L'Oréal's success is built on a strong foundation. The world's largest beauty products company, it creates cosmetics, perfume, and hair and skin care items for the mass-market (its L'Oréal Paris and Maybelline brands), the luxury market (Lancôme), and for the retail and salon sectors (Redken and SoftSheen/Carson). L’Oréal, which owns SkinCeuticals, also conducts cosmetology and dermatology research. L’Oréal generates about two-thirds of sales outside Europe, and in 2015 China surpassed France as its second-biggest market, behind the United States. L’Oréal also owns the UK-based natural cosmetics retailer The Body Shop International, which numbers some 2,500 stores in over 60 markets worldwide.
L'Oréal's cosmetics segment generates some 96% of its revenue and is organized into four divisions: Professional Products (salon hair care), Consumer Products (hair and skin care, makeup), L'Oréal Luxe (beauty products, fragrances), and Active Cosmetics (dermo-cosmetic products). The largest operational division by revenue is Consumer Products, which accounts for nearly 50% of the cosmetics total. The non-cosmetics revenue comes from its Body Shop business, which brings in just over 4% of total revenue.
L'Oréal has a global reach and sells its products across 140 countries. The cosmetics division makes just around a third of sales in Western Europe, while North America pulls in just over a quarter. The growing Asia-Pacific region accounts for some 22% of sales. In addition, in order to tailor its presence to the local market, the beauty company operates 18 research centers, 16 evaluation centers, 45 factories and some 70 distribution centers worldwide, as well as a handful of development and learning centers.
Sales and Marketing
The company sells its beauty items globally through retailers, distributors, and online. L'Oréal's consumer products division distributes products worldwide to mass-market channels, such as supermarket, drug stores, and mass merchants.
Note: Growth rates may differ after conversion to US Dollars.
L'Oréal grew strongly in 2015, continuing a positive trend started in 2010. Revenue was up 12% year-over-year and reached an all-time high of €25.2 billion, although three-quarters of growth was due to favourable exchange rates. Consumer Products and Active Cosmetics racked up the biggest chunk of sales growth at a combined €2.1 billion, on the back of strong performances in what L'Oréal calls its New Markets (Asia-Pacific (including Japan), Latin America, Eastern Europe and Africa and the Middle East). In regional terms, while Western Europe saw a small expansion in 2015, North America grew by €1.3 billion and New Markets by €0.9 billion.
Following along with revenue, net profit was also up 12% in 2015, hitting €3.5 billion and cash flow from operations was up 9% to €4.2 billion.
Emerging markets remain a focus for expansion, and L'Oréal has added new facilities in Egypt, Kenya, China, Indonesia and India in order fulfil its "Universalisation" approach, i.e. globalization that captures, understands and respects differences, and to swell its pool of consumers by its target of a billion. The company reports 60% growth in emerging markets between 2005 and 2015.
L'Oréal is pushing hard into the digital sphere: online sales grew nearly 40% in 2015 and are now equal to revenues from the company's fifth-largest country. A quarter of L'Oréal's media spending is now focused on digital, and the company is looking to capitalize on the appearance-conscious "selfie generation" that has been a driving force in the recent explosion in the global makeup market.
Mergers & Acquisitions
The uncertain global economic climate means L'Oréal's recent aggressive expansion has eased. In 2015 the only acquisition was of Brazilian hair care group Niely Cosméticos for €140 million, and in 2016 L'Oréal USA acquired Raylon Corporation as part of its drive to shore-up its professional products division against increasing competition.
Liliane Bettencourt, director and daughter of founder Eugène Schueller, is L'Oréal's primary stockholder and the world's second-richest woman. She and her family own about 31% of the company's shares, while Nestlé owns about 30%. The Bettencourts and Nestlé have been indirect owners of L'Oréal through the Gesparal SA holding company for some 30 years. (Gesparal merged into L'Oréal in 2004.)