LOreals Garnier Nutritioniste - Essay Example

Situation Analysis L’Oreal’s Garnier Nutritioniste Group 4 INDUSTRY DEFINITION – International leader in the manufacturing of Cosmetic & Beauty Products in the US. This industry comprises of establishments primarily engaged in preparing, blending, compounding, and packaging of toilet preparations, such as perfumes, shaving preparations, hair preparations, face creams, lotions (including sunscreens) and other cosmetic preparations. According to online information obtained from L’Oreal Group Corporate Website, players in this industry are often large multinational organizations that carry out their own product distribution. Its products are often found in supermarkets, departmental stores, specialty retailers, and professional hair and beauty salons. Background review The client/brand L’Oreal is a French cosmetics company engaged in the production and marketing of a range of perfume, make-up, hair and skin care products. The company operates in over 130 countries, though primarily in Europe and in North America. It markets a total of 19 global brands in different markets in form of three major categories which are: Cosmetics, The Body Shop and Dermatology. Cosmetics have four segments namely professional products, consumer products, luxury products and active cosmetics. Consumer products are defined as the segment that sells products through mass-market retailing channels such as supermarkets. Garnier is another example considered a consumer product. A few other brands of L’Oreal are, L’Oreal Paris, Maybelline, Redkin, Lancome, SoftSheen Carson, Ralph Lauren, Giorgio Armani, Viktor and Rolpf. L’Oreal has a strong brand portfolio resulting in not only steady revenues and profits but a competitive advantage in the marketplace. However, the global cosmetics business is intensely competitive with companies vying for market shares. In some instances, increased competition may result in price reductions, reduced profit margins and loss of market share. Mission Its mission is to help men and women around the world to realize that aspiration and express their individual personalities to the full. As a company that believes in good corporate citizenship, L’Oreal is keen to contribute to projects that serve the wider community and that reflect the values it has upheld for almost a century. In every country where they do business, they support projects that contribute to the community at large through long-term partnerships with communities. L’Oreal’s Consumers For the fiscal year of 2006, Western Europe, the company’s largest geographic market accounted for 46.6% of the total revenues. The baby boomer cohort and the teen/pre-teen age group are thought to be key market segments, generating much of the demand for industry products. For example, baby boomers are thought to be a key growth driver with their increasing demands for age-defying products. L’Oreal’s largest customer is Carrefour. Its Competitors AD SPENDING IN 18 MEASURED MEDIA MARKET SHARE (%) MILLIONS OF $ BRAND 2007 2006 2007 2006 Olay (Procter & Gamble) 6.3% 6.2% $394.8 $357.7 L’Oreal (L’Oreal) 4.7 5.5 298.7 312.3 Dove (Unilever) 3.1 3.1 192.8 176.3 Garnier (L’Oreal) 3.0 2.5 189.2 142.2 Neutrogena (Johnson & Johnson) 2.6 2.7 165.9 152.0 Aveeno (J&J) 2.0 2.1 127.0 121.7 The environment in which it operate (See Industry information above) Nature and extent of demand Extent of Demand Current sales The company recorded revenues of E15790 million during the fiscal year end in December 2006, an increase of 8.6% over 2005. The operating profit was E2541 million in fiscal year 2006. The sales of the L’Oreal group, at June 30th 2008, amounted to €8.646 billions, an increase of +1.6%. LOreal is currently anticipating sales growth of 6 to 8% for 2008 despite the uncertainties of the current economic environment. In the immediate future, sales made in new and emerging markets will be a key growth driver. Sales trends There has been a surge in demand for Natural Cosmetics over the years. There have been quite a number of retail channels that were opened world wide that improved the sales activities across the globe. Focus has been shifted to Youth who are vibrant consumers in the market for cosmetics. The sales were also stimulated by the changing lifestyles of the consumers who are adapting to new changes where new things are dominating the markets. Increasing Role of Media has also heightened awareness of various L’Oreal products through advertisements and press statements as well as advertisements flighted in the media. Nature of Demand Description of current customers The majority of customers who consume L’Oreal products are mainly females whose ages mainly range from 35 to 55 and these in most cases are either married or unmarried people. These consumers are from diverse cultural as well as ethnic backgrounds. Statistics showing the trend of sales that were obtained from the company’s official website revealed that the majority of consumers have an average income ranging between 25 000 to 35 000 per annum. (Seasonality and Purchase Cycle) During the fiscal year 2006, the dermatology division recorded revenues of E344 million, an increase of 8.2% over 2005. North America accounted for 26.3% of the total revenues in the fiscal year 2006, an increase of 2.5% over 2005. Purchase cycle Products are to be used daily for at