LOREAL : THE BIGGEST COSMETIC COMAPANY

Submitted In Partial Fulfillment Of The Requirements For BBA

(GENERAL) Semester VI Programme Of G.G.S Indraprastha
University, Delhi.

Submitted By
(Jatin Sukhija)
(BBA (General) – Semester –VI)
Enrl.No:0581241708
DELHI INSTITUTE OF RURAL DEVELOPMENT
NANGLI PUNA, DELHI -36
 Declaration
I here by declare that the major project report , entitled “Loreal: The
biggest cosmetic comapany”, is based on my original study and has not
been submitted earlier for award of ant degree or diploma to any
institute or university.

Place: New Delhi Candidate signature

Date: 4th April 2011 name: Jatin Sukhija

Enrl.no: 0581241708

Countersigned

Name: Ashima Verma

Supervisor

Name:Dr. J.P Varshney

Director

Delhi Institute Of Rural Development Of Rural Development

 ACKNOWLEDGEMENT

I owe a great many thanks to a great many people who helped

and supported me during the writing of this book.

My deepest thanks to Lecturer, [Ashima Verma] the Guide of the

project for guiding and correcting various documents of mine with
attention and care. He has taken pain to go through the project and
make necessary correction as and when needed.
 Contents

1. Title page
2.Declaration
3.Acknowledgement
4.Contents
5.Introduction
6.L’ORÉAL brands

7.Strategic analysis

8.Outlook and objectives

9..Future prospects and references

10.Annual report for 2010

11.Conclusions/ Recommendations
 Introduction

The L'Oréal Group is the world's

largest cosmetics and beauty company.[3] With its registered
office in Paris and head office in the Paris suburb of Clichy,
Hauts-de-Seine, France,[4] it has developed activities in the field
of cosmetics. Concentrating on hair colour, skin care, sun
protection, make-up, perfumes and hair care, the company is
active in the dermatological andpharmaceutical  fields and is the
top nanotechnology patent-holder in the United States.
L'Oréal is a listed company, but the founder's daughter Liliane
Bettencourt and the Swiss food company Nestlé each control
over a quarter of the shares and voting rights.
History
In 1907, Eugène Schueller, a young French chemist, developed
a hair dye formula called Auréole. Schueller formulated and
manufactured his own products, which he then sold
to Parisianhairdressers.
In 1909, Schueller registered his company, the Société
Française de Teintures Inoffensives pour Cheveux ("Safe
Hair Dye Company of France" literally "French Society of
Inoffensive Hair Dyes"), the original L’Oréal. The guiding
principles of the company, which eventually became L’Oréal,
were research and innovation in the field of beauty.
In 1920, the small company employed three chemists. By 1950,
the research teams were 100 strong; that number reached
1,000 by 1984 and is nearly 2,000 today.

L’Oréal got its start in the hair-color business, but the company
soon branched out into other cleansing and beauty products.
L’Oréal currently markets over 500 brands and many thousands
of individual products in all sectors of the beauty business: hair
color, permanents, hair styling, body and skin care, cleansers,
makeup and fragrances. The company's products are found in a
wide variety of distribution channels, from hair salons and
perfumeries to hyper - and supermarkets, health/beauty outlets,
pharmacies and direct mail.
L’Oréal has five worldwide research and development  centers:
two in France: Aulnay and Chevilly; one in the U.S.: Clark, New
Jersey; one in Japan: Kawasaki, Kanagawa Prefecture ; and in
2005, one was established in Shanghai, China. A future facility
in the US will be in Berkeley Heights, New Jersey .
From 1988 to 1989, L'Oréal controlled the film company
Paravision, whose properties included the Filmation and De
Laurentiis libraries. StudioCanal acquired the Paravision
properties in 1994.
L’Oréal purchased Synthélabo in 1973 to pursue its ambitions
in the pharmaceutical field. Synthélabo merged with Sanofi in
1999 to become Sanofi-Synthélabo. Sanofi-Synthélabo merged
with Aventis in 2004 to become Sanofi-Aventis.
On 17 March 2006, L'Oréal purchased cosmetics company The
Body Shop for £652 million.
The company has recently faced discrimination lawsuits in
France related to the hiring of spokesmodels and Institutional
racism. In the UK, L'Oréal has faced widespread condemnation
from OFCOM regarding truth in their advertising and marketing
campaigns concerning the product performance of one of their
mascara brands.
A book by Monica Waitzfelder, published in French as L'Oréal a
pris ma maison and in English as L'Oréal stole my house!,
details how L'Oréal, a company claimed to be anti-Semitic by
the author, took over the Waitzfelder home in the German city
of Karlsruhe (after the Nazis had engineered the removal of the
family) to make it its German headquarters. [citation needed]
L'Oréal's famous advertising slogan  is "Because I'm worth it". In
the mid 2000s, this was replaced by "Because you're worth it".
In late 2009, the slogan was changed again to "Because we're
worth it" following motivation analysis and work into consumer
psychology of Dr. Maxim Titorenko. The shift to "we" was made
to create stronger consumer involvement in L'Oréal philosophy
and lifestyle and provide more consumer satisfaction with
L'Oréal products. L'Oréal also owns a Hair and Body products
line for kids called L'Oréal Kids, the slogan for which is
"Because we're worth it too".
Protest group Naturewatch states that L'Oréal continues to test
new ingredients on animals. [5] The company states that no
animal testing for finished products has taken place since 1989
and that L'Oreal has invested significantly in alternative
methods for chemical safety testing, [6], though they implicitly
acknowledge that they continue to perform animal testing of
ingredients.[7]
Following L'Oréal's purchase of The Body Shop, who continue
to be against animal testing, The Body Shop founder
Dame Anita Roddick was forced to defend herself against
allegations of abandoning her principles over L'Oréal's track
record on animal testing. She declared that her belief in the
power of cosmetics to enhance female beauty was greater than
any concern over animal testing. As a result, calls were made
for shoppers to boycott The Body Shop.[8]
In 1987, L'Oréal and 3 Suisses founded Le Club des Créateurs
de Beauté specializing in mail order sales of cosmetic products.
February 2011: L'Oreal will has the largest factory in
the Jababeka Industrial Park, Cikarang , Indonesia with total
investment of US$50 million and it will be ready in October
2011. The production will be absorbed 25 percent by domestic
market and the rest will be exported. In 2010 significant growth
occurred at Indonesia with 61 percent increase of unit sales or
28 percent of net sales.[9]
[edit]Business
L'Oréal Paris hair gel. Note thePiet Mondrian-esque design.
[edit]Corporate governance
[edit]Board of directors
Current members of the board of directors of L’Oréal are: Jean-
Paul Agon, Francisco Basco, Werner Bauer, Liliane
Bettencourt, Françoise Bettencourt Meyers, Peter Brabeck-
Letmathe, Charles-Henri Filippi, Xavier Fontanet, Bernard
Kasriel, Marc Lacharrière, Jean-Pierre Meyers, Lindsay Owen-
Jones, Franck Riboud, Annette Roux and Louis Schweitzer.
[edit]Management committee
The management committee includes:
Jean-Paul Agon, Chief Executive Officer
Frederic Roze, Chief Executive Officer, L’Oréal USA
Béatrice Dautresme, EVP of Corporate Communications
Jean-François Grollier, EVP of Research and Development
Christian Mulliez, EVP of Finances
Jean-Jacques Lebel, President of Consumer Products
Nicolas Hieronimus, President of Professional Products
Geoff Skingsley, EVP of Human Resources
Marc Menesguen, President of Luxury Products
[edit]Stockholders
As at year end 2009: [2]
Breakdown of share ownership: 31.0% by
the Bettencourt family, 29.8% by Nestlé, 2.4% treasury shares,
and the remaining 36.8% is public
[edit]Sales, profits, etc.
In 2003, L’Oréal announced its 19th consecutive year of
double-digit growth. Its consolidated sales was €14.029 bn and
net profit was €1.653 bn. 96.7% of sales derived from cosmetic
activities and 2.5% from dermatological activities. L’Oréal has
operations in over 130 countries, employing 50,500 people,
24% of which work in France. 3.3% of consolidated sales is
invested in research and development, which accounts for
2,900 of its employees. In 2003, it applied for 515 patents. It
operates 42 manufacturing plants throughout the world, which
employ 14,000 people.
Cosmetics sales by division breakdown: 54.8% from consumer
products at €7.506 bn, 25.1% from luxury products at €3.441
bn, 13.9% from professional products at €1.9 bn, and 5.5%
from active cosmetics at €0.749 bn.
Cosmetic sales by geographic zone breakdown: 52.7%
from Western Europe  at €7.221 bn, 27.6% from North
America at €3.784 bn, 19.7% from rest of the world at €2.699
bn.
In 2007, L’Oréal was ranked 353 in the Fortune Global 500 .
[10]
 The company had earned $2,585 million on sales of $19,811
million. There were 60,850 employees. [10]
[edit]Joint ventures and minority interests
L’Oréal holds 10.41% of the shares of Sanofi-Aventis, the
world's number 3 and Europe's number 1 pharmaceutical
company. The Laboratoires Innéov is a joint venture in
nutritional cosmetics between L’Oréal and Nestlé; they draw on
L’Oréal's knowledge in the fields of nutrition and food safety.
Galderma is another joint venture in dermatology between
L'Oréal and Nestlé.
[edit]Community involvement and awards
In 2008, L'Oréal was named Europe's top business employer by
The European Student Barometer, [11] a survey conducted
by Trendence that covers 20 European countries and
incorporates the responses of over 91,000 students.
The L'Oréal-UNESCO Awards for Women in Science  was
established to improve the position of women in science by
recognizing outstanding women researchers who have
contributed to scientific progress.
The awards are a result of a partnership between the French
cosmetics company L'Oréal and the United Nations
Educational, Scientific and Cultural Organization (UNESCO)
and carry a grant of $100,000 USD for each laureate. [1]
The same partnership awards the UNESCO-L'Oréal
International Fellowships, providing up to $40,000 USD in
funding over two years to fifteen young women scientists
engaged in exemplary and promising research projects. [12]
L'Oréal organizes every year the L'Oréal Brandstorm, an
acknowledged business game for students in 43 countries. The
game is related to marketing and has a first prize of $10,000, a
second prize of $5,000 and a third prize of $2500.
[edit]Claims of racial discrimination in advertising, and other
litigation
On August 11, 2005, the Supreme Court of California  ruled that
former L'Oréal sales manager Elyse Yanowitz had adequately
pleaded a cause of action for retaliatory termination under
the California Fair Employment and Housing Act , and remanded
the case for trial. [13] The case arose out of a 1997 incident in
which Jack Wiswall, then the general manager for designer
fragrances, allegedly told Yanowitz to fire a dark-skinned sales
associate despite the associate's good performance. When
Yanowitz refused, Wiswall pointed to a "sexy" blonde-haired
woman and said, "God damn it, get me one that looks like that."
Wiswall retired as president of the luxury products division of
L'Oréal USA at the end of 2006.
In May 2007, L'Oréal was one of several cosmetic
manufacturers ordered by the Therapeutic Goods
Administration in Australia to withdraw advertising regarding
the wrinkle removal capabilities of their products. [14]
In July 2007, the Garnier division and an external employment
agency were fined €30,000 for recruitment practices that
intentionally excluded non-white women from promoting its
shampoo, "Fructis Style". [15] L'Oréal is reported as saying the
decision was "incomprehensible", [16] and would challenge the
measure in court.
In July 2007, the British Advertising Standards
Authority attacked L'Oréal for a television advert on its
“Telescopic” mascara, featuring Penélope Cruz, stating "it will
make your eyelashes 60% longer." In fact, it only made the
lashes look 60% bigger, by separating and thickening at the
roots and by thickening the tips of the lashes. They also failed
to state that the model was wearing false eyelashes.[17]
[edit]Brands
Brands are generally categorized by their targeted markets,
such as the mass, professional, luxury, and active cosmetics
markets. Garnier - L'Oreal's product, reached the top 100
brands of The Brand Trust Report  published by Trust Research
Advisory in India. Garnier was ranked in the 61st position in the
list of Most Trusted brands of India.
[edit]Head office

