Most global packaged-goods and beauty marketers focus predominantly where the growth is these days: developing markets. Others are benefiting by catering mainly to upscale households left unscathed by the recession in developed markets.
But L'Oréal has stood apart by actually stepping up its focus on the U.S., from where it expects to provide 70 million of the billion new consumers it hopes to add globally by 2021, ranking it just behind China and India in strategic importance. And it is doing so with the broadest portfolio in the business, operating in mass, prestige and even retail via such outlets as Kiehl's and Body Shop units.
Zigging where others have zagged seems to be paying off. L'Oral's sales in North America rose 5.8% organically in the first half, well ahead of the 3.5% growth Kline & Co. projects this year in U.S. beauty. And L'Oral's gains have come despite just entering the fastest-growing mass segment -- nail care -- and being the dominant player in the weakest segment, salon hair-care, where the company has seen sales growth despite broader market decline.
The success comes as -- and in part because -- L'Oreal has, for the first time, coordinated marketing across its far-flung collection of brands. L'Oreal USA CEO Frederic Roze last year named Colgate -Palmolive Co.veteran Marc Speichert as the company's first chief marketing officer. It was a big change for a traditionally decentralized company, and one that forged the path for appointment of a global CMO, Marc Menesguen, later in the year.
The goal, Mr. Speichert said, was to get innovation in marketing and media to the level L'Oreal has had in products. To that end, he led creation of the company's first centralized market-research or "insights" organization after the function had previously been divided among brands.
Mr. Speichert also stepped up digital marketing, leading a review consolidating U.S. digital media planning buying with Moxie Interactive in December and putting them to work fast. L'Oreal will spend as much on digital marketing in 2011 as it spent the prior two years combined, after doubling such spending in 2010, Mr. Speichert said, bringing the level to around 10% of an outlay that 's also been growing in other areas; it's up 25% to $1 billion last year in overall measured media.
Part of the rationale behind that shift, he said, are changing consumer purchase habits, as people not only buy more beauty products online, but also spend more time there in the "evaluation phase" of offline purchases. "When we realized we needed to shift more [spending] to the evaluation phase, that led to more investment in owned assets" in digital, Mr. Speichert said.
Among the steps L'Oreal has taken in digital during the past two years:
- Creating a multibrand Beauty TV YouTube channel that 's generated 22 million views, and enlisting video blogger Michelle Phan, who's produced five of the 10 most-watched beauty videos on YouTube, for Lancome.
- Working with Demand Media to create microsites to capture beauty consumers as they make increasingly complex searches of five words or more.
- Purchasing Makeup.com, supported 100% by L'Oreal ads, and revamping it with editorial content from Federated Media.
Social media also has played a role in L'Oreal growing sales in a shrinking salon hair-care market this year. Its Professional division segmented its brands and salon customers four ways along volume and price lines, then used a Facebook marketing program developed with Buddy Media to build business through stylists in each segment.
The effort, which won a Forrester Groundswell Award, created an estimated 21 million impressions through 6,000 salons and 1.7 million consumers, with some salons reporting incremental sales of more than $4,000 as a result.
Helping fuel the explosion of digital efforts, Mr. Speichert said, has been L'Oreal 's first centralized marketing innovation fund. While centralized, Mr. Speichert has worked to keep marketers from all of L'Oreal 's brands involved in evaluation and selection of vendors and projects.
Part of L'Oreal 's recent success also has come from an agility that 's rare for big, traditional beauty marketers. L'Oreal last year found itself shut out of the nail category, the fastest-growing segment of the business, up 20% in 2010. As a result, its Maybelline brand was losing share modestly in U.S. cosmetics despite gaining share in each of its categories of eye, lip and face makeup.
Then L'Oreal in April of 2010 acquired salon nail brand Essie. By December, Essie was showing up at Walmart on the way to a mass rollout in the U.S. early this year. By September, L'Oreal had captured a 10% share of a category growing 25% this year, according to the company's Nielsen data.
"One of the reasons I felt good about joining the company is that I felt it was open to change," Mr. Speichert said. "It's entrepreneurial because it's a big company created over time as a compilation of small companies."