Multi Brand Architecture

Company Focus

L’Oréal Multi-Brand Architecture The L’Oréal Group, one of the world’s leading cosmetics conglomerates, serves as an astounding example for the study of brand architecture, with its amazing maze of brands and sub-brands in a diverse range of beauty and personal care products. Over the years, L’Oréal has acquired a number of companies, thus bringing into its fold numerous “corporate brands.” Each of these corporate/umbrella brands in turn has several range or line brands and sub-brands in various product categories. Several of the companies have overlapping products, but are positioned differently so that the L’Oréal Group as a whole reaches out to the widest possible range of consumers across all market segments. Keeping the individual corporate brand names distinct helps the Group address the premium, midrange and economy markets simultaneously, without facing the problems of brand dilution and customer confusion.

Brand Architecture Brand Architecture refers to the way a company structures its brands. Some of the strategic issues that brand architecture addresses are: handling of acquired brands, integration of various brands, choice between umbrella and individual brands, and the structuring of brands as part of the marketing mix. The type of brand architecture that a company would follow depends on a variety of factors including depth and breadth of the product mix, the extent of geographic coverage, the product category, characteristic buying behavior, if any, and so on. Here, we look at how L’Oréal has developed its brand architecture and used it as a strategic tool for nurturing a large and successful global business. The Origins of L’Oréal L’Oréal’s story began in 1907 when Eugène Schueller, a young chemist, formulated the first synthetic hair dyes in his kitchen, and sold them to hair salons in Paris under the brand name Auréole. Within two years, he established the Société Francaise des Teintures Inoffensives pour Cheveux,

© iupindia.org

Introduction

which soon afterward became L’Oréal. By the 1920s, the company had extended its business to a number of countries in Europe, North and South America, the erstwhile Soviet Union and the Far East. A Plethora of Brands Currently, the L’Oréal Group has operations in over 130 countries and more than 80% of the Group’s sales are generated outside the home coun-

MARKETING MASTERMIND © 2008 The Icfai University Press. All Rights Reserved.

55 March 2008

try, i.e., France. L’Oréal is known as a house of diverse corporate and umbrella brands which include L’Oréal Paris, L’Oréal Professionnel, Garnier, Maybelline, Matrix, Biotherm, RedKen, SoftSheen Carson, Lancôme, Helena Rubinstein, Cacharel, Shu Uemura, Giorgio Armani, Ralph Lauren, Vichy and many others. Each of these umbrella brands, in-turn has under its fold numerous range, line and product

Company Focus Exhibit 1: L’Oréal’s Multi-brand Matrix Architecture Showing the Major Master Brands Consumer Products Division

Luxury Products Division

† L’Oréal Paris

† Lancôme

† Giorgio Armani

† Garnier

† Biotherm

† Ralph Lauren

† Maybelline New York

† Helena Rubinstein

† Cacharel

† SoftSheen Carson

† Kiehl’s

† Victor & Rolf

† Le Club des Créateurs de Beaute

† Shu Uemura

† Diesel

Professional Products Division

Active Cosmetics Department

† L’Oréal Professionnel

† Vichy

† Kérastase

† La Roche-Posay

† RedKen 5th Avenue NYC

† Innéov

† Matrix

† SkinCeuticals

Analysis of the Brand Architecture Design

† Mizani

brands. In effect, the brand architecture that we have is what one may call a multi-brand matrix, with a hierarchy of brands which target different groups and levels of clientele (Refer Exhibit 1). Multi-brand Matrix Architecture Under Four Groups The L’Oréal Group’s business is broadly classified under three divisions – the Consumer Products, Professional Products and Luxury Products divisions; and one department – the Active Cosmetics department. The Consumer Products Division offers a range of competitively priced hair care, skin care, make-up and perfume products. The most prominent international brands in this division are — L’Oréal Paris, Garnier, Maybelline New York, SoftSheen Carson and Le Club des Créateurs de Beaute. These are distributed through mass-market retail outlets. The Professional Products Division serves hairdressers by providing products to meet the requirements of salon professionals and salon customers. There are five major

