L'Oreal also said it had gained major customers from its rivals.

CATCHING UP

Several independent hairdressers said they opted for Schwarzkopf or Wella not only because they were slightly cheaper than L'Oreal but also because the two German brands had made great strides in quality and marketing in recent years.

"The packaging (of Schwarzkopf) products is very good and the quality for me equals that of Kerastase," said Frederic Maret, 31, who used L'Oreal for 10 years and switched to Schwarzkopf when he opened Le Salon Et Vous near the Louvre in April.

He said the move to Schwarzkopf allowed him to cut his costs by 10 to 15 per cent. He also said he found Kerastase was now distributed too widely in hair salons in France, which made it lose its exclusive appeal.

L'Oreal issued its second sales warning in three months on October 31 and said it expected 2009 to be another difficult year as the global downturn hits spending on cosmetics.

In the quarter to September, it saw a steeper decline in sales to beauty salons -- 2.7 per cent – than to consumers – 0.9 per cent.

It said it would maintain its global marketing spending, sacrificing its decades-long double-digit annual earnings per share growth in order to keep up its sales growth, a move that stock analysts welcomed.

"Their marketing spending was below what it should be to hold or gain market share and they are now remedying to that," said Harold Thompson at Deutsche Bank in London.

... contd.