Miruna Codeanu

Garnier – China divorce

In espresso on January 10, 2014 at 8:42 am

When I stumble upon contradictory things or matters that don’t apparently make sense, I either challenging people to an apparent debate or I start writing about them, in order to be able to clarify my thoughts on the matter and form an opinion. These days, two of my favorite topics have met: the Chinese market and cosmetics. You’ve probably heard of L’Oreal pulling back Garnier from the Chinese market. L’Oreal is the world’s largest cosmetics and beauty company. With more 30 brands and one subsidiary (The Body Shop), L’Oreal is a market leader in very many market segments. This equation would be reduced to: two world leader willing to make more money together. However, at a certain point, one of them says selling one its brands to its partner is not profitable. Alright, that is a decent reason to step out. However, why didn’t it work out for Garnier in China?

Garnier is a mass market cosmetics brand of L’Oréal that produces hair care and skin care products. I’ve been looking for a somewhat official positioning for Garnier. Most people would describe as “good value skincare technology”. Garnier is the typical mass market cosmetics bought by L’Oreal to rival Nivea and other such. That kind of product that leaves you with the feeling that anybody can buy. The Chinese market was one of the most promising developing markets, with many companies grounding their forecast for 2013 on the Chinese market. High quality global journalism requires investment. “China’s $25.9bn cosmetics market is the third largest in the world and is expected to grow 63 per cent for the five years to 2015, according to consumer research firm Euromonitor.” (source: The Financial Times).

Yes, the Chinese marker has a huge potential with 2.5 billion consumers. However, not any brand is for China. China’s working class is poor, poorer than the standard working class in Europe or North America. Remember the talks about sweatshops and all the scandals at Foxconn? Yes, there’s a reason behind that. It means, the most numerous market segment of the Chinese market spends less.  Which means this mass consumption market is not that big in China. However, L’Oreal is China’s no. 1 full range beauty brand and brands like Lancome, account for a bigger percentage in sales than brands like Garnier.

First of all, I’ve said it before and this is a lesson to learn for the next time we will be having this problem (African markets): any market that develops on manufacturing and workforce cand also become competition at any moment. It is not only about economic resources, do take into consideration also the development of human resources: corporate employees are becoming qualified enough to become entrepreneurs. Apart from that, China is a very particular case: its very centralized government and economic strategy rather support Chinese companies in favor of Western multinationals. Remember Apple and China and Xiamo’s debut on the market? Well, yes. China is not only a consumer, but also a competitor. That, plus the fact the Chinese government has very good PR weapons for its local businesses.

2013 was the year in which most  multinational corporations based their growth on the Chinese market. For some, it happened, for some it failed. For Garnier and Revlon, the Chinese market was a disappointment. For some markets, China is the most promising territory. Yes, luxury markets. In 2012, Blancpain, haute horlogerie watch manufacture, launched a Dragon edition of its Caruso models, in order to celebrate the Dragon year. The Chinese will hunt status indicator, European status indicator, which comes for them as something both exotic and reputable. Expensive brands and exclusive brands will triumph, the rest will be replaced with local competitors, which is somehow the other way around from the European market, where local products have another definition and are associated with another market segment, but that is a story to be told another time.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: