HEG

ElwinKusumaningtyas

Goran Adam Gasparac

Hung Duy

China’s cosmetics market

• The second largest in Asia Pacific after Japan and the eighth largest in the

world.

• The total retail sales of cosmetics in the country is estimated to top RMB 70

billion in 2006.

• National Bureau of Statistics (NBS) China’s middleclass household is

expected to grow from 5% in 2005 to 45% in 2020. The cosmetics market is

set to benefit enormously with the middle class, particularly the high-income

office ladies, being the major spender of cosmetics.

L’oreal in China Market

• To reach a wider audience, L’Oréal has announced plans to bring 4 middle-range

brands including L’Oréal Paris, Mininurse, Garnier and Maybelline to

hypermarkets and supermarkets in China

• The products will initially be test-marketed in foreign-owned hypermarkets and

supermarkets such as Carrefour and Wal-mart, before extending to locals such

as Lianhua and Hualian.

• L’Oréal, on the other hand, has introduced four product groups including generic

products, professional products, luxury products and medicated products.

Multi-brand strategy of L’oreal

All products that target the mass market

For consumers looking for mid-level quality of products.

High-end products

Each of diversified brands with different tiers of sales channels has a distinguished personality-Maybelline is fashion driven, Garnier is regarded as a natural brand, and L'Oreal Paris is known for a high-performance technology brand. 

Garnier

Local Acquisitions• L'Oréal China acquired Mini-Nurse (Chinese mass-market skin care brand) in late

2003 and Yue-Sai (a local make-up and skin care brand) in early 2004. 

• Mini-Nurse with forecast sales of Euro40 million (HK$377.6 million), was distributed

in 280,000 outlets across China, and held a large share of the low-end market at that

time.

• The acquisition enabled L'Oréal to access mass-market consumers that have never

been able to access the products before as well as securing local

distribution/operation knowledge to L'Oréal.

• Nearly 60% of the company's sales in China come from the

bottom base of L'Oréal's brand pyramid (i.e. local brands and

mass-market products).

Question 1

• Was the Mininurse acquisition really worth the wait and the effort for L’Oréal ?

• No• Even they got many benefits• Distribution network (280,000 outlets)• Marketing network• Manufacturing facility• Local research

• But• The brand market share decreased from

5.1 % in October 2003 to 3.5% in 2005• So they did not earn as much profit as

they hoped since they bought Mininurse

Question 2

• What might have been the drivers behind Mininurse’s market share drop?

• Was the Mininurse-Garnier co-branding a strategic mistake?

the drivers behind Mininurse’s market share drop

1. A decision was made to buy a local brand, Mininurse was found, and a deal was done.

2. A gleeful announcement was made that this acquisition would open up the 2nd and 3rd tier

cities through Mininurse’s distribution infrastructure to L’Oreal’s own brands.

3. A glum L’Oreal found that the distribution channels smooth and were complex, multi-layered

beasts, with no direct connection between the top and bottom layers.

4. L’Oreal dumped the strategy and the brand and came up with a totally new one: Garnier

Mininurse. “…in other words, they changed the brand, the packaging, the formula, the position,

and the distribution channel…all at the same time”.

5. The “hybrid brand (Garnier is international while Mininurse is rural China)” did

not go down well, and no amount of promotion through modern channels

helped.

6. Mininurse strategy has been unsuccessful, and they plan to go back to the

original channels in which Mininurse was strong”.

Mininurse-Garnier co-branding

• It’s not totally a mistake because L’oreal can introduce it

own brand, garnier brand to mass market in china, which

has a similar product positioning to Mininurse.

• In the other hand, mininurse seems to be fading away in

the Chinese market and lose their popularity.

Question 3• What is your description to revitalize Mininurse ?

Should L’Oreal discard the Garnier endorsement ? Should the brand be responsible ?

Solution• Find out weaknesses ( from brands or products )

Brand• Re-positioning the brand, which depends on customers’ awareness• Research new marketing campaigns• Increase budget for marketing campaigns

Products• Improve, or even re-design their products to be suitable with

customers’ demands• Should improve first because of cost• Increase budget for product research

Garnier• L’Oreal should discard the Garnier endorsement,

because of customers’ awareness• Should develop brands independently• Mininurse should focus on original customers, which

were interested of Mininurse’s products • Garnier should prove that they are the good brand drom

L’Oreal (France)• L’Oreal should be responsible to switch it to the right way

THANKS FOR LISTENING