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Now that the consumer is up for grabs as never before, the mass market is a channel in transition. With a strategy based on speed, service and innovation, Carol Hamilton is looking to ensure L'Oréal Paris comes out on top. <BR><BR>Carol Hamilton,...

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Now that the consumer is up for grabs as never before, the mass market is a channel in transition. With a strategy based on speed, service and innovation, Carol Hamilton is looking to ensure L’Oréal Paris comes out on top.

Carol Hamilton, president of L’Oréal Paris, thrives on being one of the busiest women in beauty, but right now what she really needs is time. Not time to recharge her batteries, mind you. But time from retailers to let L’Oréal’s newest color brand, HIP High Intensity Pigments, take root in their stores.

Targeted primarily to African-American women and Latinas, as well as Caucasian women, HIP has been a disappointment since its launch in February, with retailers grumbling about an overly dark shade range and an edgy ad campaign that failed to drive customers into stores.

“Innovation takes time to seed,” says Hamilton. “With the fragmentation of the media and consumers being bombarded, the seeding of ideas, especially when it requires a behavioral shopping change, is not necessarily going to happen overnight,” she continues, noting that ethnic consumers haven’t historically bought beauty products in the channel. “When the going gets rough, we have to remind ourselves of the commitment we’ve made and how much it’s costing us. We’re asking [retailers] to make sure they give us time to make it work.”

The plea for time is a rare one coming from a woman who’s visited three continents in the past two weeks. But Hamilton—who oversees L’Oréal Paris in the U.S., which has estimated sales of $1.3 billion—is passionate about planting the seeds of growth. Be it at her country house in Connecticut, where her self-taught gardening skills are evident in the profusion of perennial shrubs and flowers that populate the grounds, or at L’Oréal, which she joined 22 years ago as director of marketing for cosmetics and was named president of in January 2002, her nurturing skills are equally on display.

With the plethora of challenges and opportunities facing the mass market, she’s going to need them. In the short term, Hamilton estimates that HIP’s sales will be on track within six months. The company has started adding brighter shades to the line, and a new ad campaign will launch in July or August. “We’re evolving from a launch image-building campaign to a more product technology and superiority story that will focus on star products,” says Hamilton, noting that a massive foundation sampling campaign driven by radio and outdoor advertising breaks in July. Though Hamilton declined to discuss figures, sources estimate L’Oréal will spend about $25 million this year on marketing HIP. “By the end of the year, we should have gotten the sales up to the point where the turns justify the space,” says Hamilton. According to Information Resources Inc., L’Oréal Paris’ overall color cosmetics sales were about $386 million for the 52-week period ended March 19, 2006, not including Wal-Mart. With HIP and other new product initiatives, L’Oréal is looking for a sales increase of 5 to 10 percent this year.

In the long term, though, Hamilton’s challenge is bigger than establishing a fledgling brand in a tough retail environment. The success of HIP is a key part of her vision of L’Oréal as the premium brand—including premium multicultural brand—at mass. “If you look at the different sizes of the ethnic groups, clearly we’re still more than 50 percent Caucasian. But we know the country is evolving—if you look at people under the age of 24 it’s almost 50-50,” Hamilton says. “Everyone universally says we should have products for women with darker skins, but the challenge is finding the right balance with ROI [return on investment]. No one has to do the math to understand that if you have products that cater to women with darker skins, they’re not going to turn as quickly as products that are targeted to [the more statistically prevalent] Caucasian skin. How do we make sure

our product offerings and retailing concepts treat every group equally when we have such stringent financial requirements? And they’re only becoming tougher and tougher.”

Hamilton’s not exaggerating when she talks about the tough conditions in the mass market. It is a channel in flux. After a boom period in the late Nineties, beauty sales started to slow. Now, though, consumers are showing an unprecedented propensity to shop across all classes of trade, and thanks to the rapid pace of technological innovation, sophisticated, high-efficacy products are no longer the sole province of the department store. In short, the consumer is up for grabs as never before. To capture them, Hamilton wants to capitalize on L’Oréal’s premium positioning and create a new paradigm for service and education.

“There’s a die-hard department store customer who will never shop mass,” she says. “There’s a die-hard mass customer. But there’s that big group in between who’s shopping everywhere and that group is getting bigger and bigger and bigger. We’re all too busy today not to tap into new ways of shopping and that’s where people are going to win the most. If you can get a share of the shopping experiences to come into your class of trade—that is what we have to keep fighting for.”