umbrella brands under this division L’Oréal Professionnel, Kérastase, RedKen 5th Avenue NYC, Matrix and Mizani. The Luxury Products Division offers up-market premium products to consumers. The major master brands are—Lancôme, Biotherm, Helena Rubinstein, Kiehl’s and Shu Uemura. The world’s top perfume brand like Giorgio Armani, Ralph Lauren, Cacharel, Victor & Rolf and Diesel also form part of this division. This division’s products are mainly sold through department stores, travel retail outlets, perfumeries, and the respective brands’ own boutiques. The Active Cosmetics Department offers skin care, sun care, hair care and make-up products. It has three prominent brands under its fold— Vichy, La Roche-Posay and Innéov plus the SkinCeuticals range. These products are sold through pharmacies and specialist retailers. They offer consumers proven safety and effectiveness, supported with professional advice from pharmacists and dermatologists. Author’s Profile

R Harish, Faculty Member, The Icfai Business School, Bangalore. The author can be reached at [email protected]

MARKETING MASTERMIND

That L’Oréal has divided its business into product-based divisions, rather than dividing it on geographic basis clearly indicates that it is the products and brands that form the focus of the business and not geographic regions. This approach lays the foundation for a brand architecture, wherein umbrella and range brands play an important role.

56 March 2008

Divisional Architecture Based on Target Markets L’Oréal has classified its business into different divisions based primarily on the target market segments, rather than on product categories. The brand architecture is designed in such a way that different umbrella brands are focused on each segment, thereby creating synergy, clarity and leverage, in spite of apparently having several competing brands in the same product categories. Consumers from diverse socioeconomic and cultural backgrounds are thus able to find products suitable to their tastes and spending power, without conflict or confusion. Focus on Distinct Identity and Image of Individual Brands L’Oréal also focuses regularly on strengthening the meanings of its brands and fully exploits the advantages which are rooted in the individual brands. L’Oréal has established distinct identity, image and signage for each of its brands so as to build a close relationship with the relevant target markets. For example, customers have come to associate Lancôme with stylish combination of elegance, charm and daring. Helena Rubinstein is perceived as a cosmetics pioneer, which combines cutting-edge science

L’Oréal with the art of femininity, glamour, high-performance and luxury. Garnier fulfills the aspiration of natural beauty for the masses. Emphasis on Cultural Origins and Diversity of the Brands L’Oréal embodies cultural diversity and captures the cultural cachet of different countries in its brands. Many of L’Oréal’s star brands are from different cultures, whose distinct identities and cultural origins have been promoted to advantage by the company. This marks a conscious departure from the common practice of multinationals trying to harmonize and standardize their products and brands for global markets. The most prominent example is that of Maybelline New York, whose cultural association with its country of origin was strengthened by L’Oréal after its acquisition. As a result, Maybelline’s sales rose dramatically. It was also pushed into more than 90 countries, positioned as an aspirational brand from the US. It soon became a stylish global brand for women all over the world, from being merely a regional brand earlier. Currently, around 50% of Maybelline’s sales revenue comes from outside the US. L’Oréal’s brand architecture provides a platform for a diverse variety of brands by letting each brand retain its specialty and specific target markets; while at the same time fitting into the overall brand matrix. While retaining umbrella/range brands as endorsers, many individual brands are promoted under various products. Leveraging Core Technology Platforms Across Brands L’Oréal has a strong research and development network. Its innovations

always begin at the top with luxury brands, which are then modified to penetrate downwards into different price levels and markets. The development of multiple products on the same technology platform reduces the overall cost. The company thus takes advantage of spreading the benefits of a strategic investment across different product divisions. For example, L’Oréal first introduced a break-through anti-ageing formula in 1986 under the prestigious Lancôme stable, as Lancôme Niosôme. This was then implemented under the Vichy brand and eventually extended quite successfully to the consumer products division as L’Oréal Plenitude. Leveraging core technology platforms across brands, thus optimizing on developmental cost and reducing wastage of resources, is an important factor in successfully managing a complicated brand architecture having a multitude of brands marketed widely across the world. Aligning the Brand Architecture with the Marketing Mix Brand architecture is a sub-set of the larger view of the marketing mix. It is closely allied with the marketing practices and distribution channels. Each product division has many brands and sub-brands, and their distinct identities are maintained through conspicuously different packaging, image and advertising. The luxury brands are sold strictly in selected up-market outlets. Professional products are sold through salons and hair dressers. Active cosmetics products are distributed through pharmacists. The products which generate maximum revenues—the consumer products—are sold through mass market retailers such as super markets and department stores.

