L'Oral at 100

August 3, 2009

Global beauty giant celebrates 100 years of scientific success and business acumen.

L’Oréal’s science then...
(Charles Zviak in the lab in 1946).

L’Oréal at 100

Global beauty giant celebrates 100 years of scientific success and business acumen.

Christine Esposito
Associate Editor

From mass-market moisturizers to single-process color at the salon to upscale eau de toilettes, the L’Oréal stable has scope and depth that’s hard to match. It is quite possible that at least one product from the global beauty giant’s expansive array of brands is being used at least once a day by nearly every woman in the in the U.S.—if not the world.
L’Oréal’s science now!

All those applications and spritzes add up: the company’s consolidated net sales have risen from $16.9 billion (€13.6 billion) in 2004 to $25.8 billion (€17.5 billion) last year—an impressive gain for a 100-year-old firm that sprouted from a two-bedroom Paris apartment in the early part of the 20th century.

Today, L’Oréal boasts some of the most recognized and successful companies in beauty and personal care—Lancôme, Maybelline, Garnier, The Body Shop and SoftSheen-Carson—as well as players that enjoy coveted spots and steadfast reputations in their select categories—Redken, Kiehl’s, Shu Uemura and Yves Saint Laurent Beauté.

How It All Began

The company that would become L’Oréal can be traced back to 1907, when Eugène Schueller, a young French chemist, created the first synthetic hair dye and began selling them under the name“L’Aureale,” inspired by the L’Aureole, a fashionable hair style of the time. A few months later, he renamed his dye L’Oréal. In 1908 he registered his company—The Societe Francaise de Teintures Inoffensives pour Cheveux—which was headquartered in his two bedroom apartment in rue d’Alger; the dining room was used as the demonstration area and the bedroom the laboratory. And like most entrepreneurs, Mr. Schueller did it all—manufacturing products at night, making sales calls to hairdressers in the morning and delivering product in the afternoon.

His hard work paid off a year later in 1909 as he gained the backing of an accountant from Epernay. The loan enabled him to move the company—which he renamed L’Oréal—to a four-bedroom apartment on the rue du Louvre and hire his first employee.

Eugène Schueller and Jean-Paul Agon
It wasn’t long before his company became an international entity. By 1910, L’Oréal products were sold in Austria and Italy, and by 1914, Hungary, Germany, Belgium, Holland, Switzerland and Russia were added. Mr. Schueller made the leap across the Atlantic to the Americas in the 1920s and also tapped faraway markets like Asia.

In the 1930s, Mr. Schueller began to expand into hygiene and toiletry products. In 1934 he took over French soaper Monsavon and launched Dop, a mass market shampoo formulated without fatty alcohol sulphates—a technological breakthrough for the mass market as it did not leave behind residue.

Ambre Solaire, L’Oréal’s first protective suntan oil, bowed in 1935 and the timing couldn’t have been better—Leon Blum and the socialist party SFIO just helped push through paid holidays for French workers, women were revealing more skin and pale skin was giving way to suntans as the model of health and modern living. With an attractive scent, wavy packaging and pin-up style advertising, Ambre Solaire struck a chord with consumers. More than 70 years later, the Ambre Solaire stable touts some of the most effective sun protection technologies in the market, with patented Mexoryl XL and Mexoryl SX filtration systems that protect against UVA and UVB rays.

Revolutions in Hair Care

While Mr. Schueller was keen to expand in toiletries and personal care, hair care remained critical to the company’s success and growth. From its earliest days, L’Oréal’s major advances in hair science provided both salon and consumer convenience.

In 1946, L’Oréal introduced Oréol, the first cold wave in Europe, which was a major revolution in the world of hairdressing, as it set women free from heat processes. Régé-Color followed in 1951, which brought the concept of color to the masses. French hairdressers fell in love with this new formulation, which they could also sell to consumers to use it at home.In hair spray, Elnett came on the scene in 1960. Another technological leap, it contained certain polymers that could be removed with light brushing while other sprays were still being formulated with lacquers. In 1966, L’Oréal introduced
Preference, its first mass-market hair color line.

L’Oréal’s Innovation and Research Milestones

With an average of 500-plus patents registered each year, L’Oréal is responsible for many major advancements in cosmetic and beauty science. Here’s a quick look at some of the patented molecules and the products that stemmed from those advances.

Ionène G • Patent 1974 • First Product 1978
At the end of the 1970s, L’Oréal research laboratories attempted to answer an important question: what ingredients could help prevent hair dye from causing damage to hair? Studying more than 200 types of polymers, the group’s research teams selected Ionène G as the most effective molecule in repairing and smoothing hair fibers. The miracle molecule was first integrated into hair dye products in the 1980s, including Crescendo and Majirel.

