A company known for consistently launching new products every few years, French cosmetics major L'Oréal recorded a turnover of Rs 600 crore (Rs 6 billion), and a growth of nearly 40 per cent, in India in 2007.
L'Oréal India, launched 13 years ago taking into account the sheer size of the Indian market, has recently set up its own manufacturing plant in Pune. L'Oréal India imports most of its products from its own facilities abroad and manufactures the rest in Pune.
Regulations in India prevented L'Oréal from entering solo and the company formed a joint venture with MJ Group to launch the Ultra Doux range of hair-care products. Encouraged by the acceptance its brand received in India, L'Oréal seized the opportunity to break the JV and form its own subsidiary in 1994.
One of the most important factors that worked for L'Oréal is its high spend on advertising. Globally, L'Oréal spends 30.7 per cent of its worldwide turnover on advertising and promotion and 3 per cent on research and development.
In India, it is the fifth largest media spender in the industry. The Indian subsidiary headed by Chief Operating Officer Dinesh Dayal, who has been with the company for 20 years, is one of the key officials responsible for the formation and operations of L'Oréal India.
"We have deployed a judicious blend of global and local methods of advertising to appeal to the Indian consumer," says Dayal. The L'Oréal advertising account is handled by the Publicis group globally. In India, it is working with Mccann Erickson.
"Initially, we were not aware of the extent of potential in India but now our estimates have been proved right. One of our biggest realisations in the Indian consumer market was the discovery that the Indian consumer is not as price conscious as it is often portrayed to be. Our brands were more expensive than an average fast moving consumer good (FMCG) here, yet we found a market because we were offering the right value for money," says Dayal.
Last year L'Oréal introduced its premium make-up range Lancome. In its way forward, the company will target this category as a growth area. However, it faces a challenge of distribution as the premium skin care segment needs the support of organised retail outlets to grow.
"We have to cope with the limited expansion of high-end retail due to astronomical rentals in catchment areas. We hope to see upgradation of traditional medical stores in India where we market our Vichy Laboratories products (active cosmetics)," explains Dayal.
L'Oréal operates in India through four main divisions: consumer products, professional products, active cosmetics and luxury products. The biggest contributor to its revenue in India is the consumer products division led by its strongest brand in terms of sales - Garnier.
In the hair colour segment, Garnier operates in the mid-price and luxury segment. This has enabled it to garner a 20 per cent share in a market dominated by local hair colourants and dyes.
Garnier attributes its performance to being the first player in India to introduce a cream-based hair colour below the price of Rs 100 (2002) and the first home-highlighting kit (2005).
L'Oréal India's, whose other strong brands include L'Oréal Paris and Maybelline, workforce comprises only 600 employees but it has an intensive product portfolio of brands.
Talking about facing increasing competition from global brands Dayal says, "By constantly innovating in products, supply chain, systems and structure, we will ensure the company's growth."