“Because you’re worth it” – L’Oreal’s success in China

3 Nov

By Lin Bai | November 03, 2009

Because you’re worth it “ä½ å€¼å¾—æ‹¥æœ‰”– ask anybody in the streets of China and they will recognize L’Oréal’s memorable brand tagline. However, scratch the surface further, few would have known that the cosmetics beauty giant L’Oréal Group also owns 16 other brands in China since first entering in the market in 1996.

China Looks Beautiful to L’Oréal
If you compare L’Oréal with its competitors, L’Oréal entered the China market late. However, compare L’Oréal’s growth in China and they are simply in a league of their own. Their sales in China last year grew 27.7% year-over-year to 6.95M RMB (USD $1.02B) – a double digit growth in China for eight consecutive years (compared to a decline in sales in Western Europe and North America in 2008).

Multi- Brand Strategy

L’Oréal uses a multi-brand strategy to cover the mass market in China. The best way to describe their diversified brands is that of a pyramid:

At the base of the pyramid comprise of L’Oréal Paris, Maybelline Garnier, and Mini-Nurse – all products that target the mass market.

Brands such as Vichy, Kerastase, and Matrix make up the middle of this pyramid. These products are sold in pharmacies and hair salons meant for consumers looking for that mid-level quality of products.

The very top of that pyramid is reserved strictly for the high-end products such as Lancome, Biotherm, Shu Uemura, and Kiehl’s. These products are sold in retail outlets, high-end department stores, and specialized boutiques.

Each level of L’Oréal brand pyramid occupies a certain price area, which meets the needs of Chinese consumers from a price sensitivity perspective namely due to the wide income gaps in China.

Now beyond price, L’Oréal products go through different tiers of sales channels including supermarkets, pharmacies, hair salons, department stores, and specialized boutiques. Even L’Oréal brands have their own unique ‘personality’ – L’Oréal Paris is a high-performance technology brand, Maybelline New York is fashion driven, and Garnier is often characterized as a natural brand. Diversity in products, branding, and sales distribution all contribute to L’Oréal’s success in cornering the beauty and cosmetic market in China today.

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