Strategy

L’Oréal Luxe’s approach to building and expanding its fragrance expertise

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Marc Dubrule

Formerly the boss of Lancôme International, Marc Dubrule is now in charge of strategic development of L’Oréal’s Selective Divisions. He tells us how the Group has built up its mastery of fragrance creation.

Steadily picking up the pace over the last half-decade

Since the 2012 launch of Lancôme’s hugely popular La Vie est Belle, L’Oréal has been steadily picking up the pace, notching up one fragrance success after another, with Sì by Giorgio Armani, and Black Opium and Mon Paris, both by Yves Saint Laurent. The first of these three rank among the world’s top ten perfumes, with La Vie est Belle taking Europe’s number-one spot. Mon Paris is no slouch either and has broken into the US top ten. By harnessing this ability to create top-performing international perfumes, L’Oréal Luxe has made a name for itself as a global leader on the perfume market. “Our perfumes are reporting average annual growth of 5.5%, putting us well above the market average, which has hovered around 3% in the last four years”, comments Marc.

L’Oréal Luxe’s expertise in fragrances is not new. “It all began in 1964, when the Group acquired Lancôme”, says Marc. That takeover marked the first step in 50 years of perfumery and a string of worldwide success stories. “Two years later saw the release of Fidji by Guy Laroche, which was the Group’s first fragrance. Then in 1969 came Ô by Lancôme, followed by Anaïs Anaïs in 1978 – the year in which L’Oréal obtained the Ralph Lauren licence – then Drakkar Noir, which was released four years later and went on to become one of the world’s biggest selling perfumes.” In 1990 came Trésor by Lancôme, which was also a world number-one for several years. Marc points out that ten bottles of Trésor are still sold every minute around the world. In 1996, L’Oréal launched Acqua Di Gio, the embodiment of Armani’s sober and sophisticated style for men. It too has enjoyed huge and enduring popularity.

This history of excellence, backed up in the last five years by a series of resounding international successes, has made fragrances increasingly important to L’Oréal Luxe as a foundation for growth. “Fragrances are a key area for the Selective Divisions, particularly in the USA and Western Europe, where we command sizeable market share”, says Marc.

High-calibre, bespoke products: L’Oréal Luxe’s strategy

Marc attributes this success to two major strategic strengths, citing L’Oréal’s high-calibre perfumes and bespoke creation strategy.

Quality comes first. “This has always been and must remain the common denominator for all our fragrances”, says Marc. Several teams are involved in making sure that this is the case. One is the Olfactory Department. “Staffed by expert perfumers, this is an artistic department that acts as an interface between our major brands and the world’s top noses. At an early stage, they identify the most interesting and complementary olfactory directions within each brand. They then work in partnership with the great perfume houses to figure out the composition of each fragrance, check the technical qualities – strength, diffusion and tenacity – and oversee the meticulous selection of raw ingredients.” The Operations team, meanwhile, looks after industrial excellence, handling technical design and manufacture of the perfumes, plus packaging and bottling. “This task might involve 100 numbered and engraved units for a prestige limited edition just as easily as a run of several million units for a global product such as La Vie est Belle”, says Marc. Manufacturing is centralised at the Fapagau plant in Picardy, which also makes sure that quality is absolutely perfect before perfumes go to market. As a result, the value chain is secured and quality assured from the selection of raw materials to packaging.

The second strategic strength is the ability to create unique perfumes that resonate with the brand’s personality. L’Oréal Luxe boasts a portfolio of distinctive and complementary brands, including time-honoured brands like Lancôme, major designer brands with their origins in couture, such as Ralph Laurent, Yves Saint Laurent and Giorgio Armani, but also alternative designer brands such as Victor & Rolf and Maison Margiela. Each one of these brands has its own personality and universe, and every new fragrance must be able to sustain that personality and convey it to consumers. “This notion of the bespoke creation of a unique fragrance universe and the wealth of our brands generate huge potential. By tapping into these strengths, we have managed to establish ourselves on many markets”, says Marc.

The final stage in this diversification process is centred around the development of niche perfumery within the Group. “This market is worth over €1 billion and is experiencing double-digit growth. To get into it, we have acquired Atelier Cologne, a pure player from the sector, and launched exclusive luxury perfume collections, such as Armani Privé, Le Vestiaire des Parfums by Yves Saint Laurent, Maison Lancôme, Replica by Maison Margiela and, just recently, Ralph Lauren Collection, and Magic by Viktor & Rolf”, explains Marc. These collections also play their part in expressing the personality of each individual brand.

Setting out to conquer emerging markets from Asia to the Middle East and Latin America

Now L’Oréal Luxe faces the daunting task of pursuing this strategy on a global scale, and particularly on emerging markets. Unlike Western Europe and North America, which are the largest markets in terms of perfume consumption, other markets are starting from further back but still offer attractive trends for L’Oréal Luxe. These include Asia, the Middle East, Eastern Europe and Latin America, where people are starting to pay more attention to the luxury goods and beauty market. “Today, on a global selective perfume market worth around €15 billion*, South America represents approximately €700 million, the Middle East €300 million, while China stands at over €350 million already”, Marc tells us.

To carve out a place on these markets, you need to have a proper command of their specific features and adapt your strategy appropriately. “Trends in these regions are not the same as those that we see in Western Europe and North America. In the Middle East, for example, which has an ancient perfume tradition and where agarwood has been a fundamental ingredient in perfume making since the 9th Century, people use unisex scents and prefer stronger, longer-lasting and all-enveloping fragrances. Asian consumers, conversely, are highly receptive to fresh, light, flowery notes, and put on different perfumes for personal, family and professional occasions”, explains Marc. So far, the Group has scored a number of successes on this market. Miracle by Lancôme is one of China’s top fragrances and L’Oréal is looking to repeat this success, notably with Mon Paris, which Marc believes has all the qualities needed to win over this market.

Fragrances of the future?

How will the perfume market of tomorrow look? “The only thing certain is change. We are constantly making adjustments in our quest to create high-calibre, original and creative fragrances that match with men and women’s aspirations all around the world. Perfume is the quintessential expression of luxury”, says Marc.

What does he see as the latest market trend? “The way the market is evolving towards the higher end, with increased sophistication, more personalisation and higher value. Our customers want the best products with the finest ingredients. They want to stand out from the crowd, and I get that. That is the challenge for our craft.”

*internal source, sell-in data.

 

Consumption | December 2016