MARKETING MASTERMIND

57 March 2008

L’Oréal also adopts different advertising and promotional methods according to the brand’s position in the market. The mass brand Maybelline is promoted mainly through TV advertising and brand ambassadors. La Roche-Posay, the brand positioned at solving skincare problems, is promoted through dermatologists, skincare specialists and professional beauty salons. L’Oréal Paris relies to a significant extent on public praise by professional cosmetics consultants. L’Oréal has created a brand matrix with a strong power of integration. Thus, new brands merge into the existing structure taking full benefit of available resources, related to both technology and marketing. The company leverages upon the strength of its brands and advertises brands rather than the products. It focuses on building a strong relationship between the brands and the market segments that they are targeted at. In effect, L’Oréal emphasizes on brands rather than on product features, and thus uses brands as strategic marketing tools. The value of a brand lies in its ability to be hedonistic. It also reduces perceived risk and generates much more customer value as compared to an equivalent product, which too may otherwise have the same level of utility, quality and various tangible features. Integrating Acquired Brands into the Brand Architecture Firms that aim for strengthening their market position internationally, tend to make acquisitions and hence bring in new brands into their brand architecture. L’Oréal has continuously pursued the strategy of acquiring well-positioned brands in related businesses, from different geographic regions. The acquisition of the American brand Maybelline

Company Focus and the Japanese brand Shu Uemura are prominent examples. This strategy also helps compete effectively with strongly entrenched local brands and gain access to local distribution channels in different markets. Competing Brands Within the Group Help Beat the Competition While it is true that multiple brands in the same category are aimed at different market segments, it is equally true that some brands do compete with each other. L’Oréal is at times described as a federation of competing companies. For example, L’Oréal Paris and Maybelline New York are prima facie quite different – the former has distinct sophistication and supreme elegance, while the latter is a street smart value-for-money brand for the younger generation. But the two do compete with each other to varying degrees in different markets. Having multiple self-competing brands is a sure-shot way of maintaining creativity in a large and geographically dispersed multinational firm. This would ensure that different research centers and marketing groups are constantly on their toes and try to beat each other. While they do so, they also beat the competition. Moreover, the so-called competing brands often serve as flanking brands for the lead brand in a category. By offering alternative brands to meet the needs of various market segments, the company tries to retain different categories of customers in its fold, who may otherwise have flocked to competitors’ brands. A Complex Hierarchy of Umbrella, Range, Line and Product Brands L’Oréal has acquired numerous companies and has many subsidiaries – big and small, in different parts of

Exhibit 2: L’Oréal’s Consumer Products Division – Major Master Brands

Source: http://www.lorealv2.com/_en/_ww/brands/consumer_products/index.aspx

Exhibit 3: L’Oréal’s Professional Products Division – Major Master Brands

Source: http://www.lorealv2.com/_en/_ww/brands/professional_products/index.aspx

the world. It has quite a complicated brand architecture with numerous corporate/umbrella brands, range brands, line brands and product brands. For example, L’Oréal Paris is an umbrella brand that has a number of range brands, one of which is Dermo-Expertise. Under Dermo-Expertise, one has several line brands and product brands such as Pure Zone, HydraFresh, Happyderm, Nutrissime, Refinish and Renoviste. The umbrella/range brands often serve as endorsers for the line/product brands in advertisements and on the packages. The L’Oréal Group has over 500 brands in all. A complete and technically precise exposition of L’Oréal’s brand architecture and brand portfolio would therefore become very lengthy. Consequently, only the major umbrella/ range brands (which in most instances correspond with the names of various companies belonging to the L’Oréal Group), the principal

MARKETING MASTERMIND

58 March 2008

businesses that they are in and the key line/product brands thereunder, are described briefly in the following sections. The material is presented under four headings—Consumer Products, Professional Products, Luxury Products and Fragrances, and Active Cosmetics; considering around 20 master/umbrella brands.

