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Tables
Table 1. Australia Haircare Market Shares ................................................................................................... 6
Table 2. SWOT Analysis of L'Oreal ................................................................................................................ 9
1. EXECUTIVE SUMMARY
The case provided sheds light on the haircare industry in the years before 2008, and how it has
drastically changed due to economic conditions.
Like clothing, hairstyles have also evolved through the ages and haircare had become a priority for
celebrities who posed as trendsetters and paved the path for others. Buying haircare products for most
people was not just about keeping your hair clean anymore. Styling it and keeping it healthy had also
gained importance.
However this growth in the industry abruptly stopped in the first decade of the twenty-first century. Five
main problems were identified in the case that affected haircare sale globally.
1. Due to the recession many people had to give up some of the luxuries they enjoyed before, one
of them being trips to the hairdresser. Hairdressers were one of the main consumers of haircare
brands as they stocked up on products to use on their clients so it was a huge blow to the
industry.
2. With less money to spare, shampoo was now the main product being bought, and that too of
cheaper brands and those that come in value packs or with price promotions.
3. Many consumers had cut conditioning from their haircare routine altogeth er, so conditioner
sales were hit worse than shampoos
4. Western Europe’s aging population was another problem as now older consumers washed their
hair less frequently and used fewer products.
5. The increase in awareness amongst consumers regarding negative environmental of haircare
products has also posed a problem for manufacturers.
The Australian haircare market had total revenues of $814.1m in 2018, representing a compound annual
growth rate (CAGR) of 3.0% between 2014 and 2018.
The company recorded revenues of $30,705 million in the fiscal year ending December 2017. This was a
4.4% when compared to FY2016. Its net income was $4,226 million in FY2017, a good rise from the
income of $3,664 million in the previous year.(2019b)
Professional Products – This segment sells haircare, styling and coloring products to hair salons
and beauty institutes.
Consumer Products – This segment sells coloring products, hair care, make-up and skin care
products under multiple brands including L'Oreal Paris and Garnier through mass-marketing
channels.
L'Oreal Luxe – This segment sells skin care, make-up and perfume products such as Lancôme.
Active Cosmetics – This segment sells dermo-cosmetic skin care products through healthcare
channels.
In Australia, the company sells its products under L'Oreal, Garnier, Redken and a few other brand
names.
2.2. Collaborators
2.2.1. Suppliers
Suppliers in the haircare market include manufacturers of chemical ingredients used in the production
of cosmetics.
The quality of many of the raw materials is highly important. Health scares and the possible dangers of
synthetic chemicals used in beauty and personal care increase consumer demand for safer and healthier
alternatives and increase their interest in product quality and safety issues. Overall, supplier power is
assessed as moderate.(2015)
2.2.2. Endorsement
Hair care manufacturers often go into collaborations with designers and celebrities in order to build
their brand awareness and attract new customers.(2019b)
2.3. Customers
Overall L’Oreal targets young affluent middle class females. L’Oréal aims to use low prices and advertise
luxury from their products in order to appeal to this audience, this works well because working-class
women usually do not have much excess income to spend on luxury items, thus the pricing is a huge
factor that makes L’Oréals products appealing.
The benefit that this audience seeks from the product is clean fresh hair, which suggests that the
product is quite heavily used; this is because in order to maintain this benefit regular usage is required.
Active Cosmetics: Targeting pharmaceutical industry for people looking at medicinal properties
in cosmetic products.
Professional Products: Targeting salon professionals and beauty experts. L’Oreal has brands such
as L'Oreal professional, Kerastase and Matrix.
Consumer Product: Targeting middle and lower level income consumers. Middle and lower level
income consumers have brands such as Maybelline New York, Garnier. These brands focus on
masses that buy without much thought, hence no exclusivity.
L'Oreal Luxe: Targeting high end consumers
Some consumers may also rotate the use of shampoos using one brand for about a month or two and
then switch to another because they believe their hair becomes immune to the effects of the shampoo
they are using.
2.4. Competitors
As Table shows, L’Oréal is the market leader in Australia with a market share of 21.8% in the haircare
industry. Unilever is next in line at 18.3% and P&G is third, with 14.8%.
2.4.1. Unilever
Unilever N.V. (Unilever) manufactures and distributes food, home and personal care products.
Personal Care
Foods
Home Care
Refreshment
Since this case is about the Haircare industry, our area of concern is the Personal Care segment.
