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How L'Oréal Continues to Reinvent Itself

November 19, 2019 00:00 AM UTC
- Updated September 25, 2020 16:54 PM UTC

CEO Jean-Paul Agon joins Fortune’s Global Forum.

As the world's leading beauty company, L'Oréal is constantly reinventing itself. We're going to hear a lot about L'Oréal, actually, as a tech company and a company that's very focused on sustainability and leadership on the part of CEO and chairman Jean-Paul Agon. Jean-Paul, welcome. [MUSIC PLAYING] Good to see you. [INAUDIBLE] So this is a bit of a conflict of interest, Jean-Paul-- Why? --in that I'm a Lancome girl. Good. Good. And you suggested that I'm old because it used to be a-- [CHUCKLES] Never. --a label that us older women really love, and loved. But you have found, through digital technology, that young people are loving this product. No, I never said, of course, that Lancome was for old women. On the contrary. You know, I just told you in the discussion before that I remember when I was the chairman and CEO of L'Oréal in the USA in the 2000s, that the average age of the Lancome user was around 38, 40 years old in the US, and that thanks to the digital revolution, to the globalization, for example, to Asia alone, the average age of the local user, for example, in China now is more around 28, 29. Which is very interesting, because it shows that you can rejuvenate, and reinvent, and regenerate a brand thanks to this revolution. And Lancome also has become the number one undisputed global beauty brand in the world. And it's the number one beauty brand, for example, in luxury in China. Let's talk about that. That's fascinating. I want to get to China in a minute. But just technology-- talk about how you're using digital technology to keep this brand at the top, Lancome, and L'Oréal, and other brands. Yeah, I think it's a fascinating subject. I think that technology has changed everything in the past, I would say, five to seven years. In fact, there was a real complete change in a very short period of time. Of course, thanks to digital, thanks to the social media platform, thanks to Google search, thanks to ratings and reviews, thanks to e-commerce, this industry has changed completely. And the way we do business today, the way we interact with consumers is totally different from what it used to be even five years ago. You're personalizing. Yeah, absolutely. And you know, for me, it's fascinating, because I have been 40 years at L'Oréal. And I can really say that the last five years I've seen more change-- more dramatic change-- than the previous 15 years. It's amazing. And so we are really personalizing-- you're right-- personalizing for the relationship, which is very important. So we can really respond to individual needs, desires, dreams, et cetera. We can even now formulate almost for individual needs or also desires. And so this is the long-term, by-the-way, direction. The direction will be that the mission is beauty for all. But the next mission we will have will be beauty for each of all. Because we will be able, probably, in the long term to more or less personalize the beauty products we're going to do for billions of women around the world. And let's drill down a bit on that, on how you're doing that, using AI but augmented reality. Can you explain. Give us an example of that. Yeah. For the moment, it's mostly at the stage of choosing products and trying products. For example, we bought a company in Canada called ModiFace. And these guys are the champion of augmented reality, simulation reality. So what you can do with that is to, online, simulate the effect of a product on yourself. It's a technology that started a few years ago, but now that we have really mastered. And thanks to this product, you can do many things. You can simulate any type of makeup product on yourself, on your phone, for example. You can simulate new hair color, new haircut, new quality of skin. You can even do skin diagnosis, acne diagnosis. You can do all kinds of things. And this is a great help for consumers before they choose and before they buy the products. So it is a complete change in the way they can really buy products. And it's also fascinating-- we were just talking about this-- of course there's dozens of other cosmetic companies that have a smaller name but are super popular. And women are very loyal to a lot of these brands. And yet you've stayed on the top and you haven't been disrupted. How does that happen? It's interesting. It's true. Even more than that, in fact, we accelerated. And it's an interesting information-- a few years ago, people thought that the digital revolution would disrupt the beauty industry, and that big brands would lose their power, and that the smaller brands, there would be an inflation, mushrooming of small brands that would really take the market. In fact, what's happened is that, yes, there are more little brands, because now it's more easy than before to create your little brand. But it's still very difficult to go from a little brand to a bigger brand, because you stay small. But at the same time, the digital world, with the rating and reviews, the social media platforms, and the e-commerce, all this is working with algorithms. And in fact, the algorithms are favoring the top-of-mind brands and the top-of-mind products. So in fact the effect of that is that this is favoring the big brands. And the proof of that is that, in the past two years, we have seen our big brands growing like never before. We had, last year in the first nine months, our best year in 15 years. The market also, by the way. But our big brands have seen extraordinary growth, probably linked to this digital effect. Fascinating. And then we just had, as I was mentioning to you, a panel yesterday on China, and the Chinese economy, and e-commerce, where the growth in cosmetics is-- Huge. --dramatic. Huge. Because why? Because I think that China has been the country in the world that have really embraced e-commerce totally, globally, without any limits. It's fascinating to discuss with the young generation of Chinese. For