L'Oréal SA

The Founder

Eugene Schueller, L'Oréal’s founder was born in Paris, France on March 20, 1881 where he studied at the Institute of Applied Chemistry. In 1907, Schueller invented the first commercial synthetic hair dye which he called Auréale and sold the product in the hair salons of Paris. Later on he founded the Societe Francaise des Teintures Inoffensives pour Cheveux which is now popularly known as L'Oréal.

History of L'Oréal L'Oréal ‘s history began when its founder, Eugene Schueller invented the first synthetic hair dye and started marketing the product in the hair salons of Paris. After developing the market for hair dye, L'Oréal expanded its product line to soaps and shampoos and subsequently began to market its products out side of France, covering Austria, Holland, and Italy.

By 1920, L'Oréal was already selling its products 17 more countries that included Latin American countries like Peru, Brazil, Chile, Ecuador, and Bolivia as well as the Soviet Union and the United States. With a staff of 10 sales representatives and three research chemists, L'Oréal began advertising its products on radio, making it the first major French cosmetics manufacturer to use radio as a medium of advertising its products.

Demand for L'Oréal’s cosmetic products significantly increased as World War II ended. In 1953, the US market’s ever-growing demand for its products compelled L'Oréal to establish its subsidiary, Cosmair in the United States, which would later on be renamed as L'Oréal USA. The said subsidiary of L'Oréal managed the distribution of its hair products in various hair salons in the US and then later expanded its product line to makeup and perfume.

In 1957, Eugene Schueller died and the company was taken over by Francois Dalle, a close associate of the diseased founder of L’Oréal. In 1963, Dalle decided to have the company publicly-listed although Schueller's daughter, Liliane Bettencourt, held on to a majority interest in her father's company.

The company began diversifying its portfolio when it acquired Lancome in 1965 and Synthelabo in the early 70s, marking L’Oréal’s entry into the pharmaceuticals industry. By the 1980s, L’Oréal began to emerge as the biggest manufacturer in the international cosmetics industry. This was followed by more strategic acquisitions such as the purchase of Warner Communications' cosmetics operations, the acquisition of Gloria Vanderbilt, Ralph Lauren, Helena Rubinstein, and Laboratoires Pharmaeutiques Goupil and the investment into Lanvin.

The 1990s also marked L’Oréal’s acquisition of control of its Cosmair U.S. licensee from Nestle SA and the Bettencourt family,  the purchase of  Maybelline for $508 million, thus becoming the second largest U.S. cosmetics producer, next only to Procter & Gamble. In 1997, the company bought the sun protection brand Ombrelle and later on acquired Soft Sheen Products, a manufacturer of ethnic hair care products in 1998.

By 2000 L'Oréal added another ethnic beauty products producer, Carson, which was then combined with L'Oréal's Soft Sheen and renamed Soft Sheen/Carson Products. The company also acquired Kiehl's, a family-owned producer of natural cosmetic products, and Matrix Essentials, which produces products for use in beauty salons.

Description of Products/Product Lines L'Oréal's product line is spread out over four different divisions: Active Cosmetics, Consumer Products, Luxury Products, and Professional. Within the Active Cosmetics division, the major brand names are La RochePosay and Vichy. Brand names marketed by the Consumer Products division include Gemey, Laboratoires Garnier, L'Oréal, Plenitude, and Maybelline.

Luxury Products brand names include Biotherm, Cacharel, Lan-come, Lanvin, Guy Laroche, Giorgio Armani, Helena Rubinstein, Ralph Lauren, and Paloma Picasso. The Professional division offers such brand names as Kerastase, Inne, Redken, and L'Oréal Professional. L'Oréal also offers pharmaceuticals, luxury goods, and dermatological products through its Galderma, Lanvin, and Vich Laboratoires subsidiaries.

