The cosmetics market has always proven resilient in times of crisis. As L’Oréal’s founder, Eugène Schueller, so philosophically put it, “Successes and failures are always fleeting.”
The young chemist and entrepreneur launched the company in 1909 with hair dyes that he developed, produced and sold to hairstylists in Paris. His first hair dye formula, l’Auréale, used a blend of harmless chemical compounds, which was groundbreaking at the time. Innovative, determined and ambitious, Schueller then set up a hair colouring school on Rue du Louvre in Paris, convincing Parisian hairstylists to use his dyes. He soon introduced representatives to sell his products throughout France, establishing a close relationship with hairstylists, which was an important element of his success.
It’s a far cry from Schueller’s kitchen in 1909 to L’Oréal’s operation today, which includes 42 plants on all continents, distribution in 130 countries, 67,500 employees and 18 research centres. It seems that Schueller had a vision, but when he started out, peddling his product on the streets of Paris, could he ever have imagined that L’Oréal would become so dominant globally?
Celebrating its centenary this year, the company owns more than 15 per cent of the world beauty market, with brands such as the Body Shop, Lancôme, Redken, Kérastase, Shu Uemura, Garnier, Maybelline, Biotherm and Kiehl’s, along with fragrances such as Giorgio Armani, Ralph Lauren and Diesel, coming under the umbrella of the L’Oréal Group.
As a beauty company L’Oréal’s aspiration for the consumer is simple: to make the world a more beautiful place. L’Oréal believes that every woman and man has the right to be beautiful every day. That might seem a little optimistic and misty-eyed, however, L’Oréal is committed to its ongoing quest for innovation and quality, spending 3.3 per cent of total turnover on research and development – the largest percentage spent on research and development in the beauty industry – and employing more than 3200 researchers around the world.
In 2008 L’Oréal registered a record 628 new patents, which is an impressive testament to the company’s ability to adapt its business model with realism so it continues to flourish despite the global recession.
“Over the past 20 years, we have been fortunate to enjoy steady growth to the point, at times, of taking it for granted. This cannot be the case. Today’s adversity encourages us to demonstrate qualities that form the core of L’Oréal’s culture: staying power, inventiveness and a healthy dose of humility,” advises L’Oréal’s chairman, Sir Lindsay Owen-Jones.
L’Oréal’s close proximity to all distribution channels and its diverse product range across all price points will see the company continue to grow, certainly helped by its strategy of diversity.
The company is refreshingly up-front about its current trading strategies. Its focus is to avoid fragmentation and merge smaller brands into larger, more successful ones. With fewer launches planned, L’Oréal’s aim is to target a wider consumer base, speed up its entry into untapped markets and set up subsidiaries. You can see from the recent launch of the innovative Garnier Caffeine Eye Roll-On, which retails for less than $20, and the acquisition of haute couture brand YSL Beauté that the strategy is in place. Schueller would be proud.
It makes sense to ensure that newly acquired brands complement brands already owned by the group, based not only on turnover but also a consideration of what will add a new dimension to the existing brand portfolio. L’Oréal’s acquisition of YSL Beauté, the embodiment of French luxury, is very much a strategic one. “It has considerable international influence and is the perfect complement to our current brands, giving our luxury division a unique aura and dimension,” says L’Oréal’s CEO, Jean-Paul Agon.
Tapping into contemporary popular culture with stars that are easily identifiable in the global market, the faces of L’Oréal are always big names: Beyoncé, Penélope Cruz, Eva Longoria Parker, Patrick Dempsey, Jane Fonda and newly signed Slumdog Millionaire beauty Freida Pinto.
At the same time, L’Oréal focuses on creating global brands with a local approach and consumers have come to expect such innovation from this global French company. From colouring the thick, black hair of Mexican women to preventing African hair from breaking, giving Japanese women a porcelain complexion, taming European eyelashes and enhancing the lip colour of women from Paihia to Prahran, L’Oréal has every corner of the market covered.
Beauty habits are influenced not only by customs and culture but also living conditions. “Individuals are inextricably associated with their geographic and cultural environment; this is the whole basis of geocosmetics,” says L’Oréal’s director of international product evaluation, Fabrice Aghassian. “This relatively recent concept has developed along with globalisation and is now an essential tool in the markets that are still underdeveloped and little known, where it’s easy to make a misjudgment. We work with psychosociologists and ethnologists to observe consumers from a totally new angle,” Aghassian explains.