Brand Architecture Consumer Products L’Oréal Paris The French brand, L’Oréal Paris, offers a comprehensive range of beauty and personal care products for both men and women. It includes products for skin care, hair care, hair coloring, make-up and styling. There are several range brands under L’Oréal Paris such as Elsève, Studio-Line, Dermo-Expertise and others. In turn, under each range brand, there are many sub-brands for specific products and product lines.

L’Oréal Garnier The Garnier portfolio (under the subsidiary – Laboratoire Garnier Paris) includes four product lines: † Garnier Fructis - hair care products † Garnier Nutritionist - skin care products † Garnier Ambre Solaire for sun protection, and † Garnier Nutrisse for nourishing and safeguarding hair color. Maybelline New York Maybelline came into commercial existence with the introduction of the first modern mascara in the American market way back in 1917. Great Lash, launched in 1971 in the US, continues to remain one of its best selling sub-brands to this day. Comparatively recent additions such as XXL Volume+ Length Mascara and DreamMatte Mousse have been quite successful. The Maybelline portfolio now includes more than 200 products and is available in over 90 countries. SoftSheen Carson SoftSheen Carson, formed in 2000 by the merger of Carson and SoftSheen companies of the L’Oréal Group, is the front-runner in hair care products for persons of African descent. The merging companies—SoftSheen and Carson were originally founded in 1901 and 1964 respectively. SoftSheen was a hair care products company targeted at African-American women. The Dark & Lovely nolye hair relaxer is one of the most popular brands from SoftSheen Carson. The other key product and line brands are – Optimum Care, Optimum Crème HairColor with Ionene G, Optimum Multi-Mineral Relaxer, Optimum Oil Therapy, Let’s Jam, Magic and Wave Nouveau Coiffure Permanent Wave with Tri-Fusion

Technology. While majority of these products are for retail sale, some are meant for professional use. Le Club des Créateurs de Beaute Le Club des Créateurs de Beaute or CCB Paris is the direct selling arm which offers a range of affordable beauty products and programs to women in several countries through telephone, internet, catalog and direct mail. To locate the above said master brands in L’Oréal consumer products refer Exhibit 2.

Brand Architecture Professional Products L’Oréal Professionnel L’Oréal Professionnel includes a range of products for hairstylists and colorists. The products are developed in close collaboration with hair dressers, and include: † Color Products: Majirel, Diacolor, Luo Color, Platinium, etc. † Hair Styling Products: Tecni.Art, Série Expert, X-Tenso (for long lasting hair straightening) and Dulcia perm lotion. Kérastase Paris The Kérastase hair care products were first introduced in 1964. They comprise a variety of luxury and aspirational hair care products that are sold for professional use by service providers through salons and spas across the world. The Kérastase Collection comprises around 50 distinct products to address a wide range of hair care needs such as nourishing, revitalizing, recharging, curling, smoothening, blowing/expanding, sculpting, color protection, etc. It includes six line brands designed for different types of hair – Nutritive, Reflection, Dermo-Calm, Resistance, Specifique and Soleil.

MARKETING MASTERMIND

59 March 2008

RedKen 5th Avenue NYC RedKen, founded in 1960, is a hair care brand dedicated to combining scientific approach with beauty, and is focused on continuing research and development. It comprises shampoos, conditioners, styling products, etc. The RedKen range encompasses four product lines and many subbrands: † RedKen Hair Care: All Soft, Blonde Glam, Body Full, Clear Moisture, Color Extend, Dandruff Control, Extreme, Fresh Curls, Smooth Down, UV Rescue † RedKen Styling: This product line comes in four categories – Mild Control, Medium Control, Maximum Control and Urban Experiment. Some of the specific sub-brands are – Rewind 06, Quick Dry 18, Guts 10 and Rough Paste 12. † RedKen Color: There are three categories under this product line—hair color products for fashion looks, natural looks and covering grey. Prominent sub-brands are Shades EQ Equalizing Conditioning Color Gloss and Color Fusion Advanced Performance Colorcreme. † RedKen for Men: This is a line of hair care products for men. Matrix Matrix was originally founded in 1980 for providing an extensive range of professional products for hair dressers. Matrix offers affordably priced products together with training programs for salon professionals and also provides insalon marketing guidance and support. The key product and line brands are Amplify, Biolage, Color Smart, Color Sync, Curl Life, Opti.smooth, Sleek.look 4-Step Professional Smoothing System, SoColor.beauty and Trix.

