L'Oreal Localizing R&D In Emerging Markets To Achieve Growth Objectives
This article was originally published in PharmAsia News
Executive Summary
To meet its goal of reaching 1 billion new customers over the next 10 years, L'Oreal's new strategy calls for a localized research and development approach in emerging markets
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To meet its goal of reaching 1 billion new customers over the next 10 years, L'Oreal's new strategy calls for a localized research and development approach in emerging markets. "Innovation must take place where consumers are based," the firm said in a Dec. 8 announcement. "The ability to innovate for new markets must therefore rely on in-depth knowledge of the culture, needs and preferences ... of consumers." The French cosmetics giant says it will focus most of its efforts on consumers in Brazil, China and India. Additionally, L'Oreal will create a new Consumer Insights International division as well as regional R&D hubs. L'Oreal announced its intent to add 1 billion new customers in the next 10 years in February by concentrating on consumers in emerging markets, essentially doubling its customer base (Also see "L'Oreal Branches Out, Targets One Billion New Customers In 10 Years" - HBW Insight, 22 Feb, 2010.). The firm is already on its way to meeting that goal. In its third fiscal quarter, L'Oreal posted 11.3% sales growth outside of Europe and North America, "which supports that L'Oreal is gaining share," according to an Oct. 22 note by Sanford Bernstein senior analyst Andrew Wood. Catering To Cultural Differences L'Oreal says that emerging markets account for 53% of the global market, and it plans to reach those consumers by understanding and adapting to cultural differences. "Tomorrow's beauty will be global and universal, and we will respect the unique nature of each region," the firm says. Its strategy includes utilizing market intelligence and considering "consumer habits in a given location to develop and innovate." L'Oreal cites the use of kohl in India as an example, as women have traditionally used it on their eyes. "It is being used as a source of inspiration for the development of products that will meet not only the beauty expectations of Indian women, but also those of consumers from other regions," the firm explains. Observation of beauty rituals and a familiarity with emblematic products and cultural habits will be combined with "in-depth knowledge of skin and hair's biology and physiology" to devise meaningful new products. L'Oreal also pointed to antiperspirants and products targeting oily skin as key areas for strategic growth in emerging markets. "In most of these countries, sweat and oily skin are seen as one and the same and are intimately linked to climate, diet and physiology," the firm says. The antiperspirant and deodorant market is the fifth-largest and one of the fastest-growing in the industry, presently dominated by Unilever and its Dove, Axe and Rexona brands, according to analyst Wood. "Effective" A Relative Term Efficacy will also be an important consideration in product development; however, consumers' ideas about what makes a product effective can vary. "Innovation will be increasingly based on the efficacy perceived by the consumer and demonstrated by scientific and clinical proof," L'Oreal says. For example, the amount of lather provided by a shampoo or shower gel "is not appreciated in the same way by all cultures," the firm explains. L'Oreal says it looks to use objective evaluation "of the product's emotional and sensorial performance" to assess efficacy across regions, such as measuring brain imaging or eye tracking, in order to better develop products. "Earlier and more efficient predictions are key and should be built on the knowledge of cultural contexts, beauty rituals, diet and climate ... and the in-depth knowledge of skin's structure and understanding of its mechanisms," the firm says. L'Oreal plans to launch products with formulas that enrich the consumer's product experience as well as invest in technology "that will generate even greater innovation," says Laurent Attal, executive vice president of research and innovation. The firm cites genomics, stem cells, biphonotics and reconstructed skin as areas ripe for research to help "decode skin (and hair's) aging mechanisms." L'Oreal currently operates 18 research centers and 13 evaluation centers worldwide. The firm has steadily increased its R&D spending over the past few years, rising 6.2% from 2007 to $609 million. Patents filed by L'Oreal have also increased, from 576 in 2007 to 674 in 2009. France leads the world in patents filed involving nanotechnology and cosmetics, mostly due to L'Oreal, "which has long led the patenting of nano," according to Charles Brumlik, a principal with consulting firm Nanobiz LLC ('Patent Filings Up As Industry Continues Investing In Nanotech Research,' 'The Rose Sheet' Oct. 18, 2010). - Lauren Nardella ([email protected]) [Editor's note: This story appeared in the Rose Sheet Dec. 13, 2010. For a free trial of the Rose sheet, visit http://pages.elsevierbi.net/RSSI.] |