least 6-8 weeks for the best results. The various Nutritioniste products range up to 6.7 oz and need to be repurchased approximately once every two months. Nature and extent of competition Major competitors in this category include The Estée Lauder Companies; Proctor & Gamble Co. and Shiseido Company Ltd which also specialize in manufacturing and selling cosmetics. Other Competitors include Avon Products, Kao Corporation, Shiseido Company, Limited Procter & Gamble, Revlon Inc, Estee Lauder Companies, Flamel Technologies SA. These specialize in different brands of cosmetics which range from perfumes to various ointment oils as well as fragrants. Sales and market share data In skincare, the Consumer Products Division is continuing to record very strong growth and significant market share gains in 2008. At L’Oreal Paris, Skin Genesis is confirming its resounding success. Initial results for Ultra Life Pro-X by Garnier are very encouraging. With a progression of +7.1% in sales in the first half of 2008 at constant exchange rates, L’Oreal has continued to gain market share worldwide and is making progress, according to our estimates, significantly ahead of the cosmetics market. The company is looking forward to achieving double-digit growth in net earnings per share, at constant exchange rates, for 2008. Advertising message analysis In 1998, the company launched a global advertising campaign with the tagline, "Because Im worth it." Under the leadership of Owen-Jones, L’Oreal began making a series of acquisitions that would bring it closer to its goal of becoming one of the worlds top four brands. It also renewed its focus on its emerging markets including Asia and Eastern Europe. In China, Maybelline was sold in 40 cities and the company hoped to up that number to 80. The current advertising message by Garnier Nutritioniste, “Is your anti wrinkle cream working DEEP enough?” specifically targets people with deep wrinkles all over their faces acting as a reassurance that their problems can actually be solved by applying L’Oreal products. This advertisement has a powerful message that seeks to convince customers about the effectiveness of the cosmetic products in plumping, filling as well as smoothing. “Introduces Ultra Lift Deep Wrinkle,” targets deep wrinkles all over, use daily, measure it, “clinically proven,” “increases full dermatological grade” for instance are powerful messages targeted at winning the hearts of many would be potential customers. Another equally powerful message is, Garnier “takes care” of your skin, better than all of the other creams that don’t go “deep” enough. Advertising budget L’Oreal’s advertising budget rose 9.5 percent in 2006 to $6.29. L’Oreal spends an average of 75% of its budget on TV advertisements, 20% on print advertisements and the rest on billboards. As the advertising landscape is rapidly changing to “new media,” the internet is becoming a larger advertising medium. L’Oreal is one of the biggest advertisers in the world, and is starting to change the way they spend money on advertising. As part of L’Oreal’s phase out strategy from traditional media, it plans to spend 2% of its overall advertising budget on the internet. The company found success in advertising on the web with the launch of their new men’s fragrance in France called Amor pour Homme, which took advantage of the internet as an advertising outlet. Within a month, the website received more than 2 million hits and the product gained a half percentage of the French Market. In December, 2005, L’Oreal was the number two advertiser, behind Procter and Gamble, spending 9,981,745 EURO. However, in 2007, a survey of 16-64 year olds in the UK was done and rated the most hated television advertisement of the year and Garnier Nutrisse was rated number 15. From the statistics obtained from its website which showed that its budget on advertising was $300 million in 2004, 142.2 million advertising budget in 2006 and 189.2 million advertising budget in 2007 show that there has been a slight decline in the money spent on advertising. Advertising and promotion expenses came out at euro 2,570 million. In the first half, they accounted for 29.7% of sales, compared with 30.5% for 2007 first half. In 2006 the company spent E4, 569.1 million of advertising and promotion. Channel of distribution Basically, there are quite a number and different types of distribution outlets that carry the brand to various consumers who in most cases would be located in different places across the globe. The brand is also carried in online settings, super centers and pharmacies such as Ex: Meijer, Target, Eckerd.com, ULTA.com, CVS Pharmacy, drugstore.com, Walgreens and many more. Stage of product life cycle (PLC) Product sales over time Overall, the Garnier Nutritioniste line is new and it is still in the introductory stage of its life cycle. Since sales are increasing from its initial introduction, it can be safe to say it is growing and will continue to grow similarly to the other products of L’Oreal which have proven to be very successful. Stages: introduction, growth, maturity, decline The introduction stage is the grassroot level where a product is released into the market for the first time. Normally, it would be a new product that would be introduced into the market. After this stage, the product then moves to the growth stage where its potential