L'Oreal turns to cheaper products to spur future growth
Yesterday the France-based company reported a drop in like-for-like sales in the fourth quarter missing its turnover target for the full year.
A price for everyone
Looking to 2009, the company said releasing cheaper products was one of the ways it planned to stay ahead of the market.
“L’Oreal Paris is the premium mass brand and in skin care prices range from €11 to €18. In mid 2009, however, we are planning on releasing a €9 moisturiser,” explained Jean Jacques Lebel, president of consumer products division.
The Garnier range retails for slightly less than L’Oreal Paris, and Lebel announced plans to release a Garnier Essential range which would retail at about €5.
In this way the company will have skin care brands that range in price from €5 to €250 which, as CEO Jean Paul Agon pointed out, is a way to make sure the company does not overlook any consumer segment or benefit that it may hold.
In addition, it plans to offer smaller sizes of luxury brands, in an attempt to catch consumers who may otherwise struggle to pay the full price tag.
“We have to make sure each of our brands is accessible,” explained Marc Menesguen, president of luxury.
Menesguen gave the example of the launch, planned for February 2009, of a 20ml version of a Viktor & Rolf perfume that will retail at €35, as opposed to €98 for the traditional 100 ml size.
‘Finger in the dyke?’
However, these plans have not been met with wholly positive reactions from analysts.
Although it represents a move from management to try to address the current economic situation, analysts at Bernstein Research are not convinced by the plan.
“After all, the economics of the 20ml vs. 100ml do not look hugely attractive, plus Luxury/Professional is suffering as much from footfall, which any price-points strategy is unlikely to address,” said lead analyst Andrew Wood.
They ask whether the plan is ‘just putting a finger in the dyke’ and warn that the company should watch out for the growing popularity of discount stores which draw business away form the supermarket chains where it performs well.