Centre Eugène Schueller, L'Oréal head office, in Clichy, France

L'Oréal Group has its head office in the Centre Eugène
Schueller in Clichy, Hauts-de-Seine , near Paris.[18] The building,
constructed in the 1970s from brick and steel, replaced the
former Monsavon factory, and employees moved into the facility
in 1978. 1,400 employees work in the building. [19] The building
is often referred to as the "Beauty Factory" by the public. In
2005 Nils Klawitter of Der Spiegel said "the building, with its
brown glazed façade of windows, is every bit as ugly as its
neighborhood." Klawitter added that the facility "gives the
impression of a high-security zone" due to the CCTV cameras
and security equipment. The world's largest hair salon is
located inside the head office building. As of 2005, 90
hairdressers served 300 women, including retirees, students,
and unemployed people, per day; the customers are used as
test subjects for new hair colours. [20]
L'Oréal USA has its headquarters in New York City,[21] its New
Jersey headquarters is in Berkeley Heights

L’ORÉAL brands
Consumer Brands:
• L'ORÉAL Paris
• Garnier
• SoftSheen-Carson
• Maybelline New York
• Le Club de Createurs
Professional Products:
• Kérastase
• L'ORÉAL Professional
• Matrix
• Redken
 Strategy Analysis of L'Oreal

Strategy analysis focuses on the long-term objective generating

alternative strategies, and selecting strategies to pursue. The firm’s
present strategies, objectives and mission, couple with the external
andinternal audit information, provide a basis for generating and
evaluating feasible alternative strategies (David 200).L’Oreal has
numerous competitors. To have an advantage on competition, L’Oreal
has to apply some strategies that include internal audit
information and external opportunities that will make the company
stronger. They will also prevent competitors to have an advantage over
L’Oreal.This report will be based upon the effectiveness of current
strategies of L’Oreal, a real global leader in every segment of the
industry.L’Oreal encounters threats and opportunities and they have
weaknesses and strengths. It is known as the TOWS matrix. It is an
important matching tool that helps managers develop four types of
strategies: SO Strategies, WO Strategies, ST Strategies and WT
Strategies. Theexternal opportunities and threats were identified earlier
(see part 1) by developing the “External Factor Evaluation Matrix” and
“Competitive Pro
"L"tmOreal: The Beauty of Global Branding" Business Week.
Exchange rate fluctuations, still positive at 0. With the global expansion,
new innovations and the Internet strategy, it will definitely increase the
sales and automatically more profits. It has adapted to every particular
environment. INPLEMENTATIONL"tmOreal has opened the last door
to the world. To achieve that, they provide training for employees
throughout the world that joins them. ST StrategiesST strategies use a
firm"tms strengths to avoid or reduce the impact of external threats.
EFFECTIVENESS OF STRATEGIESL"tmOreal capitalize on
opportunities in the global market. That makes L"tmOreal competitors
more hustling to catch up. file Matrix" is important for the current
strategies development. In 2001, the group made two acquisitions:
BioMedic, which specializes in skin care products to accompany
dermatological and plastic surgery treatments, and Colorama, a Brazilian
mass-market make-up brand. 

Outlook and objectives

Effective supplier relations are essential for sustainable development and

L’Oréal has set itself key objectives in this area.

We will:
 Continue to increase, develop and formalise our business
exchanges with suppliers:
 Increase coverage of business reviews to all categories
and regions,
 Measure progress against specific environmental and SD
KPIs,
 Conduct a supplier satisfaction survey to identify critical
issues and areas of improvement,
 Ensure ongoing feedback to suppliers following
Invitations to Tender.
 Continue promoting internal awareness of sustainable
development issues among purchasing teams:
 Organise specific workshops on SD across the categories
and regions,
 Continue training buyers on good purchasing practices
(Purchasing Strategy & Practices training) to achieve a rate of
90%.
 Carbon Disclosure Project (CDP) Supply Chain:
 Monitor progress of the 26 first suppliers of L’Oréal that
are participating in the CDP Supply Leadership Project,
 Integrate new suppliers into the CDP Supply Leadership
Project, from Latin America and Asia.
 Encourage suppliers to achieve FSC certification and reduce
their packaging and energy consumption,
 Continue the social audits programme with the objective of 400
audits in 2010,
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 Pursue the deployment and further development of the "L’Oréal
Buy & Care"programme,
 Increase the visibility of supplier innovations and facilitate
access to L’Oréal decision-makers in Research & Innovation and
marketing.

Social data scope, indicators, reporting method and systems

Review report by one of the statutory auditors on the procedures used to

compile certain social data published in the Group sustainable
development report.

