L'Oreal (France)

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 L'Oreal is the global #1 in cosmetics with a portfolio that contains many of the world's biggest hair and beauty products, including such brands as Garnier, Maybelline and Lancome. It also markets fragrances and cosmetics under license for other companies such as Giorgio Armani and Ralph Lauren. More than 80% of group sales are generated outside France, with operations in every major territory. Since the 1980s the group has made North America a particular focus of attention, wrong-footing domestic rivals with dynamic marketing and a series of smart launches and clever acquisitions. Among the most recent of these were the purchase of ethical beauty products retailer Body Shop in 2006 and the YSL Beauté portfolio in 2008.

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Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 6th Aug 2015: Like other Euro-denominated companies, L'Oreal enjoyed a big boost from currencies for its 2Q, with revenues up 15% on a reported basis to E6.4bn. At constant rates, the gain was under 4%, slightly below expectations. Developed markets like North America and Europe did better than had been expected, while emerging markets performed worse. Growth was led by the premium-priced luxury and active comsetics divisions. Net profit for the first half of the year grew by almost 9%.

Adbrands Weekly Update 23rd Apr 2015: L'Oreal was the latest Euro-reporting company to enjoy a big boost from exchange rates. Reported revenues for 1Q jumped 14% to E6.4bn. The increase at constant rates was less dramatic though still solid at 5%. The best performance came from the higher priced Luxury Products division, up over 20%. Highlighting the significance of exchange rates, the reported increase from North America was a whopping 25%, but only 2% on a like-for-like basis.

Adbrands Weekly Update 17th Feb 2015: A stronger final quarter delivered a satisfactory if not spectacular conclusion to L'Oreal's year. Reported revenues rose almost 2% to E22.53bn, though like-for-like growth at constant exchange rates would have been more like 4%. The best growth came from luxury products, up almost 6% reported, while active cosmetics rose over 5%. Consumer products were down slightly year-on-year, and the North America region as a whole was little better than flat. Net income soared by two-thirds to E4.91bn as a result of an exceptional gain for the sale of Galderma to Nestle. Excluding that one-off item, bottom line was up 3%.

Adbrands Weekly Update 29th Dec 2014: France's competition regulator fined a group of the world's largest packaged goods manufacturers a total of E951m for colluding to fix the prices of home and personal care products. According to the findings, the groups met regularly to swap notes and co-ordinate their commercial policies. L'Oreal was hit with the largest individual fine of E190m; Unilever is to pay E172m and Reckitt Benckiser E121m. L'Oreal and Unilever both called the fines disproportionate and said they would appeal. SC Johnson, which was the main whistleblower on the conspiracy, was forgiven any fine, while Colgate Palmolive and Henkel, both of whom assisted with the investigation, received reduced penalties. P&G and Beiersdorf also received fines.

Adbrands Weekly Update 29th May 2014: L'Oreal's global chief marketing officer Marc Speichert has resigned in order to join Google's global client & agency solutions group. Speichert has spent less than a year in the global role at L'Oreal; he was previously CMO for North America. Marie Gulin, currently VP, global integrated marketing & communications, will assume Speichert's duties in North America.


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Background

Free for all users | see full profile for current activities: L'Oreal's business was originally based on hair colourants. In 1907, French chemist Eugene Schueller developed one of the first stable hair-dyes made from safe synthetic ingredients. He set up a company to manufacture and market the product, which he named L'Aureole (French for halo), to hair salons. At the time he gave the business the cumbersome name of the Societe Francaise de Teintures Inoffensives Pour Cheveux ("The French Safe Hair Tint Company"). Within a few years, Schueller had begun to export his dyes to neighbouring Holland, Austria and Italy, then further afield. The L'Aureole name was replaced by L'Oreal because it was easier for non-French-speaking countries to pronounce. German subsidiary Haarkosmetik und Parfuemerien was formed in 1930; UK arm Golden Ltd was formed in 1932 by family friend HS Laurenson (see L'Oreal UK). The name L'Oreal gradually developed to guard against mispronunciation of the main L'Aureole product in non-French markets.

To support the business's growth, Schueller acquired soap manufacturer Monsavon and began developing additional products, including Dop, the first ready-to-use shampoo made without soap. Launched in 1934, it is still one of France's best known domestic brands, and was followed by Ambre Solaire sun-oils, launched in 1936. He was also quick to adopt advertising as a way of developing awareness of the company's brands. L'Oreal had been one of the first businesses to advertise on French radio in the 1920s, then became a major poster contractor in the 1930s. In one early promotional stunt, the company covered the front of an office with a giant sheet advertising its O'Cap hair lotion. In 1933, Schueller backed the launch of women's magazine launched the magazine Votre Beauté, and moved into cinema ads in the late 1940s and 1950s, and subsequently television.

