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NEW YORK — L’Oréal Consumer Products, which generates an estimated $2.5 billion in annual retail sales, must maintain the individuality of its brands to compete with its top rivals, such as Procter & Gamble, L’Oréal Consumer Products Group president Joseph J. Campinell said.

“Our guiding principle is to develop brands with their own unique personalities for each division, and to not become a central function that consolidates its divisions’ marketing and sales efforts,” Campinell said during an interview in his 28th-floor Manhattan office. “We need to focus on our brands, which is what the consumer knows.”

As part of that effort, L’Oréal in September will open its first retail store in Los Angeles’ Beverly Center. The shop will feature the L’Oréal Paris brand, and its estimated 2,500 square feet will be filled with L’Oréal Paris hair color, cosmetics, skin care and hair care items.

The venture seeks to bring the beauty giant precisely what Campinell wants to impress upon consumers — brand identity in a prestige environment. L’Oréal, an upscale mass beauty brand with technology-driven products, will feature items such as the Féria, Preference and Excellence hair color brands; L’Oréal Colour Riche lipstick; True Match foundation, and Dermo-Expertise skin care products.

The store might deliver for L’Oréal as much as for consumers. The potential for what the company stands to learn about customer shopping habits, merchandising and marketing issues, and what the consumer wants in terms of product, might even make L’Oréal’s main competitor, Procter & Gamble, among the most innovative companies in terms of data collection and consumer focus groups, stand at attention.

“We do think the L’Oréal stores will provide some interesting insight on consumer behavior and product education opportunities,” said a beauty executive at a leading national drugstore chain. Translating L’Oréal’s in-store experience to the drugstore industry’s limited beauty environment must remain realistic, the executive said, in terms of service and displays for the store’s data potential to pay off.

Campinell, who took over as president two years ago after 18 years with the company, said that news of the store — and another location to follow in Farmington, Conn. in November — has gone over so well with retailers that several larger chains are inquiring how they could fit a L’Oréal store-within-a-store version in their units.

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This story first appeared in the July 16, 2004 issue of WWD. Subscribe Today.

“That’s how intriguing it is,” Campinell said. “The economics are tough, but there’s going to be an evolution in retail, and we’re going to be a part of it wherever it makes sense.”

Carol Hamilton, president and general manager of the L’Oréal Paris division of the L’Oréal Consumer Products Group, is most proud that L’Oréal has been able to design the store, and its merchandising capabilities, from the bottom up. Being a complete beauty brand — L’Oréal offers products in every beauty category, from nail care to hair care — will allow the store and L’Oréal to offer head-to-toe beauty in a way that’s new to the consumer.

“The value in this is that L’Oréal owns everything, and for the first time, we will be able to put our products in the environment we think is consistent with our image,’’ she said. “We’ve never had a three-dimensional space to express the core values of the brand. This will allow us to understand the brand and also to evolve the brand in a very important way.

“[Retailers] assume we are going to bring them great products. We have some expertise in that area, but what I feel is that we will be able to be a much more valuable partner because I’ll be dealing with [some of their issues] and we will come up with solutions.”

William Steele, a consumer analyst at Bank of America who covers Procter & Gamble, said P&G likely wouldn’t follow L’Oréal’s lead in this area, instead continuing to rely on its extensive focus groups to garner opinion.

“[The L’Oréal store] is an interesting initiative, but I really don’t see Procter getting into the retail business,” he said.

Steele said that several years ago, P&G did open a single store — a brick-and-mortar version of its online beauty store — in San Francisco, but it was short term.

“From a mass market perspective, I don’t know what Procter & Gamble would gain from opening a single store in a single city,’’ he said. “I don’t see what it brings to the table.”

While the idea of a retail store that bears the name of a mass beauty brand may be novel to mass, it’s one that has worked in the prestige industry. L’Oréal’s Biotherm brand already operates stores in Hong Kong and the U.K. A Glendale, Calif.-based Biotherm store in the Glendale Galeria is planned for September.

Lancôme, another prestige L’Oréal property, is giving its L’Institut Lancôme a facelift on the Rue du Faubourg Saint-Honoré in Paris, which is set to reopen in September. The brand also recently opened a concept store in Shanghai and is planning one in Seoul, plus a third Hong Kong door by year’s end. A New York version is on the way, too, according to published reports.