Hair care, skin care, sun care, color cosmetics, toiletries and fragrances marketed under such brand names as Artec, Biotherm, Cacheral, Carson, Helena Rubinstein, Lancôme, Lanvin, La Roche-Posay, L’Oréal, L’Oréal Paris, L’Oréal Professionnel, L’Oréal Perfection, L’Oréal Kids, Kérastase, Redken, Inné, Laboratoires Garnier, Giorgio Armani, Harley Davidson, Matrix, Maybelline, Jade, Gemey Paris, Jean-Louis David, Dop, Cadonet, Jacques Dessange, Ralph Lauren, Redken, Soft Sheen Carson and Vichy. New Products: Professional-VolumeActive, Majirel colorants, ColorSmart. Consumer-RevitaLift Double Lifting skin care, Elséve Nutri-Gloss hair care and Volume Shocking mascara.

Major Launches in Companys History

1907:

Eugene Schueller invents first synthetic hair dye

1909:

Schueller founds Societe Francaise des Teintures Inoffensives pour Cheveux, which is soon renamed L'Oréal

1953:

L'Oréal sets up U.S. licensee, Cosmair, to distribute its products in the United States

1963:

L'Oréal goes public

1984:

L'Oréal acquires Ralph Lauren and Gloria Vanderbilt brands

Significant impact on the Beauty Industry/Culture Writing of the corporation's dedication to its core profession in L'Oréal's 2001 annual report, Chairman Lindsay Owen-Jones observed that "our profession, which has existed since the earliest societies, is constantly changing and reinventing itself, enabling us to anticipate the future with confidence." As to the importance L'Oréal attaches to innovation and quality, its chairman wrote that "by producing ourselves over 94 percent of the product ranges we sell, we recognize the part played by our own manufacturing sites in delivering overall quality."

To avoid spreading itself too thin, L'Oréal has resolved to focus on a limited number of worldwide brands. In recent years, the company's core products of French heritage have been joined by a second group of products of American origin. The company has recognized the emergence of New York as a second center of global creativity in the cosmetics business. Some of the more influential L'Oréal brands of American origin are Redken, Maybelline, Ralph Lauren, Matrix, and Kiehl's. Although L'Oréal's principal business will continue to be cosmetics, dermatology has emerged as a market offering significant potential for the company.

Central to the success of L'Oréal's blueprint for the future is the full involvement of all company employees. Explaining this aspect of the company's strategy in its 2001 Annual Report, Chairman Owen-Jones wrote: "L'Oréal has a clear aim to enable company staff to benefit from the company's economic success.

For example, a manual worker in France on an average salary of 23,400 euros received a profit sharing bonus of 3,950 euros in 2001." And L'Oréal has not forgotten the important contributions made by the communities in which the company operates. To help repay those communities for their support, the company has undertaken a number of initiatives in cultural, humanitarian, and scientific fields.

One of the more significant adverse factor facing L'Oréal in 2001 was the weakness in the U.S. cosmetics market, particularly for luxury-type products. The company managed, however, to make up for the softness in U.S. sales by concentrating more of its marketing efforts in emerging markets. The success of this strategy was reflected in L'Oréal's 7.1 percent in sales growth during 2001, this despite an economic slowdown worldwide.

At the end of 2001, L'Oréal SA had a workforce of 49,150 people worldwide. L'Oréal feels that it has a responsibility to enable its workers to benefit from the company's success. Its Worldwide Profit Sharing program is gradually extending these benefits to all company employees worldwide.

For those already in the program, the company's 2001 results were expected to yield a bonus payment equivalent to one week's salary. Providing the company is able to meet its profit targets, it hopes to increase the size of such profit-sharing bonuses to the equivalent of one month's salary or even more. In addition the company's stock option plan, as of early 2002, was available to more than 2,500 of L'Oréal's managers, about one-quarter of its global management staff.

Current Market Activities A significant trend for L'Oréal over the last two or more decades has been its expansion through strategic acquisition. In 2001 the company purchased Colorama, Revlon's makeup and hair care brand in Brazil, and CosMedic Concepts' line of 60 BioMedic products, which are distributed to dermatologists in 60 countries. In early 2002, rumors circulated that L'Oréal was planning to make a bid for Germany's Beiersdorf consumer care group, producer of Nivea skin care products. L'Oréal executives declined to disclose whether such an acquisition was planned.

