“THE FRENCH TOUCH”:
INTERNATIONAL BEAUTY
AND HEALTH CARE AT L’ORÉAL
(SINCE 1907)
Hubert Bonin,
professor in economic contemporary history
at Bordeaux Political Sciences Institute;
Carole Pailhé & Nadine Polakowski,
documentation & information officers at L’Oréal
French ‘articles de Paris’,
that is luxury or high level products dedicated to world-wide bourgeoisies all over contemporary
times, were most contemplated, admired, and sometimes bought, whilst they entertained dreams
among other non-buying people. Perfumes, jewellery, haute couture, home equipment, etc. conquered
large world market shares – like silk merchants of Lyon of Bordeaux wines traders. But the
perennity of individual companies has been questioned at the end of the 20th century as more and
more capitalist groups discovered that high profitability of luxury goods. South-African and Swiss
group Richemont, or French B. Arnault’s group, LVMH1, for instance, built large luxury groups in
the last decades of the century, then joined too by Pinault’s group or Taittinger’s group recently and
some others. Among familial companies, most disappeared owing to petty management or had been
purchased by groups. Paris Hermes familial company still resists to predators, but Christophle was
shaken by managerial crisis. Conversely to common sense, thus, most of the “ French touch ” didn’t
transform itself into keen management and strategy touch. But one familial company, L’Oréal,
succeeded anyway to become a multinational one, which raisas some questions about the means it
used to achieve that mastership2.
1. French beauty abroad: the first paths of L’Oréal (1907-1940)
L’Oréal had been founded by a young chemist, Eugène Schueller, in 1907, soon after having created
in 1907 the first synthetic hair dye. He registered that product along two brand names, Black &
Gold and L’Auréale, a name inspired by the hairstyle in fashion at that time, called L’Auréole, from
the Latin ‘aureola ”, golden crown and by extension a luminous and coloured halo. A few months
later the name was simplified into L’Oréal, which interestingly was derived from the Greek ‘orea’,
which means beauty… That very small company – which adopted the social name L’Oréal in 1909
– showed immediately the skills which explained its growth: besides entrepreneurship, as Schueller
expanded his activities with obstination and imagination, whilst being sustained by a small amount
of capital provided by an accountant (25 000 francs), Schueller established links with Paris hairdressers
to sell his products – he manufactured them at home… – and launched advertisement campaigns,
through a specialised trade journal, La Coiffure de Paris.
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Thirdly he didn’t fail to follow fashion moves: he launched thus in 1929 new colouring
products adapted to shorter hairs, Imédia Liquide. Fourthly Schueller developed a strategy of
lateral diversification toward hygiene and toiletry products in 1934 either through the buying
of Monsavon or through the invention of the first mass-market shampoo without soap, Dop,
before launching in 1935 Ambre Solaire, a sun tan oil – just before a leftist government established
two weeks paid holidays next year for Summer 1936! Selling and advertising skills, on
one side, a strategy of a balanced range of beauty and toiletry products, on the other side, all
factors of L’Oréal growth were then available at the end of the 1930s; the second half of the
century completed that development by enriching considerably the range and adding mass
marketing to sale skills. But in the meanwhile it had added new skills and strategies to its core
culture: internationalisation. As soon as 1910 in fact Schueller began to prospect foreign countries:
Austria and Italy, then Hungary, Germany, Belgium, Netherlands, Switzerland and
Russia. Of course bourgeoisies were supposed to be the main target as mass women hairdressing
was not such developed at that times and as many people practised hairdressing at home; but
more and more markets were enlarged during the interwar and L’Oréal products reached
Americas and the Far East.
2. Toward a large enterprise (1950s-1970s)
As more and more new products were launched by the company (Oréol, the first cold wave in
Europe in 1946 ; Régé-Color in 1951, which raised the hair-colouring culture amongst masses in
France; Elnett hairspray in 1960 ; purchasing of Garnier in 1964 ; Biotherm in 1970 ; Gemey in
1975, etc.), its dimension grew whilst Schueller staid as its chairman and manager up to 1957 –
helped by François Dalle, the executive officer since 1948, who became then chairman and chief
executive officer, up to 1983. Moreover he didn’t miss the enlargement of commercial distribution
and inserted quickly L’Oréal products into mass distribution, commercial chains, then supermarkets
and finally hypermarkets. But too L’Oréal established a strategy over perfume activities when it purchased
Lancôme in 1964 – with a high range of toiletries, make-up and perfumes, and more importantly
the access to high level ‘selective channels’ of distribution, deserved by the perfume sector –,
then when it created Guy Laroche Perfumes in 1965.
