L’Oreal Case Study

L’Oreal has a number of issues to consider; the approaching retirement of CEO Owen Jones, the potential takeovers of Nivea and Shu Uemura, their trouble gaining a presence in the Japanese market, and the lack of revenue in certain areas of their products offerings. There is also some loss in business for high demand products during turnover time as buyers wait for new shipments.

Problem

L’Oreal has experienced unprecedented success through global expansion into new beauty-product markets, under the direction of Owen Jones, who became a chairman in 1988. In 2006, Owen Jones plans to retire, so there is some speculation on how things may change with his successor. Currently there are a number of business maneuvers L’Oreal is considering: the friendly takeover of Japanese brand Shu Uemura, the bid for German Nivea, and the sale of their 19.5% interest in Sanofi-Synthelabo. There is also a potential takeover threat from Nestle, as they have a 26% interest in the L’Oreal; and the potential takeover threat from Beiersdorf/Tchibo Group, who have a 30% interest in Nivea, so if L’Oreal buys into Nivea they could expose themselves to a takeover attempt and start a bidding war.

L'Oreal is also struggling to break into the Japanese market, despite their success with Water Shine and Wonder Curl.

They are also loosing business in certain areas (Moscow) because their supply chain is failing to meet the demand for product.

Background

Eugene Schuller founded L’Oreal in 1907. Schuller was a chemist who started the company selling his patented hair dyes to local hairdressers in Paris. When he died in 1957, Francois Dalle took over as CEO. In 1963 L’Oreal went public. In 1973, to avoid interference from left-wind politicians, Dalle convinced the founder’s daughter, Lilaine Bettencourt, to dilute her majority stake. In a complex deal, the Swiss food-products company, Nestle, took a 49% stake in the company Gesparal, the other 51% being