First of all, capitalizing on a multi-brand strategy enables L'Oreal to cover the mass market in China. L'Oreal Paris, Maybelline Garnier and Mini Nurse targets the bottom of the pyramid. Brands such as Kerastase, Vichy and Matrix attracts consumers at the middle of the pyramid who look for mid-level quality of products. The very top of that pyramid is reserved strictly for the high-end products sold in retail outlets, high-end department stores and specialized boutiques, such as Lancome, Shu Uemura, Biotherm and Kiehl's. Each of diversified brands with different tiers of sales channels has a distinguished personality-Maybelline is fashion driven, Garnier is regarded as a natural brand, and L'Oreal Paris is known for a high-performance technology brand.
Secondly, acquisition plays a critical role in penetrating Chinese market. As case in point, L'Oreal China acquired Mini-Nurse, a chinese mass-market skin care brand and Yue-Sai, a local make-up brand. By absorbing 280,000 outlets of Mini-Nurse that held a huge market share in the low-end market, L'Oreal gained access to market consumers with local distribution and operation knowledge. Given the fact that nearly 60percent of L'Oreal's sales in China come from mass markets, the acquisitions of local brand needs to be considered very carefully when companies penetrate the emerging markets they are not used to.
However, there's one more thing that needs to be added here. As in Coca-cola Brazil, an unexpected competitor is playing a significant role in China. Amorepacific, South Korean cosmetics giant, are luring consumers by stressing that its products are more suited for Asian skin. Furthermore, thanks to so-called Korean wave which refers to spread of South Korean entertainment culture, Amorepacific is appealing to star-struck chinese women having strong preference over Korean brand.
How can L'Oreal edge out new strong player in this game?
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