L’OREAL’S ISRAELI INITIATIVE
Byline: Pete Born
NEW YORK — L’Oreal SA has found a new opportunity in the ancient land of Israel.
After 20 years of importing products into the country, the Paris-based beauty giant has begun manufacturing there. Its first move was to spend $7.5 million last May to acquire a 30 percent stake in Interbeauty, Israel’s largest cosmetics marketing organization and the principal distributor of L’Oreal’s products, which consisted primarily of prestige brands like Lancome and Helena Rubinstein.
A month ago, L’Oreal began manufacturing there, with an eye toward developing its mass market business — not only in Israel but in the surrounding Middle Eastern countries and beyond.
Lindsay Owen-Jones, chairman and chief executive officer, led a delegation of executives to Israel Jan. 13 to inaugurate the production of L’Oreal’s Elseve shampoo brand at Interbeauty’s Migdal Ha’emek factory.
Owen-Jones estimated that the size of L’Oreal’s business could ultimately grow to $100 million in Israel. The company’s Israeli sales are expected to jump from 94 million shekels last year to up to 120 million shekels ($40 million) this year at current exchange rates.
“According to our plan,” he said, “Israel will export the company’s products to the Arab countries, to other countries in the Mediterranean region and, in the future, to countries in Southern Europe. Israel will become L’Oreal’s strategic center in the Middle East.”
L’Oreal has also initiated a venture with the Hadassah Medical Organization for cosmetics and dermatological studies that may lead to the marketing of new products. In addition, Gladerma, a L’Oreal affiliate, is forming a joint venture with TEVA Laboratories to develop a new treatment for psoriasis.
The new interest in Israel was kindled, executives say, by the changing atmosphere in the Middle East with the end of the Cold War and the coming of the Arab-Israeli peace talks. The Israeli economy grew 7 percent last year, executives pointed out.
In a key development, the broadcasting of commercial advertising was allowed on TV last year, paving the way for L’Oreal marketing campaigns.
Gad Propper, Interbeauty chairman, is planning to double production of the 60,000-square-foot Migdal Ha’emek factory, according to L’Oreal, which is also negotiating to establish a company to distribute its hair salon products.
L’Oreal has been involved in a dispute with Jean and David Frydman, a former company executive and his brother, who had claimed the company ended the production of Helena Rubinstein products in Israel to escape the Arab Boycott. L’Oreal firmly denied those charges and insists its investment has no connection.
“The decision to invest in Israel was entirely economic and not political,” Owen-Jones said. “Israel is the leading consumer of cosmetics in the Middle East.”
At Sanofi Beaute, Pierre Berlancourt, who had been U.S. president, has been promoted to executive vice president, international markets to coordinate distribution and image worldwide. He will relocate to Paris in March. Vincent Bastien, the company’s managing director, said he will announce a replacement for the vacated post in the next few months.