How (Not) To Buy a Brand

Related entries: Consumer Market, Corporate News, General, Investment, Strategy

How to access the mass market in China may be the mythical million dollar question, and it is interesting to see how different companies try to answer it (see Brands in China. Bring or Buy?). Innovatize’s example of L’Oreal’s “Excellent China Adventure”, with the purchase of Mininurse, makes a good “how not to” case study.

In a not uncommon story, these are they key points:

    1. A decision was made to buy a local brand, Mininurse was found, and a deal was done.

    2. A gleeful announcement was made that this acquisition would open up the 2nd and 3rd tier cities through Mininurse’s distribution infrastructure…to l’Oreal’s own brands.

    3. A glum L’Oreal found that the distribution channels were anything but smooth – and were complex, multi-layered beasts, with no direct connection between the top and bottom layers.

    4. Global processes and top-down promotion meet “Chinese characteristics” and angry distributors. Owch!

    5. Adapt or attack? Attack! L’Oreal dumped the strategy and the brand and came up with a totally new one: Garnier Mininurse. “…in other words, they changed the brand, the packaging, the formula, the position, and the distribution channel…all at the same time”. Hmmm…

    6. The “hybrid brand (Garnier is international while Mininurse is rural China)” did not go down well, and no amount of promotion through modern channels helped.

    7. Post mortem…”L’Oreal China president Paolo Gasparrini…admits that their Mininurse strategy has been unsuccessful, and they plan to go back to the original channels in which Mininurse was strong”.

    8. Start again with the benefit of experience…

At least they have deep pockets and can afford to go back for another go. Others do not have that luxury. In any event, the story is a reminder that “Chinese characteristics” do actually exist in the China market (not to mention the regional consumer markets) – and that some flexibility is needed when taking them on.

What works at home, may not work in China…

See the full story here: L’Oreal’s Excellent China Adventure with their acquisition of Mininurse

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