Two weeks ago, the East African subsidiary of French multi-national L’Oréal announced it had acquired Kenyan firm Interconsumer Products. How we made it in Africa’s Dinfin Mulupi caught up with L’Oréal East Africa managing director Patricia Ithau to discuss the acquisition, L’Oreal’s strategy, competition in the beauty market, and why Africa is a critical market for the beauty giant.[hidepost=9][/hidepost]
How is the business performing in East Africa since the 2011 launch of the L’Oréal regional office in Kenya?
Our brands were previously available in the market through agents and distributors who were actually export customers of L’Oréal in South Africa. These distributors only supplied key cities that were convenient for them and they did not have an obligation to make sure products were available everywhere, all the time.
Since opening the subsidiary in Kenya we have predominantly focused on ensuring availability of products like Dark and Lovely across Kenya. We now have a better distribution structure and customers can access products consistently. As the number one beauty business globally, L’Oréal’s ambition is to access one billion consumers over the next five to ten years. The next two billion consumers in the world are not going to come from L’Oréal’s traditional strongholds. They are going to come from the emerging markets of Africa, South East Asia, Asia and Latin America.
Africa is a big and fundamental market for L’Oréal. In the last four years, Egypt, Nigeria and East Africa have come on line to join South Africa, Morocco and Ghana where L’Oréal previously had a presence. It is critical for us to have a presence where it matters. Countries served by the East Africa subsidiary – like Ethiopia, Tanzania – are great opportunities for us and are doing well. We are developing Uganda and we expect it to grow.
You recently acquired the health and beauty business of Kenyan company Interconsumer Products. How does this acquisition fit in with L’Oréal East Africa’s overall goal?
Our strength lies in hair due to the popularity of Dark and Lovely. We are trying to extend to body products. The strength of Interconsumer Products Limited is in its body products with the brand Nice & Lovely. The acquisition offers us access not just from a portfolio point of view, but also from a consumer point of view. We target all middle class and emerging consumers. Unfortunately, looking at this market and the price positioning of many of our brands, it is clear that we must have a strategy of pricing that meets consumers at every single level. Nice & Lovely offers us that; they have a small petroleum jelly pack which retails at about 25 shillings (US$0.30).
The story of Paul Kinuthia, the founder of Interconsumer Products, is also quite similar to that of L’Oréal founder, French chemist Eugene Schueller. They both started by mixing things and selling it personally to people and later building their businesses until they became big organisations. These are two companies founded by the same philosophy. We value entrepreneurship, innovation and great passion at L’Oréal.
Describe the challenges L’Oréal East Africa faces.
Our biggest challenge at the moment will be solved by the acquisition. My number one priority is getting our distribution right across East Africa. There is no point in having the most brilliant marketing effort, yet when people go to the shop they can’t find our products. The right distribution will ensure that our products arrive at an acceptable price to the consumer. The other challenge we face, especially with Dark and Lovely, is parallel importers. These people go to South Africa, or wherever, and buy products; maybe they pay duty or maybe they don’t. They offer products at cheaper prices and this creates an unlevel playing field. It is difficult to understand how other people can bring in cheaper products yet we are the trademark owner and the official manufacturer and importers. Anything coming into Kenya under any of our brand names should only be brought in by L’Oréal East Africa.
We are seeing a lot of international beauty brands entering the East African market. What is driving this?
The middle class is growing and consumerism is following right behind. Secondly, the internet, which we easily access via our mobile phones, allows everybody access to information. This means we no longer have to educate people about products. Advertising in the 1990s focused on problems and solutions. Today the focus is on why a customer should choose a particular product or brand.
Is the entry of other foreign brands and the growth of local players a threat to L’Oréal?
The day you start to compete against competition, you are not really a marketer. You should be in the business to meet consumer needs. The more choice the better; let the challenge be on which is the better brand in terms of meeting consumer needs.
Describe the opportunities and trends in the beauty industry?
The potential is huge. I spend time observing how people behave in the washrooms. I am fascinated that every single woman, whether an executive or cleaning lady, will come in with a compact and powder their face, line their eyebrows and apply lipstick. Every salon in Kenya offers manicures, whether it is in a shack or a five star hotel; it is just a question of price and quality. This was a luxury but now it is standard. Women are increasingly becoming more confident, are loud at home and hold higher offices. I think the next big thing is deodorants. The beauty industry can only progress.
What advice would you give to foreign brands planning to enter the East African market?
It is not as difficult as it seems. I had a fantastic experience because I have a lot of networks locally and the backup of a global brand. It is very systematic once you are clear what steps need to be made. The first step is to get a good lawyer who can help with the documentation and registration. You also need to get a good talent recruitment partner. Placing an advertisement in the newspapers will get you all the people you do not need.