Maybelline Background and Challenges Ahead
In 1913, pharmacist Thomas L. Williams invented a product to help his sister, Mabel, safely enhance her looks. Williams combined carbon dust and Vaseline, creating the first mascara. The mascara worked so well that Mabel got her man, and Thomas got a successful new business. He named the company Maybelline, after his sister and the key ingredient. Maybelline promised its customers the finest makeup sensibly priced. By 1996, Maybelline was the number-three brand in the U.S. mass cosmetic market, behind Revlon and Cover Girl.
In the mid-1990s, L’Oreal, a Paris-based health and beauty company, was a dominant player in the worldwide cosmetics industry, with $8.2 billion in annual sales. L’Oreal sold products in the consumer mass-market segment and also in the luxury and professional product segments. L’Oreal owned several subsidiaries, including the high-end Lancome brand. L’Oreal’s consumer products division stood just behind Maybelline as the fourth-ranked player in U.S. mass cosmetics. L’Oreal management was looking to compliment the company’s distinctly upscale.
The company had French image with a more accessible American brand, yet it was also looking for a brand that had the potential for significant global expansion. In December 1995, L’Oreal purchased Maybelline. As of 2001, L’Oreal products were sold in 150 countries with total sales of $13.8 billion. Maybelline continued to grow after the acquisition. U.S. mass market dollar share grew from 17 percent in 1996 to almost 19 percent ($700 million) in 2000. L’Oreal parentage fuelled Maybelline efforts toward international expansion. As of 2001, the brand was being distributed in 90 countries with sales of over $1 billion worldwide. To reflect the importance of developing Maybelline as a global brand, the corporate offices were moved from Memphis, Tennessee, to New York City (Ono 2005).
1. Maybelline Market Environment and Key Issues
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Employing 1,800 employees and $355 million in revenues, Maybelline has been third-leading United States makeup brand. The company owns a production and distribution centre in Little Rock, Arkansas with its headquarters and research laboratories in Memphis, Tennessee. The company had a little presence in the global market and its activities remained concentrated within the United States, and 87 percent of its revenue till the year 1994 earned from the United States market. Its popular brands included Great Lash (mascara introduced in 1972), Moisture Whip (a lipstick introduced in 1982), and Shades of You, which is a cosmetic line introduced in 1992. In the United States, selling and retailing of Maybelline was primarily through mass market discounted stores, drug stores, cosmetic specialty stores, and super markets. According to many watchers and industry analysts, Maybelline, at the time of acquisition, lost its focus over the market. Two years before acquisition, the company entered the market of lucrative anti-aging with its Revitalizing brand. Its key competitor Revlon quickly reacted with well capitalized and an aggressive campaign for its age-defying product, overwhelmingly and negated Maybelline’s performing Revitalizing. Another sign of its poor performance was the fact that Maybelline lost its focus and market share when brand managers determined to drop for some time one of the prominent Maybelline’s famous taglines, which said “Maybe it’s Maybelline. Maybe she is born with it.” The senior vice president of marketing, Ketan Patel, summarized “the brand had a sleepy image, almost a stale brand and when customers in focus groups recalled said, “Maybelline? At the same time, customers had the image of a Great Lash or mascara company and not as a full cosmetic house (Sloan 1996). Revlon and L’Oreal were dominant players in the market with their famous brands at that time. The image that Maybelline could not perceive was “Revlon was sexy and chic; L’Oreal and Revlon were girls that I adore, and Maybelline was something that my mother wore. An old fashioned, mid western cosmetics brand appeared an unlikely suitable for L’Oreal to fix its hopes of attaining the top beauty company in the United States. However, L’Oreal was confident that it could perform a better job of continuing the brand than Maybelline was doing. Senior managers of Maybelline were confident that with company’s technology and expertise, it would be possible to improve its brand image, and its share of the United States sales. The brand being an American corresponded with this idea that girls are well made up in the U.S., and thus, this concept of perfection is a message from America. This caused a significant appeal to younger generation all over the world. In a short time Maybelline became a really powerful entry into the less affluent customers, and in turn younger generation as the customers felt that Maybelline gave them a much more than a brand that could be sold internationally immediately (Jones 2005).
