L'Oreal: The Making Of An International Super-Organization

L'Oreal: The Beauty of Global Branding (int'l edition)

The French giant stays on top by selling cultural cachet as well as cosmetics

It's a sunny afternoon outside Parkson's department store in Shanghai, and a marketing battle is raging for the attention of Chinese women. Tall, pouty models in beige skirts and sheer tops pass out flyers promoting Revlon's new spring colors. But their effort pales in comparison with L'Oreal's eye-catching show for its Maybelline brand.

To a pulsing rhythm, two gangly models in shimmering lycra tops dance on a podium before a large backdrop depicting the New York City skyline. The music stops, and a makeup artist transforms a model's face while a Chinese saleswoman delivers the punch line. ''This brand comes from America. It's very trendy,'' she shouts into her microphone. ''If you want to be fashionable, just choose Maybelline.''

Few of the women in the admiring crowd realize that the trendy ''New York'' Maybelline brand belongs to French cosmetics giant L'Oreal. In the battle for global beauty markets, $12.4 billion L'Oreal has developed a winning formula: a growing portfolio of international brands that has transformed the French company into the United Nations of beauty. Blink an eye, and L'Oreal has just sold 85 products around the world, from Redken hair care and Ralph Lauren perfumes to Helena Rubinstein cosmetics and Vichy skin care.

Thanks to this strategy, masterminded by L'Oreal Chief Executive Lindsay Owen-Jones, the French company has not only enjoyed a decade of double-digit growth but has pioneered new ground rules for staying on top in a fiercely competitive industry. L'Oreal's net profits rose 12% in 1998, to $768 million, while its stock has soared 900% in the '90s.

L'Oreal's success is proof that when done right, global branding can speed growth in mature consumer-products companies even when global markets themselves are shaky. Asia's economy is a mess, Latin America is tottery. Other worldwide marketers, such as Procter & Gamble Co., are suffering partly as a result. But L'Oreal is surging in markets stretching from China to Mexico. Its secret: conveying the allure of different cultures through its many products. Whether it's selling Italian elegance, New York street smarts, or French beauty through its brands, L'Oreal is reaching out to more people across a bigger range of incomes and cultures than just about any other beauty-products company in the world. That sets L'Oreal apart from one-note marketers such as Coca-Cola Co., which has just one brand to sell globally.

L'Oreal's strategy positions it beautifully to profit even further when the middle class begins to grow again in emerging markets. Says Veronique Adam, analyst at J.P. Morgan Securities Inc. in Paris: ''L'Oreal is the only real global leader in every segment of the industry.''

For Owen-Jones, the trick will be staying ahead in the game as his powerful rivals seek to play the global branding game. From giant P&G to niche players such as Los Angeles-based cosmetics maker Stila, L'Oreal's competitors are hustling to catch up. ''We want to become more of a global company like L'Oreal,'' says Yoshikuni Miyakawa, a general manager of the cosmetics-marketing division of Shiseido Co., Japan's No. 1 cosmetics company. Already, Shiseido is dominant at home and now expanding around the world. Meanwhile, the French company is No. 10 in Japan, trailing rivals such as Clinique and Estee Lauder.

ELECTRONIC THREAT. As Owen-Jones races to expand international sales of his products, he must be careful that his brands don't blur together for consumers. Yet another threat may come from the electronic world. An Amazon.com of the beauty business could shake up the industry in unexpected ways--just when L'Oreal is experimenting with its own retail formats.

Owen-Jones knows the risks--the 53-year-old CEO is always asking himself what aggressive marketer, what hot fragrance could steal share from L'Oreal. Glancing at shelves in his Paris office lined with L'Oreal's latest products, he notes: ''I'm never satisfied and never convinced we are winning. I try to convince my people we might not be.''

That healthy doubt is just one of the ways L'Oreal's chief has kept his company on top. Known by his rivals as a marketing whiz, he loves to prowl the aisles of department stores, quizzing customers and salespeople alike on every aspect of the beauty business. On his latest visit to China, he stopped two women on the street and asked whether they used L'Oreal products to color their hair. When the women said they had their hair done in a salon, Owen-Jones escorted them to the nearest store selling L'Oreal products and offered them hair-color kits for free.

The knowledge he gains in the street helps him keep his executives sharp. Owen-Jones is known for raking his managers over the coals in meetings, hammering them with skepticism. ''He tries to destabilize you to see if you are capable of defending your ideas,'' says a senior L'Oreal executive.

At the same time, Owen-Jones--known simply as ''O-J''--has used his own multicultural background to the company's advantage. Owen-Jones was born in Wales, studied at Oxford and Paris, married an Italian, and has a French-born daughter. Although his first job was selling shampoo in Normandy in 1969, he has spent half his professional career outside France and all of it outside Britain. ''I've tried to be a hyphen between France and English-speaking countries,'' says Owen-Jones, who speaks four languages. ''We have made a conscious effort to diversify the cultural origins of our brands.''

That philosophy has proved key to L'Oreal's success. While many companies seek to homogenize their brands to make them palatable in myriad cultures, Owen-Jones has taken L'Oreal's products in the opposite direction. He wants them to embody their country of origin. So he has turned what many marketing gurus consider a narrowing factor into a marketing virtue.

L'Oreal's work with Maybelline is a prime example. In 1996, L'Oreal acquired Maybelline for $758 million and began a complete makeover of the brand, including moving the headquarters from Memphis, Tenn., to New York City. The key: figuratively stamping ''urban