General Direction 
L’Oréal Group 
14, rue Royale 
75008 Paris
Further to your request and in our capacity as Statutory Auditor of the
L’Oréal Group, we have performed a review designed to enable us to
express moderate assurance on the procedures used to compile certain
social data published in the L’Oréal Group sustainable development
report and identified by the sign ( ).
These procedures, together with the data published in the Group
sustainable development report, were prepared under the responsibility
of the Human Resources Executive Management in accordance with the
Group's internal reporting standards. These standards are available on
the Group's website.
Our responsibility is to express a conclusion on the procedures for
compiling the selected social data, based on our review.
Nature and scope of our work
We performed the work according to The Compagnie Nationale des
Commissaires aux Comptes (CNCC) professional doctrine related to this
review.
We performed the work described below in order to obtain moderate
assurance as to whether procedures used to compile the selected social
data are free of material misstatement. A higher level of assurance
would have required more extensive procedures. Moreover, our review
is not intended to express, and we do not express, a conclusion on the
accuracy of the figures published.
We performed the following work:
 At headquarters level: 
For each of the areas reviewed, we met with various representatives
from the departments listed below responsible for organizing the
reporting procedures as well as for the consolidation of social data at
Group level: the Labor Relations Department, HR Information
Systems Department, Corporate HR Support Services, Corporate
Learning for Development Department.
Based on interviews with these representatives and reviews of
documents (Group consolidation manuals and subsidiary reporting
schedules), we obtained assurance as to the:
 existence of instructions concerning definitions of the
data to be compiled and the related calculation methods;
 existence of reporting and consolidation procedures;
 consistency of the data published with the scope set for
such data;
 due and proper inclusion of the social data obtained from
the reporting systems in the consolidation packages, assessed on
a test basis.
Our work was based on the following indicators: total cost of the
retirement programmes, % of countries which complete local social
security and mandatory programmes, number of employees per
gender, data taken from the management database of executives'
profiles and careers (nationalities, number of executives by gender,
number of women amongst the management committee for
instance), number of employees and executive staff trained, amount
 allocated to the WPS program, number of employees'
representatives, absenteeism rate.
 At subsidiary level: 
Additional tests were carried out to ensure the understanding and
correct application of Group reporting procedures by the
subsidiaries. These tests were carried out at country consolidation
level, on a selection of five countries (Denmark, Finland, Norway,
Sweden, and Spain) and in respect of the aforementioned indicators,
except for the two specific indicators related to retirement (total cost
of the retirement programmes, % of countries which complete local
social security and mandatory programmes) performed for all
countries at headquarters level.
Our work was based on interviews with the individuals responsible
for reporting at country level as well as with other people involved in
the data collection and reporting procedures.
The tests involved assessing:
 the understanding and application of Group data
definitions and data collection procedures at country and
subsidiary level;
 the consolidation procedures at country level and
exhaustiveness of the scope;
 the existence and appropriateness of internal control
procedures at country level with a view to ensuring compliance
with such procedures by the subsidiaries.
We were assisted in our work by Sylvain Lambert, Partner in charge
of our Sustainable Development Practice.
Review 
L’Oreal received a score of 58 out of a possible 100 in the latest (2008)
Climate Counts Scorecard. Climate Counts is a non-profit website based
in New Hampshire that was founded by Stonyfield Farm Organics (85%
owned by Groupe Danone).
L’OREAL’S PERFORMANCE 
L’Oreal has a relatively strong record on climate change, tying for
second place among the six companies in the "Household Products"
sector reviewed by Climate Counts. According to my method (see
below), L’Oreal deserves a rating of 58/20 = 2.9.
Climate Counts has this to say about L’Oreal:
“STRIDING – The best Climate Counts choice. These companies still
have work to do, but they’re beginning to hit their stride.”
“Score: 58. Change from 2007 score: +4.
“Review: 16/22 points. Climate Counts has found that L’Oreal has been
measuring its companywide impact on global warming since 2001.
“Reduce: 35/56 points. Climate Counts has found that L’Oreal has
established clear goals to reduce its energy use and has reduced its
impact on global warming (i.e., its greenhouse gas emissions or climate
footprint).
“Policy Stance: 0/10 points. Climate Counts has found no public
information to suggest that L’Oreal supports public policy that addresses
climate change.
“Report: 6/12 points. Climate Counts has found that L’Oreal has made
some public information available on its companywide efforts to address
global warming.”
PEER PERFORMANCE* 
Unilever. Climate Counts Score: 75/100. My rating = 3.75 
Procter & Gamble. Climate Counts Score: 69/100. My rating = 69/20 =
3.45 
Kimberly-Clark. Climate Counts Score: 58/100. My rating = 58/20 =
2.9 
L'Oreal. Climate Counts Score: 58/100. My rating = 58/20 = 2.9 
Colgate-Palmolive. Climate Counts Score: 44/100. My rating = 44/20 =
2.2 
Avon Products. Climate Counts Score: 29/100. My rating = 29/20 =
1.45 
The Clorox Company. Climate Counts Score: 15/100. My rating = 15/20
= 0.75
* I include here some major companies that could be considered peers,
not just those that are categorized in the same sector by Climate Counts.
For example, Climate Counts categorizes Unilever as “Food Products”
and Procter & Gamble as “Household Products,” while both companies
compete directly on personal and household products.
METHODOLOGY
Climate Counts says they “use a 0-to-100 point scale and 22 criteria to
determine if companies have: 
• MEASURED their climate “footprint” 
• REDUCED their impact on global warming 
• SUPPORTED (or suggest intent to block) progressive climate
legislation 
• Publicly DISCLOSED their climate actions clearly and
comprehensively
“GreenOrder, a leading sustainability strategy firm, provided strategic
guidance on the Climate Counts program, assisted in the development of
the scoring system, and verified the scoring results for accuracy.”
Of the 104 companies on the Climate Counts website, the highest score
is 82 (Nike) and most (67) of the scores are below 50. So there’s a lot of
room for improvement across the board.
In addition to the 0-to-100 point scale, Climate Counts categorizes
companies as “Stuck” (red), “Starting” (yellow) or “Striding” (green).
Climate Counts appears to be considering more than the raw score in
assigning these categories; potential factors include prior performance
and peer performance. For example, Starbucks is labeled as “Striding”
(green) for a score of 49 in the pitiful Food Services sector, whereas Dell
is labeled as merely “Starting” (yellow) for the same score of 49 in the
climate-conscious Electronics sector.
As the methodology for assigning the three Stuck/Starting/Striding
categories was not clear, I decided to ignore them and simply divide the
raw Climate Counts score (0-100) by 20 to create my Citizens Market
rating from 1-5.

L’Oreal – Building a Global Cosmetic Brand

“It is a strategy based on buying local cosmetics brands, giving them a

facelift and exporting them around the world."

-- One Brand at a Time: The Secret of L'Oreal's Global Makeover,

August 12, 2002.

L’Oreal Makes Waves

In November 2002, L'Oreal, the France-based leading global cosmetics

major, received the 'Global Corporate Achievement Award 2002’, for
Europe by 'The Economist Group'. Awarded by the publisher of the
world's leading weekly business and current affairs journal The
Economist, the honour was given in appreciation and recognition of the
'depth, breadth, and diversity of L'Oreal's management team.

In the same month, L'Oreal's Chairman and CEO, Lindsey Owen Jones
(Jones) was honoured with the ‘Best Manager of the Last 20 Years' title
by the French Minister of Finance and Economy, Francis Mer. This
award instituted by the leading French business publication, Challenges,
was in recognition of Jone’s outstanding achievements in transforming
L'Oreal from a French company into a global powerhouse. Jones also
received the prestigious 'Manager of the Year 2002' award from the
French Prime Minister, Jean-Pierre Raffarin. Jones was the first foreign
head of any French company to receive this award, which was sponsored
by the leading French business publication, Le Nouvel Economiste. 

These honours were not just a 'cosmetic' eulogy; L'Oreal deserved them,
for it was the only company in its industry to post a double-digit profit
for 18 consecutive years (refer Exhibit 1 for L’Oreal's key financials).
L'Oreal, which had operations in 130 countries in the world, posted a
turnover of € 13.7 billion in 2001. The company recorded a 19.6% and
26% growth in profit in 2001 and 2002 (half-yearly results),
respectively. Commenting on L'Oreal's performance, Jones said, "At
L’Oreal, we are 50,000 people who share the same desire; because it is
not just about business but about a dream we have to realize, perfection."

Known for its diverse mix of brands (from Europe, America, and Asia),
like L'Oreal Paris, Maybelline, Garnier, Soft Sheen Carson, Matfix,
Redken, L'Oreal Professionnel, Vichy, La Roche-Posay, Lancome,
Helena Rubinstein, Biotherm, Kiehl's, Shu Uemura, Armani, Cacharel,
and Ralph Lauren, L'Oreal was the only cosmetics company in the world
to own more than one brand franchise and have a presence in all the
distribution channels of the industry (refer Exhibit C.8.2 for a note on
the global cosmetics industry). 

Background 

In 1907, Eugene Schueller (Schueller), a French chemist, developed an

innovative hair colour formula. The uniqueness of this formula, named
Aureole, was that it did not damage hair while colouring it, unlike other
hair colour products that used relatively harsh chemicals. Schueller
formulated and manufactured his products on his own and sold them to
Parisian hairdressers. Two years later, in 1909, Schueller set up a
company and named it 'Societe Francaise de Teintures inoffensives pour
Cheveux’. 

From the very beginning, Schueller gave a lot of importance to research

and innovation to develop new and better beauty care products. By 1920,
the company employed three in-house chemists and made brisk business
selling hair colour in various countries like Holland, Austria, and Italy.
Schueller used advertising in a major way to market his products. He
used promotional posters made by famous graphic artists like Paul
Colin, Charles Loupot, and Raymond Savignac to promote his
company's products.

In 1933, Schueller, created and launched a beauty magazine for women

named, Votre Beaute. In 1937, he started the 'clean children' campaign
and created a jingle 'Be nice and clean, smell good' for Dop shampoo,
which went on to become one of the most famous jingles in France. In
the early 1940s, the company's name was changed to L'Oreal, which was
an adaptation of one of the brands 'L' Aureole' (the halo). 

