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Agon Visits India

The chief executive officer and soon-to-be chairman of L’Oréal, made a weeklong trip last month.

NEW DELHI — Jean-Paul Agon, chief executive officer and soon-to-be chairman of L’Oréal, made a weeklong visit to India last month, as the firm’s wholly owned Indian subsidiary is raring for growth and plans to open a new research-and-development center in India.

“We believe that India will very soon be among the top 10 markets of L’Oréal worldwide and the ambition is that in 10 to 15 years, India would be among the top five in the world for L’Oréal,” he said while he was here. “But for us, the strategic importance of a company is not just in its sales contribution, but also in terms of how much a country can help the global company to do better. Because of the long tradition of beauty [in the Indian culture], we believe the influence of India on the total L’Oréal would be even bigger.”

L’Oréal India is targeting a turnover of 10 billion rupees, or $221.27 million at current exchange, by next month (a growth of more than 20 percent over the last year), according to Dinesh Dayal, chief operating officer of L’Oréal India and director of the luxury division for the company.

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The company, which has been growing at an average of 30 percent a year for the last eight years, continues to have big growth plans in India.

The first Kiehl’s stand-alone store in India was opened at the Ambience Mall in New Delhi on Nov. 13. The 550-square-foot store has two entry points, with the well-known skeleton standing just inside one door wearing a turban, hands folded in a namaste, the traditional style of greeting.

The store has been launched in partnership with Quest Retail, which is also the master franchisee for The Body Shop in India. Since L’Oréal is a foreign company, it needs an Indian partner to be in compliance with the rules for FDI for foreign brands.

“Skin care is a huge market,” said Dayal. “There is also a huge [focus on] the organic skin care market inspired by the home remedies that have always been practised here. Natural products is a huge global trend as well, which gives us a strong indication that Kiehl’s will do very well in India.” The brand plans to launch next in Mumbai, then roll out to four other cities.

Anjali Pai, Kiehl’s brand manager, is upbeat about the growth prospect. “We are introducing Kiehl’s with a lot of sampling and education. Indian customers are ready to experience this brand.” The pricing will be on par with Asian markets, and lower than Singapore, she said.

Typically, pricing in India is a challenge, with high customs duties adding to the prices of retail goods. More than 120 items are now available, ranging from 450 rupees, or $9.98, to 3,800 rupees, or $84.30.

The luxury division has 13 brands in India, including Ralph Lauren, Lancôme, Giorgio Armani and Diesel. “As you go up on the price points, the air gets pretty rarified,” he quipped.

L’Oréal has been in India for the last 13 years, through a wholly owned subsidiary. It has four divisions — consumer products, professional products, active cosmetics and luxury products.

“L’Oréal Paris, Maybelline NY, Garnier and Vichy in the dermacosmetic segment have been actively making their mark in India for several reasons,” said Sudhir Dhir, an industry analyst. “One of the first is the timing with which the brand entered the market when foreign brands were not really available in India. Another reason is their aggressive advertising.”

The company is the fourth-biggest advertiser on Indian television, and while Garnier still leads growth with its low pricing and innovations, L’Oréal Paris is making a strong play in the color segment. Its brand ambassadors are some of the top Bollywood actresses, including Aishwarya Rai, who is part of the global Dream Team. In July, L’Oréal Paris made its first big Bollywood collaboration with a film called “Aisha,” which featured actress Sonam Kapoor, who is also its brand ambassador.

But it is not only about advertising and hype. The company has an extensive distribution system that includes both modern trade retail formats as well as mom-and-pop stores in markets across the country.
A manufacturing unit in India also helps customize some of L’Oréal’s products for the Indian market. For example, Garnier launched a shampoo with oil, endearing itself to the Indian customer and seeing strong sales with this innovation.

Local innovation has given the company a vantage point, according to Dayal. Garnier was in India in 2009, giving an edge to the fast-growing men’s market.

Looking ahead, all of the brands will see more activity this year, he added, without revealing too much: “We will see a lot of growth in 2011.”