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Last Updated: Monday, 2 May 2005, 22:09 GMT 23:09 UK
Hair-care firms wise up to ethnic pound
Joia Shillingford
BBC News business reporter

Inside the L'Oreal Institute for Ethnic Hair and Skin Research in Chicago
Locals like to drop in to the laboratory with hair samples
Black women in the UK spend six times more on hair-care products than white women, according to L'Oreal, the French hair and beauty products company.

This translates into a financial opportunity and explains why several hair-care companies, which already target ethnic markets in the US, are getting ready for major efforts in the UK and Europe.

L'Oreal's strength in the US market was built through acquisitions of several smaller businesses which already had a loyal black customer base.

They included Soft Sheen, bought in 1998, and Carson, bought in 2000. The two companies now make up its Softsheen-Carson division.

Rival hair-care companies Alberto Culver US and Wella Manufacturing have also bought ethnic hair-care brands.

Lab work

But L'Oreal, which had sales of 14.5bn euros (9.93bn;$18.68bn) in 2004, has gone one step further and set up a laboratory in Chicago, an area with a large black population, to study black, Asian and Hispanic hair and skin.

The Chicago laboratory - the L'Oreal Institute for Ethnic Hair & Skin Research - is headed by Dr Victoria Holloway, who is also vice president R&D for L'Oreal USA.

The L'Oreal Institute for Ethnic Hair and Skin Research building in Chicago
L'Oreal spent $11m setting up its Chicago laboratory

Herself an African American, the first thing she did when she started the laboratory in September 2003 was to try and find out what academic and medical research was already out there.

But she says there was very little - ethnic hair and skin had been under-researched.

This is despite the fact that some products for straightening black women's hair were so strong that it is not unknown for middle-aged black women to have bald patches.

Academic approach

Dr Holloway says when she goes to academic conferences now, there is a lot more interest and funding going into ethnic research.

L'Oreal spent $11m setting up the Chicago laboratory and it spends a third of its $650m research budget on advanced research, such as is carried out in Chicago. The lab conducts scientific research into ethnic hair and skin to feed back into new product development and into improving existing products.

Dr Victoria Holloway, vice president R&D for L'Oreal USA
Dr Holloway says there was little research on ethnic hair and skin

It also looks at differences in how ethnic minorities treat their hair and skin, such as frequency of shampooing.

"Local people really like the laboratory and often come in several times to bring us hair samples and participate in our research," says dermatologist Dr Holloway.

Coming soon

African Americans... yield a purchasing power of over $650bn
Market research company, ACNielsen

One of the approaches L'Oreal is taking in Europe is to build links with black hair salons, through providing seminars and training and attending black hair and beauty exhibitions.

It has also run roadshows, giving advice and makeovers to customers in ethnic areas like Shepherds Bush in London.

So-called viral (word-of-mouth) marketing is important for selling to ethnic groups because products targeted at them often get less coverage in mainstream media.

Ethnic minorities, therefore, often have to hunt out products that work for them, or rely on recommendations from friends.

ACNielsen, the US-based market research company says that: "The growing importance of ethnic segments can no longer be overlooked... African Americans account for 12.7% of the US population and yield a purchasing power of over $650bn."

Marketing Week, which is running its first Diversity Marketing Forum in June, says Britain's diverse communities - including ethnic, religious and sexual minorities - now make up a 120bn market.

Ethnic pound

But businesses in Europe often overlook ethnic markets.

Tewa Onasanya, editor of Exquisite magazine
Tewa Onasanya felt there was a gap in the market for a glamorous read

Tewa Onasanya, editor of Exquisite, a glossy magazine aimed mainly at affluent, stylish black women, says she has been surprised by the attitude of some potential advertisers.

"Because it's a mainly black publication, some advertisers are a bit reluctant to be in it. They've told us they don't think they're in our market.

"It's their loss. Our readers spend more than most on designer clothes and on looking good, and the people I know are impressed if they see a designer like Gucci supporting a black publication."

Her experience - that it can be difficult to win traditional businesses over to a new idea, despite producing an intelligent, professional magazine, shows that cracking ethnic markets isn't easy.

Buying companies with an existing customer base is one of the quickest routes to success.

Others include carrying out detailed research, hiring more ethnic minority staff (and listening to them), and bringing in people or agencies with previous experience of targeting ethnic markets.

Without specialist knowledge, the big risk is getting the tone of marketing campaigns wrong.

Employment agency Reed was, for example, forced to withdraw a TV commercial which featured a black recruitment consultant apparently mugging a white executive.

Politics of hair

So ethnic marketing is not necessarily a soft option when it comes to increasing profits.

Even hair can be political. One of the reasons black women spend so much on their hair is that those who straighten their hair using relaxers need to use a lot of products: the relaxer itself, moisturisers, hair cream, glazes or gels and so on.

In these apparently more tolerant times, choosing whether to have straight or curly hair, or plaits, may just be a lifestyle choice.

But it is noticeable that few black women in American or British professional jobs such as the law or news presenting choose to display their own naturally curly hair. So it may be that conforming to European standards of appearance is still required to get on in some professions.

If this is so, it is unlikely to be mentioned in the adverts for hair straighteners.

So there are pitfalls a plenty, but L'Oreal's experience shows the rewards are there for companies which establish a strong market position early.

Vanessa Rhodes, a UK spokeswoman for L'Oreal, says the company now has a 30% share of the market for ethnic hair-care products in Europe.

And Candace Matthews, president of its Softsheen-Carson unit, says it is the number one ethnic hair-care company in the world.

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