In 1957, after Schueller's death, Francois DaIle (DaIle), Shueller's

deputy, took over as the company's Chairman and CEO. During the
1950s, the company pioneered the concept of advertising products
through film commercials screened at movie theaters. The first movie
advertisement was for L'Oreal's 'Amber Solaire' (sun care cream) with
the tagline, "Just as it was before the war, Amber Solaire is back". 1

In 1963, L'Oreal became a publicly traded company. This posed a threat

to its existence as it could easily come under the state's control,2 which
in turn could affect its international growth plans. Dalle, therefore, began
taking steps to internationalize L'Oreal's ownership structure to prevent
it from coming under the control of the government. His efforts bore
fruit a decade later in 1973, when he persuaded Liliane Bettencourt
(Bettencourt), Schueller's daughter and the company's main shareholder,
to dilute her majority stake. Later, half of L'Oreal's stock was sold to
Gesparal, a France-based manufacturer of personal care products, while
the other half was publicly traded. Later, 49% of Gesparal's stock was
sold to Nestle, the Swiss food products giant, while the remaining 51 %
was held by Bettencourt.

In 1972, the company launched the legendry advertisement campaign

'Because I'm worth it' to promote the 'Preference' line of hair colour. The
slogan summed up the company's philosophy of providing the most
innovative, high-quality, and advanced products at an affordable price.

The campaign was considered as brilliant by many marketing gurus. The

slogan seemed to cleverly differentiate L'Oreal's products from others
and proved to be a 'winning' factor. 

In the cosmetics business, profit margins tend to be generally low as

there was not much differentiation between the products offered by
various companies. L'Oreal's decision to differentiate its products by
attaching an emotional quality to its brands thus worked very well. The
emotional pitch, ''Because I'm worth it", indirectly conveyed the
message that ''I'm willing to pay more". According to a article, it
conveyed that, "I will prove that I value myself by paying more than I
have to." This translated directly into profits for the company.
Commenting on the campaign, an analyst stated, "The extra 50% L'Oreal
charges for nothing other than your warm glow of self-satisfaction, goes
from your pocket right to theirs, and everyone's happy. Genius." 

Over the next few years, the company's business expanded considerably.
It started distributing its products through agents and consignments to
the U.S., South America, Russia, and the Far East. L'Oreal soon
emerged as the only cosmetics brand in the world that had products in all
segments of the Industry, that is, Consumer, Luxury, Professional, and
Pharmaceutical. Although the company started as a hair colour
manufacturer, over the decades it had branched out into a wide range of
beauty products such as permanents, styling aids, body and skincare
cosmetics, and cleansers and fragrances over the decades (refer Table 1
for product launches till the mid-1990s and Table 2 for a segment wise
break-up of sales for the year 2002).

On The Road To Fame

By the 1970s, L'Oreal's products had become quite popular in many

countries outside France. Jones’ entry in the late-1970s marked the
beginning of a new era of growth for the company. During 1978-81
Jones functioned as the head of L'Oreal's Italian business. Due to his
exceptional performance, Jones was given the responsibility of looking
after L'Oreal's US operations (the company's most important overseas
operation) during 1981-4. 

Managing the company's US operations was not an easy task. Jones'

colleagues argued that European brands such as Lancome (in the luxury
cosmetics segment) could never compete with established American
brands like Estee Lauder and Revlon.
In spite of their doubts and the reluctance of retailers to carry European
brands, Jones persuaded Macy's, one of the leading retail stores in the
US, to give Lancome the same shelf space that it gave to Estee Lauder.
Not surprisingly, Lancome's sales increased by 25% in the US in 1983.

Jones, a company insider with good management skills, succeeded DaIle

as L'Oreal's Chairman in 1988. He was aware that DaIle had begun the
work of internationalizing L'Oreal to prevent it from remaining as 'just a
French cosmetics company'. As he tried to continue Dalle's work, he
realized that he had to tackle the situation created by L'Oreal's image.

During the late 1980s and early 1990s, almost 75% of the company's
sales were in Europe, mainly in France. L'Oreal's image was so closely
tied to Parisian sophistication, it was difficult to market its brands
internationally. Jones thus decided to take a series of concrete steps to
make L'Oreal a globally recognized brand and the leading cosmetics
company in the world. In what proved to be a major advantage later on,
he decided to acquire brands of different origins.

In the cosmetics industry, companies did not acquire diverse brands;

they generally homogenized their brands to make them acceptable across
different cultures. By choosing to work with brands from different
cultures, Jones deliberately took L'Oreal down a different road.
Commenting on his decision, Jones said, "We have made a conscious
effort to diversify the cultural origins of our brands." The rationale for
the above decision was to 'make the brands embody their country of
origin'. The reason Jones had so much conviction in this philosophy was
his own multicultural background (he was born in Wale, studied at
Oxford and Paris, married an Italian, and had a French-born daughter).
Many analysts were of the opinion that Jones had turned what many
marketing gurus had considered a 'narrowing factor' into a 'marketing
virtue'.

May Be? No, It 'Is' Maybelline

One of the first brands that L'Oreal bought in line with the above
strategy was the Memphis (US) based Maybelline.3 The company
acquired Maybelline in 1996 for $ 758 million. Buying Maybelline was
a risky decision because the brand was well known for bringing out
ordinary, staid colour lipsticks and nail polishes. In 1996, Maybelline
had a 3% share in the US nail enamel market. Maybelline was not a
well-known brand outside the US. In 1995-6, only 7% of its revenues
($350 million) came from outside the US. L'Oreal decided to overcome
this problem by giving Maybelline a complete makeover and turning it
into a global mass-market brand while retaining its American image.

The first thing that L'Oreal did was to move Maybelline's headquarters
to New York, a city known for fast and sophisticated lifestyles.
Commenting on this decision, Jones said, "Memphis just did not quite fit
the sort of profile for finding some of the key people we needed." Then
L'Oreal aggressiveness promoted the US origins of Maybelline by
attaching the tagline 'Urban American Chic' to it. The company also
attached 'New York' to the brand name in order to associate Maybelline
with 'American street smart'.

In 1997, the company launched Maybelline's new make-up line called

'Miami Chill' with bold colours like yellow and green. This gave the
brand a new look and targeted it at spirited and lively teenagers and
middle-aged women. It also renamed Maybelline's 'Great Finish' line of
nail polish 'Express Finish,' because the nail enamel dried within one
minute of application. The company positioned it as a product used by
the 'urban woman on the go'.

This revamp was very successful: Maybelline's market share in the US

increased to 15% in 1997 from just 3% in 1996. In addition,
Maybelline's sales rose steeply from just over $320 million in 1996 to $
600 million in 1999. In 1999, buoyed by the success of Maybelline in
the US, L'Oreal acquired the Maybelline brand in Japan from Kose
Corporation, the brand’s Japanese distributor, thus gaining world rights
to Maybelline. 
L'Oreal introduced its new line of Maybelline lipsticks and nail polishes
in the Japanese market. However, Maybelline's 'Moisture Whip' (a wet
look lipstick) did not do well in Japanese markets as it dried quickly
after application. L'Oreal gave the lipstick a makeover by adding more
moisturizers to it. The new Japanese version of 'Moisture Whip' was
given a new name-'Water Shine Diamond'. Water Shine-Diamonds
became a runaway success in Japan. Commenting on the success of the
brand, Yoshitsugu Kaketa, L'Oreal's Consumer-Products General
Manager (Japan), said, "It was so successful in Japan that we started to
sell Water Shine in Asia and then around the world." 

By the end of 1999, Maybelline was being sold in more than 70

countries around the world. While in 1999 50% of the brand's total
revenues came from outside the US, by 2000 the figure increased to
56%. Maybelline became the leading brand in the medium priced
makeup segment in Western Europe with a 20% market share.
Commenting on the company's superior brand management framework,
an August 2000 article stated, "L'Oreal achieved sales growth of nearly
20% by developing new products, expanding into key international
markets, and investing in new facilities, all the while concentrating on
increasing the reach of the group's top 10 brands."

Cashing in on the Maybelline Formula

Maynelline's success proved Jones' philosophy of creating successful

cosmetic brands by embracing two different yet prominent beauty
cultures (French and American). Commenting on this, Guy Peyrelongue,
head of Maybelline, Cosmair Inc., 4 US Division, said, "It is a cross-
fertilization." L'Oreal followed this strategy for the other brands it
acquired over the years, such as Redken (hair care), Ralph Lauren
(fragrances), Caron (skin care and cosmetics), SoftSheen (skincare and
cosmetics), Helena Rubenstein (luxury cosmetics), and Kheil's (skin
care) (refer Table 3).
L'Oreal acquired the above relatively unknown brands, gave them a face
lift, and repackaged and marketed them aggressively. The US-based hair
care firms Soft Sheen and Carson were acquired in 1998 and 2000
respectively. Both these brands catered to African-American women.
Jones merged these two brands as SoftSheen-Carson and used them as a
launch pad to aggressively promote itself outside the US - specifically
Africa. As a result, the brand derived over 30% of its $ 200 million
revenues in 2002 from outside the US, most of it from South Africa.

L'Oreal firmly believed in the strategy of promoting all its brands in

different nations. Even though it had brands originating in different
cultures, it sold all its different lines in all countries. However, L'Oreal
promoted only one brand aggressively in a country. The brand to be
promoted was selected on the basis of the local culture. Thus, for people
who preferred 'American products, L'Oreal promoted Maybelline, and
for those who preferred 'French' products, the L'Oreal brand was
promoted. Similarly, the company promoted Asian and Italian brands for
customers who preferred them.

