PARIS — L’Oréal is using “reverse innovation” in “new” — or emerging — markets, which are key in the quest of doubling its consumer base. It’s an example of the newfangled strategies beauty companies are implementing increasingly to juice up business in a highly competitive landscape rife with mature markets.
This story first appeared in the February 8, 2011 issue of WWD. Subscribe Today.
Reverse innovation involves beauty products being developed locally for a particular region after information about its denizens is culled in situ and then the products possibly rolling out worldwide, according to Laurent Attal, L’Oréal’s executive vice president of Research and Innovation. He was speaking during a press conference held at the firm’s headquarters in the Paris suburb of Clichy.
It has been three years since this phenomenon started at the company, said Jean-Jacques Lebel, executive vice president and managing director of L’Oréal’s Consumer Products division, at another press conference in Paris. He cited three examples: Elsève Total Repair 5, which was conceived in Brazil for Brazilians prior to being deployed in the rest of the world; Garnier Mineral deodorant, a Russian creation first, and Garnier Men, out of India.
“The process is irreversible,” said Lebel, of reverse innovation. “Why? In those countries we have first a critical size that permits us to have teams and all the means necessary to put new products on the market.”
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Growth in new markets — where 76 percent of the global population lives — is on a steep upward trajectory. Those countries today generate 38 percent of L’Oréal’s Consumer Products division’s sales, whereas five years ago they made up 28 percent. And the number could hit the 50 percent mark in some five to six years.
That’s because spending power is on the rise. While 67 percent of people in the world currently have an annual revenue of less than $1,500, in 2020, the annual revenue per person is estimated to hit $5,800 in the BRIC (Brazil, Russia, India and China) zone, according to statistics presented by L’Oréal that source Goldman Sachs research papers and the International Monetary Fund.
Still, today the lion’s share — a full 90 percent — of L’Oréal’s R&D staff is based in Europe, the U.S. and Japan.
“We are going to accelerate our investments, our implantations in emerging markets,” said Attal. “The combination of an intimate knowledge of the structure of skin, its mechanisms and at the same time consumer habits is the element absolutely strategic and fundamental in the conquest of these markets.
“Our vision is to establish poles of research and innovation in each big region of the world,” he said.
Local research already carried out in Asia, for instance, caused L’Oréal to focus on conceiving treatment masks and a lip balm with a glossy finish, well suited to tastes of the population there.
Another way L’Oréal caters to cash-poor consumers in markets such as the Philippines, Indonesia, Thailand and Egypt is by offering products in accessible sachet sizes. In India, for example, a 7-ml. sachet of Garnier Fructis Shampoo & Oil comes with a price tag of 3 rupees, or $0.06 at current exchange.