L'Oreal: Acquire any valuable local brand

In an increasingly competitive market in China, in order to avoid the "marginalized" predicament, the multinational cosmetics company has chosen the strategy of "activating" local brands.

After two successive launches of the merger gate, the “honeymoon” excitement of PaoloGasparrini, president of L'Oreal China, continues.

"The hand holding Yuexi's hands feels heavy, and at the same time I feel a special kind of fulfillment. I have a special liking for this brand." On the afternoon of May 13, Gaipaul said in an exclusive interview with reporters.

“We don’t deny whether you mentioned whether there will be new acquisition plans in China. However, this year we will focus on integrating the previously acquired small nurses and Yuexi. At the same time, we’re looking at our eyes and are always looking for our group. Add a brand with added value. If there is a target brand that meets the company's overall and long-term development strategy, why not consider it?”

In fact, L'Oréal’s current brand idea is very clear. M&A is a quick way to get brand resources, but M&A is not directly related to increasing sales. In addition, the bottom line of L'Oreal's M&A is not the price of the transaction, but the "actual and potential brand value."

L'Oréal is looking for the next chance to step in with new funds. In the construction of the brand pyramid, any valuable local brand may become a new channel for L'Oreal to enter.

Big deal "try"

Despite sufficient funds, L'Oréal's merger and acquisition strategy is not stormy.

The L'Oreal Group's annual report stated that in 2004 the company’s sales growth in the Chinese market doubled and its annual sales revenue was about 3 billion yuan. Among them, the acquisition of the two brands of Yuexi and Xiaoneng played an important role in the growth of the Chinese market.

"If there are no accidents, we will have no more brands to launch this year. Our key task is how to integrate the two major local brands, Xiao Lin and Yue Sai."

Gaipaul said that currently 14 brands of L'Oréal Group have entered China, and he is "very satisfied" with the head office on the product line.

However, from the four years of the little nurse's unbearable love to Yue Xia's half-year lightning hand, what really made Gaipaul lamented was that L'Oreal experienced a painful "self-education process."

For L'Oréal, the acquisition of nurses at the end of 2003 was actually the first step in M&A strategy. The acquisition of Yuexi in January 2004 was a comprehensive test of L'Oreal's bulk M&A deal.

At that time, P & G was the biggest opponent in the competition. In the crucial moment of contending with P & G for Yue-Sai, Gaipaul went through a severe test of "taking a shot or continuing to wait and see" with the head of the headquarters.

In fact, when the market situation pushed the issue to the bottom line of decision-making, L'Oréal headquarters in France quickly made a decision, alleging that Yue-Sai’s annual sales were about 2 times the price of the product. For the specific price of the transaction, L'Oréal has been strictly confidential.

It is reported that Yuexi was founded in 1992 by the Chinese-American Huan Yuxi. In 2003, sales revenue reached 38 million euros. According to this calculation, L'Oreal has paid more than 76 million euros.

People in the industry believe that if the acquisition of the nurse is a strategic acquisition after an in-depth investigation and study, and in hand Yuexi is a "defensive" acquisition of L'Oreal based on long-term strategy.

Various sources also indicated that L'Oreal appeared to be “somewhat hasty” in the acquisition of Yuexi and did not make sufficient preparations as it did for the acquisition of a nurse. However, this does not affect the positive significance of the acquisition of Yuexi. This kind of rapid buying has indeed great risks in management, but it also tests L'Oreal’s investment management capabilities.

From the analysis of the entire cosmetics industry, in recent years, P & G has made greater efforts in the field of daily chemical to tilt to the cosmetics field, which undoubtedly gave L'Oreal a huge challenge. The annual sales of Olay 2.5 billion yuan is a good proof.

The biggest weakness of Procter & Gamble today is the thinness of its product line. If the acquisition of Yuexi succeeds, P&G's product line in the cosmetics field will be further improved, which will undoubtedly pose a serious threat to L'Oréal.

Paul Paul believes that the key to the acquisition of a new brand for L'Oréal is whether it can expand L'Oreal's brand line and whether it is in line with the company's overall development strategy. In the pyramidal group brand strategy, the joining of nurses will undoubtedly help L'Oréal enter the vast mass market quickly. On the other hand, it also strengthens L'Oreal's relatively thin and deep distribution channels.