L'Oreal Ups the Ante

The advertising and promotional budget is expected to increase again this year, both for the mass division and L’Oréal USA as a whole.

with contributions from Faye Brookman

“Stiletto is flying out of the stores,” said a buyer in a drugstore chain who did not want to be mentioned on the record. “EverPure is doing very well and is a very good product. No one spends like L’Oréal. L’Oréal has been a great strategic partner. Like any company, their sales vary from week to week, up or down for both L’Oréal and Maybelline, but we are happy with our business.”

A buyer at another chain observed, “During Christmas, we saw an increase in L’Oréal cosmetics, which we attribute to women trading down out of department stores, but to the high end of mass.”

During a store tour in December, Catherine N. Lindner, divisional vice president of marketing development at Walgreens, agreed. She said customers, many used to department stores, have been impressed with the new fixturing and testers in a specially created L’Oréal department in the store.

Campinell had taken issue with some media speculation L’Oréal was losing ground to its mass market rivals. He singled out skin care and pointed out that Garnier’s Nutritioniste launch had scored “as high as a nine share” in the moisturizing category in less than two years. He noted that the Maybelline and Garnier brands together were up 30 percent, while “the category is up 5 [percent].” He added that, in moisturizers, the L’Oréal Paris brand was up 11 percent, twice the category.

In hair color, L’Oréal’s traditional strength, Campinell conceded “the category has fallen and that has hurt us. We have not grown this year. We’re off maybe a point, but we have new launches for 2009 and we still have a 22-point share above our nearest competitor.”

The color cosmetics market was up by only one point, but L’Oréal Paris was “plus-nine,” driven by the launch of Bare Naturale, plus Infallible lipstick, Campinell said.

Looking forward through 2009, Campinell said: “The first three quarters are going to be probably flat, maybe minus one in our categories.” He added that a bit of a turn is expected in the second half “because the weakness really started in July. The fight will be just improving our performance during the first half.”

Much of the criticism of L’Oréal was generated by the quarterly sales figures of the parent company and its U.S. subsidiary, which includes businesses dependent on the beleaguered department stores, as well as the salon division.

Dan Dolev, European HBC associate analyst at Sanford C. Bernstein, declared, “It’s a wise strategy.” But he added that maybe “it’s too little too late.”

Dolev estimates sales for all of L’Oréal USA in the fourth quarter will be down by 6 percent, and he blamed the shortfall on past quarters of cutting advertising and promotional spending. “It is very hard to reverse the erosion,” he said, predicting L’Oréal, the worldwide French parent, will miss both its traditional targets of 6 to 8 percent sales growth and 10 percent earnings per share growth.”

Credit Suisse’s Mills stopped short of making a prediction. While noting that L’Oréal has come out of the fourth quarter with “all guns blazing,” he pointed out that market share growth is dependent on having the right new products. But he reiterated, revenue growth is the Clichy, France-based company’s mantra, and “L’Oréal is nothing if not persistent.”


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