. This compared to revenue growth of 8.1% worldwide and 14.3% in Asia. Emma Walmsley, vice president of L’Oréal China, spoke to CHINA ECONOMIC REVIEW about how the company targets local consumers.
Q: What do you think is unique about the Chinese market in comparison to other developing economies like India or Russia?
A: China is completely unique, not only in the structure of the beauty market, but also in its incredible changeability. Chinese people – whether it’s in beauty or IT or all other areas of life – adopt change very, very fast. So, the Chinese market is dynamic, it’s changing all the time. It’s also very brand driven, which you also see this Russia and other developing markets. This makes it very competitive because everyone wants to be there. Ten years ago China wasn’t in the press in the West very much and now it’s there all the time – this is one of the most, if not the most, attractive market in the world, so everyone is playing. It’s actually not an immature market in the sense that consumers are extremely demanding. They have a lot of choices, and they know what they want. Chinese women are very pragmatic. They know when they’re getting a good deal and when they’re not, and they know when people tell them something that isn’t true. We have to make sure that we stand by our promises to our consumers, and that we deliver the best possible technologies for them. We have our labs here and we do huge amounts of research, developing products for here. We tailor products specifically for China to make sure that our Chinese customers are getting the best deal possible.
Q: L’Oréal sets out to have different products in each price bracket. In pursuing this strategy in China have you encountered any problems with brand management?
A: Firstly, we group our brands. We make a brand occupy a certain price area, so we have divisional structures. The luxury brands, which are at the very high-end, will be priced at a premium level, and then you have semi-selective brands like L’Oréal Paris, which is one of the brands I’m responsible for. After that come the more mass-market distribution brands like Garnier, and finally at the economical end you have Mininurse. You need to occupy a certain price bracket within these structures, but what’s interesting about that is you can stretch the pricing of brands more in China than you can in many other markets. The highest-priced product and the lowest-priced product can be a little bit further apart.
Q: Why is that?
A: People tend to communicate about brands at the top end of the range, but in a market where people want to have access to a brand, getting a little taste of a brand at an accessible price can mean a lot. You see the luxury brands doing it as well. If you can’t buy a Prada suit, you can buy a Prada handbag. If you can’t buy a handbag, you can buy a key ring. A little bit of brand magic goes a long way because the aspiration of the Chinese consumer is very high.
Q: Beyond price, how are different products targeted at certain groups of consumers?
A: You have to think about the attitudinal point of view toward brands. L’Oreal Paris is a French, luxury, high-performance technology brand. Maybelline New York is fashion driven, color driven – it’s a bit funkier, a bit younger. I’m going to say it takes itself a little less seriously. And Garnier is a natural brand. If you’re a Garnier person, you believe in products that have the power of plants in them – this is a very well-fitting idea for a Chinese consumer. Garnier people are not going to be interested in L’Oréal Paris and its high-level technology and glamor. It’s a totally different consumer psychographic. One of the reasons we have these brands in different places is so we don’t end up recruiting from ourselves.
Q: Taking all these things into account, what is L’Oréal overall China strategy for the next 10 years?
A: It’s extremely simple. We are in the Chinese market, and the strategy is to grow, but not just to grow for growth’s sake, but to grow by investing. This means investing, as we have done, in plants, in research facilities and in people. My job is to help coach and invest in the people here so that they can run the company. We want to be ambitious but in a sustainable way with all the respect that you need to have for a country and its culture and environment.
Q: To what extent do the acquisitions of local brands Mininurse and Yue Sai reflect L’Oreal’s overall approach to China?
A: We’ve seen phenomenal growth with our existing brands, and we took a very important decision to acquire both a Chinese luxury brand, Yue Sai, and a Chinese mass-market skincare brand, Mininurse. They’ve been incredibly valuable acquisitions to us, both in the business that they bring and in the market knowledge that they bring. Mininurse has taught us how to access mass-market consumers that we haven’t accessed before. In doing this, it has also taught us about a particular type of distribution that we weren’t operating in before. Because of the Mininurse acquisition we’ve been able to launch our Garnier brand fairly successfully, basically building on the Mininurse platform. As for Yue Sai, the world needs Chinese luxury brands and is open to them. There are so many industries in which Chinese brands are growing and becoming global – I don’t need to list them. In beauty, it’s exactly the same. The big question is: When will we see Yue Sai in New York and Paris? It’s very exciting.
Q: How exactly did Garnier build on the Mininurse platform?
A: The business we were operating before we bought the Mininurse brand was essentially a counter business. Maybelline is a counter business. You have a beauty advisor and a bunch of products sitting on a counter; people come and ask the beauty advisor for advice and the products are bought right there. It is the same for L’Oréal. Mininurse is a self service business – you go into a hypermarket, choose your product, and buy it at the till. In many other parts of the world, consumer divisions I’ve run have been self-service businesses. But we didn’t know how to do that in this part of the world. One of the reasons we bought a local player was to help us understand that operating model.