The Personal Care segment sells skincare and hair care products, cleansing products, deodorants and
other oral care products. In Australia, the company sells its products under Sunsilk, Tresemmé, Dove and
other brand names. (2019b)
2.4.2. Procter & Gamble Co.
The Proctor & Gamble Co (P&G) manufactures, markets and sells branded consumer products.
Beauty
Grooming
Health Care
Fabric and Home Care
Baby, Feminine and Family Care
Since this case is about the Haircare industry, our area of concern is the Beauty segment.
The Beauty segment sells hair care, skin care and personal care products. The hair care category includes
conditioners, shampoos, styling aids and treatments. In Australia, the company sells its products under
Head & Shoulders, Clairol, New Wave and other brand names. (2019b)
The company classifies its business operations into four reportable segments:
Adhesive Technologies
Laundry and Home Care
Beauty Care
Corporate
Since this case is about the Haircare industry, our area of concern is the Beauty Care segment.
The Beauty Care segment includes the company's branded consumer goods business providing hair care,
hair colorants, hair styling, body care, skin care and oral care products, as well as its professional hair
salon business. In Australia, the company sells its products under Schwarzkopf, Nordic Colors and other
brand names. (2019b)
2.5. Context
2.5.1. Economy
As shown in the case study L’Oréal’s main consumer products categories are all highly sensitive to global
economies of scale and scope.
L’Oréal should adapt to all the different economic environments and problems in all countries it
operates in. For example in 2004, L’Oréal was affected by the continued weakness of the dollar.
2.5.2. Politics
The political challenge is that L’Oréal should conform to all the different government leadership styles in
various countries it operates within. L’Oréal is obligated to produce safe products that do not contain
any harmful substances.
In Australia, the Department of Health regulates the cosmetics market under its National Industrial
Chemicals Notification and Assessment Scheme. This body covers all aspects of regulation, from banned
ingredients to labelling. (2019b)
L’Oréal has to follow the rules set by Advertising Standards Authority too. For example, advertisements
cannot be misleading that over-exaggerating the functions of a product.
2.5.3. Technology
Scientific knowledge of the skin and hair accumulated by L’Oréal for over a century has opened the way
to great innovations. L’Oréal's research and development activities focus on skin, haircare, color
cosmetics, beauty, and sun protection, among others. As of December 2017, the company operated 16
evaluation centers and 20 research centers. In FY2017, the company spent US$877m on its R&D
activities, which as a percentage stood at 3.4%. (2019b)
2.5.4. Environment
Environmental concern is L’Oréal use natural ingredients mostly which is environment friendly. As
mentioned in the case, consumers became increasingly aware of the negative impact haircare products
have on the environment. For example there was a consortium between cosmetics maker L'Oréal and
green plastics start-up Carbios to bring Carbios's recycling technology to market, so basically they are
pursuing plastic recycling.(Tullo, 2017)
L’Oréal manages a programmed of internal audits and establish indicators for measuring and reporting
on group performance in terms of the environment.
3. SWOT Analysis
Table 2. SWOT Analysis of L'Oreal
3.1. Strengths
3.1.1. Market Position
L’Oréal's strong market position has built its brand equity and helped the company to establish itself as a
leading provider in cosmetics market. Its leading market position also helps the company to attract a
larger customer base and improve its top-line performance. The company has developed a strong brand
portfolio of 36 international brands. These brands are available through a variety of distribution
channels ranging from mass market retailers to selective distribution, including hair salons,
pharmacies/drugstores and a network of directly-owned stores and franchisees as mentioned in
Company Section of the report. (2019a)
3.1.2. R&D
Focused R&D activities nurture new growth platforms and has allowed L’Oréal to gain the ‘first mover’
advantage by launching products ahead of competition.
Its R&D activities are focused on developing skincare; haircare; color cosmetics; beauty and sun
protection products. L’Oréal employed 3,993 researchers of various disciplines for product
development, as well as applied research. In FY2018, the company registered 505 patents. The company
collaborates with various institutions, laboratories, start-ups, suppliers and research institutions. (2019a)
3.2. Weakness
3.2.1. Lawsuits
Legal proceeding, regardless of the outcome, could drain the financial resources and divert the time and
effort of any management. In June 2018, a UK High Court has ruled in favor of Olaplex, a US-based
cosmetics manufacturer, in a patent infringement lawsuit filed against L’Oréal. Such lawsuits could
affect the company’s brand value and result in huge penalties. (2019a)
For example a religious group had filed suit against L'Oreal claiming that the cosmetics maker has
infringed on patents covering use of the nucleoside adenosine in wrinkle-erasing creams that the charity
sells to raise money for the poor.(Reisch, 2017)
Another one was about how a startup Olaplex triumphed over L’Oreal in court (Reisch, 2018).
