The Six Keys to L’Oréal’s Success in India
As the sun sets over the streets of Mumbai, the rattle of rickshaws mingles with the honking of horns, the scent of fragrantly spiced street food and charcoal braziers rises into the air as swaying saris and vibrant street stalls catch the last amber rays of sunlight. Amid this bustling feast for the senses, L’Oréal India is preparing for a party: it is the last night of L’Oréal Chairman Jean Paul Agon’s visit and he will be meeting with local officials for a farewell reception.
For foreign companies, India’s cacophonous harmony can be enticing but difficult to penetrate — today as in the past. In his 1924 novel A Passage to India, E. M. Forster told of the disintegrating relationship between Britain and India, a century-long culture clash coming to a turbulent end. While not quite as lengthy, L’Oréal’s relationship with the country tells a very different story, one of investment, development and mutual benefit. Jean-Paul Agon’s visit, though brief, cemented the group’s commitment to the country on a number of levels.
The story so far
L’Oréal has been present in the Indian market since the mid-1990s and Jean-Paul Agon’s own connection with the country stretches back some 18 years to when he was appointed managing director for the Asian zone. At the time, he was responsible for accelerating operations on the subcontinent. He set about achieving L’Oréal’s mission of “sharing beauty with all” through a process he calls “universalisation”, an idea that lies at the core of L’Oréal’s strategy to win over another billion consumers by 2020, of which 150 million are expected to be Indian.
Writing the global story… locally
Universalisation is a concept that is particular to the group. It represents a unique take on globalisation, whereby its 28 brands maintain an international profile while still adapting to local needs and desires.
As Mr Agon told The Economic Times of India during his visit: “We respect the differences among our consumers around the world… The traditional concepts of beauty change as you travel the world.” How has this attitude been translated into action? Primarily through significant targeted investment at a local level. In 2013, Mr Agon announced that the group planned to invest a total of 9.7 billion rupees (140 million euros) between 2011 and 2016 with a focus on expanding its supply chain, reinforcing production facilities and funding research and innovation in India. This approach has so far served L’Oréal well, enabling optimistic projection with a plan to beat market growth by two to three times and grow by 25–30 percent a year. This would mean achieving a topline target of 70 billion rupees (994 million euros) by 2020, catapulting India into the top five countries for L’Oréal in the coming years.
Making the story a reality
Mr Agon’s announcement in 2013 coincided with the opening of L’Oréal’s first R&I centre in India — the third in Asia after Japan and China and the sixth globally. It includes both a Product Development Centre in Mumbai and an Advanced Research Centre in Bangalore that screens active ingredients available in India in order to assess their potential for use in other parts of the world. This is an example of how universalisation runs two ways: international products are adapted to local markets while at the same time local research can contribute to international development. As Mr Agon said in his interview with the Economic Times of India, already L’Oréal’s two centres for research have created a new hair colour and invented revolutionary new kohl. Their continued innovation will play an important role in the future of the group’s universalisation strategy.
Localised content
Local research is complemented with local manufacturing at L’Oréal India’s two production units, which together ensure that 91% of the products for the Indian market are produced in the country, with only a few luxury products being imported. As well as being in line with the group’s universalisation strategy, these manufacturing sites are the embodiment of L’Oréal’s commitment to the “Make in India” campaign, a major new national program designed to transform India into a global manufacturing hub. This has allowed the company to to play a key role in transforming the Indian beauty market, instigating social change in keeping with L’Oréal’s commitment to “Sharing Beauty with All”.
A people story
During his keynote address to a captive audience the at Indian Institute of Management, Mr Agon highlighted the importance of this commitment, whereby 100% of the company’s products will have an environmental or social benefit that is quantifiable, measurable and verifiable by 2020. This is an ambitious, but hardly surprising project for a company that has always placed people at the centre of its success. As Mr Agon said in his address: “At L’Oréal, we believe that people make the difference.” For the group’s CEO, India provides the perfect example this philosophy: “India’s wealth is its great young talent, passionate inquiring minds, and budding entrepreneurs, and I am confident they will play a major role in catapulting India to be a far bigger economic powerhouse on the global stage.”
A tale of many cultures
L’Oréal already knows first-hand about India’s talent: Over 200 of its international managers are of Indian origin and some of its leadership positions are filled with Indian talent, including key global positions such as country managers. L’Oréal’s strategy of universalisation could be said to apply to its global players too: travel is a prerequisite for professional advancement, meaning that L’Oréal has fostered a culture of multicultural managers with an understanding of both local and international concerns. As Jean-Paul Agon says: “living in different countries gives you the capacity to understand what consumers there want.” Right now, the director of research and managing director of L’Oreal India are both French but Mr Agon is sure that could all change with time.
The story of L’Oréal and India is still being written, the various narrative threads weaving a tale of mutual prosperity. And they lived happily ever after? Things are never that simple. But as the company’s strategy of universalisation continues to take global brands local, encourage local innovation to support global growth and above all pursue its fostering of talent in all its diversity, its passage to India promises to be a lasting one.