Through this constant research many facts are uncovered; for example, Chinese women remove their lipstick before eating for fear of swallowing the pigments, and deodorant sprays are not popular with Japanese women because the noise they make gives away how often they are used.
L’Oréal Research has been examining hair types since the 1980s and it seems the traditional classification of hair according to ethnic group – Caucasian, Asian and African – is now obsolete.
So, beyond the obvious differences, does hair behave differently in terms of growth rate and density? Working on this in 23 countries, L’Oréal has discovered there are considerable variations. African hair, for example, is the thinnest; Chinese, Korean and Japanese hair grows the fastest, and the record for thickness is held by European, Brazilian, Australian and Lebanese hair. As these are important factors when it comes to colouring, L’Oréal can vary the amount of product in the bottle according to the particular markets around the world.
New product developments are constant and local in nature. Knowing that some women in Brazil were not rinsing conditioner out after shampooing – in an attempt to weigh down their thick, curly hair – led to the development of L’Oréal Paris Elvive Liss Extreme, an anti-frizz range. Research teams in South Africa discovered the men were using dishwashing liquid to keep their hair shiny and control oil, which led to new product ranges for the local market.
BEAUTY IN DIVERSITY
The approach to skin colour has also changed significantly and is no longer confined to a simplistic geographical classification. Sixty-three shades divided into six groups have been identified worldwide. Using this knowledge L’Oréal offers a wide range of foundations to cater more fully for all skin colours.
Uneven pigmentation (particularly in Asian women), darker skin colours, uneven skin tone and scars are other important considerations. In the Asia-Pacific region L’Oréal identified a consumer priority for products with sun protection, formulating its UV Perfect SPF 50 especially for that market.
Research is also looking at defining the different types of eyelashes, eyelids and lips, which is essential for developing formulas tailored to specific needs. The most unexpected discovery has been the irregularity of eyelashes, which has contributed to the success, particularly in Asia, of the launch of Lancôme’s Virtuôse mascara, which gives the eyelashes a curved shape.
The global drum of being committed to sustainable development beats loudly at L’Oréal, where they take that responsibility seriously and feel they must lead by example. Since 2005 the company has reduced water use per finished product by more than 13 per cent and CO2 emissions by 11.5 per cent. L’Oréal’s current aim is to halve its greenhouse gas emissions, water use and wastewater by 2015.
Though there is no manufacturing in New Zealand, L’Oréal New Zealand applied a global principle at a local level and has reduced paper usage by 40 per cent (by setting photocopiers to double-sided) and waste by 60 per cent (by replacing individual office rubbish bins with smaller bins).
GROWTH AND PHILANTHROPY
L’Oréal’s first female managing director, Frances Stead (L’Oréal New Zealand) is hands-on, tenacious and driven. Her competitive edge translates to the equestrian field, another of her passions. Her office off the reception area is that of a busy executive. Family photos, industry awards and a plaque signifying more than 20 years’ service to L’Oréal adorn the walls.
“Beauty has become more holistic to encompass wellbeing, inner beauty and self-confidence. The beauty market remains buoyant. The world will always need beauty; it is universal and a fundamental human aspiration,” Stead says.
“With new markets emerging in men’s beauty and with baby boomers ageing gracefully, we will continue to expand into these new sectors to attract new customers,” Stead adds. “L’Oréal’s solid financial situation, limited debt and strong credit will keep us in good shape.”
So, what is the secret behind the company’s success, both locally and internationally? “We are loyal to our origins, being focused on beauty products, which accounts for 98 per cent of our turnover and enables us to maintain our core values of innovation, excellence and attentiveness to individual beauty needs,” Stead says.
“L’Oréal also attracts diversity in nationalities. With just fewer than 200 employees in the L’Oréal New Zealand office we have around 30 nationalities.”
With L’Oréal’s 100th birthday comes the worldwide launch of 100 Citizen Projects. L’Oréal New Zealand has partnered with the New Zealand Family and Foster Care Federation to provide workshops for vulnerable children in foster care that empower them to make decisions about their future.