3.3. Opportunity
3.3.1. Strategic Acquisitions
As mentioned above in the report, L’Oréal entered into many strategic acquisitions to strengthen its
market position such as the acquisition of Logocos Naturkosmetik AG to move into the organic beauty
segment. (2010)
4. STP Strategy
4.1. Segmentation
L’Oréal use a geo-demographic approach to their targeting; since they are a multi-national company
they use different campaign strategies in different countries. This approach is successful because it can
be adapted to suit the majority of their consumers; for example, the values and beliefs of the Australian
target audience would differ from that of the Asian target audience.(王玉寶 and 高水玲, 2017)
The socioeconomic status of the target market is middle class. The household is made up of and adult
female (25-35 years), an adult male (25-35 years) and one of two small children. Household income is
between AUD 100,000 and 130,000.(Martin, 2011)
Geographically, Garnier’s target market is located around inner-city suburbs of Australia’s main cities.
Garnier’s products retail throughout Australia as all states have consumers with similar needs and
wants. The climate in Australia is mostly warm and people need a shampoo that will allow their hair to
feel fresh even in the heat.
4.2. Buyer Persona
The buyer persona of Garnier products is outlined by an active lifestyle with activities such as jogging,
swimming, social tennis, shopping and eating out. They follow the latest fashions and trends as well as
clothing and hairstyles. They believe looking good is an indicator of success and happiness. They have
busy lives and quite social lifestyles, spending a lot of time outdoors and on the go.
Within the VALS framework, they are ‘Achievers’. Members of this category strive for success and
achieve it, they are committed to their work and have high job satisfaction. More importantly, they like
to purchase products that display their success. (2017)
4.3. Target Market
Garnier has an extensive range of products targeted at multiple audiences, however their main product
is shampoo focusing on solving a range of problems such as frizzy hair, oily hair and damaged hair
among others. The target audience of Garnier is every-day middle class females aged 25-35 with an
income level between AUD 40,000-70,000. This target audience purchases the mid-tier products that are
mass-marketed.
When talking about Garnier Fructis (hair care line) in Australia, the brand has positioned itself as an
active, outdoor brand for people leading a healthy and natural lifestyle. The image is consistent across
all media and promotions that it employs. (Bhasin, 2018)
Based on this data and other findings mentioned above, we can safely say that the ideal products are
still shampoos and conditioners. L’Oréal should continue working on their mass-market brands such as
Maybelline New York, Garnier and L’Oréal Paris as these are part of the Consumer Products segments
which are distributed through mass-retailing channels. In Australia hypermarkets and supermarkets are
in the lead which is perfect for this segment.
As mentioned in the STP Strategy section, the main concern for Australians is the climate which makes
their hair frizzy and oily. Even though they prefer cheaper products, they want to buy good quality
shampoos which serve as essentials to solve their hair problems.
6. RESEARCH PROPOSAL
6.1. Problem Statement
In 2008 recession, many users became price-conscious and moved towards more economical offerings.
Despite the increase in incomes post 2009, consumers are still buying low to mid-tier products. They are
looking for quality at an affordable price as well as actively seeking sustainable brands.
In this scenario, how can brands push consumers to graduate to higher tiers as well as position their
products to suit the needs of various emerging segments?
In the first stage we will conduct qualitative research in which at least four focus group discussion (FGD)
will take place to gain relevant insights from L’Oréal’s target audience regarding their day-to-day habits,
their haircare routine, their brand preferences and how the economic conditions have influenced their
purchases.
The insights from FGDs would allow us to develop scale items for the relevant constructs identified in
the conceptual framework, which can be tested when inputted to SPSS software. Quantitative data
analysis provides us concrete numerical results leading to either acceptance or rejection of the
hypothesis developed in the conceptual framework.
Reliability and factor analysis should be run in SPSS for the validity and accuracy of results. Survey’s
result would be then tested using correlation test of SPSS between the variables identified in conceptual
framework.