Company Focus Mizani The word ‘Mizani’ means balance in Swahili. The Mizani range, launched in 1991, comprises a superior line of professional hair care products meant for the people of African descent, sold exclusively through salons. To locate the above said master brands in L’Oréal professional products refer Exhibit 3.

Brand Architecture – Luxury Products and Fragrances Lancôme Lancôme is a British luxury brand offering an exclusive range of skin care products since 1946. It was bought by L’Oréal in 1965. The star brands in the Lancôme range are: † Skin care: Absolue, Blanc Expert, Hydra Zen, Primordiale, Rénergie and Résolution † Make-Up: Color ID, Flextencils, Juicy Tubes, Photogénic and Rouge Absolue † Fragrances: Attraction, Hypnôse, Miracle and Trésor. Biotherm Biotherm was founded in 1950 and offers an extensive range of face care, body care, sun care and skin care products for men and women. It was acquired by L’Oréal in 1970. Many of Biotherm’s products are based on a patented technology that uses an active ingredient extracted from thermal plankton— a vitamin and mineral-rich natural product found in spring water. The star sub-brands are: Age Fitness, Aquasource, Biotherm Homme (i.e., Biotherm Men), Lime Peel Wrinkle Corrector, Oléosource, Skin Loving Colors Make-Up and Source Therapie. Biotherm is priced 20% to 30% lower than Lancôme and caters to a younger age group. It focuses on pure skin care, youth and freshness; with less emphasis on anti-ageing and make up.

Exhibit 4: L’Oréal’s Luxury Products Division – Major Master Brands

Source: http://www.lorealv2.com/_en/_ww/brands/luxury_products/index.aspx

Exhibit 5: L’Oréal’s Active Cosmetics Department – Major Master Brands

Source: http://www.lorealv2.com/_en/_ww/brands/active_cosmetics/index.aspx

Helena Rubinstein Helena Rubinstein Inc. began its journey in 1902 with a beauty salon established by its eponymous founder. It was acquired by L’Oréal during the 1980s. The Helena Rubinstein portfolio includes a sophisticated range of cosmetics focused on femininity and glamour. The key brands are: † Skin care: Collagenist, Life Pearl and Prodigy † Make-up: Color Clone, Full Kiss and Lash Queen. Kiehl’s Kiehl’s was founded in 1851 as a pharmacy. During the early part of the 20th century, it offered herbal and homeopathic medicines, over the counter drugs, essential oils and the first Kiehl’s brand name products. Today, Kiehl’s offers skin care and hair care products that utilize unique, natural ingredients; and the products are often “prescribed” to customers by Kiehl’s well-trained customer representatives. The key brands are: Kiehl’s Lip Balm, Abyssine Cream, Blue Astringent Herbal Lotion and Crème de Corps.

MARKETING MASTERMIND

60 March 2008

Shu Uemura Shu Uemura, a brand created in 1983 by a Japanese make-up artist and skin care specialist of the same name, is active in make-up, skin care and professional tools. The brand relies on quality sales outlets that provide high standards of service. The important products are Shu Uemura Cleansing Oils, Depsea Water, Depsea Therapy, Eye Lash Curler, UV Mousse Underbase and Beta-Glucan skin care ranges. Giorgio Armani (Fragrances) Created by Giorgio Armani, the Armani brand has a well-differentiated line of fashion and personal care products which meets a wide range of consumer needs. The Giorgio Armani fragrance was first launched in 1982. The key subbrands in the fragrances category are Armani Eau pour Homme, Armani Mania, Acqua di Gio and the Emporio Armani duos (Emporio Armani He & She, Emporio Armani White & Emporio Armani Night), Sensi and Armani Code. The Giorgio Armani cosmetics range is distributed exclusively through select department stores.

