L’Oréal


History:

L’Oréal traces its roots to French chemist Eugene Schueller’s 1907 invention of the first synthetic hair dye. After Schueller had developed a market—largely among the hair salons of Paris—for his product, he founded a company he called Societe Francaise des Teintures Inoffensives pour Cheveux. Not long thereafter Schueller’s company changed its name to L’Oréal. After it had firmly established its hold on the market for hair dye, L’Oréal added soaps and shampoos. Within only a few years of the company’s founding, L’Oréal had expanded its sales outside France. By 1912 its products were being sold in Austria, Holland, and Italy. Eight years later, L’Oréal products were available in 17 countries, including Bolivia, Brazil, Chile, Ecuador, the Far East, Peru, the Soviet Union, and the United States, as well as the European countries in which L’Oréal had begun selling earlier. The company, still headquartered in Paris, had a staff of 10 sales representatives and three research chemists. In the 1920s L’Oréal was the first major French cosmetics maker to begin advertising on radio.

After World War II the demand for L’Oréal’s products grew rapidly. To serve its ever-growing market in the United States, the company in 1953 established a U.S. subsidiary called Cosmair (renamed L’Oréal USA in 2000) to oversee the distribution of L’Oréal’s hair products to U.S. hairdressing salons. Before long, Cosmair added L’Oréal’s makeup and perfume to its product offerings in the United States. Francois Dalle, a close associate of Eugene Schueller, took over the direction of the company after the death of the L’Oréal founder in1957. Dalle in 1963 took the company public, although Schueller’s daughter, Liliane Bettencourt, held on to a majority interest in her father’s company. An important step in the company’s diversification came in 1965 when L’Oréal acquired Lancome. In the early 1970s L’Oréal gained a foothold in the pharmaceuticals industry with its purchase of Synthelabo.

The 1980s saw L’Oréal emerge from the shadows of the international cosmetic business to become the industry’s biggest manufacturer. This was accomplished largely through strategic acquisitions, including the 1984 purchase of Warner Communications’ cosmetics operations, including the Gloria Vanderbilt and Ralph Lauren brand names; Helena Rubinstein and Laboratoires Pharmaeutiques Goupil in 1988; and an investment in Lanvin in 1989. In 1994 L’Oréal purchased control of its Cosmair U.S. licensee from Nestle SA and the Betten-court family. In 1995, L’Oréal purchased Maybelline for $508 million, thus becoming the second largest U.S. cosmetics producer, trailing only Procter & Gamble, which manufactures Cover Girl and Max Factor brand-name products. In 1997 the company purchased the sun protection brand Ombrelle; the following year it acquired Soft Sheen Products, a manufacturer of ethnic hair care products. In 2000 L’Oréal added another ethnic beauty products producer, Carson, which has since been combined with L’Oréal’s Soft Sheen and renamed Soft Sheen/Carson Products. The company in 2000 also acquired Kiehl’s Since 1851, a family-owned producer of natural cosmetic products, and Matrix Essentials, which produces products for use in beauty salons.

Marketing:

In 1987, during the growth years of the mail order business, L’Oréal and 3 Suisses founded Le Club des Créateurs de Beauté for mail-order sales of cosmetic products, with brands including Agnès b., Cosmence and Professeur Christine Poelman among others. In March 2008, L’Oréal acquired 3 Suisse’s stake, taking sole control of the company In November 2013, L’Oréal announced that Le Club des Créateurs de Beauté would cease activity in the first half of 2014.

In November 2012, L’Oréal inaugurated the largest factory in the Jababeka Industrial Park, Cikarang, Indonesia, with a total investment of US$100 million The production will be absorbed 25 percent by domestic market and the rest will be exported. In 2010, significant growth occurred at Indonesia with 61 percent increase of unit sales or 28 percent of net sales.

Other acquisitions:

In January 2014, L’Oréal finalised the acquisition of major Chinese beauty brand Magic Holdings for $840 million.

On 11 February 2014 it was announced that L’Oreal had sealed a deal worth €3.4bn to buy back 8% of its shares from Swiss consumer goods giant Nestle. As a result of the deal, Nestle’s stake in L’Oreal will be reduced from 29.4pc to 23.29pc while the Bettencourt Meyers family’s stake will increase from 30.6pc to 33.2pc. Nestle has owned a stake in L’Oreal since 1974 when it bought into the company at the request of Liliane Bettencourt, the daughter of the founder of L’Oreal and world’s richest woman, who was trying to prevent the French state’s intervention in the company.

On 20 February 2014, Shiseido agreed to sell its Carita and Decléor brands to L’Oréal for €227.5 million (US$312.93 million (2014)).

On 18 June 2014, L’Oréal agreed to acquire NYX Cosmetics for an undisclosed price, bolstering its makeup offer in North America where its consumer-products unit has faltered.

In September 2014, L’Oréal announced it had agreed to purchase Brazilian hair care company Niely Cosmeticos Group for an undisclosed amount.