Aminexil • Patent 1990 • First Product 1996
The result of more than 15 years of research, in June 1996, L’Oréal discovered its first anti-baldness molecule, providing an important step forward in the treatment of alopecia. Aminexil was first used in the anti-baldness treatment Dercos Vichy.

Ceramide R • Patent 1991 • First Product 1994
In 1985, laboratories discovered that certain products could help fight against the effects of aging on hair using a lipid called ceramide: the idea was to use the molecule as a kind of cement, filling intercellular gaps and thus strengthening hair. For four years, researchers studied the molecule’s potential for application, establishing 39 patents for its use. It first appeared in 1994, in Elsève shampoo, and was subsequently integrated into skin care products.

Mexoryl SX • Patent 1982 • First Product 1992
Mexoryl SX, the first and only stable sun filter designed to protect skin from short UVA rays, emerged as the best technology in sun protection, representing an important breakthrough in the field. The Mexoryl SX patent was granted to L’Oréal in 1982, but took 10 years for it to be introduced into products. Today, all sun-protection products in the company benefit from Mexoryl XL.

Pro-Xylane • Patent 2000 • First Product 2006
Anti-aging skin care has always been one of L’Oréal’s key areas of research, and the discovery of Pro-Xylane represents a breakthrough in skin care. Pro-Xylane is derived from beechwood, marking an important breakthrough in green chemistry.

Fast forward to today, and L’Oréal’s hair care brands continue to break new ground. She Uemura Art of Hair, for example, recently rolled out Prime Plenish, billed as an anti-aging line of hair care products enriched with jasmine essential oil which purifies and restores body and shine to hair fibers to deliver silky, glossy and weightless locks.

Acquisitions Abound

Big changes came for L’Oréal Group in the mid-1960s when it acquired Lancôme (1964) and Laboratoires Garnier (1965), a pair of brands that have been major weapons in the firm’s war chest. Lancôme marked L’Oréal’s ascent into luxury. The brand, which entered the U.S. market in 1974, has been a leader in skin care, cosmetics and fine fragrance developing both highly advanced and beloved products such as Absolue Premium ßx, Le Rouge Absolu lipstick and Juicy Tubes lipgloss as well as fine fragrances like Trésor, a floral oriental with notes of rose, muguet, lilac and apricot blossom which bowed in 1990.

From the early days of Ambre Solaire (above) to the newest Garnier treatments (right), L’Oréal has strived to answer the skin care needs of modern mass market consumers.
Today, Lancôme continues to make waves even as the luxury beauty market has been rocked by recession. The firm has launched unique products that harness the best in raw materials and packaging, such as Génifique—billed as a youth activating concentrate that boosts the activity of genes and stimulates the production of youth proteins—and Ôscillation—a mascara with a vibrating brush that delivers 7000 oscillations per minute to bring more volume and length to lashes.

Laboratoires Garnier, which has sported natural positioning since its early days, has proven to be a trendsetter. Starting with hair care products in the 1920s, the iconic brand has successfully segued the natural message into skin care with Garnier Nutritioniste, a mass brand that promotes the nutritional-dermatological connection with topical products that include ingredients such as Omegas 3 and 6, and magnesium. Recently, the brand rolled out several new products including Garnier Nutritioniste Skin Renew Awakening Face Massager, a moisturizer containing caffeine that comes with a built-in rolling applicator. For more on this launch and other new products from Garnier, see our online exclusive, “New Ideas from Garnier” at www.happi.com.

During the next 14 years, L’Oréal executives would make several other deals to expand its areas of expertise—Biotherm in 1970, Synthélabo Pharma-ceutical Laboratories and Gemey in 1973, Ralph Lauren Fragrances in 1984, Helena Rubinstein in 1989, La Roche-Posay in 1989, Redken in 1993, Maybelline in the U.S. in 1996 and Soft Sheen in 1998.

With the onset of the new millennium, L’Oréal furthered its reach—adding Miss Ylang, a leading mass-market cosmetics company in Argentina, ethnic hair care giant Carson, salon brand Matrix and skin care specialist Kiehl’s Since 1851. In 2001, Brazilian mass market cosmetics and shampoo brand Colorama was acquired as well as a 35% interest in Japan’s Shu Uemura; two years later, L’Oréal would take control of the entire firm.

In 2003, L’Oréal Group acquired one of the top three skin care brands in China, Mininurse, a mass-market line sold in 280,000 outlets. In 2004, the company added Yue-Sai, a Chinese cosmetics and skin care brand, and in 2006, The Body Shop became part of the L’Oréal family. Its most recent high-profile purchase was the $1.8 billion acquisition of YSL Beauté.

