KEYNOTE: GUY PEYRELONGUE
Byline: Soren Larson
His company is the largest beauty product manufacturer in the world. Its brands are bestsellers in every nook and cranny where cosmetics are sold. And last year, it reached net cosmetics sales of $9.599 billion,
But according to Guy Peyrelongue, president and chief executive officer of Cosmair, the U.S. arm of cosmetics giant L’Oreal, finding widespread success in the beauty industry boils down to following simple formulas.
“L’Oreal is one of the few cosmetics corporations with a strategy of developing lines both in the prestige market, which is Lancome, and in the mass market with L’Oreal and now Maybelline,” Peyrelongue said.
The company’s model of development for color cosmetics and skin care was started 10 years ago by Lindsay Owen-Jones, chairman of L’Oreal in Paris, Peyrelongue said.
From 1986 to 1996, L’Oreal’s cosmetics research and development expenditures grew from $74 million to $283 million — maintaining the level of 3 percent of sales.
“In building our prestige as well as our mass market business, we believe that priority has to be given to product performance to succeed in a very competitive environment,” Peyrelongue said. “This is why we give such an importance to research.
“Technology in a new product is expensive. This is why we focus on new technologies first in our prestige lines,” he continued, noting that Lancome brought new ingredients to the market with such launches as Niosome and Primordiale.
The prestige of Lancome products commands higher prices and allows smaller manufacturing runs. And those higher prices can be justified as long as the prestige products offer the most advanced technology, along with the personalized service of the beauty adviser.
In the U.S., Lancome offers a range of 56 stockkeeping units with the latest technologies of L’Oreal’s laboratories. The products are sold in 2,000 department stores with the support of 6,000 exclusive beauty advisers trained by Lancome.
When the company’s new technologies have reached their potential in the service-oriented markets, L’Oreal can then use them to develop products for the self-service environment of the mass market, Peyrelongue said.
“We then move into the economies of scale of mass production with products like L’Oreal Plenitude,” he explained. “Our most important challenge in the process is to maintain a constant flow of innovation using the latest technology in new products and renovation in existing formulas.”
It was from following this strategy that in 1989, L’Oreal was able to launch Plenitude, which Peyrelongue claimed was the first upscale skin care line in the U.S. in the mass market.
Plenitude offers a choice of 17 sku’s, sold through self-service in 35,000 doors and pre-sold through mass media advertising.
Keeping the synergies between the two types of brands is a tricky proposition, Peyrelongue said.
“The more we grow our mass market brands, the more we have to nurture our prestige lines — the mystique of their brands and the exclusivity of the distribution,” he said. “We believe that successful prestige lines are essential to the future of our cosmetics business” because they instigate trends which then filter down from department and specialty stores.
While technologies are shared, maintaining completely separate divisions for the prestige end and the mass market is “absolutely mandatory,” with specific brands and specialized people.
“This organization allows us, for a line like Lancome, to focus on brand identity and the specificity of these products,” Peyrelongue said. “We have learned that our prestige brands have to be managed by people with a flair for fashion and style. These people have to understand what exclusive distribution means, and they have to be able to develop very close partnerships with the retailers.”
Last year, L’Oreal’s prestige brands — which also include such names as Ralph Lauren, Giorgio Armani, Picasso, Helena Rubinstein and Biotherm — represented 28 percent of sales worldwide and the mass market 54 percent. The rest was done by lines that the company sells to hairdressers or exclusively in pharmacies in Europe.
In the U.S. and Canada, sales were $2.111 billion, with the prestige distribution taking up 36 percent and the mass market 57 percent.
“In the last 10 years, we have experienced spectacular growth in the mass market,” Peyrelongue said. “Our objective for the next 10 years is to keep our momentum in this category, while we focus on more intense development of our prestige lines. We also intend in the near future to bring to the U.S. market some lines that exist only in other countries.
“We will also extend the franchise of our major designers — like Ralph Lauren — beyond the field of fragrances and into other categories,” Peyrelongue added.
Though he spelled out the different strategies and priorities for his company’s varying levels of distribution, Peyrelongue allowed that he actually didn’t prefer to use the terms mass and class.
“I am not completely at ease with this description, because on the one side, mass sounds lesser, while prestige sounds pompous,” he said. “So, if you have a better description, I would like to hear it.”