Nov 22, 2008

Business - Q&A COO,Oriflame Cosmetics;Jesper Martinsson

Bindu D. Menon

Meera Mohanty

Recession doesn’t worry direct selling company Oriflame. For one, it helps more people come into the direct selling business and second, cosmetics sales also rise as people like to pamper themselves, says Jesper Martinsson, Chief Operating Offi cer, Oriflame Cosmetics.

With over one lakh consultants and a plan to triple the sales in the next five years, the Swedish company has set its focus on India. Martinsson tells BrandLine that the growing middle class in the country is exciting and the company is planning to reach consumers in smaller towns besides the bigger towns and cities. The North-East is already seeing a quick growth. Oriflame has to now work out a distribution model that can tackle the economics of the large expanse that’s India.

At times of economic slowdown, how is the cosmetics industry doing?

The cosmetics market is growing, but we (Oriflame) are growing six-seven times faster than the market. So, we are clearly gaining the market share

Can you put a figure to that?

No. We don’t talk about individual markets. But if we are talking about the Asia region, we are growing at over forty per cent. We are present in six markets in Asia, and India is one of the biggest and also the fastest growing markets for us.

Oriflame is also doing well, on the whole. As many other European companies, we were founded and headquartered in Sweden. We are actually the fastest growing cosmetics company in the market, and were last year too, growing globally at 26 per cent. Oriflame Europe is very well penetrated, we have a good presence in world markets and are still growing well. But we will come to a point where we cannot grow that fast and therefore, we are looking at Latin America and Asia, where we see big growth opportunities.

Is the European market saturated?

No, but it’s becoming more and more difficult to grow. Even as we are growing at a steady pace, there isn’t a growth opportunity that we see in the future in European markets. The cosmetics industry is growing 3-4 per cent and we also have quite a big sales force relative to the population. In Europe, if you take the number of consultants we have and compare that to the population, each consultant will be serving around 250 consumers. But if that figure has to come down to 100, it will become a big issue.

But the opportunities in Latin America and Asia are very, very big. There are many more markets for us to open and also to improve penetration where we are present. And India is the most important market for Oriflame in Asia, and as we all know, the market is growing fast.

Have the input costs and the feedstock, which have gone up in the last couple of months, had a bearing on your sales?

No, not at all. We haven’t noticed anything. We are in the direct sales business and are not that affected by the current crisis. People will still buy cosmetics and amongst the products we are offering is also a business opportunity for people to earn some extra money. It is almost like, it should become more attractive to people during a crisis. We have been through various crises and recessions before and have not been affected.

We have actually had our best quarter in Oriflame globally this year, a fantastic third quarter. So, we are doing well, but of course you never know. We don’t see any issues, any slowdown anywhere in the world right now. You will still need your mascara, lipstick and cream during a recession. Actually, some say consumers buy even more during such times because they like to be nice to themselves.

Are you planning to launch any new range or line of products here?

We are looking into wellness. I don’t want to get into specifics, but there will be products like supplements and nutrients. The wellness industry is the fastest growing industry in the world, as you know. Another area for which we have products is oral care — we have successfully launched this in Europe. We have received lots of request for this range from India.

Could these be sold through retail, maybe?

We don’t know how to do retail and are not interested in learning new things at the moment. We are focussed on direct sales.

We are gradually looking to introduce more and more products. We have, today by far, the largest portfolio amongst direct selling companies. We have twice the number of products as our competitor, but we are looking to broaden the portfolio. We are looking to develop special products, colours for the Indian skin type. It’s a project that our research and development team is working on.

We produce more than a hundred products. In fact, one of the first products that our founders started with 41 years ago is produced in India for all the sixty markets. It’s called Tender Care.

We have talked about the cosmetic products, but what we are even more proud of in Oriflame is the business opportunity that we offer. We have 2.6 million active sales consultants in the world leading and building their own businesses within the Oriflame framework. The way we pay our remuneration and the way the system works is something that we are proud of. I have been with Oriflame for 12 years and one of the most fun things in the job is to see people changing their lives and fulfilling their dreams. Coming back to India we feel there is a good match between the cosmetics and directs sale.

What do you think of your price points here?

I think we have a good positioning. We are not the cheapest but we maintain good quality. Quality is very important in any business and even more important in direct sales, where selling is from a friend to another. When you are selling to a friend you don’t want to fool them.

What is the investment for the coming year? What are the challenges?

We cannot share figures but we are increasing our investments in marketing in 2009. What we can say is that in the next five years we should have at least tripled our sales in India.

One important thing for us is to spread geographically. The challenge for us is to work out smarter distribution systems because our consultants can’t pay higher freight charges — those cost more than the product. That’s a key area we will be investing in.

Do you ever see yourself being a mass product?

Probably not. Not to that extent as you see some of the retail brands. On some products on the toiletries which is on the heavier price, it’s very hard for us to compete.

In colour cosmetics, I think we offer value for money. Skin care is really the heritage of Oriflame, that is how we started, it’s the most complex product and we have developed several break-through technologies.

One range that we have been very successful with in India is the whitening range. Swedish people like to be brown.

I, for example, am going on a holiday and am looking forward to sunbathing. In Sweden, we sell creams so that people can become brown and in India we sell creams to make people fairer.