In October 2014, L’Oréal acquired multi-cultural brand Carol’s Daughter.

In May 2018, L’Oréal announce a brand-new beauty and fragrance partnership with Valentino.

Head Office:

Centre Eugène Schueller, L’Oréal head office, in Clichy, France

L’Oréal Group has its head office in the Centre Eugène Schueller in Clichy, Hauts-de-Seine, near Paris.[17] The building, constructed in the 1970s from brick and steel, replaced the former Monsavon factory, and employees moved into the facility in 1978. 1,400 employees work in the building. In 2005, Nils Klawitter of Der Spiegel said “the building, with its brown glazed façade of windows, is every bit as ugly as its neighbourhood.” Klawitter added that the facility “gives the impression of a high-security zone” due to the CCTV cameras and security equipment. The world’s largest hair salon is located inside the head office building. As of 2005, 90 hairdressers served 300 women, including retirees, students, and unemployed people, per day; the customers are used as test subjects for new hair colours.

International units include:

  • L’Oréal USA, changed from Cosmair in 2000 –has its headquarters in New York City; responsible for the operations in the America
  • L’Oréal Canada Incorporated – Canadian operations based in Montreal
  • L’Oréal Australia – head office is in Melbourne
  • L’Oréal Nordic – head office is in Copenhagen Denmark
  • L’ORÉAL Deutschland GmbH – legal seat is in Karlsruhe, head office is in Düsseldorf .

Corporate governance

Jean-Paul Agon is the chairman and chief executive officer of L’Oréal.[23] Jean-Pierre Meyers and Peter Brabeck-Letmathe are vice chairmen of the board of directors.[23]

Stockholders

As at year end 2013:[24]

  • Breakdown of share ownership: 33.31% by the Bettencourt family, 23.29% by Nestlé, 21.8% by international institutional investors, 9.3% by French institutional investors, 5,7% by individual shareholders, 1.9% treasury stock and 0.7% by employees.

Business figures

In 2003, L’Oréal announced its 19th consecutive year of double-digit growth. Its consolidated sales were €14.029 bn and net profit was €1.653 bn. 96.7% of sales derived from cosmetic activities and 2.5% from dermatological activities. L’Oréal has operations in over 130 countries, employing 50,500 people, 24% of which work in France. 3.3% of consolidated sales is invested in research and development, which accounts for 2,900 of its employees. In 2003, it applied for 515 patents. It operates 42 manufacturing plants throughout the world, which employ 14,000 people.

  • Cosmetics sales by division breakdown: 54.8% from consumer products at €7.506 bn, 25.1% from luxury products at €3.441 bn, 13.9% from professional products at €1.9 bn, and 5.5% from active cosmetics at €0.749 bn.
  • Cosmetic sales by geographic zone breakdown: 52.7% from Western Europe at €7.221 bn, 27.6% from North America at €3.784 bn, 19.7% from rest of the world at €2.699 bn.

In 2007, L’Oréal was ranked 353 in the Fortune Global 500.[25] The company had earned $2,585 million on sales of $19,811 million. There were 60,850 employees.

By March 19, 2016 the company had a share value of 89,542 million euros, distributed in 562,983,348 shares. Its reported operating profit in 2016 was €4.54 bn based on revenue of €25.8 bn.

Joint ventures and minority interests

L’Oréal holds 10.41% of the shares of Sanofi-Aventis, the world’s number three and Europe’s number one pharmaceutical company. The Laboratoires Innéov is a joint venture in nutritional cosmetics between L’Oréal and Nestlé; they draw on L’Oréal’s knowledge in the fields of nutrition and food safety.

Corporate social responsibility

Group-wide sustainability plan

L’Oreal announced a new sustainability plan in 2013, which they hope will help reach the goal of 1 billion new consumers by 2020 by producing more products with less environmental impact and helping customers make sustainable lifestyle choices. The main commitments to achieve by 2020 include: aiming for 100 percent of its products to have an environmental or social benefit; reducing the company’s environmental footprint by 60 percent; and empowering consumers to make sustainable consumption choices.

Sustainable development

In 2009, L’Oréal declared their intention to cut greenhouse gas emissions, water consumption and waste by 50% over the period 2005-2015 – a deduction in carbon dioxide emissions that is to be in part achieved by the use of solar panels, biogas and electricity and hot water produced from the combustion of methane gas recovered from agricultural waste. In 2012, the company declared a 37.1% deduction in C02 Emissions, a 24% deduction in water consumption and a 22% deduction in transportable waste, and was named a sector leader by Climate Counts for its practices and achievements in the management of carbon emissions. In 2014, L’Oréal made the commitment to ensure that none of its products were linked to deforestation, and to source 100% renewable raw materials by 2020.The group was included in the Corporate Knights “Global 100” list of the 100 most sustainable companies.