example, Chinese woman, if you discuss with a young Chinese woman, 18 years, 19 years old, in a way, she doesn't even know that you can buy your product in a store. For her, the normal way to buy your product is to buy online. And maybe you can tell her, do you know you can find it also in the store? Ah, I didn't know. So for most of them now, this new generation is totally embracing e-commerce. And for us, we started very much at the beginning. We were the first partners of Alibaba seven years ago. And now e-commerce, for some of our makeup brands, for example Maybelline, number one makeup brand in the world, it's more than 50% of all sales. And it's also fascinating because it allows any consumer in China, any girl/lady in any city/region of China to order the product. So there is also no more limit to availability of the products in the country. And your size helps with that as well, I'm-- Absolutely. Questions-- go ahead and raise your hands for any questions. I wanted to ask you, while we're waiting for a question, agility-- you've got this massive workforce. How many people work for you? 100 and-- 86,000. 86,000. And yet you've trained your workforce to be agile and to spot trends. Yep. How do you do that? Oh, I think it has been always the culture of L'Oréal. You know, L'Oréal is a-- I would say it's a strange animal. It's not a company like others. It's a company with a very particular culture, always on the left, always curious, always ready to reinvent itself, to look for opportunities, to seize what's starting everywhere. It's also a company that covers all segments of beauty, everywhere in the world. So whatever happens anywhere in the world, we can see it, seize it, grab it, and maximize it. And it's also the organization that we have. Sometimes I call L'Oréal an organized chaos. And some competitors say, my God, what does it mean? But you know, in the world of today, where you have to be agile, and quick, and fast, and reactive, to be a kind of organized chaos is a very good thing. That's a good thing. Questions-- right here. Hi. Kevin Lobo from Stryker. I wondered about the sort of omnichannel approach. So do you have a proactive which has the subscription-based model for skin, for acne in the US? You also have the door-to-door of Amway and Avon. And then you have sort of retail. So how does that break down for you? Are you in all areas, or do you choose to isolate yourself? No, we are not. We are covering 90% of the segments and channels. But I'm sorry to say there are some parts of the business that we've never wanted to enter. And for example, direct sales has always been something that we never wanted to enter. And by the way, I think that we were right. Because as you can see, the evolution of some of these companies have been pretty difficult. So we are choosing pretty well where we want to go or not. But we are also testing and learning. Th subscription models are pretty new. We are doing some experiments. But I have, also, a great respect for my shareholders. So I don't want to go too much in models that have difficulties to become profitable. Questions-- right here. Not easy to get to the mic. It's coming. Yeah, sorry. [CHUCKLES] Thank you. Fields Wicker-Miurin, Board, BNP Paribas. Very nice to see you. Thank you. L'Oréal has a reputation for being very innovative, as we've just heard, especially on the digital side-- beauty for all, very close to customers, very good at listening to what customers are asking for. And I'm a big user of your products. Thank you. One of the things I do notice, however, is that to get to the beautiful pot of wonderful cream, I have to go through three different layers of packaging. Yeah. And obviously L'Oréal is not alone. It's just you're very big, you're very powerful, and you're a leader that people look to. I'm really interested to hear what are some of the innovations that are coming down the line that you're thinking about as you distribute your product to your consumer. That's an excellent question, packaging. I think all of us are feeling a bit of guilt when we-- You're right. --purchase these products. It's an excellent question, also, because for many, many years, packaging was part of the pleasure of a cosmetic product. And we have also to respect the pleasure of consumers. If they by your product, if they by your cream, for example, if you buy a Lancome cream, you would buy it in a beautiful jar, crystal or glass jar that is really a piece of art also. But we realize completely that we have to evolve. And so, for example, what we are doing in this-- some smart and simple moves, is that we are inventing, right now, refillable jars. So for example, you would buy your Absolue Lancome cream, which is a beautiful product. It cost a little bit of money. And it's a beautiful crystal jar. Inside, you have the product. But then, after that, you can keep the jar. And you will be able to just buy the content that you would put into the jar. So we think that there are many simple ideas that can really solve the question of keeping the pleasure for consumers, but at the same time being smart and sustainable for the long term. Recycling. Not only recycling-- because in this case, the good thing is that you don't even recycle. Because recycling is also pretty complicated sometimes. But recycling your own jar, yeah. Yeah, yeah. You keep the jar, but you just change the content with a kind of-- I don't know how to say it-- interchangeable part that you put inside, which is very easy to do. So anyway, we are working very much on that. It's clear that packaging is the number one priority for this industry for the next 20 years. Everyone is working on it. We have taken, already, commitments in terms of plastics. For example, we took the commitment that by 2025, all our plastics will be either refillable, reusable, recyclable, or compostable, that we will use 50% less plastics. So we are really determined to go fast, and to keep our leadership also in this field. Jean-Paul, thank you so much, both on a sustainability front, the technology front, the innovation front. Thank you. [MUSIC PLAYING]