“L’Oréal has been savvy in its acquisition, especially those in the recent past, in how they have positioned themselves to be on trend in some of the leading areas of growth or potential for growth,” said Karen Grant of The NPD group, Port Washington, NY.

According to Virginia Lee of Euromonitor, L’Oréal “rightly used acquisition to increase its market position globally. Through acquisitions L’Oréal has developed a range of brands, together which helps the firm rule a given market.”

For example, in China’s anti-aging market segment Olay is the leading brand, but L’Oréal is the leading company simply because it has a wider range of brands to offer, Ms. Lee explained.

“The wide range of brands also gives L’Oréal the flexibility to enter different markets. For example, in India, where average consumer income is much lower than that of those in the western market, Garnier is a more suitable brand with its more competitive pricing,” she added.

L’Oréal’s executives recognize that global expansion is critical to success. The firm is currently present in more than 130 countries with 23 international brands. According to chief executive Jean-Paul Agon, the globalization of the cosmetics market “provides our company with a huge opportunity for at least the next 20 years.”

Driven by Science

While L’Oréal has found success through acquisition, scientific research remains at its core. The firm has more 3000 employees focused on research endeavors and dedicates 3.3% of its turnover to R&D (which it points out is the highest ratio in the cosmetics industry). As proof if its commitment to science, L’Oréal secured a record 623 patents in 2008 alone.

“L’Oréal has—and always will—continue to achieve success in the beauty market thanks to our key strength, an obsession with quality and a passion for innovation,” said Patricia Pineau, L’Oréal scientific communications director. “That passion for innovation has driven L’Oréal forward over the past century.”

The company continues to make strides in the understanding of skin and hair. Recent discoveries regarding the role that genes play in cutaneous aging are opening new investigative horizons for its scientists, according to the company. Officials contend Lancôme’s Génifique has sparked new perspectives in anti-aging. In addition, L’Oréal says a more thorough understanding of stem cells’ biological behavior, which is responsible for skin and hair regeneration during aging, has allowed it to select the active ingredients to protect them.

“Huge advances in skinomics, stem cell biology and cell reprogramming will pave the way of the future of beauty,” added Ms. Pineau.
Navin Geria, vice president of research and development at SpaDermaceuticals and Happi columnist, remarked on L’Oréal’s current technologies that are combating the signs of skin aging.

“L’Oréal’s anti-aging brands are based on deep insights they have gained from aging skin dermatological knowledge. Skin Genesis and Collagen Remodeller brands are designed to counter balance the effects of aging by strengthening the underlying layers of skin. These products are based on the idea that the skin weakens as one ages because of its increasing thinness, which leads to a slowdown in cellular rejuvenation, resulting in skin discoloration and dullness.”

According to Mr. Geria, L’Oréal’s patented anti-aging molecule known as Pro-Xylane (the firm’s name for xylose, a sugar molecule derived from the beechwood plant) has been clinically shown to reduce lines and wrinkles by boosting the production of glycoaminoglycans (GAGs) within the skin.

Mr. Geria noted that L’Oréal’s research revealed that xylose, when applied to the skin, held more moisture, stimulated collagen production and generated the production of new GAGs within the skin.

“Stimulating the aged skin to mimic younger skin with the production of GAGs is a new advancement,” said Mr. Geria. “The product appears promising and should stimulate the skin to generate hyaluronic acid or other natural moisturizing factor.”

He pointed out that Skin Genesis also includes hyaluronic acid, so even before your skin starts to make more GAGs, one could gain its hydrating benefits.

Skin Genesis, he said, is formulated with several unique ingredients which are well recognized for their anti-aging benefits. “Continued product use would hopefully help boost skin’s GAG production, which is absolutely critical in fighting the aging skin. Collagen Skin Remodeller contains collagen biospheres, which swell when they come in contact with skin and thus help fill up wrinkles,” Mr. Geria concluded.

Beyond the Bottom Line

Leadership in science is a critical element to L’Oréal’s strategy. However, the firm also excels in sustainability and social responsibility.

“L’Oréal’s goal is to ensure sustainable and responsible growth. We believe that sustainable success is based on strong ethical principles, which provide a framework of values, shared by all employees, and guide our growth. It is also based on a genuine sense of responsibility to the wider community. As a company we want to be a good citizen of the world, and support projects that serve the wider community and which reflect the values we have upheld for almost a century,” noted Rebecca Caruso, L’Oréal USA executive vice president, corporate communications and external relations.

