Prospects by Jean-Paul Agon
“Exemplarity and non-financial performance are just as important as financial performance”
Prospects
by Jean-Paul Agon
Jessica: Each year, the cosmetics market is continuing to grow steadily. In your view, which key factors made the market dynamic in 2019?
The cosmetics market was very dynamic in 2019, growing between +5.0% and +5.5% . It was driven firstly by the same fundamental economic, demographic and sociological trends seen over the last few years: globalisation, the rise of the middle and upper income classes, and the emergence of new targets, including seniors and men… More recently, growth has also been fuelled by other factors, and primarily of course by the digital revolution. Because beauty has vast potential in terms of engaging with people on the Internet. Then there is e-commerce, extending the reach of the beauty sector to far greater numbers of consumers all over the world, well beyond the possibilities of traditional retailing. Another factor is the huge appetite of younger generations for beauty products, especially in the new markets. And last but not least, the “premiumisation” of the market. More and more consumers want to trade up to products offering both higher performance and superior quality.
Santiago: L’Oréal has once again outperformed the market in 2019, and it’s the case year after year. How do you explain this?
We not only outperformed the market, but also posted our best like-for-like sales growth for 12 years ! This reflects a winning strategy that is clearly defined: concentrating our resources and our efforts on the fastest-growing segments of the market. And outperforming each one of those segments.
L’Oréal Luxe, drawing on its iconic brands, significantly outperformed the selective market. The Active Cosmetics Division grew twice as fast as the dermocosmetics market, thanks to the power of its business model based on brands recommended by health professionals. In skincare, the number one category in this market, our R&D, expertise and star innovations enabled us to post growth two and a half times higher than the market. The story is the same in Asia Pacific, now our number one geographic Zone, with a spectacular growth rate. And finally our sales have accelerated strongly in two channels that are booming. In e-commerce, where our growth is twice as fast as the market . And in the Travel Retail channel, where we are the long-established market leader.
Jessica: In this new world of augmented reality and beauty experiences driven by digital, can you explain how we use technology to improve the experiences of our consumers?
Today we can deliver quite remarkable services: make a skin “diagnosis” based on a selfie, or use virtual reality to try out a hair colour or makeup… These services, created by our company ModiFace, provide a much richer relationship with the consumer. For a number of years now, L’Oréal has been leading the field when it comes to digital. We are experts in new marketing models, with digital representing about half of our media spending. And we are determined to keep on advancing. We have decided to be the pioneers, the champions and the leaders of Beauty Tech , which is clearly the future of the beauty market. We have everything it takes to be successful. We are the only company that can combine more than 100 years of beauty expertise and knowledge of our consumers with cutting-edge digital excellence.
Santiago: L’Oréal is the undisputed leader of the beauty market in terms of performance. But we are also proud that L’Oréal is just as committed to corporate social responsibility. What were the major advances this year? And how will we continue to act in the face of our current climate emergency?
For me also, this is my greatest source of pride. In today’s world, financial performance is obviously important, but exemplarity and non-financial performance in social, societal, environmental and ethical responsibility are just as important. Over the last ten years I have guided the Group in this direction.
2019 was another year of outstanding achievements. The vast majority of our new and renovated products have an improved social or environmental profile. And our transition to a low-carbon business model has made great progress. We are continuing to demonstrate that it is possible to uncouple impact and growth.
Our efforts have been recognised by independent experts. In the environmental field, L’Oréal is the only company in the world to be awarded three A-ratings from CDP for the fourth year running, for our efforts in combating climate change, managing water sustainably and preventing deforestation. In the field of ethics, L’Oréal is the world number one in the Covalence EthicalQuote reputation index. And we are recognised by Equileap as one of the top global companies in terms of gender equality.
But faced with the vast scale of climate issues, it is essential to achieve much more. We will shortly be announcing the next chapter of our “Sharing Beauty With All” programme, and setting highly ambitious targets for 2030.
Jessica: Could you share your vision of L’Oréal’s future? How is the Group well-equipped to remain the market leader going forward?
L’Oréal has been the market leader for more than 30 years. And the goal shared by each one of us, every day, is to strengthen this leadership. To do so, we can draw on our very solid fundamentals.
First of all, we boast the strongest R&D force in the cosmetics industry. And we have always been totally focused on quality, safety and sustainability. This enables us to create major innovations that renew and strengthen the most attractive brand portfolio in the industry. Furthermore, we have put digital at the very heart of our business model. We also have a unique organisational approach: we are strategically centralised but operationally decentralised. And this approach is backed up by L’Oréal’s unique corporate culture. Although we are the market leader, we are driven by the spirit of a challenger. Although we are a major company, we are constantly becoming more agile thanks to a startup mindset. And lastly, I am convinced that we have the best teams in the industry, which you are also part of. For all these reasons, I am extremely confident and optimistic. I am fully convinced that a tremendous new collective adventure lies ahead, and a great success story.
