L'Oréal adapts in India

21 April 2011

NEW DELHI: L'Oréal, the cosmetics giant, is taking a nuanced approach to innovation in India, where a majority of its product introductions this year will be goods developed for the local market.

The French multinational currently claims annual revenues of 1,000 crore rupees ($226m; €155m; £138m) in the rapidly-expanding economy.

Having rolled out brand extensions like fairness cream Garnier Light Ultra and shampoo Garnier Shampoo + Oil aimed specifically at Indian shoppers, it is seeking to further such momentum.

"Almost 70% of our launches this year will be of products that are locally designed and developed," Jacques Challes, managing director, L'Oréal India, told the Business Standard.

"The balance [of] 30% will be products from the international stable."

A new R&D hub now under construction in Mumbai, one of six similar sites worldwide, should be functioning by the close of 2011, yielding a variety of potential advantages, Challes argued.

"In many ways this highlights just how important the Indian market is," he said.

"With a team of qualified people sitting here, developing solutions that are relevant to the Indian market will only grow."

The benefits of crafting goods in India include the chance to export appropriate offerings to other emerging countries.

In an example of this trend in action, a beauty line created for Indian men has been added to L'Oréal's portfolio elsewhere in Asia.

Color Natural hair dye was also pioneered in India, and has since gone on sale in parts of Asia and Eastern Europe.

While rival operators like Unilever and Procter & Gamble have pursued activities in India for a longer time period than L'Oréal, this has not hampered the latter organisation's progress.

"We came to India 15 years ago. Our compounded annual growth rate in the last decade has been about 30%," said Challes.

Given the pace of expansion, India might soon enter L'Oréal's core group of biggest-value outlets, at present led by the US, France, China, Germany and Brazil.

"We intend to maintain this pace of growth. In fact, in the next ten years we [India] should be amongst the top five in the L'Oréal universe."

The corporation's consumer products range, housing brands such as Garnier, Maybelline and L'Oréal Paris, delivers 70% of Indian returns.

However, the firm is keen to strengthen its luxury division, having recently unveiled Kiehl's in India, alongside bolstering its professional and active cosmetics units.

Within a broader holistic model, L'Oréal plans to spend €10m apiece on innovation, manufacturing, distribution and marketing.

The company already invests around 100 crore rupees in advertising each year, and will augment expenditure as revenues rise.

"Garnier alone is amongst the top three advertised beauty brands in the country," Challes said. "With sales growth, our share of voice would also have to grow."

Although L'Oréal is confident its existing stable will deliver significant gains in India, it may consider making extra additions.

"Either we [could] do an acquisition that we can take globally or we do something that can complement our strengths," said Challes. "I think the latter would apply more to us in India."

Data sourced from Business Standard; additional content by Warc staff