Position on animal testing

Since the 80s, L’Oréal has invested €900 million in researching alternatives to animal testing for product safety, using methods such as reconstructed skin models, like the Episkin modelat their research centers in Gerland, France, and Pudong, China.

Nevertheless, this is complicated by markets such as China,where animal testing of all cosmetics for human use is mandatory.Cosmetics by brands such as The Body Shop, which refuses to do animal testing, are thus not available for sale in the Chinese market.

In 2013, L’Oréal was part of a consortium calling on the EU to invest more in research on alternatives to animal testing.

Community involvement and awards

In 2014, L’Oreal was listed 61st among 1200 of India’s most trusted brands according to the Brand Trust Report 2014, a study conducted by Trust Research Advisory, a brand analytics company.

In 2008, L’Oréal was named Europe’s top business employer by the European Student Barometer,a survey conducted by Trendence that covers 20 European countries and incorporates the responses of over 91,000 students.

The L’Oréal-UNESCO Awards for Women in Science was established to improve the position of women in science by recognizing outstanding women researchers who have contributed to scientific progress.

The awards are a result of a partnership between the French cosmetics company L’Oréal and the United Nations Educational, Scientific and Cultural Organization (UNESCO) and carry a grant of $100,000 USD for each laureate.

The same partnership awards the UNESCO-L’Oréal International Fellowships, providing up to $40,000 USD in funding over two years to fifteen young women scientists engaged in exemplary and promising research projects.

L’Oréal organises the yearly L’Oréal Brandstorm, a business game for students in 43 countries. The game is related to marketing and has a first prize of $10,000, a second prize of $5,000 and a third prize of $2500.

L’Oréal is also a founding member of the “Look Good…Feel Better” project, a charity which was formed over 16 years ago to help women combat the visible side effects of cancer treatment.

In 2015, Standard Ethics Aei gave a rating to L’Oreal in order to include it in its Standard Ethics French Index.

Advertising:

n May 2007, L’Oréal was one of several cosmetic manufacturers (along with Clinique, Estee Lauder, Payot, Lancôme) ordered by the Therapeutic Goods Administration in Australia to withdraw advertising regarding the wrinkle removal capabilities of their products.

In the UK, L’Oréal has faced criticism from OFCOM regarding the truth of their advertising and marketing campaigns concerning the product performance of one of their mascara brands. In July 2007, the British Advertising Standards Authority attacked L’Oréal for a television advert on its “Telescopic” mascara, featuring Penélope Cruz, stating, “it will make your eyelashes 60% longer.” In fact, it only made the lashes look 60% bigger, by separating and thickening at the roots and by thickening the tips of the lashes. They also failed to state that the model was wearing false eyelashes.

In July 2011, the British Advertising Standards Authority took action against L’Oréal, banning two airbrushed Lancôme advertisements in the UK featuring actress Julia Roberts and supermodel Christy Turlington. The agency issued the ban after British politician Jo Swinson argued that the two ads misrepresented reality and added to the self-image problem amongst females in the UK. L’Oréal acknowledged that the photos had been airbrushed but argued that the two cosmetic products could actually produce the results depicted in the ads and that the results of the products had been scientifically proven.

In June 2014 the company reached agreement with the U.S. Federal Trade Commission not to make claims about its anti-aging products unless it had credible scientific evidence supporting the claims. The settlement followed an investigation by the commission into claims being made in relation to two products, which the commission described as “false and unsubstantiated.”

L’Oréal has a team of 400 members of staff who post content to Facebook every day, according to Marc Menesguen, the company’s chief marketing officer.

Human Resources:

On 11 August 2005, the Supreme Court of California ruled that former L’Oréal sales manager Elyse Yanowitz had adequately pleaded a cause of action for retaliatory termination under the California Fair Employment and Housing Act, and remanded the case for trial. The case arose out of a 1997 incident in which Jack Wiswall, then the general manager for designer fragrances, allegedly told Yanowitz to fire a dark-skinned sales associate despite the associate’s good performance. When Yanowitz refused, Wiswall pointed to a “sexy” blonde-haired woman and said “God damn it, get me one that looks like that.” Wiswall retired as president of the luxury products division of L’Oréal USA at the end of 2006.

The company has recently faced discrimination lawsuits in France related to the hiring of spokesmodels and institutional racism. In July 2007, the Garnier division and an external employment agency were fined €30,000 for recruitment practices that intentionally excluded non-white women from promoting its hair wash, “Fructis Style”.L’Oréal is reported as saying the decision was “incomprehensible”,[59] and would challenge the measure in court.

In August 2017, L’Oréal dismissed Munroe Bergdorf, a mixed-race transgender model, after she responded to the Unite the Right rally in Charlottesville, Virginia by stating in a Facebook post that racism is institutionalized in society by white people. Shortly after terminating Bergdorf, L’Oréal released a statement reaffirming their commitment to “[support] diversity and tolerance towards all people irrespective of their race, background, gender and religion” and had terminated their partnership with Bergdorf because her comments were “at odds with those values.”

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