What’s Driving L’Oréal’s Consumer Products Division’s Growth?

PARIS — L’Oréal’s Consumer Products Division was back to black in the third quarter of 2020, buoyed by a three-pronged recovery plan.

The first part of the acceleration strategy, which was conceived during France’s first lockdown this spring, was to maintain a strong innovation pipeline, so “we could come back now in the back half of this year, next year with strong, relevant innovations,” said Alexis Perakis-Valat, president of the Consumer Products Division. He cited as an example L’Oréal Paris Revitalift Retinol Night Serum, which is launching in the U.S.

The largest division within the world’s biggest beauty maker, the Consumer Products Division saw organic sales rise 0.8 percent to 2.86 billion euros in the July-to-September period, despite wide exposure to the soft makeup category. Of the more than seven billion product references L’Oréal sells, more than five billion come from that division.

Its Garnier brand registered a double-digit sales increase, and L’Oréal Paris, the world’s largest beauty label, returned to growth during the period, as did the Consumer Products Division in North America, among the quarterly highlights.

The second part of the division’s plan was a strategy called Back to Beauty. It involves consumer insights being gathered and analyzed to help inform beauty operations codesigned with retailers.

“We’re super committed to partnering with our retailers around the world, to help them reinvent the in-store beauty experience,” said Perakis-Valat. “That’s extremely critical for us.”

He described L’Oréal’s vantage point on the beauty industry as unique — being both global and multichannel.

“When you talk about skin care to a mass retailer, the fact of having insight of what’s happening in pharmacies or in department stores is a huge source of insight,” said Perakis-Valat. “What’s happening in South Korea and China is very valuable in the collaboration with retailers.”

L’Oréal has, for instance, partnered with Watsons in China on the Color Lab for a makeup experience, and with Carrefour in Europe on the Beauté Plurielle project to transform the beauty space, starting in the Carrefour Carré Sénart location in France.

The third part of the action plan has been to invest in such operations and innovations.

The coronavirus pandemic has catalyzed what Perakis-Valat called “beauty revolutions” already brewing. He highlighted three, with one related to digital. “We are at plus-50 percent this year on e-commerce,” said Perakis-Valat, adding that’s on top of a strong performance last year.

The momentum isn’t waning.

L’Oréal Paris was the first global beauty brand to have a store on Tmall in China, a country with the most advanced e-commerce channel anywhere.

“Since then, we’ve retained and amplified this leadership,” said Perakis-Valat.

During the recent Singles’ Day holiday, L’Oréal Paris ranked first among mass-market beauty brands on Tmall, where 3CE Stylenanda was in the top five makeup brands. And L’Oréal Paris was the best-selling beauty brand on JD.com.

“There’s very big momentum in China that has been growing,” he explained, referring to e-commerce. “What’s interesting this year is that we’re seeing that everywhere in the world. We’re having great results in the U.S., Europe and emerging markets.”

The Consumer Products Division has amplified digital beauty services, such as virtual try-ons and diagnosis, which help enhance conversion rates.

There’s the “green revolution,” which the division harnesses in various ways. Garnier, for example, continually ramps up its green theme. In October, the brand launched Ultra Doux Solid Shampoo with 94 percent plant-based ingredients in Western Europe.

“[It] foams, smells and cares like a shampoo with zero plastic,” said Perakis-Valat. “We’re convinced that the green revolution will be also about innovation.”

Another example is Elseve, billed to be the first large beauty brand in Europe producing 100 percent of its bottles from recycled plastics. It’s now launching pouches.

The division’s homegrown organic skin-care brand, La Proven?ale Bio, has been growing business in France, launched in Belgium in early 2020, and is expanding in Spain and Italy.

The third revolution Perakis-Valat outlined is purpose-led.

“More than ever, for consumers, employees — all our stakeholders — this importance of purpose is absolutely paramount,” he said.

Each of the division’s brands is involved. L’Oréal Paris, for instance, this year started its Stand Up Against Street Harassment program. Maybelline, the largest makeup brand worldwide, has the Brave Together mental health initiative.

Such beauty revolutions are both opportunities and challenges.

“Opportunities, because they’re changing the market for the better. Challenges because if you don’t embrace them with the right determination, you have the risk of becoming irrelevant,” said Perakis-Valat.

Another challenge for the division is that sales in many segments of the makeup market are down, such as the lip category, due to widespread mask-wearing.

“That’s a short-term challenge,” said Perakis-Valat. “Makeup has always been a cyclical business. On top of that, we’re convinced that when this [pandemic] will be over, there might be a boom of makeup. Makeup has always been a category where you’ve got to evolve with the zeitgeist,” he added, pointing to the rise of non-transfer products as a case in point.

Perakis-Valat noted that Gen Zers haven’t lost their appetite for makeup. Among the most recent successful launches for the division was Maybelline’s Lifter Gloss, reaching a young target group. He said such screen-friendly products work well.

L’Oréal has seen a boom in hand care, so it’s dialed up its offer in that segment. Concurrently other trends are rising because of lockdowns. One is at-home beauty.

“That’s why, for example, we’ve launched a product in the U.S. that we’re going to roll out in Europe, which is called Wonder Water,” said Perakis-Valat, referring to a South Korea-inspired product that’s said to moisturize hair after an eight-second leave-on period, prior to rinsing.

Another mounting trend is the focus on “care.”

“Care in general is really very dynamic,” he said.

One more ingredient in the division’s success is leveraging cross-fertilization between geographies, like bringing innovations conceived in the West eastward, or vice versa. Agility and collaboration have been key during these volatile times.

“We’ve never needed each other so much, both between functions and between geographies of the company,” said Perakis-Valat. “That’s one big learning for me and for us in terms of leadership.”

The executive looks to the future with great optimism. “In spite of everything that is happening, there are some macro trends that are extremely positive,” he said, noting the rise of the middle class.

“That’s the driving force behind the development of beauty consumer products,” he said, explaining another trend is increasing urbanization, which syncs with more people having disposable income and social uses for beauty products.

Further, there are growing aging populations in many countries.

“We know that the more people age, the more they use beauty products,” continued Perakis-Valat. “On the other side of the spectrum, the younger part of the population is craving more [beauty] products. So you’ve got on both sides positive forces for consumer products.”

Skin care for men represents a big opportunity for L’Oréal’s Consumer Products Division, too.

“We see that people around the world keep looking for beauty solutions that are more efficient, more advanced, more pleasurable,” said Perakis-Valat. “There is this eternal desire and quest for beauty, which is the driving force of the market. So if you put that all together, the future is pretty exciting.”

For more, see:

L’Oréal Q3 Sales Broadly Beat Expectations

E-commerce: ‘The New Name of the Game’ at L’Oréal

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