With Its R&D Flags Planted In Subcontinent, French Cosmetics Giant L’Oreal Hopes To Learn How To Target Indian Consumer

Add to that the wide differences in skin pigmentation among the population and hair so ideal that it’s literally a commodity and what you have is a sector that requires a great deal of country-specific research in a beauty and wellness market that is rapidly expanding, thanks to the nation's growing middle class.

Which is why global beauty giant L'Oreal (EPA:OR) of Clichy, France, has just planted two flags in the Subcontinent: a product development center in Mumbai to sketch out India-specific beauty products and a research center in Bangalore, partly to delve deeply into the secrets of plants used in Ayurveda, the Hindu system of traditional medicine that may offer leads to improved cosmetics. The company will invest €140 million ($184.6 million) through 2016 setting up the project.  

“With one of the highest growths of the Group in Asia Pacific, India is a key contributor to L’Oréal’s objective of reaching one billion new consumers,” said Jean-Paul Agon, chairman and CEO of L’Oréal in a written statement Thursday inaugurating the 5,000-square-meter product development facility in Mumbai, the country’s financial center.

Meanwhile, 620 miles to the southeast, the company is setting up a 2,000-square-meter research facility in the Whitefield suburb of balmy Bangalore, which L’Oreal says is “favorable” for bioinformatics – the research into the storing and analyzing of biological data – and phytochemistry, or the study of the chemicals derived from plants. The Bangalore facility is expected to be opened in April.

L’Oreal India markets under the L’Oreal, Garnier and Maybelline brands. It also sells luxury cosmetics under its Lancôme label. The French company has had a presence in India since 1994.

Mohamed Kanji, director of research & innovation for L’Oréal India, estimated that the company generated $29.3 million in annual sales last year, according to India’s Financial Chronicle; the final figures are not out yet. L’Oreal hopes to growth its annual sales in India to $128 million by 2020, targeting about 150 million customers.

About 100 specialists, including chemists, physicists, biotechnologists and biologists will be hired in the expansion. L’Oreal currently has similar overseas facilities in Europe, the US, China, Japan and Brazil.

The Federation of Indian Chambers of Commerce and Industry in New Delhi and Delaware-based PricewaterhouseCoopers LLP estimated late last year the Indian beauty and wellness market is growing 20 percent annually to hit $16 billion by the end of next year, with the fastest growth in color cosmetics and fragrances.

With that growth, interest in this segment of the Indian market by big transnational players in the market is growing right along with it.

Chanel SA, for example, created Bombay Express de Chanel, a limited edition cosmetics line for Karl Lagerfeld’s fall collection last year, inspired by the embellished, colorful saris popular with South Asian women.  

Avon Products, Inc. (NYSE:AVP) announced in August it was adding over 300 items to its merchandise offerings through its wholly owned Indian subsidiary. New items include color cosmetics and skin care products.

“By 2015, we would like to cover around 93 percent of the population across the country,” Avon India Managing Director, Ujjwal Sankar Mukhopadhyay, told the Press Trust of India.

Avon currently has a manufacturing facility in Dehradun, in northern Uttarakhand state, which makes 85 percent of the products Avon sells in the country.