To stay abreast of changing tastes and styles, L'Oréal maintains an extensive research and development operation. The company has research centers on three continents: Europe, North America, and Asia. These centers are staffed by some 2,700 employees who originate from 26 different countries and work in 30 different areas of specialization.

L'Oréal each year allocates one-third of its research and development resources, including staff, to fundamental research projects. These include intensive study of hair structure to learn more about how and why hair changes, turns grey, or falls out.

Such research into the characteristics of hair has turned up some interesting findings about the fragility of hair of African origin, which will form the basis of innovative products for L'Oréal's ethnic hair products. To improve its understanding of skin, L'Oréal researchers have been exploring the phenomenon of pigmentation through studying the characteristics of the melanocyte cells responsible for skin color. Researchers' findings about the workings of melanocyte have been passed along to L'Oréal chemists, and it is hoped that in time these research studies will enable chemists to develop more effective products to correct blemishes and dull skin.

Future Opportunities for Firm Key elements in L'Oréal's strategy for 2002 and the short-term future include (1) dedication to a profession of enduring relevance; (2) staking its success on innovation and quality; (3) focus on a limited number of worldwide brands with diverse origins; (4) development of promising new reservoirs of growth; (5) organic growth as a core priority; (6) full involvement of company personnel; (7) respect for fundamental values; and (8) sustainable growth.

L'Oréal operates in 130 different countries. In recent years the growth of cosmetic markets in developed countries has stabilized at about 5 percent annually. The growth rates in emerging markets, however, are far more vigorous. Major growth areas for L'Oréal have been Latin America, where the cosmetics market grew 14 percent in 2001; Asia outside Japan with 2001 growth of 17 percent; and Eastern Europe with a growth rate of 21 percent

Analysis of Firms Overall Place in the History of Beauty Industry

L'Oréal SA may be the world's largest cosmetic company, but it is hardly posted its 16th consecutive year of double-digit profits for 2001 when it announced that it expected to do it once again in 2002. For 2001 L'Oréal reported a profit of almost 1 billion on revenue of about $12.2 billion. This compared with net income of almost $968 million on sales of slightly more than $11.9 billion in 2000. In 1999 L'Oréal posted a profit of almost $702 million on revenue of $10.8 billion.

In 2001, 54 percent of L'Oréal's sales were generated by the company's Consumer division. The Luxury division accounted for 27 percent of total sales in 2001, while the Professional division brought in 14 percent of total revenue. Bringing up the rear with 5 percent of total sales was L'Oréal's Active Cosmetics division. Geographically, European markets accounted for 49 percent of total 2001 sales, followed by North America with 23 percent and other markets with 19 percent.

For L'Oréal, the year 2002 got off to a promising start. The company in early April 2002 posted a first quarter sales increase of 8.5 percent, excluding acquisitions and currency effects. This was substantially above the 7 percent estimate for first-quarter sales growth. In announcing the first-quarter results, Lindsay Own-Jones, L'Oréal's chairman and CEO, said: "The first-quarter results deepen our confidence for 2002. . . .After 17 years of growth, another is starting to emerge. What can we say? In the short term, it isn't looking bad at all."

Given its glittering record of profitability over more than a decade and a half, it's difficult to find a security analyst anywhere with an unkind word to say about L'Oréal SA. After all, it's tough to argue with success. L'Oréal's 7.1 percent increase in sales during 2001, despite a worldwide economic slowdown, slightly exceeded the predictions of a JCF Group poll of 25 analysts that had predicted the company would post a 7 percent increase in sales in 2001. Of the company's 2001 performance, one Paris analyst observed: "Their weak point is luxury in the United States, but that is compensated for by a very good performance in the younger markets."

Analysts were equally positive about L'Oréal's prospects for 2002. After the company announced a jump of 8.5 percent-excluding currency effects and acquisitions-in its sales for the first quarter of 2001, Aurel Leven analyst Marina Boutry-Cuypers said that "everything leads us to expect that internal growth will largely exceed that [L'Oréal's 7.1 percent sales growth in 2001] this year." Boutry-Cuypers said she was encouraged by the outlook for improved economic conditions in the second half of 2002.