MBA Resources And Advice: The L'Oréal Group

Source: Wikipedia
The L'Oréal Group is the world's largest cosmetics and beauty company.^[2] With its registered office in Paris and head office in the Paris suburb of Clichy, Hauts-de-Seine, France,^[3] it has developed activities in the field of cosmetics. Concentrating on hair colour, skin care, sun protection, make-up, perfumes and hair care, the company is active in the dermatological and pharmaceutical fields and is the top nanotechnology patent-holder in the United States.
L'Oréal is a listed company, but the founder's daughter Liliane Bettencourt and the Swiss food company Nestlé each control over a quarter of the shares and voting rights.

History

In 1907, Eugène Schueller, a young French chemist, developed a hair dye formula called Auréole. Schueller formulated and manufactured his own products, which he then sold to Parisian hairdressers.
In 1909, Schueller registered his company, the Société Française de Teintures Inoffensives pour Cheveux ("Safe Hair Dye Company of France" literally "French Society of Inoffensive Hair Dyes"), the original L’Oréal. The guiding principles of the company, which eventually became L’Oréal, were research and innovation in the field of beauty.

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In 1920, the small company employed three chemists. By 1950, the research teams were 100 strong; that number reached 1,000 by 1984 and is nearly 2,000 today.
L’Oréal got its start in the hair-color business, but the company soon branched out into other cleansing and beauty products. L’Oréal currently markets over 500 brands and many thousands of individual products in all sectors of the beauty business: hair color, permanents, hair styling, body and skin care, cleansers, makeup and fragrances. The company's products are found in a wide variety of distribution channels, from hair salons and perfumeries to hyper - and supermarkets, health/beauty outlets, pharmacies and direct mail.
L’Oréal has five worldwide research and development centers: two in France: Aulnay and Chevilly; one in the U.S.: Clark, New Jersey; one in Japan: Kawasaki, Kanagawa Prefecture; and in 2005, one was established in Shanghai, China. A future facility in the US will be in Berkeley Heights, New Jersey.
From 1988 to 1989, L'Oréal controlled the film company Paravision, whose properties included the Filmation and De Laurentiis libraries. StudioCanal acquired the Paravision properties in 1994.
L’Oréal purchased Synthélabo in 1973 to pursue its ambitions in the pharmaceutical field. Synthélabo merged with Sanofi in 1999 to become Sanofi-Synthélabo. Sanofi-Synthélabo merged with Aventis in 2004 to become Sanofi-Aventis.
On 17 March 2006, L'Oréal purchased cosmetics company The Body Shop for £652 million.
The company has recently faced discrimination lawsuits in France related to the hiring of spokesmodels and Institutional racism. In the UK, L'Oréal has faced widespread condemnation from OFCOM regarding truth in their advertising and marketing campaigns concerning the product performance of one of their mascara brands.
A book by Monica Waitzfelder, published in French as L'Oréal a pris ma maison and in English as L'Oréal stole my house!, details how L'Oréal, a company claimed to be anti-Semitic by the author, took over the Waitzfelder home in the German city of Karlsruhe (after the Nazis had engineered the removal of the family) to make it its German headquarters.^{[citation needed]}
L'Oréal's famous advertising slogan is "Because I'm worth it". In the mid 2000s, this was replaced by "Because you're worth it". In late 2009, the slogan was changed again to "Because we're worth it" following motivation analysis and work into consumer psychology of Dr. Maxim Titorenko. The shift to "we" was made to create stronger consumer involvement in L'Oréal philosophy and lifestyle and provide more consumer satisfaction with L'Oréal products. L'Oréal also owns a Hair and Body products line for kids called L'Oréal Kids, the slogan for which is "Because we're worth it too".
Protest group Naturewatch states that L'Oréal continues to test new ingredients on animals.^[4] The company states that no animal testing for finished products has taken place since 1989 and that L'Oreal has invested significantly in alternative methods for chemical safety testing, ^[5], though they implicitly acknowledge that they continue to perform animal testing of ingredients.^[6]
Following L'Oréal's purchase of The Body Shop, who continue to be against animal testing, The Body Shop founder Dame Anita Roddick was forced to defend herself against allegations of abandoning her principles over L'Oréal's track record on animal testing. She declared that her belief in the power of cosmetics to enhance female beauty was greater than any concern over animal testing. As a result, calls were made for shoppers to boycott The Body Shop.^[7]
In 1987, L'Oréal and 3 Suisses founded Le Club des Créateurs de Beauté specializing in mail order sales of cosmetic products.

Business

Corporate governance

Board of directors

Current members of the board of directors of L’Oréal are: Jean-Paul Agon, Francisco Basco, Werner Bauer, Liliane Bettencourt, Françoise Bettencourt Meyers, Peter Brabeck-Letmathe, Charles-Henri Filippi, Xavier Fontanet, Bernard Kasriel, Marc Lacharrière, Jean-Pierre Meyers, Lindsay Owen-Jones, Franck Riboud, Annette Roux and Louis Schweitzer.

Management committee

The management committee includes:

Jean-Paul Agon, Chief Executive Officer
Frederic Roze, Chief Executive Officer, L’Oréal USA
Béatrice Dautresme, EVP of Corporate Communications
Jean-François Grollier, EVP of Research and Development
Christian Mulliez, EVP of Finances
Jean-Jacques Lebel, President of Consumer Products
Nicolas Hieronimus, President of Professional Products
Geoff Skingsley, EVP of Human Resources
Marc Menesguen, President of Luxury Products

Stockholders

As at year end 2009:^[1]

Breakdown of share ownership: 31.0% by the Bettencourt family, 29.8% by Nestlé, 2.4% treasury shares, and the remaining 36.8% is publicly traded.

Sales, profits, etc.

In 2003, L’Oréal announced its 19th consecutive year of double-digit growth. Its consolidated sales was €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.^[8] The company had earned $2,585 million on sales of $19,811 million. There were 60,850 employees.^[8]

Joint ventures and minority interests

L’Oréal holds 10.41% of the shares of Sanofi-Aventis, the world's number 3 and Europe's number 1 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. Galderma is another joint venture in dermatology between L'Oréal and Nestlé.

Community involvement and awards

In 2008, L'Oréal was named Europe's top business employer by The European Student Barometer,^[9] 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. [1]
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.^[10]

Claims of racial discrimination in advertising, and other litigation

On August 11, 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.^[11] 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.
In May 2007, L'Oréal was one of several cosmetic manufacturers ordered by the Therapeutic Goods Administration in Australia to withdraw advertising regarding the wrinkle removal capabilities of their products.^[12]
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 shampoo, "Fructis Style".^[13] L'Oréal is reported as saying the decision was "incomprehensible",^[14] and would challenge the measure in court.
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.^[15]

Brands

Brands are generally categorized by their targeted markets, such as the mass, professional, luxury, and active cosmetics markets.

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.^[16] 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.^[17] The building is often referred to as the "Beauty Factory" by the public. In 2005 Nils Klawitter of Der Spiegel said "the building, with its brown glazed façade of windows, is every bit as ugly as its neighborhood." 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.^[18]
L'Oréal USA has its headquarters in New York City,^[19] its New Jersey headquarters is in Berkeley Heights.^{[citation needed]}