Jones also encouraged competition between the different brands of the

company. For instance, L'Oreal acquired Redken, a US-based hair care
brand in 1998, and introduced it in the French market, where it would
have to compete with L'Oreal's Preference line of hair care products.
Analysts were skeptical of this move as they thought introducing new
brands in the same category would cannibalize L'Oreal's own established
brands. However, Jones took a different point of view; he argued that the
competition would inspire both the Redken and Preference marketing
teams to work harder.

Since self-competition was encouraged at L'Oreal, teams had ample

freedom to innovate and develop better products. This kind of
competitive spirit from within allowed L'Oreal to beat competition from
other players in the market. Commenting on this, Jones said, "The only
way to favour creativity in large corporations is to favour multiple
brands in different places which compete with each other." 

To encourage competition and nurture creativity, L'Oreal operated two

research centres - one in Paris and the other in New York. These centres
helped Jones maintain L'Oreal's image as the 'scientific' beauty
company. The company spent around 3% of its revenues on research
every year, which was more than the industry average of less than 2%.
L'Oreal employed 2700 researchers from all over the world and had 493
patents registered in its name in 2001, the largest ever for any cosmetic
company in one year. 

L'Oreal made sure that each of its brands had its own image and took
care that the image of one product did not overlap with the image of
another product. A cosmetics industry analyst, Marlene Eskin, said;
"That is a big challenge for this company-to add brands, yet keep the
differentiation." 

One of L'Oreal's most radical experiments was the makeover and re-
launch of the Helena Rubinstein skin care and cosmetics brand.
Originally positioned in the luxury segment, Helena Rubinstein had the
image of a product used by middle aged-women. In 1999, L'Oreal
relaunched the brand and targeted it at a much younger and trendier
audience than the brand's typical luxury customers (middle-aged
women). Now, the target users were women aged between 20-30 years,
living in urban centres like London, Paris, New York, and Tokyo. The
company also opened a Spa 5 in New York to promote the brand (the
first instance of a company attempting to run a retail operation as part of
a promotional package).

L'Oreal also made use of 'dramatic' advertisements to promote the brand.

In one of its advertisements, the model sported a green lipstick and white
eye shadow. Many analysts even thought that such advertising for a
traditional luxury brand was incoherent. However, Jones argued that
industry observers who held this opinion had not taken into account how
fast the market was changing. He said, "Is it incoherent for younger
people to buy luxury cosmetics? Why? Perhaps it was 10 years ago
when luxury was equated to the middle-aged customer. But sorry, the
biggest luxury consumers in all of Asia, which is one of the strongest
luxury markets in the world, are between 20 and 25. This is why the
Guccis and Pradas have taken the luxury-goods market by storm." 

Jones also said, "The worldwide luxury consumer no longer equates to a

middle-aged lady. She can be. But she can also be young and trendy. So
the whole idea that it is incongruous for Helena Rubinstein to be cutting
edge in terms of image and makeup is out of date by about 10 years. On
the contrary, it is very good, original positioning for Helena Rubinstein
to be the coolest of the traditional luxury brands." Thus, L'Oreal cleverly
positioned Helena Rubinstein as a luxury brand for a younger audience
without overlapping its image with that of other luxury brands like
Biotherm, Lancome, and Shu Umeura.

L'Oreal attached a tinge of glamour to its brands to make them more

appealing to customers. The company liberally used celebrities from
various fields of life, from all parts of the world, for promoting its
brands. Some of the well-known personalities featured in L'Oreal's
promotional campaigns included Claudia Schiffer, Gong Li, Kate Moss,
Jennifer Aniston, Heather Locklear, Vanessa Williams. Milla Jovovich,
Diana Hayden, Dayle Haddon, Andie MacDowell, Laeticia Casta,
Virginie Ledoyen, Catherine Deneuve, Noemie Lenoir, Jessica Alba,
Beyonce Knowles, and Natalie Imbruglia.

L'Oreal’s brand management strategists believed that good brand

management was all about hitting the right audience with the right
product. Commenting on the company's brand portfolio management
strategies, Jones said, "It is a very carefully crafted portfolio. Each brand
is positioned on a very precise segment, which overlaps as little as
possible with the others."

Future Prospects
L'Oreal's efforts paid off handsomely. The company posted a profit of €
1464 million for the financial year 2002, as against € 1236 million for
the financial year 2001. Its overall sales grew by 10% in 2002, and much
of this increase was attributed to impressive growth rates achieved in
emerging markets like Asia (of the 21 % increase in sales volume, China
contributed 61 %), Latin America (sales grew by 22% with sales in
Brazil increasing to 50%), and Eastern Europe (sales grew by 30% with
sales in Russia increasing by 61 %).

Industry observers noted that L'Oreal was much ahead of its competitors
in terms of profitability and growth rate. L'Oreal's rival in the luxury
segment, Estee Lauder, had reportedly posted a 22% drop in profits in
August 2002. The company had also announced a cost-cutting
programme. Even Revlon, L'Oreal's competitor in the mass-market
segment, had posted nine consecutive quarterly losses since late-2001.

Not all competitors were in such bad shape though; rival companies like
Beiersdmf (a Germany based company that owns the globally popular
brand Nivea), Avon, and Procter & Gamble had been performing quite
well. However, industry analysts agreed that no other cosmetics player
matched L'Oreal's combination of 'strong brands, global reach, and
narrow product focus'.

In March 2003, L'Oreal ventured into new businesses that were closely
related to its core activities. One such initiative was Laboratoires Inneov,
L'Oreal's joint venture with Nestle. Through Inneov, L'Oreal entered the
market of cosmetic nutritional supplements. Analysts observed that this
would mark the beginning of 'neutraceutical6 development. A research
analyst at Frost and Sullivan (US based leading provider of strategic
market and technical information), commented, "The Inneov business
will draw on both the growing demand for skin products designed to
retain youthfulness and the growing market for dietary supplements." 

L'Oreal expected the cosmetics market to grow at 4-5% per annum in the
future. Looking at the future with optimism, Jones said, "No other
consumer products group has grown as quickly as we have. The
prospects for the next three to four years seem promising to me. L'Oreal
has the good fortune of being involved in a business that is a bit less
sensitive than others to economic cycles. When, the economic climate is
bleak, you might put off buying a new car, but you will still buy a tube
of lipstick that lets you 'take a different sort of trip' for a much smaller
price.

In March 2003, the company entered the prestigious list of the world's
fifty most admired companies compiled by leading business magazine,
Fortune, for the first time. This was yet another indicator of the fact that
L'Oreal seemed to be going from strength to strength each year. If the
strategists at the helm of affairs continued focusing on enhancing
stakeholder value year after year, the future would continue to be rosy
for the company that sold millions of women the dream of living a
'beautiful' life.

REFERENCES

1. Initially launched in 1936, Amber Solaire was withdrawn from the

market during the war period due to production hitches. It was
relaunched in 1957.
2. The French people were attached to the notion of having a special
identity called the 'I' exception francaise', which was nurtured by French
politicians. It was rooted in two beliefs: the threat from the outside world
(global trade and Anglo-Saxon economics) and the role of the French
state in preventing such threat. The French political system was attached
to the idea of a strong French state, which could provide security to the
French community and its trade. Therefore, the French state played a
central role in subsidizing, managing, and directing the ways in which
France's publicly owned businesses were managed, L'Oreal being a
publicly traded company was easily susceptible to come under the state's
influence.
3. Maybelline was established in 1915 in the US by T.L. Williams. After
beginning with the hugely successful mascara (a cosmetic to darken
eyelashes), Maybelline expanded its product portfolio to include other
cosmetics and built up a sizeable brand equity. Till 1967, it was under
the control of the Williams family. It was sold to Plough Inc. (later
Schering-Plough Corp.) in 1971, to Wasserstein Perella & Co. in 1990,
and finally to L'Oreal in 1996.
4. L'Oreal's wholly-owned US subsidiary.
5. The word spa (originally name of famous mineral springs in Spa,
Belgium) refers to any place/resort that has one or more of the following
facilities: therapeutic baths, massages, mineral springs, health
improvement, beauty treatment, exercise, relaxation and meditation (not
an exhaustive list). 
6. The term 'neutraceutical' is derived by combining two words
'nutritional' and 'pharmaceutical' and refers to foods that acts as
medicines. Neutraceuticals act as a source of specific food that provides
essential nutrients to users.

Established in 1946 in New York, US, Estee Lauder competed with

L'Oreal in the luxury segment with brands like Estee Lauder, Aramis,
Cliniaje, Prescriptives, Origins, MAC, Bobbi Brown Essentials, Tommy
Hilfiger, Jac, Donna Karan, Aveda, La Mer, Stila, and Jo Malone.
Proctor and Gamble, the US based FMCG manufacturer, competed with
L'Oreal in the mass-market segment with skincare, haircare and
bodycare products. Some of P&G's well-known brands include Biactol,
Camay, Cover Girl, Ellen Betrix, lnfasil, Max Factor skincare), Herbal
Essences, Loving Care; Natural Instincts, Nice n' Easy, Panteen Pro-V,
Rejoice, Vidal Sassoon, Wash & Go (haircare), Laura Biagiotti, Hugo
Boss, and Helmut Lang (perfumes). The US based Revlon Inc also
competed with L'Oreal in the mass-market segment with brands like
Charlie, Colorsilk, Colorsay, Fire&lce and Skinlights. Other companies
like Avon, Kose, Coty, and Siseido competed globally in the mass-
market segment. L'Oreal remained the overall industry leader, as it was
the only company that competed in all four segments.