When asked what, therefore, she sees as the biggest growth opportunities for L’Oréal, Hamilton’s answer is immediate, delivered in rapid-fire succession: “To continue to redefine what premium means in the mass market. To be quick to market with new ideas that address what women want in terms of their entire lifestyle. To reinvent the prestige codes in the mass market. The market is bigger and moving faster than ever and we have to continue to accelerate in the way we approach it.”

Though Hamilton travels frequently for photo shoots and retailer meetings, today she’s in her office at L’Oréal’s New York headquarters. With its Eero Saarinen white marble conference table and lipstick-red chairs, it’s an oasis of modernity on an otherwise nondescript corporate floor. She’s wearing a black leather jacket, short white skirt and sporty black and white sneakers—her footwear as good an indication as any that when she talks about acceleration, she means it.

“The mass market has the most customers and the most stores,” Hamilton continues. “To me, it’s all about how do we exploit the fact that consumers are shopping there, that they want to shop there for convenience? How do we evolve the codes of the mass market beauty world to capitalize on that?”

For Hamilton, one answer lies in service and education. “It’s an issue of evolving self-service into a hybrid of assisted self-service,” she says. “Our big challenge is to figure out the right formula for assisted self-service. Little by little, there is a recognition that the old code of pure self-service is not what’s going to take the mass market part of the beauty industry forward. We have to evolve.”

She’s not talking about installing beauty advisers in the brand’s 30,000 doors—although she applauds companies such as Walgreens and CVS, which are testing such programs. Rather, it’s coming up with the right balance of products, communications and in-store initiatives like adjacencies, testers and signage. For example, Natural Match hair color, which launched in February, has a mirror on the box and before and after pictures to minimize the guesswork when choosing a new hair color, plus a special applicator similar to the kind professionals use. “When we put together a new product now versus five years ago, we don’t just look at the packaging and formula, but how to surround it with education and service,” Hamilton says. “If we can evolve the category to deliver service through education and an environment that is better to shop in, retailers have been much more responsive and their willingness to test new formats is much higher.”

No category is more important in terms of evolving education than skin care, believes Hamilton. After five years of explosive growth, sales have started to level off as consumers become more confused by the seemingly limitless options. According to IRI, L’Oréal’s skin care sales were about $170 million for the 52-week period ended March 19, 2006, excluding Wal-Mart. “There is still a lot of growth to be had if we can educate the consumer on the kind of regimen to use,” Hamilton says, “not just on the new technology but on how to build regimens so that she layers products and buys more products. We are definitely at the point where we have to bring more education and organization to the category.”

As evidenced with the launch of HIP, evolving an entire category, much less a channel, is easier said than done. “It’s very difficult for big chains to think about beauty in a different way, as a specialty environment more than a mass commoditized environment,” says Wendy Liebmann, founder and president of WSL Strategic Retail. “One of the biggest challenges is retailers who think all brands are created equal and should be presented in a commoditized format with everything lined up like good little soldiers. How do you distinguish your brand at retail and tell the story behind the brand in a store that presents all brands as equal?”

To help gain an edge in its approach to retail, L’Oréal opened two freestanding stores in 2004, one at the Beverly Center in Los Angeles, the other at the West Farms Mall in in West Hartford, Conn. Called Living Labs, the stores enable the company to gather firsthand data about how customers like to shop the brand. “What we’re learning about is the consumer reaction when she sees and understands the concept of L’Oréal as a total beauty brand,” Hamilton says. “They also tell us the flow of how consumers buy products. We learned that cosmetics is the candy that draws her into the store, then she gets a little more serious and buys skin care and then, if she has more energy or needs shampoo or conditioner or hair color, she buys that. To see that play out is a very good learn for us in terms of how to entice the consumer with different categories.”

One category that Hamilton hopes will be particularly enticing for consumers this summer is hair care. In July, L’Oréal will launch Vive Pro, a 24-item line that’s a revamped version of its existing Vive range. Packaged in brightly colored bottles Hamilton calls “the colors of the sun,” the range is divided into four categories: Style and Body Infusing, Color Vive, Smooth Intense and Men’s. Although L’Oréal is number one in hair color, with sales of almost $416 million for the 52-week period ended March 19, 2006, excluding Wal-Mart, according to IRI, the company lags behind arch rival Procter & Gamble in hair care. With a Vive Pro war chest estimated by sources to be $50 million for the remaining six months of this year, Hamilton believes the time is right to make her move for market share. “There are signs everywhere that the consumer wants to upgrade her hair care regimen—we know that from the attention that the diverted salon brands have gotten,” she says. “The whole commodity aspect of hair care is quickly being replaced by a quality obsession, which is a natural place for L’Oréal to be. It’s one of the big, big growth opportunities for retail in the next five years. It’s huge.” Although Hamilton declined to discuss figures, sources say the brand is hoping to double its share of the hair care market to a 7- or 8-dollar share, or about $150 million in sales.

