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 including Giorgio Armani, Ralph Lauren, YSL and Diesel. 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 more recent of these were the purchase of the YSL Beauté portfolio in 2008, Essie in 2011 and Urban Decay a year later.
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Adbrands Weekly Update 15th Feb 2018: L'Oreal reported solid performance for last year, though currencies eroded some of the beauty giant's numbers. On an organic basis, excluding currencies and M&A activity, revenues were up almost 5% to €26.0bn; however, the reported increase was under 1%, reflecting currency depreciation and the sale of Body Shop to Brazil's Natura Cosmeticos. Star performers were the luxury division - up over 10% to almost €8.5bn - and to a lesser extent active cosmetics such as Vichy, where sales topped €2bn for the first time. That offset much weaker growth in the main consumer beauty business, and flat numbers from professional products. Despite a price tag of €1bn on the sale of Body Shop, that disposal left a €250m dent in the group's bottom line. Reported net profit rose by 15% to €3.6bn, while net profit from continuing operations only - excluding Body Shop - was up by 24% to over €3.8bn. The big question at L'Oreal's investor conference was what would happen in March, when the multi-year pact between L'Oreal's two biggest shareholders - Nestlé and the founding Bettencourt family - is due to expire. Will L'Oreal buy out Nestlé's €25bn stake? Or will Nestlé make a bid for the Bettencourt shares? "It starts from Vevey," said CEO Jean-Paul Agon, referring to the town where the Swiss group has its HQ. “If Nestlé one day wants to sell, we are ready." A few days later, L'Oreal got its answer. Nestlé said today that the status quo will continue, for the time being at least. It declined to extend the shareholders pact, in order to maintain all available options, but "We do not intend to increase our stake in L'Oreal and are committed to maintaining our constructive relationship with the Bettencourt family."
Adbrands Weekly Update 28th Sep 2017: Liliane Bettencourt, daughter of the founder of L'Oreal, and its biggest individual shareholder, has died at the age of 94. She had been unwell for several years, and the onset of a form of dementia gave rise to a series of legal battles after 2007 with her daughter and heir Francoise Bettencourt Meyers. Her demise raises some questions about the future of the group. Mrs Meyers now succeeds her mother as the biggest shareholder in L'Oreal, and also as the world's wealthiest woman. The family has a combined stake of just over 33%. The second largest shareholder is Swiss food giant Nestle, now with 23%. Several years ago, Nestle signed an agreement not to make any changes to its holding until at least six months after Bettencourt's demise. The question now is whether Nestle will choose to increase its stake, possibly with a partial or complete buyout of the founding family; or will decide to divest the shares altogether. Nestle CEO Mark Schneider sought to calm speculation this week, telling delegates at an investor conference that the group's attitude towards the shareholding has not changed, at least for the time being.
Adbrands Weekly Update 15th Jun 2017: Further to L'Oreal's earlier announcement that it was considering the sale of natural cosmetics retailer The Body Shop, it has agreed to open exclusive negotiations with Natura Cosmeticos of Brazil. Price tag is expected to be around €1bn. Natura is Brazil's biggest personal care company, outselling P&G, Unilever and others in its home country. Like the Body Shop it prides itself on using only natural ingredients, and conducts no animal testing. That chain's international network would provide an invaluable springboard for global expansion.
Adbrands Weekly Update 27th Apr 2017: L'Oreal promoted Nicolas Hieronimus to a newly created position as deputy CEO, putting him in pole position to replace current CEO Jean-Paul Agon in due course. Hieronimus has been president of "selective divisions" for the past year, with responsibility for all group units except mainstream consumer products. In his new role he adds oversight of this division too.
Adbrands Weekly Update 16th Feb 2017: L'Oreal's performance slowed a little in 2016 as a result of currencies, weak growth in professional products and a flat performance at The Body Shop. As had been anticipated the group confirmed it is seeking a buyer for that business. However, L'Oreal's luxury division remained strong, with revenues up an impressive 7% year-on-year on a like-for-like basis, compared to 4% at the main consumer products division. Combined revenues rose 2% (or almost 5% on a like for like basis) to €25.8bn. Net income was dented by previously reported impairments at the Clarisonic skincare devices business, slipping 6% to €3.1bn.
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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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