The cosmetics industry has always been characterized by & intensive

research and innovation by companies to introduce newer and better
products. Since the 1990s, the industry has witnessed many changes in
terms of the manufacture of cosmetics owing to growing awareness
among consumers about the harmful effects that harsh chemicals
(generally used in cosmetics) may cause to their body (skin and hair).
This was one of the reasons for the manufacture of products with natural
or herbal ingredients by companies like L'Oreal and P&G. Due to the
increased focus on 'wellness', the industry as a whole is now moving
towards 'cosmecuticals' and 'neutraceuticals', that is products that
combine the qualities of nutrients and beauty aids. Industry analysts
speculate that the market for these products would rise sharply in the
21st century.
2010 Annual Results

STRONG GROWTH

IN SALES AND PROFITS

¾ 2010 sales: 19.5 billion euros

ƒ +11.6% based on reported figures

ƒ +5.6% like-for-like

¾ Operating profit: +18.6%

¾ Net earnings per share*: +17.2%

¾ Confidence in a new year of sales and profit growth

¾ Increase in dividend**: +20% at 1.80 euro

The Board of Directors of L'Oréal met on February 10

th

, 2011 under the chairmanship of Sir Lindsay OwenJones and in the

presence of the Statutory Auditors. The Board closed the
consolidated financial

statements and the financial statements for 2010.

Commenting on the figures, Mr Jean-Paul Agon, Chief Executive

Officer of L'Oréal, said:
“In the context of an upturn in the cosmetics market, L’Oréal
achieved strong sales growth. The group

advanced in all zones, all channels and all business segments; more
dynamic than the market, it bolstered

its position as the world number one in beauty.

2010 was a year of conquests for the group, with several of our
brands achieving spectacular

breakthroughs: L’Oréal Professionnel with its hair colourant Inoa,

Maybelline in mass-market make-up,

Yves Saint Laurent which is experiencing a true renaissance, and La

Roche-Posay which is continuing its
expansion.

The group is growing in Western Europe, clearly improving its

positions in North America, and continuing

its conquest of the new strategic markets, particularly in Asia and

Latin America. In 2010, L’Oréal China

became the group’s number three cosmetics subsidiary, with sales of

more than one billion euros.

These performances confirm the relevance of the strategic thrusts

adopted at the end of 2008: accessible

innovation, new product categories, accelerated globalisation of our

brands, and strengthening of our R&D

and advertising & promotional investments.

2010 was also a year of strong profit growth; the actions taken over
the last two years to improve operating

efficiency are continuing to pay off.

Well prepared to seize all strategic opportunities, and driven by the

ambition of winning a further one billion
new consumers, L’Oréal is turning a new page in its history: the
page of universalisation and beauty for

everyone.

Supported by an encouraging start to the year, we are confident in

the group’s ability to achieve a new year

of sales and profit growth in 2011.”

Furthermore, the Board of Directors has decided to propose to the

Annual General Meeting on April 22

nd

2011 the payment of a dividend of 1.80 euro per share, an increase

of +20% compared with 2009.

The Board will also propose to the Annual General Meeting on

April 22nd

2011 the renewal of the terms of

office of Mrs Liliane BETTENCOURT, Mrs Annette ROUX and Mr

Charles-Henri FILIPPI.

At the end of the board meeting, Sir Lindsay Owen-Jones said:

“With this level of growth and results, the

group produced a good performance in 2010. Thanks to their drive

and imagination, Jean-Paul Agon and

his teams have succeeded in opening up new areas for growth and
profitability, which are also paving the
way for the future. The proposal by the Board of Directors to pay a
dividend of 1.80 euro is an expression

of our confidence in the group’s solidity and dynamism.”

* diluted net earnings per share, based on net profit excluding non-
recurring items attributable to the group.

** proposed at the Annual General Meeting of April 22

nd

, 2011.www.loreal.com - Follow us on twitter @lorealpress

2/15

A – 2010 sales

Like-for-like, i.e. based on a comparable structure and identical

exchange rates, the sales trend of the

L’Oréal group was +5.6%.

The net impact of changes in consolidation amounted to +0.4%.

Currency fluctuations had a positive impact of +5.6%.

Growth at constant exchange rates was +6.0%.

Based on reported figures, the group’s sales, at December 31

st

, 2010, amounted to 19.496 billion euros,

an increase of +11.6%.

1) Cosmetics sales
PROFESSIONAL PRODUCTS

In a hairdressing market which picked up slightly, the Professional

Products Division achieved

growth in 2010 of +4.1% like-for-like, and +13.8% based on

reported figures. Its initiatives, rolled out

through a portfolio of highly complementary brands, enabled the

conversion of more than 35,000

new salons. More than ever before, the division is asserting its role
as the unchallenged leader in

this channel.

ƒ In 2010, the initiatives introduced in technical products brought

decisive success.

In hair colourants, Inoa by L’Oréal Professionnel is a worldwide

success, both in recruiting consumers

and hairdressers and winning their loyalty. Repositioned at a more

accessible price per application,

SoColor by Matrix is conquering many salons in Europe, while

Wonderbrown, a colourant for dark hair,

is expanding in the United States.

In textures, Optistraight by Matrix and Dulcia Advanced perm by

L’Oréal Professionnel are winning

over Asia. In the West, X-Tenso Moisturist by L’Oréal

Professionnel is driving the worldwide

development of “Brazilian straightening”.

Haircare is growing, supported by innovative launches: Kérastase
Chronologiste, a luxury haircare line

with caviar, L’Oréal Professionnel Fiberceutic with intracylane and

Colourist Solutions by Pureology.

L’Oréal Professionnel and Matrix are driving the division’s growth;

Kérastase is gradually accelerating,

while Redken is strengthening its leadership in the United States.

ƒ In Western Europe, the division is winning market share, with

significant growth in Germany, the United

Kingdom, Sweden and France. In North America, 2010 saw a return

to growth for Matrix, and dynamic

growth for Mizani and Pureology. The acquisition of two

distributors, CB Sullivan and Peel’s, has

completed the SalonCentric network.

The New Markets are dynamic, with strong growth rates in India,
China, Indonesia, and also in the

Middle East and Brazil, where L’Oréal Professionnel is helping to

build the professional markets of the

future by opening its first institute for the training of young

hairdressers.

CONSUMER PRODUCTS

The Consumer Products Division recorded growth of +5.5% like-

for-like and +11.4% based on

reported figures. It is winning market share in North America and

the New Markets. The dynamism
of the make-up market, the number one category in this division,
stimulated growth across all

zones. All the brands are growing, and above all Maybelline which
achieved growth of +13.3% likefor-like.

ƒ L’Oréal Paris had a good year in haircare with strong growth in

Latin America, the United States and

Asia. In skincare, Youth Code achieved good scores. In make-up,

Volume Million Lashes mascara

proved to be a worldwide success.

Garnier is strengthening its leadership in the facial skin cleanser

segment for young people with the

launch of Pure Active Exfo-Brusher. The brand is continuing its

progress in the new category of

deodorants: it is consolidating the positions it has won in Latin

America and in Eastern Europe, and is

moving into Western Europe.

Maybelline is growing strongly in all regions. It became the make-up

market leader in the United States

thanks to the success of Falsies mascara and Instant Age Rewind

The Eraser foundation. In Asia, the

tinted skincare line BB Cream is proving highly successful.

Finally, the division is making considerable progress in the men’s

skincare category, particularly in

Western Europe where Men Expert is now number 1 in the market,

and in Asia where the Garnier Men
launch complements the L’Oréal Paris Men Expert range.

ƒ In Western Europe, in a sluggish market, the division advanced

thanks to make-up, haircare and

deodorants, particularly in the United Kingdom, Germany and

Scandinavia.

In North America, in a market which was also stable, the division

significantly improved its positions

with market share gains in make-up, hair colourants, haircare and

styling.

The New Markets are being galvanised by powerful regional

initiatives: in Brazil and Argentina, thanks

to L’Oréal Paris haircare and Garnier deodorants, and in China,

India, Indonesia and the Philippines

thanks to L’Oréal Paris haircare, make-up, and L’Oréal Paris and

Garnier men’s skincare. www.loreal.com - Follow us on twitter
@lorealpress

4/15

LUXURY PRODUCTS

The Luxury Products Division recorded growth of +7% like-for-like

and +11.5% based on reported

figures. In the context of an upturn in the selective market, the

division posted sell-out growth in

line with the market trend. It thus consolidated its worldwide

positions, and particularly its
leadership in Travel Retail. Its major core brands delivered good
performances.

