L’ORÉAL: EXPANSION IN CHINA
After acquiring Mininurse at the end of 2003, this new Chinese acquisition of Yue-Sai only serves to confirm our determination to step up the pace of growth in China.
- Lindsay Owen-Jones, CEO, L’Oréal1
On January 26th 2004, French cosmetics giant L’Oréal signed an agreement to acquire a famous
Chinese cosmetics brand Yue-Sai. 2 The acquisition came shortly after L’Oréal made another successful bid for Raystar Cosmetics (Shenzhen) Co. Ltd.’s skin-care brand, Mininurse, in
December 2003.3 L’Oréal was already very successful in both China’s high-end and middle-range cosmetic markets. The acquisitions of Mininurse and Yue-sai indicated that L’Oréal would focus more on the mass market and showed its determination to step up the pace of its growth in
Chinese origin brands.
The mergers between L’Oréal and those two local companies seemed to be win-win deals, but there were still many challenges waiting ahead. Firstly, the merger triggered a wave of consolidation in the Chinese cosmetics industry, with more mergers waiting to take place between local cosmetics companies and their foreign counterparts. Facing such fierce competition, how could L’Oréal keep growing its business in China? Secondly, the tasks that follow integration were tough for a company. Would the two well-known acquired brands, Yue-Sai and Mininurse, perform as well as before? If not, would they erode the high-end brand image of L’Oréal? And finally, the most important issue was that given the many ways to differentiate oneself in a submarket—such as direct acquisition, building one’s own brand or alliance with the established brands—was the way adopted by L’Oréal, ie, acquisition, the optimal strategy to realize that objective? 1
Rumsby, Mike, “Another Breakthrough for the Group in China: After Mininurse, L’Oréal Acquires Yue-Sai”, [www document] www.Loreal.com (accessed August 16th 2005).