70% of the French cosmetics major’s launches this year will be locally designed and developed
French cosmetics major L’Oreal is going Indian with a vengeance. The firm, whose Indian unit has a turnover of Rs 1,000 crore, will spend the better part of this year launching some locally-developed products — part of its strategy to get the Indian consumer hooked to it.
L’Oreal has already taken a step in that direction with the launch of a new fairness cream called Garnier Light Ultra, which is endorsed by actor Priyanka Chopra. It is now in the process of launching a locally-developed kajal under the Maybelline umbrella. A few months down the line, some skincare products targeted at men in India will see the light of day.
“Almost 70 per cent of our launches this year will be of products that are locally designed and developed,” says Jacques Challes, managing director, L’Oreal India. “The balance 30 per cent will be products from the international stable,” he says.
The research & innovation centre - the sixth such global facility for L’Oreal - will come up in Mumbai by the end of this year, says Challes. “In many ways this highlights just how important the Indian market is,” he says. “With a team of qualified people sitting here, developing solutions that are relevant to the Indian market will only grow,” he says.
While competitors such as Procter & Gamble (P&G) and Unilever have had a headstart over L’Oreal in terms of putting an India-specific strategy in place, the $28.08-billion cosmetics giant is in no mood to let its competitive advantage get in its way. Challes argues that the Indian units of P&G and Unilever have been around longer than L’Oreal. “We came to India 15 years ago. Our compounded annual growth rate in the last decade has been about 30 per cent,” he says. “We intend to maintain this pace of growth. In fact, in the next 10 years we should be amongst the top five in the L’Oreal universe,” he says.
The top five countries for the cosmetics giant at the moment are the US, France, China, Germany and Brazil. But as consumer sentiment remains weak in the West, L’Oreal knows it is the emerging markets that hold the key to its success in the future. Already two emerging markets - China and Brazil - find mention in the top five list. India’s inclusion, argues Challes, is not far off.
In keeping with this strategy, the firm is investing across the product value chain right from research and innovation, manufacturing, distribution and marketing - empowering the subsidiary in the process. It has also sanctioned investments of over 10 million euros (that is, over Rs 64-65 crore) in each of these areas, Challes says.
In the last few years, there have been quite a few products that have been locally developed and launched including the Garnier men’s range, Garnier shampoo plus oil, a two-in-one shampoo, a special shampoo for kids, again under the Garnier brandname, and a hair colour range called Color Naturals. Of the lot, the men’s range has been exported to neighbouring Asian markets, while Color Naturals has been exported to both Asian and Eastern European countries.
The Indian unit hopes to increase exports of its products for which it is expanding capacity of its production facility at Chakan, near Pune. From 180 million units per annum, the firm is taking it up to 250 million units per annum by July this year. “In the next two years, we will take this up to about 400 million units per annum,” says Challes.
At the same time, it is strengthening its supply chain by improving fill rates and lowering inventory levels amongst its 600 distributors. “The idea is to strengthen our existing network,” says Challes.
Easily one of the most sought after advertisers, L’Oreal is also increasing its over Rs 100 crore advertising budget in line with sales growth. “Garnier alone is amongst the top three advertised beauty brands in the country,” says Challes. “With sales growth, our share of voice would also have to grow,” he says.
L’Oreal has four verticals in India including the consumer products division, luxury products, professional products and active cosmetics. Of the four, the consumer products division which includes flagship L’Oreal, Garnier and Maybelline contribute close to 70 per cent of the Indian’s unit turnover. So that is clearly the key one for the French major. But the cosmetics giant is expanding its professional business with products targeted at the high, mid and lower-end salons. It is also stepping up its retail presence with specialised boutiques that will house its Kiehl’s range of luxury products.
While organic growth remains key to L’Oreal, Challes does not rule out the possibility of acquisitions in India. “Either we do an acquisition that we can take globally or we do something that can complement our strengths. I think the latter would apply more to us in India,” he adds.
