Having resisted diversification, a beauty-focused strategy has paid off for L’Oréal. Publicis Groupe's Maurice Lévy catches up with the brand's chief executive Jean-Paul Agon to discuss Frenchness, embracing digital technologies and conquering the next billion consumers.
Maurice Lévy: You were amongst the first business leaders of a mass-consumption brand to appoint a chief digital officer, Lubomira Rochet. How do you see the influence of digital on L’Oréal in the future? And to what extent has the digital revolution forced you to change your own business?
Jean-Paul Agon: We’re very lucky because digital and beauty are the perfect match. Our industry is the one benefiting most from this new digital era, because beauty is one of the favourite topics of internet users. And beauty is one of the fastest-growing categories in e-commerce.
The digital revolution is completely reinventing and redefining the rules of the game in the beauty industry, as it is in all sectors. It is a new way of creating and selling products, a new way of communicating with our consumers. Digital enables us to transform the way we engage with them. In this era of connected beauty, personalised digital services will determine the success of our brands and products.
This revolution is thus a major opportunity for us and we want to maximise it, because for us, digital equals growth. If we want to win the battle for growth, we must win the digital battle. This is why, one year ago, I appointed Lubomira Rochet as chief digital officer of the group and member of the executive committee to accelerate the digital transformation of L’Oréal.
ML:Six years ago, you expressed a desire to conquer the “next billion” consumers. Was this a utopic vision? Is this still a goal and if so, how do you plan to get there?
JPA: This goal is not utopic at all. With the fantastic economic development that has occurred in the new markets in the past 10 years, the middle class is booming everywhere in the world. This is clearly a huge shift for our company, which is at the same time a huge opportunity for growth as it will simply double the number of our potential consumers in the years to come.
In China, India, Indonesia, Brazil, Mexico, Nigeria, everywhere across the globe, women and men that earn a better income now aspire to a better quality of life, and good quality beauty products are often the first and easiest step to improve your quality of life.
ML: The L’Oréal strategy has resisted diversification and concentrated on the market dedicated to beauty and body care. Will the company expand into other sectors in future?
JPA: L’Oréal has been a pure beauty player for 106 years and will remain a ‘beauty only’ company, because we believe in the endless possibilities of the beauty market, which will continue to be very dynamic.
It has grown by a little over four per cent on average each year for the last 15 years. It is driven by major forces and powerful underlying tendencies, the first of which is the fast-rising levels of income in Asia, Latin America and Eastern Europe. Cosmetics products are amongst the first to benefit from this growth in income.
The second major trend is the inexorable rise in the number of senior citizens: by 2020, there will be more than one billion women over 50 years old worldwide. The third is the skyrocketing increase in cosmetics consumption by men. Overall, what we have is a phenomenal reservoir of new and more sophisticated consumers with new needs, lending strong impetus to our market over the coming years.
ML: We tend to think that being French is an added benefit for beauty, cosmetics and perfume brands. But at the same time, it’s a handicap for the industrial dimension. Has L’Oréal benefitted from or suffered because of its Frenchness? How do you see the business in the context of globalisation?
JPA: In my mind, L’Oréal has greatly benefitted from the fact that we’re a French company. It’s perhaps thanks to some of our French values, like universalism and a desire to listen to other cultures that we were able to so successfully expand internationally. Traits like empathy, creativity and sensitivity have helped us to pursue our goal of meeting the infinite diversity of beauty needs and desires all over the world.
You could hardly say that we’ve been a prisoner of France, it’s been quite the opposite! We achieve more than 90 per cent of our sales outside of France and we have been creating a multicultural brand portfolio that is still unique in the industry – with European, American and Asian brands.
Amongst our recent acquisitions, there are three that have symbolic importance: the Chinese company Magic, whose brand MG is one of the Chinese leaders in cosmetic facial masks, the Kenyan brand Interbeauty, and the Brazilan leader in hair colour and haircare, Niely Cosmeticos. That’s probably why we have been referred to as the ‘United Nations of Beauty’.
ML: L’Oréal is well-known for its aesthetic quality, the beauty of the products and its famous faces. But the general public is less familiar with the research behind it all. Could you tell us about it?
JPA: 50 years ago, a big player in the industry used to say that cosmetics are ‘hope in a jar’. At L’Oréal, we think just the opposite. It is about putting the most advanced, sophisticated science into a jar.
And this is for one simple reason, when it comes to beauty products customers are experts. They immediately recognise the difference in quality and efficiency between two lipsticks or two shampoos. They have an instinctive capacity to identify and appreciate quality.
That’s why, for us, everything starts with science. We were born out of research as our company was founded by a scientist. Our researchers have invented more than 140 molecules in the last 30 years.
ML: Is it possible to still improve the quality of products thanks to research, or have we come to a point where that can only be marginal?
JPA: There are no limits to innovation, creation and emotion in the field of cosmetics. In the correction of signs of ageing, I dream of having a cosmetics product that would be just as effective as aesthetic procedures, without the use of needles, while preserving the natural expression of the face. Or totally personalised cosmetics, made more effective by digitalisation, and the study of your own genes. In hair care, of course I dream of eliminating hair loss, and hair greying… but also of providing an ultimate, long-lasting and universal solution for all damaged hair worldwide.
Who would have imagined that one day it would be possible to 3D print skin that will be used to test products for toxicity and efficacy? Well, that’s precisely what we announced last month. Our American subsidiary will be working with bioprinting startup Organovo in order to automate the skin production process, which we have been involved in since the 1980s in our efforts to avoid animal testing.
Today, the impossible is becoming achievable thanks to great strides made in science. So yes, it certainly is still possible to improve the quality of our products thanks to research, and our consumers will always continue to see and use increasingly sophisticated products because of it.
ML: How has the company’s internal culture translated to the outside world?
JPA: Our group started its internationalisation very quickly after the creation of the company. We sold our first products outside France barely one year after the company was founded – mainly in Europe, and then we went even further, to Latin America, the United States and Asia.
Our culture has in fact been a real asset for this. Because beauty is cultural, early on we understood the importance of empathy, curiosity, and listening to our consumers. More than 100 years later, these are still fundamental features of our culture. And I am deeply convinced that a strong culture, and a strong identity, are key to opening up to others and to the world. To become truly global, you must first have strong roots.
This interview was first published in The Drum's Cannes issue, guest edited by Maurice Lévy, chief executive, Publicis Groupe.