ƒ Lancôme returned to strong growth, bolstered by the success of

its skincare lines, particularly

Génifique, but also by the launch of Teint Miracle foundation, the

product of ten years of research,

which won the Prix d’Excellence Marie-Claire. The fragrance

Trésor by Lancôme is growing strongly,

thanks to a new advertising campaign and the launch of Trésor in

Love.

Yves Saint Laurent is experiencing a renaissance, with double-digit

growth: the brand has had a string

of successes in fragrances - L’Homme Yves Saint Laurent, La Nuit

de L’Homme, the relaunch of

Opium and the arrival of Belle d’Opium – and is making a strong

comeback in make-up with the launch

of Rouge Pur Couture.

Giorgio Armani had a very good year, driven by the success of the
new women’s fragrance

Acqua di Gioia, not forgetting Giorgio Armani Cosmetics, with Eyes

to kill Excess mascara proving a

hit with consumers.

Lastly, Kiehl’s achieved an exceptional breakthrough in 2010 on all

continents.
ƒ In Western Europe, the division is clearly number one, and sales
are in line with the market trend. Its

momentum is boosted by France, Germany, the United Kingdom

and the Scandinavian countries. The

good performances of the Yves Saint Laurent, Kiehl’s and Ralph

Lauren brands are also worth noting.

In North America, the situation is more contrasting, yet the Yves

Saint Laurent, Kiehl’s and

Viktor & Rolf brands are posting strong sales growth. Ralph
Lauren showed outstanding performance

with The Big Pony Collection.

In the New Markets, the division is growing faster than the market:
in Asia, thanks to the dynamism of

Travel Retail, China, and the good performances of Lancôme,

Kiehl’s, Giorgio Armani and

Shu Uemura; and in Eastern Europe, where the division is

continuing to make conquests.

ACTIVE COSMETICS

The annual sales of the Active Cosmetics Division grew by +4.7%

like-for-like and +8.9% based on

reported figures. All the brands and all the zones achieved growth.
Across the world, the division

confirmed its position as number one in dermocosmetics.

ƒ La Roche-Posay achieved double-digit growth, thanks in

particular to Redermic[+], and is winning
market share everywhere.

Vichy saw the success of the LiftActiv franchise confirmed in the

anti-ageing market on all continents,

and particularly in China. Launched at the end of the year in

Western Europe, NutriExtra bodycare has

been very well received. This initiative is enabling the brand to

reinforce its position in bodycare, which

is a very strategic segment for pharmacies.

Thanks to a dynamic last quarter in hair products, Innéov

strengthened its leadership in Western

Europe and achieved a spectacular breakthrough in Brazil.

SkinCeuticals recorded very strong growth, thanks to its roll-out in

European markets, and the opening

up of China, Canada and Brazil.

The integration of Roger & Gallet into the division is extremely

encouraging, and internationalisation

has begun in Western Europe and Brazil.

ƒ All the zones ended the year with positive growth, and this was
particularly clear in Western Europe.

The division is accelerating in the New Markets. Latin America

produced a good performance, thanks

in particular to Brazil.www.loreal.com - Follow us on twitter

@lorealpress

5/15
Multi-division summary by geographic zone

WESTERN EUROPE

ƒ With performances of +1.7% like-for-like, and +2.6% based on

reported figures, the group’s growth was

very slightly faster than the market trend, particularly in the United
Kingdom, Germany, Sweden and

France, and in Travel Retail. All divisions recorded positive growth.

NORTH AMERICA

ƒ 2010 brought significant growth, far exceeding the market growth

trend, at +4.1% like-for-like and

+12.5% based on reported figures. The Consumer Products Division

produced a very strong

performance, thanks in particular to the excellent results of

Maybelline. The Luxury Products Division

continued the recovery which began at the end of 2009. The

Professional Products Division had a very

good year thanks to the success of Inoa.

NEW MARKETS

With growth of +11.3% like-for-like, and +22.4% based on reported

figures, the group is growing twice as

fast as the market. The main driving forces are Asia and Latin
America.

ƒ Asia, Pacific: Over the full year, the group recorded +11.2%
growth in this zone like-for-like, +22.9%
based on reported figures, and +13.2% excluding Japan, like-for-
like. The group is continuing to win

market share, particularly in India, the Philippines, Indonesia, and

also in South Korea and Taiwan.

With another year of double-digit growth, L’Oréal China, driven by

the dynamism of its Men’s lines,

make-up, and haircare initiatives, continued to win market share,

and exceeded the 1 billion euros of

sales mark, thus becoming the group’s number three cosmetics

subsidiary.

ƒ Eastern Europe: Growth remains sustained, at +8.1% like-for-like

and +15.3% based on reported

figures, despite the highly contrasting market situations in different

countries. Ukraine and Russia are

the most dynamic countries, particularly thanks to make-up,

Garnier, and the continuing advances of

the Luxury Products Division.

ƒ Latin America: Sales advanced by +17.5% like-for-like and

+32.6% based on reported figures. All the

major countries in this zone are growing, particularly Brazil and

Argentina. Mexico has returned to

growth. The Consumer Products Division is the driving force of this

expansion, through haircare and

deodorants.
ƒ Africa, Middle East: Sales grew by +4.1% like-for-like and
+13.8% based on reported figures, with

contrasting trends. While the situation remains difficult in South

Africa and Turkey, Lebanon and

Morocco recorded strong growth.

The Body Shop sales

The Body Shop ended the year with like-for-like growth at –1.1%.
Retail sales

are at -2.6%. The Body

Shop had a year of contrasting performances, with trends differing

between the developed countries and

the New Markets.

2010 was a year of transition for The Body Shop, which completed
its strategic reorganisation.

The brand is stepping up its militant approach to innovation, with

launches including Natrulift, a firming

skincare line with organic pomegranate, Dreams Unlimited, a

fragrance with Community Fair Trade

Ecuadorean alcohol and also Rainforest, an eco-conscious haircare

range.

Above all, The Body Shop is accelerating its expansion into the New
Markets, particularly in Eastern

Europe, Asia, and India where the brand has doubled the number of
its stores. The brand has also
extended its distribution into new channels, such as the Internet and
Travel Retail, to increase its reach and

its visibility.

Lastly, the actions taken on the operational front continue to

deliver: The Body Shop is steadily improving

its profitability.

At the end of 2010, The Body Shop has a total of 2,605 stores.

Retail sales: total sales to consumers through all channels, including

franchisees. www.loreal.com - Follow us on twitter @lorealpress

6/15

Galderma sales

Galderma achieved record sales, with a like-for-like increase of

+16.1% and +23.0% based on reported

figures, re-enforcing its position as a worldwide leader in

dermatology. The company recorded double-digit

growth in all regions across the world.

Sell-out is growing twice as fast as the market.

Strategic prescription brands Epiduo (acne), Oracea (rosacea),

Clobex (scalp psoriasis), Metvix (skin

cancer), Rozex/Metro (rosacea) and Loceryl (onychomycosis) have

all shown excellent results. Galderma

also significantly expanded its presence in the corrective and

aesthetic dermatology segment. The
company continued to successfully launch Azzalure (a botulinum
toxin type A developed for use in

aesthetic medicine) in several European countries and broadened its

product portfolio with the pre-launch

of Emervel, a hyaluronic acid dermal filler range.

B – Important events during the period 10/01/10 - 12/31/10

ƒ On December 10

th

2010, the group’s subsidiary L'Oréal USA, acquired, via its

SalonCentric division,

the salon distribution business of Peel's Salon Services, a Nebraska-

based company which operates in

12 central states of the U.S. With this new acquisition, L’Oréal

USA’s SalonCentric division is extending

its distribution, which now covers the vast majority of U.S. territory.

ƒ On December 13

th

2010, the pharmaceutical company Galderma, a 50:50 joint venture

between

L'Oréal and Nestlé, announced the launch of a bid for the Swedish
company Q-Med, which specialises

in corrective and aesthetic dermatology. This acquisition should

enable Galderma to accelerate its
development in the highly dynamic segment of corrective and
aesthetic dermatology. After receiving

the support of 77.79% of Q-Med shareholders, Galderma has

indicated today, February 10

th

, in a
statement, that its offer has been extended by 15 days and increased
to SEK 79 per share.

Cash flow Statement, Balance sheet and Debt

Gross cash flow amounted to 3,171 million euros, up by +15%

compared with 2009.

There was a very positive change in the working capital

requirement, which decreased in 2010, for the

second consecutive year, by 132 million euros.

Capital expenditure continued to be contained, at 3.5% of sales.

After dividend payment and purchases of investments, and allowing

for the exercise of options, the residual

cash flow comes out at 1,891 billion euros.

The balance sheet, whose structure was already robust, has been
strengthened, with shareholders’ equity

representing 62% of total assets.

Net financial debt amounted to 41 million euros, representing 0.3%

of shareholders’ equity.
Proposed dividend at the Annual General Meeting on April 22

nd

, 2011

The Board of Directors has decided to propose that the Annual

General Meeting of Shareholders of April

22

nd

, 2011 should approve a dividend of 1.80 euro per share, an increase

of +20% compared with the

dividend paid in 2010. This dividend will be paid on May 4

th

, 2011 (ex-dividend date April 29

th

at 0:00 am).