The company’s commitment to social responsibility is evident on multiple fronts. Established in 2007 as a more formal demonstration of its commitment to local communities, the L’Oréal Corporate Foundation (which has a budget of €40 million) is focused on encouraging education, promoting scientific research and helping disadvantaged populations through the improvement of their appearance and the use of cosmetics. Recently, Mr. Agon received the Ethics Resource Center’s Pace Leadership in Ethics Award, which honors individuals and organizations who display excellence in the ethics field and whose accomplishments and contributions advance ethical business management. And as part of its 100th anniversary, more than 3000 U.S. employees provided 12,000-plus hours of volunteer service in their communities, helping the unemployed, interacting with senior citizens and caring for shelter pets, among other endeavors.

“At L’Oréal, we believe that sustainable growth can only be achieved when you act as a responsible corporate citizen,” said Laurent Attal, president and chief executive officer of L’Oréal USA. “As a citizen of the world, we support projects that serve the wider community and which reflect the values we have upheld for almost a century.”

Many of L’Oréal’s brands are at the forefront of the eco-movement. The Body Shop has long been a proponent of green practices and last fall, Kiehl’s launched its first entirely biodegradable cosmetic product—Aloe Vera Biodegradable Liquid Body Cleanser—with “Cradle to Cradle” certification. Stocked at its shops as well as in Neiman Marcus and Nordstrom in the U.S., the 100% biodegradable formula and fragrance is housed in a 100% post-consumer recycled bottle and formulated without parabens, SLS and dyes.

L’Oréal’s Retail Relationships

L’Oréal is a critical component to the world’s leading retailers, providing major brands and highly successful products demanded by luxury and mass consumers alike.

“L’Oréal is an valued partner for Macy’s. Lancôme is a significant brand for us and is loved by Macy’s customers for its excellent skin care technology, fashion-right color, and outstanding mascara. L’Oréal also has been a leader in developing its key fragrance brands of Ralph Lauren and Armani, as well as Diesel and Victor& Rolf. We look forward to its imprint on the recently acquired YSL business.”
—Muriel Gonzalez, executive vice president/general merchandising manager,
cosmetics, fragrances and shoes, Macy’s, Inc.

“Target congratulates L’Oréal Paris on being a true pioneer in the beauty industry over the last 100 years. Target and L’Oréal share a common goal of offering quality beauty products at great prices. From the introduction of the Target Red Collection, to launching L’Oréal Elnett Satin for the first time in the U.S., our partnership with L’Oréal helps Target offer innovative products to our guests.”
—Keri Jones, senior vice president, merchandising, Target

In terms of sustainability, L’Oréal Group has also made significant strides. In 2008, the company cut its energy use by 3.6% and water use by 6.9%. Greenhouse gas emissions fell by 6.6%, sulfur dioxide emissions were cut by 28.3% and VOC emissions were culled 15.4%, according to the company. In addition, the firm cut its waste by 4.9%, including returnable packaging.

This April, the company committed itself to further reducing its environmental impact with new long-term goals for its factories and warehouses that will cut in half its greenhouses gas emissions, water use per unit of finished product and waste generated per unit of finished products, using its 2005 levels as the starting point.

“At the dawn of the 21st century, the world’s leading beauty company needs to be an authentic example in terms of sustainable development,” Mr. Agon said in a statement on Earth Day, when the plan was unveiled.

Facing Challenges

With the beauty and personal market continuing to feel the effects of the global recession, company executives are anxious to chart a course that will lead to stability and success. With a steeped 100-year history, L’Oréal has weathered turbulent economies before and company officials contend the firm will negotiate the current crisis as efficiently as possible by adapting its flexible business model to end the year stronger and more competitive than ever.

For the first quarter of 2009, sales rose 0.3% to €4.37 billion (at constant exchange rates, sales were down 0.4% and like-for-like sales slid 4.3%, according to its May 6 financial posting). Performances across the firm’s divisions were mixed, with consumer products, active cosmetics and The Body Shop, proving resilient as professional product markets were slow and luxury continued to reel after the disappointing 2008 holiday period.

Mr. Agon was positive about the performance overall. “The quality of the innovations, the strength of our brands, the group’s balanced presence across the major global markets, and the acquisition of YSL Beauté have enabled us to achieve a very slight increase in sales in the first quarter,” Mr. Agon said in a May 6 press statement on the release of the company’s first quarter 2009 results.

According to Mr. Agon, to weather this crisis and emerge stronger than before, the group is implementing five main strategies:developing accessible innovation to broaden the consumer base, opening up new product categories, accelerating globalization, ensuring sustained advertising and promotional investments, and lastly, reducing costs.