Retailers are ambivalent but hopeful. “I hope L’Oréal can become a bigger player in hair care,” says Kathy Steirly, vice president, general merchandise manager, beauty and fashion, for Walgreens. “Vive has been launched on a few other occasions and I hope this is the magic formula.”

And if it doesn’t initially perform to expectations, Steirly is confident Hamilton and her team can make the necessary adjustments. “She always listens,” Steirly says. “Carol is quite a visionary. She understands the issues on both sides of the table, from a vendor perspective and a retailer perspective. She always listens, though she may not always agree. Sometimes we change minds. Sometimes we don’t.”

Although the competition in the hair care sector is heated for the second half of the year—Unilever is launching Sunsilk and Clairol is rolling out a completely revamped Herbal Essences range—those who have worked with her say Hamilton has the mettle to win the hair care battle, that underneath her diminutive exterior lies a core of steel. Nina White, today the deputy general manager and senior vice president of marketing for Lancôme USA, first joined L’Oréal Paris in 1990 as head of hair color. “We had a 32 share and Clairol was in the high 40s,” she remembers. Hamilton’s goal was to reverse those numbers—and she did, “one share point at a time,” White says. “She is absolutely tenacious. She knows what her ultimate goal is. She plans every step and she gets there.”

Says another major retailer: “She takes personal responsibility for the results. If L’Oréal isn’t doing well, she wants to know why. If they are, she wants to take it to the next level. She is so passionate it makes others want to work with her.”

For proof of Hamilton’s tenacity, one need look no further than her career. The executive can recall exactly where she was when she decided that L’Oréal was the company she wanted to work for: It was her junior

year at Vassar and Hamilton was studying for an exam with the TV on in

the background.

“I heard Meredith Baxter Birney say, ‘Because I’m worth it.’ It was a defining moment for me,” Hamilton says. “I thought, ‘What kind of company would talk to women in such an empowering way?’ It made me a student of L’Oréal from that moment on.”

Admirers say she continues to empower herself and her team today. “She’s one of the most creative and well-rounded business people I’ve met,” says White. “She can see all sides of an issue and is constantly thinking two, three steps ahead. She has already crossed the finish line and no one else has gotten off of the starting marker. “

After graduating with a degree in art history, Hamilton got a job at Chesebrough Ponds, where she met Joe Campinell, today the president of L’Oréal’s Consumer Products Division. Although she herself doesn’t have a business degree, she’s proud of the company’s reputation among college students as an ideal company to work for, citing Universum Communications’ annual survey that ranked L’Oréal number eight with undergrads and number 12 with MBAs as the ideal company to work for out of all consumer packaged goods companies.

In 1984, Beatrice Dautresme, now the highest ranking woman at L’Oréal SA, tapped Hamilton for a position in marketing and Hamilton has been with the brand ever since. Many of her key team members have been there almost as long—David Waldock, senior vice president of sales, has been there 19 years; Don Gallotti, senior vice president of finance, for over 20, and Rob Robillard, senior vice president of marketing, for eight.

The cohesiveness of her senior management team has resulted in a strategic advantage for the brand—the core group often forms a task force dedicated to speed to market for products and ideas that might otherwise get bogged down in bureaucracy. “When there’s something very big and very different and you don’t want it to be burdened with bureaucracy or diluted with lots of layers, we’ll create a special task force that’s able to cut a swath through all of the bureaucratic timetable inhibitors,” Hamilton says, noting the group usually comprises about eight people. As an example, she cites the launch of Couleur Experte, the first at-home double-process color kit that L’Oréal launched in 2002. “I knew through trials in our technical centers that we could achieve a double process that was gentle on the hair. We got the approval at the top of the company and created a task force that met almost every other day,” she says. “We were able to launch in a much more accelerated timetable than it would have taken in any other company or with any other construction even within L’Oréal.”

Thanks to successes like that, Hamilton has learned to trust her intuition when it comes to product development, relishing a risk-taking propensity instilled in her by L’Oréal chairman Lindsay Owen-Jones. “He encourages us to constantly, in his words, ‘go to the casino,’ and to not approach any project with such conventional wisdom that you forget what you can bring that’s really new and exciting,” she says.

