L'oreal Nederland B.V.: Product

L'Oreal Nederland B.V.: Product Introduction Page 1 of 1 03/31/03

L'Oreal Nederland B.V.: Product

Introduction1

By Frederick W Langrehr, Valparaiso University, Lee Dahriger Butler University, and

Anne Stocker. This case was written with the cooperation of management, solely for the

purpose of stimulating student discussion. All events and individuals are real, but

names have been disguised. We appreciate the help of J. B. Wilkenson and V B.

Langrehr on earlier drafts of this case.

'Yolanda van der Zande, director of the Netherlands L'Oreal subsidiary, faced two tough

decisions and was discussing their with Mike Rourke, her market manager for cosmetics and

toiletries. "We have to decide whether to introduce the Synergie skin care line and Belle Couleur

permanent hair colorants." Synergie had recently been successfully introduced in France, the

home country for L'Oreal. Belle Couleur had been successfully marketed in France for two

decades. Mr. Rourke responded:

Yes, and if we decide to go ahead with an introduction we'll also need to develop marketing

programs for the product lines. Fortunately, we only need to think about marketing, since the

products will still be manufactured in France.

Ms. van der Zande replied:

Right, but remember the marketing decisions on these lines are critical. Both of these lines are

part of the Garnier family brand name Currently Ambre Solaire (a sunscreen) is the only product

we distribute with the Garnier name in the Netherlands But headquarters would like us to

introduce more Garnier product lines into our market over the next few years, and it's critical

that our first product launches in this line be successful

Mr. Rourke interjected, "But we already sell other brands of L'Oreal products in our market. If

we introduce Garnier what will happen to them?" After some more discussion, Ms. van der

Zande suggested:

Why don't you review what we know about the Dutch market? We've already done extensive

marketing research on consumer reactions to Synergie and Belle Couleur. Why don't you look at

it and get back to me with your recommendations in two weeks.

1

Faculty members in nonprofit institutions are encouraged to reproduce this case for distribution to their own students without

charge or written permission All other rights reserved jointly to the authors and the North American Case Research Association

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Copyright © 1994 by the Case Research Journal and the authorsL'Oreal Nederland B.V.: Product Introduction Page 2 of 2 03/31/03

Background

In 1992 the L'Oreal Group was the largest cosmetics manufacturer in the world.

Headquartered in Paris it had subsidiaries in over 100 countries. In 1992 its sales were

$6.8 billion (a 12 percent increase over 1991) and net profits were 417 million dollars (a 14

percent increase). France contributed 24 percent of total worldwide sales, Europe (both

western and eastern countries excluding France) provided 42 percent, and the United

States and Canada together accounted for 20 percent; the rest of the world accounted

for the remaining 14 percent. L'Oreal's European subsidiaries were in one of two

groups: (1) major countries (England, France, Germany, and Italy) or (2) minor countries

(the Netherlands and nine others).

The company believed that innovation was its critical success factor. It thus invested

heavily in research and development and recovered its investment through global

introductions of its new products. All research was centered in France. As finished

products were developed, they were offered to subsidiaries around the world. Because

brand life cycles for cosmetics could be very short, L'Oreal tried to introduce one or two

new products per year in each of its worldwide markets. International subsidiaries could

make go/no go decisions on products, but they generally did not have direct input into

the R&D process. In established markets, such as the Netherlands, any new product line

introduction had to be financed by the current operations in that country.

L'Oreal marketed products under its own name as well as under a number of other

individual and family brand names. For example, it marketed Anaï s Anaï s perfume, the

high-end Lancôme line of cosmetics, and L'Oreal brand hair care products. In the 1970s

it acquired Laboratoires Garnier, and this group was one of L'Oreal's largest divisions. In

France, with a population of about 60 million people, Garnier was a completely separate

division,