“Thanks to the quality of its fundamentals and the implementation of these five major strategic thrusts, the group should gradually improve its performances in the course of 2009,” he noted.

At press time, L'Oréal had not released results for the first half of 2009.

As it deals with the rocky economy, L’Oréal remains committed to leading the beauty industry around the world. Much of the group’s success boils down to its ability to keep rooted in the ideals and visions forged a century ago by Mr. Schueller, while fostering the scientific, marketing and business acumen that has enabled it to be a leader in the modern and ever-changing beauty business.

As one of the industry’s savviest firms, L’Oréal recognizes that the future of beauty will be more than skin cream, lipstick and shampoo.

“We believe beauty will become global, incorporating cosmetics used on the surface but also those taken orally or via the use of a device to maximize effects or modify the skin, as well as surgical procedures (laser, injections),” said Ms. Pineau. “Beauty will not be limited to the face, nor to women. In terms of the company’s structure, L’Oréal is in a position to anticipate these changes and remain the beauty market leader in all categories.”

How L'Oréal Was Built—Acquisition by Acquisition

• 1964 Lancôme
Founded in 1935 by Armand Petitjean, Lancôme was a luxurious perfume, skin care and makeup brand that was the embodiment of elegance and French style in many countries. The acquisition of Lancôme in 1964 was the first stepping-stone on the road to becoming a luxury goods empire.

• 1965 Garnier
Laboratoires Garnier had been successfully marketing various hair products since the 1920s: Garnier plant-based products such as Moelle Garnier energy-boost shampoos with natural extracts, and Moelle Color hair colorant are examples. The purchase of Garnier enabled L’Oréal to acquire a
portfolio of complementary hair care products with an organic positioning—a different approach to hair.

• 1993 Redken
The group undertakes a series of strategic acquisitions in the U.S. in order to expand its Professional Products Division and make the U.S. the second stronghold for L’Oréal. The first step involves the purchase of the premium hairstyling brand, Redken, with its young, urban, New York-inspired image.

• 1996 Maybelline
The acquisition of Maybelline, the leader in mass-market makeup in the U.S., represents a strategically important step. Not only does it make L’Oréal the uncontested leader in the U.S.—the most crucial market in the world—but it also establishes the company as the world leader in mass-market makeup. What’s more, Maybelline opens doors for L’Oréal in Asia—especially in China, where the company already operates one factory.

• 1998 SoftSheen (U.S.)
L’Oréal acquires SoftSheen, the brand for ethnic hair-types, the leading range of hair-relaxing products
in the world. With this acquisition, the group attains a singular expertise in ethnic hair care.

• 2000 Carson, Kiehl's Since 1851 and Matrix
Not long after the acquisition of SoftSheen, L’Oréal consolidates its position in the ethnic hair care market with the acquisition of Carson, owner of such famous products as Dark & Lovely. Already widely used in Africa, Carson provides the Group with an opportunity to strengthen its presence on the continent. The merger of the two brands in 2001 creates SoftSheen-Carson, the world leader in ethnic hair care products.

Kiehl’s Since 1851
L’Oréal acquires Kiehl’s Since 1851, a niche brand in the luxury market with an approach that is far from traditional: highly effective products made from natural ingredients, no advertising, wide,
targeted sampling, super-selective distribution, exceptional customer service. It represents a new territory for L’Oréal and a new source of inspiration.

L’Oréal acquires Matrix, the U.S. leader in professional hair care products, known for its youth,
creativity and quality. The objective: strengthen market share in the U.S., develop a brand that complements L’Oréal Professionnel and Redken and utilize its strong international potential.

• 2006 The Body Shop
Created by Anita Roddick, The Body Shop brand is reputed for its natural products and its ethical values of defending the environment, fair trading and social responsibility. This brand gives the company new inspiration for its sustainable development initiatives, and offers L’Oréal valuable retail expertise.

• 2007 Pureology
L’Oréal acquires Pureology, a high-end American professional hair care brand that targets hair colorists and sales through hair salons. The brand is mainly known for its sulphate-free shampoos that enhance hair color. The move adds a natural, ecological positioning for the Professional Products Division.

• 2008 YSL Beauté
YSL Beauté and its crown jewel, YSL, join L’Oréal’s Luxury Products Division on July 1, 2008. With this strategic acquisition, L’Oréal opens a whole new chapter in itshistory with the ambition of becoming the world leader in selective distribution. YSL Beauté has six brands of fragrance, makeup and skin care: Yves Saint Laurent, Roger&Gallet, Boucheron, Stella McCartney, Oscar de la Renta and Ermenegildo Zegna.