One such project was Féria, which promises multifaceted hair color and launched in 1998. “With Féria, I was in gym class and there was a beautiful African-American woman with caramel skin. She had golden hair, hazel eyes with gold flecks and a topaz-colored gym suit on. I looked at her and had an idea for a brand that would celebrate color and unique combinations so much it would seduce women into thinking about hair color in a different way,” she says. “Big ideas in beauty happen when you keep your eyes wide open and see things you didn’t see before.” Today, Féria still ranks as the number-four hair color brand at mass.

As busy as she is and as arduous as is her travel schedule, Hamilton tries to spend as much time out of the office as in it, looking for the next big idea. She bought her 1973 Marcel Breuer weekend house in Litchfield, Conn., because “I wanted to have something in my life that I loved as much as work, that pulls me away and that I’m inspired by. It wasn’t good enough to have a retreat, it had to be a place that could compete with work in a way that allowed me to relax in a very comfortable way.” After buying the house seven years ago, Hamilton and her husband, Rodney Steinweg, restored it to its original condition. Today, furniture by Le Corbusier and Noguchi share space with antiques and Hamilton’s collection of Asian artifacts. Books are stacked in every room, from coffee table art tomes to Trading Up, and photographs line the walls.

Hamilton believes that creative thinking comes out of balancing work and leisure time. “The beauty industry is a reflection of culture, of the arts and of how women are thinking,” she says. “If you can open up your mind and see how those combinations come together, then you’re able to create new dreams and new combinations of old beauty ideas, which then become new beauty ideas and dreams that constantly allow us to re-create the category and bring excitement to it.”

One aspect of beauty that demands continual re-creation is brand communications—and Hamilton has proven herself a masterful student of the new media that have emerged, from the Internet to integrated product placement. “We’re in the introductory stages of understanding what the new communication model should be,” she says. “It consumes a lot of our time to understand, first, what’s going on, secondly, how to implement that for our brands and third, how to measure if any of this is effective, because we have to separate all of the buzz and new possibilities from what’s going to drive our business.”

Whereas traditionally, there were two main avenues for advertising—magazines and television—today the number is closer to 10 and growing. “For every print ad and television commercial we used to create, we now to have to create an interactive site, a podcast, banners—content, content, content,” she says. “That’s my big obsession and I ask everyone, ‘Exactly how are you creating and affording all of this content?’ and so far, no one has given me a satisfactory answer. It’s a big challenge relative to our marketing resources, people, time and money.”

L’Oréal has experimented with a number of different ways to disseminate its message, including product integration in television shows like Project Runway and through a deal signed with movie mogul Harvey Weinstein; viewer-created content and commercials via Current TV, and interactive Web sites that are educational and service-oriented. The brand’s support of the Ovarian Cancer Research Fund, for which it has currently raised more than $10 million and is a cause Hamilton and her team are absolutely passionate about, has also been key. The company sponsors the yearly star-studded Legends Gala, runs public service campaigns on TV and in print and comes out with an annual color collection whose proceeds are donated to the cause. “We wanted to bring it to the forefront and hopefully in 20 years, we will have done for this disease what our sister companies like Avon, Revlon and Estée Lauder have done on behalf of breast cancer.”

But it is perhaps through the use of celebrity that Hamilton has proven herself most deft in cutting through the clutter of mass communications. The executive comes by her love of Hollywood naturally: She was born and partly raised there, and remembers fondly backyard barbecues with Clint Eastwood at a neighbor’s house.

Today, L’Oréal’s list of spokespeople reads like a roster at a Hollywood all-star convention: Beyoncé, Scarlett Johansson, Penélope Cruz, Eva Longoria, Heather Locklear, Milla Jovovich, Dayle Haddon, Claudia Schiffer and, most recently, Kerry Washington and Diane Keaton. “We choose people who are intelligent and aspirational, because empowerment is in our DNA,” says Hamilton. “Obviously they are beautiful and well-known, but the most important thing is that they’re intelligent and have used their intelligence to further themselves and become a role model.”

Though Hamilton is a frequent presence on the red carpet and at Hollywood’s most glamorous parties, she’s got her feet planted firmly on the ground when it comes to making her business grow. “Women today have their choice of entertainment and beauty is entertainment,” she says. “We have to acknowledge that beauty is not a separate category anymore. Consumers have only so much time to invest in seductive categories and we have to be competitive with all of them.”

This article appeared in WWD BeautyBiz a special publication to WWD available to subscribers.

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