Share capital

Finally, the Board of Directors has set the amount of the share
capital at December 31

st

, 2010:
600,992,585 shares with a par value of 0.20 euro, representing a total
of 120,198,517 euros.
Conclusion
Based on our work, no material misstatement came to our attention that
would cause us to believe that the social data selected and published on
the Group Sustainable Development report has not been prepared in
accordance with the Group's reporting procedures.
Neuilly-sur-Seine, June 4, 2010

Statutory Auditor 
PricewaterhouseCoopers Audit

Etienne Boris 
Sylvain Lambert, Sustainable Development Practice

L’Oréal India
The L’Oréal Group cares about more than making women
beautiful. Vishal Sahgal, industrial director of the Pune
manufacturing facility, talks to Jayne Alverca about the importance
of promoting sustainable development.
 
Few consumer brands are better known than those of the L’Oréal Group.
The portfolio of 23 global brands including household names such as
Maybelline, Garnier and Biotherm, as well as the L’Oréal Paris brand
itself, are all at the forefront of their market, whether it be for cosmetics,
skin care, fragrance or hair care.  
Headquartered in Paris, L’Oréal has over a hundred years’ experience in
bringing out the best in women of all ages and races. Today, the group
has a presence in 130 countries and its 65,000 employees were behind
sales of €17.5 billion last year.
L’Oréal’s presence in India dates back to 1994. “L’Oréal has a strong
belief in the value of manufacturing close to its markets,” explains
Vishal Sahgal, industrial director of the company’s Pune manufacturing
facility.
However, India did not begin a programme of liberalisation for foreign
companies until the early 1990s, so at first, manufacturing was
undertaken by a sub-contractor. “In 1998 we were finally able to move
into direct production, driven by the belief that no one has more
expertise than L’Oréal in the manufacture of the products that we are
famous for,” he adds.  
Sales of L’Oréal products in India have been meteoric. “We not only
give products that are better in terms of quality and safety, we have also
been instrumental in creating new markets. For example, hair
colouration was revolutionised by L’Oréal when we introduced fashion
shades which women had never been used before. Our Colour Naturals
brand is very accessible, costing close to €2, and it offers an
international quality standard that was never available before. Similarly,
we introduced Indian consumers to conditioners for the first time and
they have quickly taken over from traditional hair oils,” he comments.
Since 2004, manufacturing for hair care, hair colour and skin care lines
for L’Oréal’s Consumer Products division and Professional Products
division has taken place at Pune. “We need to attract and retain the best
talent in order to grow; and our first location was simply too remote,”
Sahgal explains. “Pune is where all our operations are now based and we
have up to 600 people working for us at any one time.”
Sahgal explains that promoting sustainable development is a
fundamental tenet within all plants and distribution centres that operate
under L’Oreal’s umbrella. Environmental sustainability and corporate
social responsibility (CSR) are the twin pillars that support this broader
aim. Even within the vigorous framework that all L’Oréal manufacturing
centres operate, Sahgal believes that the achievements ofthe
manufacturing facility at Pune are something special. “Our Pune factory
stands out within the group for its environmental achievements,” he
asserts. “The state government of Maharashtra where we are based
awarded the Pune factory first prize in the Excellence in Energy
Management category in 2009 for its various energy conservation
projects.”
Within the L’Oréal Group, the Pune site has won a number of accolades.
“We won the internal award for the best environmental project in 2007
for a project that involved using 320 solar cells, rather than expensive
diesel oil, to heat water for washing in our processes. Two years latter,
we again picked up first prize for a project that uses vermin culture to
convert chemical sludge into useful fertiliser. This led to the proportion
of waste being recovered from the site to increase from 95 per cent to 99
per cent,” he says.
At corporate level, the company’s Indian headquarters in Mumbai has
achieved a rare synergy between its core business, which is beauty and
good citizenship. A project aptly named ‘Beautiful Beginnings’, which
is implemented  together with the French NGO Aide et Action, aims to
help girls from marginalised communities who were unable to complete
their normal education to train as beauty therapists and achieve financial
independence. “It is expensive and quite complex to organise so it is
done centrally, but at present ‘Beautiful Beginnings’is operating in
Mumbai, Pune and Hyderabad and it represents wonderful opportunity
for the girls involved,” he says.
L’Oréal also believes that the world needs science and science needs
women. The L’Oréal India For Young Women in Science scholarships
programme, with the support of the Indian National Commission for
Cooperation with UNESCO, has helped young women passionate about
science to achieve their dreams and aspirations of pursuing a career in
science. Established in 2003, it reaches out to deserving female students
from Maharashtra and scholarships worth Rs.250,000 each are given to
five young girls to pursue graduate studies in any scientific field. Thirty-
five scholarships have been awarded to date.
The Pune factory itself has recently picked up another prize, this time
the internal Citizen of the World Award, for its approach to good
citizenship within the community where it is based. “We do not like one-
off donations and look for long term projects which will have a long
term impact in the communities around Pune, where many of our staff
come from,” he explains.
“‘Project Care’, which won us the first prize, is an integrated project that
looks at safety, health and hygiene, the environment and child education,
which we deal with in turn on a quarterly basis with the aim of raising
standards and improving the local quality of life. We rely on a mix of
professional trainers and our own employees from these villages who
feel a huge pride in our work and whose voice is sometimes more
acceptable to local communities than outsiders.”
The project is ongoing and includes facets such as free medical check-
ups for the elderly and a scheme to support schools with redundant
laboratory and IT equipment that still has relevance in the classroom.
The company is also involved in a partnership that will provide two new
classrooms to a local school—at present the children have to study
outside.
On the procurement side, L’Oréal extends its values by insisting on a
very specific vetting process. “Suppliers must pass our stringent quality
requirements and also a Safety and Social Audit. We use external
consultants like Intertech who will monitor for unacceptable practices
such as child labour, ensure that minimum wages are paid and that there
is no requirement for excessive working hours. The government has
labour laws, but not all companies comply. We only want to work with
those that do.”  
Meanwhile, Sahgal believes that the factory’s steady expansion creates a
virtuous cycle in the local economy, as at least 50 per cent of staff are
recruited from surrounding villages. “Last year we grew our capacity by
30 per cent and there is still enormous scope for L’Oréal in India. It is
very important that as we grow, we give something back to the society
that has contributed to our success,” he concludes. www.loreal.co.in
Since the company was founded in 1907 by the chemist Eugne
Schueller, scientific research has always been the heart of the L'Oréal
Group's strategy.
The performance, safety and quality of our products rely on this
continuous search for innovative scientific advances.

More than 3% of the Group's turnover is invested in R & D every year

and over the past ten years, L'Oréal's research budget has increased
fourfold. In 2002, this equated to 469 million euros. Research centres in
France, Japan and the United States employ over 2,800 staff working in
30 different specialist fields such as chemistry, biology and toxicology.

Unusually for the industry, L'Oréal is one of the few companies able to
carry out all stages of research and development, starting with advanced
research into hair and skin. The Group focuses its work on the following
three sectors:

Advanced Research aims to prepare for the future by concentrating on

innovations for the next ten years. Through advanced research, L'Oréal
aims to understand the fundamental mechanisms that govern skin and
hair, for example hair loss and pigmentation. Advanced Research is also
responsible for the creation of new molecules upon which the
development of new products depends.

Applied Research prepares for the medium term. On the basis of

synthesised molecules produced by the Applied Research teams or
proposed by external suppliers, the Applied Research teams improve
cosmetic products and study new concepts. More than 3,000 new
formulas are created each year.

Development deals with the short term. Working in close partnership

with the marketing teams, the development laboratories design products
on the basis of innovations proposed by the Applied Research branch.
Significant research achievements of recent years include skin models,
Ceramide R and sun filters. In the 1980s, L'Oréal scientists succeeded in
reconstructing skin through cell engineering. Today these skin
models are routinely used for biological research and for evaluating the
safety and efficacy of products.Ceramide R is a synthetic ceramide,
which repairs the cuticle of damaged hair, strengthening it and making
the hair shine. Discovered in 1989, it first appeared in a L'Oréal Elvive
shampoo in 1995. The first photostable UVA and UVB filter, Mexoryl
XL has been incorporated in all the L'Oréal Group's sun protection
products in the UK since 1999.

 Eugne Schueller, the chemist who founded L'Oréal in 1907, was

the inventor of the world's first synthetic hair colorants.
 3% of the L'Oréal Group's consolidated sales is invested in R&D
every year. In 2002, this equated to 469 million euros.
 55% of L'Oréal research staff are women.
 In the last three years, L'Oréal has registered more than 1,400
patents, including 501 in 2002.
 More than 120 new molecules have been patented and used by
L'Oréal over the last 40 years.

Conclusion

• L’ORÉAL is the world market leader in cosmetics

• They are very innovative and invest a lot of money in

research and development

• Products are positioned in the high-priced segment because

of their high quality

• They offer well coordinated products for different target

groups

• To keep their strength alive they have to observe their competitors

Recommendations

Observation of the market

• Competition analysis

• Using competitive intelligence to achieve strategically

competitive advantages

• Early market entry

• Growing competition

to ensure the long-term economic success at the market