Maybelline moved its headquartering to L’Oreal corporate office in New York City, where this new subsidiary could get recognition from a larger pool of cosmetic experts. Two of its prime sub- brands Revitalizing and Shades of You subsequently dropped. The advertising pattern for the remaining brands went through a thorough overhauling, as L’Oreal invested advertisement spending for Maybelline to $70 million per annum, and the Maybelline tagline was brought back. The company modernised its advertisement by adding an urban flair, with Christy in lifestyle situations. The company introduced technologically advanced beauty products like Great Wear makeup and Express Dry Nail Enamel. The company also launched a radical new makeup collection, which had bright colours such as lime green and vibrant citrus yellow, named as Miami Chill, a largest season colour collection of Maybelline in ten years. Maybelline decided to take its first colour collection to South Beach in Miami which is the “hottest” destination for fashion women and cool people. This decision brought an unusual instant success for the company as the sales were phenomenal. Miami Chill was significant for two key reasons. First, for customers, it was “Wow, this is from Maybelline” and second for retailers a signal that company was improving. The key players in beauty sector also noticed these moves as a signal of L’Oreal determination to become a leading player in the United States market. For L’Oreal, Maybelline success added the extra market opportunities to its wide range of products. From the year 1996 to 2005, sales of Maybelline products outside the United States increased by 93 percent. As the company grew its international presence expanded; thus, becoming L’Oreal passport to conquer new emerging markets. In 2005, Maybelline was rebranded as “Maybelline New York” a name which it had carried internationally over the last several years (Morais 2008).
2. SWOT Analysis of Maybelline
Maybelline has a powerful presence in the United States, France, China and most of the European fashionable countries supported by world famous L’Oreal. The cosmetic industry has been traditionally a fast paced business where new products need introduction several times a year. For maintaining its competitive edge, Maybelline is consistent in developing innovative products, in terms of positioning, technology, and packaging. Maybelline emphasizes not only on beauty but also on health and its product development efforts focus on formulas that include ingredients, which are not only for good looking but beneficial for the skin. Its consistent history of product innovation focus on colour and its dedication to advertisement spending contribute to its success. As of 2002, Maybelline Great Lash Mascara ruled the market, anchoring a lead in eye cosmetics and continuously innovated in mascaras; such as, the launch of Full N’ Soft in the year 1999 captured 6.8 percent share of mascara category within two years (Aaker 2004).
Consumer Perceived Value: Consumers are price conscious and not willing to pay the prices that are usually higher than standard substitutes. This may be either due to economic disability or customers do not perceive the value as confusion leads to them the actuality of Maybelline products. Manufacturing cost is a prime obstacle in maintenance of standards while importing raw materials from different countries. Moreover, the demographic sector of women and younger generation does not concern regarding the ingredients, long term affect and quality and, hence targeting and persuading them through promotional medium is a crucial task.
Despite a history of success, the company continued struggle in a few areas. Lip products represented the largest mass cosmetics category, accounting for 24 percent of dollar sales and 27 percent of unit sales in 2008. Yet lip products were only 14 percent of Maybelline’s business, suggesting that there was room for further growth. Consequently, the lip category had been a recent focus area for Maybelline. Maybelline was able to identify an opportunity for growth within the teenage female market: this group accounted for 33 percent of the volume in the lip category, and more than 76 percent used lip gloss. Lip products were also crucial entry point to the cosmetic category for young girls. Maybelline’s response to these phenomena was the launch of Wet Shine Lip Colour, an innovative product that produced a wet, glossy look. Wet Shine brought new life into the category and helped increase Maybelline’s dollar share from 11.2 to 13.7 percent in just six months. The size and growth profile of this segment made it a strategically significant growth target for Maybelline (James 2004).
The company faces intensive competition from its key rivals such as Cover Girl owned by P&G, Revlon, and Johnson and Johnson. Further, increasing demand of organic products poses a key challenge to company’s growth, and consumers’ awareness towards testing of products banned by the United States and the United Kingdom is a serious threat to the company in its research and development activities.
3. PESTEL Analysis of Maybelline
Federal Government laws influence almost every aspect of business life in cosmetic industry because the beauty products directly or indirectly relate to human’s health. The government imposes strict regulations on advertisements and closely governs them for modifications of creative approach so that advertisement does not depict nudity and accelerate the culture of sex. Laws concerning advertisements restrict Maybelline the amount spent on advertising, the advertising of those products that are not eco-friendly, comparative advertising, and use of certain types of visuals affects. Basic raw materials necessary in organic cosmetics such as cocoa butter, Jojoba, Olive oil, aloe Vera are imported from many countries like Mexico, Africa, India, Peru and Malaysia. Political regulations in the exporting and importing countries can affect the availability of these raw materials. For instance, political disturbance in Afghanistan can influence the import of rose oil (Tomlinson 2002).
