Price Cuts Hit Kiehl's Luxury Image in Europe

When Ilse Morgan lived in New York, she often bought cosmetics from Kiehl’s, a 161-year-old pharmacy in the East Village that has grown into a global skin-care brand. Since moving to Amsterdam a decade ago, the 42-year-old advertising manager has been able to find Kiehl’s products but rarely buys them. Local prices, she says, are just too far above what she paid in New York. One staple, the 8.4-fluid-ounce bottle of Cucumber Herbal Alcohol-Free Toner, for instance, sells for €18 ($23.70) on the Continent; it costs a third less in the U.S. “If it was the same, then I would happily make purchases here,” says Morgan. “They lose my business with the pricing.”

Kiehl’s is considered an affordable indulgence in its home country. But French beauty conglomerate L’Oréal, which bought the quirky U.S. brand in 2000, has positioned it as a luxury product in Europe. That worked fine when the economy was booming and consumers outside the U.S. willingly paid extra for a hip American import, but the economic crisis has hurt Kiehl’s. To boost growth, L’Oréal has taken a tack luxury brands usually avoid: price-cutting.