The variety of new products continued. Oreol, for example, introduced after the end of World War II, was the first cold-wave perm and widely regarded as a revolution in hairdressing. With America already a big market for L'Oreal's products by the beginning of the 1950s, Schueller formed a separate company, Cosmair, to distribute his haircare products there from 1953 onwards. During the 1950s, Schueller transferred his shareholdings in both L'Oreal and Cosmair to family holding company Gesparal. Upon his death in 1957, deputy Francois Dalle took over management of the business. He persuaded Schueller's only daughter Liliane to float a large part of the company's stock in 1963 and used the additional resources to fund a series of acquisitions including Lancome in 1964, Laboratoires Garnier a year later, and Biotherm in 1970. Key brands launched during this period included Elnett hairspray in 1957, the first home-dye kit Recital in 1966 and Elseve shampoos in 1972. The group developed its research laboratories with the acquisition of a controlling stake in Synthelabo pharmaceuticals in 1973. 

Concerned about the growing nationalism of French politicians and their tendency to interfere in the affairs of the country's leading businesses, Dalle also persuaded Bettencourt of the need to broaden ownership of the group outside France, and negotiated a groundbreaking deal to sell a 49% stake in Gesparal to Swiss group Nestle. In 1977, L'Oreal backed the launch of publishing company Marie Claire Album. Press baron Jean Prouvost had sold his substantial publishing empire to Hachette in 1976. A year later his three daughters bought Marie Claire magazine back from Hachette, with financial backing from L'Oreal, who took a 49% stake in the business. The business went on to achieve great success under the management of eldest sister Evelyne Prouvost-Berry.

The booming 1980s saw L'Oreal greatly increase its profile, particularly in the US, with the acquisition of the Ralph Lauren and Gloria Vanderbilt cosmetics and fragrances licenses in 1984, Helena Rubinstein cosmetics (1988) and a half-share in Lanvin (1989) fashion and luxury goods. Lindsay Owen-Jones, known as "OJ" within the company, took charge of the group that year. His first task was to defend the company against a string of unpleasant allegations from a former employee who claimed to have uncovered anti-Jewish activity by Eugene Schueller and other figures close to the ownership of the company. Schueller was shown to have collaborated with Nazi groups before and during the occupation of France in WWII, while Liliane Schueller's husband Andre Bettencourt, a leading French politician as well as a director of L'Oreal, had written anti-Semitic articles for pro-Nazi periodicals. Owen-Jones fought a strong campaign to clear the company's reputation, investing in Israeli businesses and settling accusations of compliance with Arab boycotts. Meanwhile Bettencourt apologised for what he said were youthful indiscretions and promptly resigned from the group, passing his seat on the board to his Jewish son-in-law, Jean-Pierre Meyers, whose parents had died in Nazi camps during the war. 

Owen-Jones went on to apply his attention to the US, a market in which L'Oreal was at that point little more than a margin player. A key development was the purchase in 1996 of cosmetics brand Maybelline. L'Oreal quickly rejuvenated the ailing brand, re-establishing it as the country's best-selling mass-market make-up. A year later, L'Oreal strengthened its position further in North America with the purchase of Canada's Ombrelle suncream business. In 1998, it acquired America's #1 ethnic haircare business Soft Sheen Products and expanded its US operations by reintroducing the Helena Rubinstein cosmetics brand, which had been unavailable in the US since 1983. The group bolstered its portfolio in 2000 with the acquisition of ethnic cosmetics business Carson, luxury brand Kiehl's, and professional haircare range Matrix Essentials (from Bristol Myers-Squibb). It also acquired Argentinean mass-market cosmetics brand Miss Ylang. As a result of aggressive marketing, the group's hair colouring business overtook US market leader Clairol in 2000. Meanwhile, back in Europe, at the end of 1998, the group merged its pharmaceutical subsidiary Synthelabo with Elf Aquitaine's Sanofi to form Sanofi-Synthelabo, Europe's 6th biggest pharmaceutical group, and France's #2. In 1999, the company announced the European launch of shampoo L'Oreal Kids, backed by a substantial marketing spend. (The children's shampoo had been available in the US since 1997). 

Late in 2000, L'Oreal was drawn into a family squabble between the Prouvost sisters who controlled Groupe Marie Claire. Each sister had held a 17% stake in the business since 1977. One of the three, Donatienne de Montmort, attempted to sell her stake back to Hachette. The deal was blocked by the other sisters and L'Oreal, who exercised a pre-emption right. This increased L'Oreal's stake to just over 57%. As part of a refocusing of the group portfolio this stake was sold back to Marie Claire chairman Evelyne Prouvost in 2001 for $296m. The group also agreed to sell off Lanvin to the investment consortium Harmoinie. 

In late 2000 the group acquired a 35% stake in Japanese cosmetics company Shu Uemura and international rights to the company's skincare and other brands. It also acquired Scandinavian shampoo Respons from Colgate-Palmolive, as well as Brazilian cosmetics brand Colorama (from Revlon, for $72m) and specialist US dermatology range BioMedic (for $28m). 

The group's shareholder structured was revised in 2004. Nestle swapped its 49% stake in holding company Gesparal for what was then a 27% direct equity position in L'Oreal. The Bettencourt family swapped their 51% for a 28% direct shareholding, and Gesparal was dissolved. See full profile for current activities


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