to attract high sales is unveiled. The sales would be growing steadily in this stage. The peak period where the product records the highest number of sales is commonly known as the maturity stage. After this stage, the product would witness a negative growth where sales begin to decline. This would be the final stage in the product life cycle where it would lead to a stage of phasing out the product. Skills and resources of firm Financial resources of brand and parent company The parent company of Garnier is L’Oreal and its gross profit amounted to euro 6141 million, at 71% of sale. Gross profit as a percentage of sales was unchanged against the year 2007 and slightly down compared with the first half of 2007. Total assets of the company have increased from US$11.9 billion in 2000 to US$25.4 billion in 2004. It is anticipated that revenues would increase to US$22.4 billion by 2009. Net income is also expected to increase, with margins expected to move upwards, due to improved efficiency and higher sales. The company expects to achieve a sales growth target of 6-8% per year for the next three years (2006-2009). Technological skills/innovations The development by L’Oreal laboratories of Pro-Xylane, the revolutionary anti-aging compound made using green chemistry techniques is a milestone in the history of anti-aging skincare. Introduced into the group’s core brands, it gives them a major technological advantage in conquering the “seniors” market. This market is our number one strategic opportunity in developed countries. Garnier was considered a breakthrough brand in 2006 with sales topping the 2 billion euro mark. Environmental climate Economic factors: cyclical or short-term fluctuations In a difficult economic environment currently obtaining on the ground, the cosmetics market is proving to be resilient and L’Oreal is continuing to perform exceptionally well in the market while strengthening its worldwide positions. Active Cosmetics division will allow LOreal to strengthen its position in the high performance professional skin care market segment which was completed in June 2005 and sun care product range Delial which was acquired from Sara Lee International and which has since joined its Garnier portfolio. In 2003 sales for LOreal USA were thought to be worth $3,800 million, up from $3,600 million in the year before and $3,000 million in 2000. In 2004 sales totaled $4,000 million representing sales growth of 5%. Employee numbers at year ended totaled 8,300. Regulatory issues The major regulating body affecting the Cosmetic & Beauty Products manufacturing industry is the US Food and Drug Administration (FDA). This body strives to ensure compliance that all the stipulated regulations are carefully followed so as to ensure quality as well as expected standards. The FD&C Act prohibits the distribution of cosmetics which are adulterated or misbranded cosmetics for retail sale to consumers for their personal care are required to bear an ingredient declaration. It is always a requirement that cosmetics which may be hazardous to consumers when misused must bear appropriate label warnings and adequate directions for safe use. The statements must be prominent and clear. Social trends: other factors that may influence demand or MarCom strategy Consumer attitudes towards animal testing or the use of synthetic chemicals may also influence demand as well as environmental concerns. Recent years have seen growing demand levels for products containing natural/certified organic ingredients, vitamins and minerals as well as products which are "free from" various chemicals including parabens, sulfates, Genetically Modified Organisms (GMOs), phthalates, fragrances, artificial preservatives for instance. They have also seen the rise of "ethical consumerism" as a growing number of socially conscious consumers take into account the ethical, social and environmental consequences of their actions, including their purchasing patterns which have been altered in favor of organic, local, ethical, eco-friendly, Fair Trade/Ecocert or carbon neutral products. In 2007 the emphasis appeared not only to be on natural ingredients but also on organic ingredients. In the first half of 2007, over 1,000 new organic products were launched into the US, French and UK markets, including face care, body care and hair care products. The year also witnessed a growing interest in carbon neutral products with Boots and Lancome (LOreal) launching various carbon related initiatives on the global stage. Societys perceptions. Of interest is the growing trend favoring a more holistic approach to beauty as consumers seek beauty from inside and outside. For example a number of consumers are now seeking beauty through nutrition which in turn has seen a strong increase in demand for oral beauty supplements and nutria cosmetics. To this end Procter & Gamble in conjunction with Pharmavite has recently launched its Olay Vitamins product. Over and above, it can be noted that L’Oreal has managed to entrench itself in the market, both regionally and globally. Its products are in great demand and it is continuing to grow from strength to strength according to the situational analysis mentioned above. This is as a result of various strategies that have been put in place to present the products in a more appealing way as well as careful consideration of pricing. Read More