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L'Oreal's success story in India
Arati Menon Carroll | September 26, 2005
When L'Oreal's Professional Products Division entered India in 1997, there wasn't a sniff of structure in the hairdressing industry. Organised education was absent, training considered redundant and hairdressers content with dubious domestic brands and prohibitively expensive foreign ones.
L'Oreal had the vision to realise all that would change and invested heavily in hairdressing education and training. Today, the hair care industry is pegged at Rs 200 crore (Rs 2 billion), growing in double digits, and L'Oreal Professional Products -- Professionnel and Kerastase -- are market leaders.
L'Oreal Professional Products prides itself on a product they believe is technologically unmatched. "3.5 per cent of our sales are pumped back into research & development; the best technology goes back into the trade," says Vismay Sharma, director, L'Oreal Professional Products Division. Their headstart also ensured broad distribution.
"We skim the top 100 cities in India and have the largest salon base in the country, of which 20 per cent is exclusive to us, contributing to 40 per cent of our revenue." Says Sharma, "Our biggest cost is the education of our trade. We have over 40 trainers; it's an entire machine that needs constant oiling."
But competitors are eating into the same strategy. Both Schwarzkopf, at the number two position in the industry, and Wella have launched technical training centres. Schwarzkopf even launched a by-invitation-only hairdressers club and flew 150 members to Goa for an inaugural meeting.
Shekhar Sethu, general manager, Schwarzkopf, is honest about a return on investment, "We do demand an increased commitment to turnover in return, whereby they become exclusive, high volume buyers." Wella, which entered India in 2001, is aiming to be in 5,000 salons by June 2006.
Professionnel in its turn has just announced Colour trophy, a nationwide quest to find the most creative hairdressers in the country and just this month sponsored two hair shows besides their annual showcasing of global fashions in hairdressing and colour.
Wooing potential affiliates into the network? "Not at all," says Sharma, a little unconvincingly. "It is more a platform to unleash creativity than a commercial venture. Sure the participants will use L'Oreal products, but how many tubes of colour can they use? We just want to be instrumental in creating new trends."
But even shows are not exclusive L'Oreal property. Both Schwarzkopf and Wella also showcase their interpretations of annual trends.
And in a revision of distribution strategy, Schwarzkopf has just begun retailing their hair colour range to power growth. Sharma reacts, "L'Oreal Professional Products began by selling through Parisienne salons. That's at the heart of our business; we will not dilute it by retailing for home use."
Okay, so the L'Oreal brand is strong, well established within target markets, and Sharma claims sales are up in India, although figures don't come by easily in the discussion. Well, this was the time, then, to become more proactive than ever before; to begin the task of figuring out just what it was going to take to sustain their competitive advantage and ensure that they stay at the cutting edge of their field.
And so, in February this year, L'Oreal announced the arrival of Matrix (their number one brand in the US), an affordable range of hair products to add to their existing offering.
Explains Sharma, "We needed to offer Indian hairdressers the option of using a professional brand at this price point." The value proposition is similar. Both brands offer all the support hairdressers need, from education, complete in-salon marketing, and salon promotions. Matrix, however will thrive on depth of distribution, with a training centre in every city it retails in.
"Matrix is young and hip. It's the best technology at that price," says Aseem Kaushik, business manager, Matrix. "I predict Matrix will be the biggest brand in India in five years or less, and it will bring in 8-10 times the revenue Professionnel does; division sales will be up by 65 per cent. The two brands will have to fight neck and neck," laughs Sharma.And then more seriously, "We will be the only company to offer products at three different price points -- luxury, premium and affordable. We will have a combination no one can beat." And so, L'Oreal Professional Products hang on to prime position for a while longer.