Clearly, consumers are already familiar with L’Oréal’s different product brands and offerings. L’Oréal Consumer Products’ business has generally produced double-digit year-in, year-out retail sales for the last 18 years.

L’Oréal Paris maintains a 15.6 percent dollar share of beauty, an $11 billion category for 2003. Its size is attributable to its successful entry into every beauty category, and its products deliver. All rank in the top five in the categories in which they compete.

In hair color, the division’s largest segment, L’Oréal Paris captures 47 percent of dollar share of the market. It makes three out of the top four hair color brands: Preference, Excellence and Féria. (Company-wide, L’Oréal’s dollar market share, which includes sales of Garnier hair color, bumps up to 55.2 percent.)

In cosmetics, L’Oréal Paris’ share has grown about a half a point to 15.5 percent dollar market share. True Match, a 24-item foundation line launched this year, already claims a 6 percent dollar market share. The division’s lipstick business has grown about 0.7 of a share point this year to 16.2 percent.

Skin care, an area where L’Oréal Consumer Products sees the most opportunity for growth, has reached consumers well. L’Oréal Paris’ Wrinkle De-Crease, a technology to help reduce expression lines, has jumped to about a 4.5 percent dollar share since its launch, and Revitalift, L’Oréal’s number one skin care brand, is up 27 percent, year to date, with a 5.9 dollar share of moisturizers-treatments.

The Maybelline New York-Garnier division, led by president Karen Fondu, has been effective in reaching consumers, too. Maybelline New York has garnered a 19.1 percent market share and claims the lead in cosmetics. In addition to growing its own brand, Maybelline New York has contributed to category growth.

“If you look at the actual growth over the span of time, Maybelline has contributed 41 percent of growth to the category,” said Fondu, who explained she calculated that number by taking the growth of the category versus the growth of the brand.

Maybelline is also a brand that is beyond being known for mascara. Its Express Finish nail line was the first fast-drying polish, and its Easy Shade Finder in-store displays have helped make the selection of foundation easier for consumers in the mass environment.

Garnier is the division’s brightest star. Launched in the U.S. in 1999 with Nutrisse Hair Color, which is represented by spokeswoman Sarah Jessica Parker, the brand in 18 months has penetrated the hair care and styling categories. Garnier’s distinct position, one that’s young and a bit irreverent, is a beauty business, that, like L’Oréal Paris, is primed to be in every beauty category.

Soft Sheen-Carson, the beauty industry’s leading maker of ethnic products with 25.1 percent of overall dollar share, is celebrating the success of HiRez hair color, which now claims a 5 percent dollar market share. Recently, the division reformatted its Dark & Lovely relaxers to address all of the issues around the dryness and lack of body when consumers relax their hair. Most notably, the company has signed Kelly Roland of Destiny’s Child as D&L’s new spokeswoman. Candace Matthews, president of Soft Sheen-Carson, said that its retail efforts of growing the ethnic category’s overall space in stores is finally coming to play, too.

“We’ve got several line reviews, several business reviews and several category reviews with retailers throughout the summer so that we can help them with their sets for next year,” Matthews said.

But what will take L’Oréal into the future? More and more manufacturers and retailers talk about the importance of technology being present in new products. While color stories define a trend from season to season, shades are not what drive consumers back to a brand.

Ingrid Jackel-Markens, senior vice president of marketing at Physicians Formula, a small cosmetics brand, concedes it is the manufacturer’s “responsibility to make the fun in shopping what it used to be.”

And, despite Campinell’s objectivity toward his group, technology is where he believes L’Oréal has the upper hand, too.

“The difference between L’Oréal and others is that, if you don’t have great technology that you can bring to the market, you don’t have a sustainable business,’’ he said. “It’s an extremely important part of what I’ve learned here and what I instill in people, especially new people, who think sometimes marketing is really about the right red for the lipstick, or the right fragrance for the shampoo, or the right texture of the skin care product. Yes, those are all important, but if you don’t have something that really is a performing technology, you have no chance of sustaining the business.”

In the next year, L’Oréal Paris plans to continue on Colour Experte’s multitonal success, which has achieved a 6.5 percent dollar market share, with a new rendition. A new teen hair color brand is in the works, as is a dedicated men’s hair color brand to be launched in April. In cosmetics, there are plans to take True Match’s stockkeeping-unit count up to 30 from 24, closer to prestige brand MAC’s 35-sku count, which is the broadest shade range in beauty. And, this month, Cashmere Perfect — a cream foundation without water in formula — hits stores. It will retail for $12.95.