L’Oréal Ralph Lauren (Fragrances) Ralph Lauren perfumes were originally introduced in 1978, and are now a division of L’Oréal. The important product brands are: Polo, Polo Black, Ralph, Ralph Rocks, Romance and Romance for Men. Cacharel (Fragrances) In the early 1960s, Cacharel was one of the first design houses to introduce ready-to-wear clothing as an alternative to couture designs. The brand was extended to fragrances in 1978, with the launch of the feminine perfume brand - Anaïs Anaïs. The Cacharel perfume range is now part of L’Oréal. Other major fragrance brands under the Cacharel line are Amor Amor, Eden, Noa, Promesse and Loulou. Viktor & Rolf (Fragrances) This is a fashion brand launched by the Dutch designer duo – Viktor and Rolf. Flowerbomb was their first women’s perfume, which is now marketed by L’Oréal. Diesel (Fragrances) Italy-based Diesel is a renowned denim brand; whose fragrances business is taken over by L’Oréal. It is best known for its “Fuel for Life” fragrance brand for men and women. To locate the above said master brands in L’Oréal luxury products refer Exhibit 4.

Brand Architecture – Active Cosmetics Vichy Vichy Laboratories offers a complete range of skin care products formulated with active ingredients stemming from pharmacological research, combined with Vichy Thermal Spa Water, which is renowned for stimulating the skin’s natural defense mechanisms. Vichy’s products address the issues of moisturization, nutrition, ageing, sun protection, hair loss and others. The prominent

brands under Vichy are: LiftActiv, Capital Soleil, Dercos, Equalia, Myokine, Novadiol, Normaderm, Thermal Fix and Vichy Men. La Roche-Posay La Roche-Posay Laboratoire Pharmaceutique is the brand strongly rooted in dermatology. La RochePosay was purchased by L’Oréal in the late 1980s. It offers a complete range of daily skin care and make up products for all types of skin. All the products are formulated with the La Roche-Posay Thermal Spring Water, which contains selenium, a substance known for its anti-radical properties. The leading brands are: Lipikar, Active C, Anthélios, Effaclar, Hydraphase, Novalip lipstick, Redermic, Respectissime mascara, Tolériane and Unifiance foundation. Innéov Innéov Laboratories’ products take off from the premise that diet has an effect on beauty. The product range comprises pills and nutritional supplements for improving the health and beauty of skin, hair and nails. Innéov Firmness is a re-densifying nutritional supplement for face and body, meant for improvement of dermal density and skin micro-texture. Innéov Hair Mass is another nutritional supplement designed to boost the growth of thick, dense glossy hair. SkinCeuticals Founded in 1997, SkinCeuticals pioneered the development of vitamin Cbased cosmeceutical products designed to combat the signs of aging, caused by environmental damage. It provides skincare solutions through dermatologists, medical spas, plastic surgeons and other skincare professionals in over 35 countries worldwide. To locate the above said master brands in L’Oréal active cosmetics refer Exhibit 5.

MARKETING MASTERMIND

61 March 2008

Conclusion The L’Oréal Group has indeed been successfully managing an amazing array of brands across the globe, with a complicated brand architecture and brand portfolio, having multiple brands in several product categories. Its approach to retaining and nurturing the identities and cultural origins of different brands exhibits a distinct departure from the practice commonly followed by multinationals, which often try to harmonize their products and brands for a global market. Most of the umbrella/master brands and the numerous range/line/ product brands thereunder have come into L’Oréal’s fold as a result of a series of acquisitions over several decades. L’Oréal has taken a conscious and considered decision to retain and nurture the legacy of the various brands that it has acquired from time to time. This has been used as a marketing strategy, which in turn has led to the present brand architecture. Regardless of the reason and history behind the present brand architecture, it is nonetheless quite evident from L’Oréal’s excellent financial and market performance that it is managing the brand architecture and portfolio quite well, in spite of the vicissitudes of the market and intense competition. A professional company treats brand architecture as a high level strategic decision as it has several strong managerial implications including resource allocation. Brands have to be nurtured and built over many years and the brand architecture therefore has long-term implications. L’Oréal has built a brand architecture that outclasses competition, and thus provides a lesson to other companies in similar competitive situations to follow, for using brand architecture as a tool for growth. r Reference # 10M-2008-03-11-10