6.4. Findings
Through this research we can expect to find the underlying cause behind the lack of or shift in purchase
behavior due to economic conditions. It will also help us understand what factors have a high
correlation with purchase intentions and influence consumer attitudes positively. Lastly it may allow us
to identify the relevant touchpoints in the customer journey, which the company can use to increase
consumer engagement.
7. BIBLIOGRAPHY
L'Oreal. Crunchbase.
2010. COMPANY SPOTLIGHT: L'OREAL. MarketWatch: Personal Care, 9, 13-18.
2014. L'Oreal SA SWOT Analysis. L'Oreal SA SWOT Analysis, 1-9.
2015. MarketLine Industry Profile: Haircare in Australia. Haircare Industry Profile: Australia, 1-39.
2017. Marketing Analysis on Garnier Fructis Shampoo [Online]. New York Essays. Available:
https://newyorkessays.com/essay-marketing-analysis-on-garnier-fructis-shampoo-entered-in-
turnitin/ [Accessed].
2018. MarketLine Industry Profile: Haircare in Australia. Haircare Industry Profile: Australia, N.PAG-
N.PAG.
2019a. L'Oreal SA SWOT Analysis. L'Oreal SA SWOT Analysis, 1-8.
2019b. MarketLine Industry Profile: Haircare in Australia. Haircare Industry Profile: Australia, N.PAG-
N.PAG.
BHASIN, H. 2018. Marketing Strategy of L’Oréal [Online]. Available:
https://www.marketing91.com/marketing-strategy-of-loreal/ [Accessed].
MARTIN, G. 2011. The importance of marketing segmentation. American Journal of Business Education
(AJBE), 4, 15-18.
REISCH, M. 2018. Start-up triumphs over L’Oréal in court. C&EN Global Enterprise, 96, 14-14.
REISCH, M. S. 2017. Startup sues L'Oreal over anti-aging ingredient. C&EN Global Enterprise, 95, 1-3.
RESTREPO, J. A. 2003. Segmentation–Targeting–Positioning. Eureka Facts, The smart marketing
Information.
TOURNOIS, L. 2012. Mass market leadership and shampoo wars: the L'Oréal strategy. Journal of Business
Strategy, 34, 4-14.
TULLO, A. H. 2017. L'Oréal pursues plastics recycling. C&EN Global Enterprise, 95, 14-14.
王玉寶 & 高水玲 2017. Case Study about Global Strategic Management of L’Oréal. Feng Chia University.
8. APPENDIX
MODERATOR GUIDE FOR THE FOCUS GROUP DISCUSSION
A. INTRODUCTORY QUESTIONS
These questions are usually open-ended questions aimed at setting the tone for the focus group. They
will gauge your group’s interest-level and knowledge of the product, as well as set the tone for the focus
group discussion.
1. Today’s topic of discussion is the brand Garnier and its line of hair care products. What are your
general feelings about it?
2. What do you already know about Garnier? What is something you would like to learn more
about it?
3. How did you first hear about Garnier?
4. What words or phrases come to mind when you think of Garnier?
5. How familiar are you with Garnier and its market offerings?
6. When, how, and where do you use Garnier’s products?
7. What do you like best about Garnier’s hair care products?
8. What are your problems or concerns when using Garnier’s hair care products?
9. What brands do you associate with hair care?
10. What trends do you see happening in this industry?
B. COMPETITOR QUESTIONS
These help you gauge exactly where the brand lies in terms of preference as compared to its
competitors.
11. When looking for a shampoo, what company or brand first comes to mind?
12. Who do you think is the largest competitor to Garnier shampoos? Why?
13. What features do you think are better in our competitor’s product?
14. In what aspects do we succeed where our competitors fail, and vise-versa?
15. What changes would you recommend making to our product to give us an edge over our
competitors?
C. SATISFACTION QUESTIONS
This will help you uncover root causes of problems the brand is facing with its product, and it allow you
to take work on areas of improvement and make your recommendations.
16. What are specific issues, concerns, or problems you’ve faced when using this product?
17. How significant is the problem or concern you have with this product?
18. What is the cause of this problem?
19. How would you expect a customer service department to respond to this problem?
20. What is something that has deterred you or would deter you from using our product?
21. What is something that would make you more inclined to buy and use this product, even if you
are already a user?
22. What are this product’s key weaknesses?
D. POSITIVE ASPECTS
This will help you identify areas that are strengths of the brand. It will help you understand what areas
are key to the success of the product and ultimately the brand.