While it’s “quite unusual” for L’Oréal to launch two foundations in the same year, Hamilton believes the more innovations that hit the market, the more growth the category will see.

Also, L’Oréal is finally entering the transfer proof lip segment. “We really didn’t want to enter this [segment], which has been one of the most competitive, until we felt we had a technology that was [worthy],” Hamilton said.

Endless Kissable, as it will be called, has a satin finish, so it doesn’t look dry. “It’s very romantic, which is why it’s called kissable,” Hamilton said.

L’Oréal also is launching the first two-step microdermabrasion kit in the mass market. The same irregular-shaped aluminum oxide crystals used in dermatologists’ offices are used in ReFinish’s formula to exfoliate the skin, lifting up the dead skin cells from the skin’s surface and absorbing oil. ReFinish also uses Biosaccharide Complex, a proprietary sugar derivative that helps prevent irritation and soothe the skin.

The kit’s second step is a post-treatment protective moisturizer with SPF 15 to seal in moisture.

Maybelline New York, which is 90 years old, requires a slew of new technology to keep the brand fresh. Dream Matte is Maybelline’s answer for the back half of the year, being that it is a foundation in a mousse. Dream Matte will retail for $8.95.

Maybelline’s second big launch for the period is XXL Volume, a mascara designed to give extraordinary volume.

While many cosmetics brands are facing losing space on the beauty wall, Maybelline is enjoying the fruits of its growth.

“I think, in some respects, there is an opportunity to consolidate [some brands] and really put a focus against the brands that are investing in terms of technology, as well as investing to help drive consumers [to stores], because there is a lot of complexity in the cosmetics categories in the mass market, and I think to simplify and to focus more, I think would be an opportunity for our customers,” said Fondu.

And, Garnier has launched 100% Color as its new hair color for the year.

In the fall, Soft Sheen-Carson is launching a new product targeting the hairdress category, called Optimum Oil Therapy. It has four different natural oils for nurturing hair without heavy buildup. There are five sku’s. It will retail for $3.99

Inarguably, technology is what drives the beauty business, but sometimes too much of a good thing can backfire. Take, for example, the Garnier Lumia and L’Oréal Open hair color brands, which subsequently were taken off the market following poor performance.

“The problem with [Open] is that it was caught between two technologies, and we had difficulty in creating enough distance between the two. From an end-result standpoint, it was hard for the consumer to really understand [it],” said Hamilton.

In regard to Cashmere Perfect, while it offers a powdery, matte finish, Hamilton explained that its technology is not very compatible with truly dark skin tones. “Because there’s a powdery finish, it can bring up ashier tones in African-American skin.”

With the two anchor brands in cosmetics and hair color, and a lead in ethnic beauty, it would seem that Campinell is sitting pretty. But there are two areas, clearly, where there’s room for his group to grow: hair care, which has a very modest position and about a 5 percent dollar share of the market, and skin care.

“In the mass market, skin care has never been at the potential that we felt existed, because if you look at some statistics in department stores, skin care is larger than cosmetics. In the mass market, cosmetics is much larger than skin care, and there’s no reason for that. The interest in skin care today is dramatic across all economic levels, all age levels. The category is the fastest-growing mass market beauty category.”

But selling skin care is made much easier by the use of beauty advisers, an advantage department and specialty stores clearly have over mass stores. Getting mass retailers to stop treating skin care like a commodity has been the trick. Some stores, such as Walgreens and Eckerd, have made efforts at putting beauty advisers in stores. But further efforts are needed, especially when drive-in pharmacies make entering a drugstore unnecessary for many potential beauty customers, and retailers such as Wal-Mart price many items cheaper.

Campinell said the creation of an economic model that would allow more retailers to test in-store beauty advisers needs to be established, one that would outline how many sales need to be generated to make the initiative cost effective.

“The big guys will support it,” Campinell said. “We’ll pay what it will cost for a 10-store test.”

The evolution could make all the difference for many cosmetics players, as well as for retailers that, year after year, lose customers to other outlets.

Speaking of evolution, Campinell recalled a time when L’Oréal had doubts about selling to the world’s largest retailer.

“When I joined here, we didn’t want to sell Wal-Mart. Why not? Well, they didn’t have the assortment we wanted. I had big screaming matches with people.”

How things have changed.

— With contributions from Carrie Melago