Paris-based L’Oréal, the world’s largest manufacturer of cosmetics and cosmetic supplies, maker of the Maybelline and Lancome brands, beat revenue projections for the fourth quarter of 2020 as beauty customers shifted to online buying and sales in China rebounded. L’Oréal’s sales reached $9.56 billion (€7.88 billion) for October through December, flat compared to the fourth quarter of 2019 on a reported basis but rising 4.8% like-for-like, without accounting for currency effects and asset acquisitions. Analysts had predicted flat-to-3% growth.
Earnings at beauty companies and luxury retailers sagged as pandemic restrictions reduced traffic at duty-free shops and high-end stores, and the pervasive use of face masks has reduced the market for makeup. But L’Oréal experienced increased demand for its professional products as beauty salons reopened along with increased demand for its skincare products as consumers shift to pampering products to be used at home. L’Oréal’s online revenues reached one-quarter of total sales, jumping 62% in 2020 alone.
L’Oréal China Sales and Online Sales “Spectacular,” Chairman Says
Chairman and Chief Executive Jean-Paul Agon told Les Echos newspaper ahead of a conference call with analysts that L’Oréal’s Q4 sales were “spectacular.” Said Agon, “E-commerce has become L’Oréal’s main market.” Despite the pandemic, the world’s number one cosmetics maker limited its turnover to a decline of 4% and maintained its margin at a record level of 18.6%. The explosion of e-commerce and market share gains – particularly in China, said Agon – have enabled the group to remain stable in a context of crisis.
L’Oréal’s success in China and its success online are intertwined, General Manager of L’Oréal China Stéphane Rinderknech says. Rinderknech says the success of the brand in china is based on L’Oréal China’s “consumer-centric 5-power model.”
The success of L’Oréal China rests on its recognition of the importance of social value. Chinese consumers respect companies that seek the greater good of society in all of their endeavors. But that does not mean that Chinese consumers do not appreciate a plethora of product choices.
L’Oréal China maintains a 22-brand portfolio in China. While each brand is unique and aspirational, the company maintains equity in capitalization and resources.
L’Oréal China recognizes that the needs and desires of Chinese consumers require unique innovations. Products that “work” in other settings do not necessarily provide Chinese consumers with desired results. In 2005, L’Oréal established a Research and Innovation Center employing 400 people who invent new products in China and for China.
The third factor in L’Oréal China’s success has been its investment in the retail market. Customers are able to buy at a store counter with their phones. But the same customers can also buy the same products online. L’Oréal China created disruptive online marketing content that maintained sales until China’s success in managing the pandemic allowed brick and mortar stores to reopen.
Stéphane Rinderknech says the success of L’Oréal China also rests on a basic insight into Chinese consumer behavior. He commented in an interview for “Beauty and the Middle Kingdom” that
“Over the past 20 or 30 years, there has been a tsunami of change in terms of consumer behavior. The generation born in the 70s, during the Cultural Revolution, was mostly behaving in conformity. Today if you look at young Millennials, it’s exactly the opposite. There is no norm for them. It’s all about “me, me and me” and about the way to express my own personality. This expression is also an explanation for the boom of the beauty market in China because this difference has to be expressed in some way. And on the other side we have this “silver generation”-the seniors- who represent hundreds of millions of additional potential consumers.”
However, L’Oréal can manage both the “we, we, we” as well as the “me, me, me.”
Agon Attributes Strength of Company to Corporate Culture
In his interview with Les Echos, L’Oréal chairman Agos attributed the strength of the company to its corporate culture. Agos commented to the newspaper:
“L’Oréal has weathered the crisis very well. Our priority has been to protect our employees and to support frontline healthcare staff. Our group’s solidarity with its suppliers and customers has had an incredible echo.”
In the second quarter, when hairdressers and small perfumers were threatened with going out of business, we froze their debts and made advance payments to small suppliers, which helped save many small businesses. It was a bet worth several hundred million euros, which we fully recovered. Everyone reimbursed when they could, as the reopening progressed, depending on the country, and was keen to do so. This created a very strong relationship with the L’Oréal group.”
L’Oréals culture of cooperation extends to its operations in the United States. In January 2021, the company announced a partnership with the NAACp to launch a grant program to support Black-owned businesses.
Protests against racial injustice sparked by the deaths of Breonna Taylor, Ahmaud Arbery, and George Floyd have moved major corporations to support initiatives that advance social change. L’Oréal USA has launched The Inclusive Beauty Fund to provide one-time grants of$10,000 for Black-owned services and brands in the beauty sector to help maintain their businesses.
“As the leading beauty company in the United States, we believe that we have a responsibility to invest in the small business owners and entrepreneurs who are the lifeblood of our dynamic beauty industry,” said Angela Guy, chief Diversity & Inclusion officer, L’Oréal USA told Black Enterprise.
“We are proud to team up with the NAACP to advance our shared mission of creating a more inclusive and equitable world during this time of great economic vulnerability for so many. We hope the Inclusive Beauty Fund will introduce us to entrepreneurs in the beauty industry that we can build strong relationships with well into the future.”
“Black-owned small beauty businesses are the heartbeat of their neighborhoods, and beauty business owners are navigating tremendous challenges stemming from the Covid-19 and recent events,” said Yumeka Rushing, chief strategy officer, NAACP. “The NAACP is proud to partner with L’Oréal USA to help support these entrepreneurs and ensure the longevity of the services and community their businesses provide.”
Agon Predicts a Roaring 20’s for the Beauty Industry
Agon, who is slated to hand over his CEO role to his No. 2, Nicolas Hieronimus later this year – told Les Echos that he remains prudent for 2021 but is confident that demand for beauty products will soar long-term.
“I’m convinced that when we come out of this crisis, it will be like the roaring 20’s,” he told Les Echos.
“After years of pervasive anxiety, the end of the pandemic will release a feeling of freedom. People will want to party and wear make-up and perfume.”