In general, the UK and the U.S. cosmetics industry remained stagnant with $6.7 billion in 2009 because of financial crisis. In the United Kingdom, growth in Maybelline organic and natural cosmetics market slowed to nine percent, whereas in the United States growth rate was only 2.5 %. In the United Kingdom, in organic cosmetics its sales estimated to 0.4% share of total cosmetics sales in 2010. However, in coming years, massive growth predict in organic cosmetics with ten percent of the United States market. Sales expect to increase by 6.2 billion US dollars in Europe and 5.7 billion US dollars in the United States in the next six years (L’oreal 2012).
Soil awareness shows that these days people inclination towards organic products is consonantly increasing. Although Maybelline with its research and development is able to achieve partial success in this field, but there is still a long way to go. Maybelline has successful tried some of the Indian herbs and plantations from India and their results have proved overwhelming. Half of the younger generation asserts that natural cosmetics are better for skincare being free from chemicals while similar ratio of adult and younger generation regards these cosmetics as environment friendly inspiring them to use organic cosmetics. However, most of people do not possess sufficient knowledge regarding credibility of the ingredients and often regard organic cosmetics as overpriced that may discourage them towards the use of natural cosmetics. In the United States, in 2010 the reports of Data Monitor stated that 44% of respondents did not agree regarding the benefits of organic cosmetics as compared to synthetic cosmetics.
Innovation in organic cosmetics raises curiosity of health safety for the consumers as well as for Maybelline to innovate constantly new products that does affect customers’ health by using latest technological methods. Usage of cosmeceuticals in which personal care products are reinforced with functional ingredients such as aromatherapy or the addition of enzymes and natural proteins have been introduced by Maybelline. Thus, not only product composition but technology is also performing a vital role in manufacture and marketing of the cosmetics.
Organic cosmetics attract consumers for its environmental friendly ingredients. COSMOS and many other standards are encouraging green environment and discouraging the test of cosmetics on animals. These agencies have published a list of protected species of plants, addressing the use of eco-friendly chemistry in chemical processes. The animal testing has been banned both by the U.S. and the UK. A considerable emphasis is put on deforestation while sourcing the raw materials (Brookman 1995).
At present, there are no legal restrictions concerning organics in the UK and the U.S. COSMOS incorporated in 2009 identifies guidelines for use of organic cosmetics, which cover origin and processing of ingredients, manufacturing, labelling, and environmental claims. However, organic cosmetics should adhere to the EU regulation and standards, which Maybelline abides. The company follows the European directive 76/768/EEC, REACH that mentions the certain chemicals not to be used in cosmetics (L’Oreal 2012).
L’Oreal strategic decision to acquire Maybelline so as to help reach the finest segment of the beauty market aimed to target much more price conscious customers and improve its position in other countries. Although L’Oreal knew that Maybelline needed refocus, they recognised that, in the long term, Maybelline would become a strategic asset to the company. Some of the prime issues, which Maybelline encountered, were customer relations with the company, lack of product focus, and finding methods to compete with other key competitors. As its vice president of marketing, Ketan Patel observed, “customers could not define what Maybelline was.” For achieving quick results L’Oreal shifted Maybelline’s offices to New York in order to join L’Oreal team forces and share research resources with other L’Oreal brands. This movement enabled the company to share marketing, technology, and resources, which L’Oreal wanted to develop in this company with differentiated product lines at affordable, luxury, and moderate price line. The Maybelline takeover met all demographic of the customers seeking luxury products within their capacity, but to target those customers Maybelline needed a strong mission, vision and defined objectives. For revitalising the brand, the company focused the ways to connect with customers over time. They developed a colour collection theme, which changed with seasons, and initiated customers to be loyal to Maybelline. Besides, the company brought back their original tagline theme. Maybelline was successful in positioning itself in the L’Oreal brand line because it appealed to a vast market as there was something new for everyone and was accessible in several outlets in many countries.