L’Oréal became little by little a large company (with the floatation of its capital on the Stock
Exchange in 1963). Then the equities capital was submitted to some kind of internationalisation:
the daughter and main heiress of Schueller, Liliane Bettencourt, and her family, agreed to
gather the control power into a holding company, Gesparal, owning about 54 % of L’Oréal (but
three quarters of voting rights), and to share the ownership of that holding with the Swiss multinational
group Nestlé (51 % to the Bettencourt family; 49 % to Nestlé); Nestlé kept a profile
of ‘sleeping partner’ anyway, with delegates on the board, but betted thus to be a future strategic
leader in case of some capitalistic restructuring whilst hindering any competitor to gain control
of the firm as a predator. This allowed indeed the development of an autonomous way of
life for L’Oréal, reinsured of its capital stability, whilst preserving the originality of its management
in front of Nestlé.
L’Oréal managed a large range of brands and of perfume, toiletry and hairdressing products
activities. It entertained therefore a policy of reproducing its selling skills in France all over the world
– whilst including within them the fresh methods of ‘marketing’, which built altogether an international-
minded style of management as L’Oréal had to learn these American methods and to use
them backwards to conquer overseas markets! At a time when international networks and habits
were not so mature, all the more as French economic and commercial power had been diminished
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in the 1930s/1940s, in some areas L’Oréal chose to grow its sale’s force through partnership. In Japan
it concluded an agreement with the Kobayashi Kose company in 1963; otherwise it reached agency
contracts with local firms: Cosmair in the United States, Lorsa-Fagel in Switzerland. Elsewhere some
subsidiaries were opened.
3. An international leadership in the last quarter
of the 20th century
The international strengths of L’Oréal couldn’t have taken shape without its innovative and commercial
skills. Innovation led to the build up of varied and solid research teams (about skin health
and treatment, for instance, in Sophia-Antipolis, on Côte-d’Azur, in 1979; about dermatology, for
instance around the liposome family, speciality launched in the group in 1986 through Lancôme),
to the creation of several products providing users with new methods or effects, and to defining an
image of innovation linked intimately with name of the company and several of its products range,
especially through advertisement. Commercial skills were constantly renewed, particularly owing to
the new chairman and CEO, Lindsay Owen-Jones, which led the firm since 1988, after almost
twenty years of commercial activities throughout L’Oréal beforehand3. The management of brands
and networks, the recurrent reshaping of selling strengths and marketing could therefore be developed
on an international level. In the meanwhile the range of brands was extended: Vichy (agreement
in 1975, then purchase in 1980), Plénitude in 1982, Helena Rubinstein in 1989, La Roche-
Posay in 1989, etc.
These major strengths could easily take root all over the world. L’Oréal decided to profit with
the emerging consuming markets in Central Europe owing to subsidiaries, set up since 1992
(Poland, etc.). A turning-point was 1994 when L’Oréal chose to take over its agents in the United
States, Cosmair, whilst it bought its agent in Switzerland (Lorsa-Fagel): it could thus integrate the
whole profit margins within its own accounts and unify commercial methods and advertisement
campaigns, through transoceanic taskforces.
This commercial internationalisation was reinforced through the purchase of foreign companies,
which could enrich L’Oréal with their own brands, product units and commercial networks. That
was the case with Redken Laboratories, in the United States in 1993, or with Procasa, in Spain in
1994-1997. But the 1996 year was earmarked to a key step in the make-up sector as L’Oréal became
suddenly the world leader: it bought Unisa, in Chile, Jade, in Germany, and especially Maybelline
(for 758 million dollars), one of the most distributed brand in the United States. Ombrelle was then
bought in Canada in 1997 (sun protection products) and Soft Sheen Products in the United States,
specialised in ‘ethnic’ cosmetic ranges, like Carson, bought in 2000 – before Argentina firm Miss
Ylang joined L’Oréal in 2000.
Asia became too a key target. Although Shiseido, the Japanese leader, is a huge world rival to
L’Oréal – in company with Procter & Gamble, Unilever or LVMH (through its activities in perfumes)
–, L’Oréal chose to launch bridgeheads in Japan: it gathered its cosmetic activities there into
a single subsidiary, Nihon L’Oréal, in 1996, before it bought in 1998 the Maybelline brands and
activities in that country. China discovered L’Oréal in 1996 through a joint-venture between L’Oréal
and the Suzhou Medical College, a medical university, the creation of a production unit, and the
development of advertisement and campaigns in order to learn young Chinese how to use beauty
products4 – before a plant was opened in Suzhu in 1999.
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4. A world leader: internationalisation and globalisation
This diversified way of growth5 explains how L’Oréal became in fact the most famous representative
of “ the French touch ”, in competition with LVMH’s for perfumes branches. Its leadership can be
asserted in four branches: hair-care, make-up, perfume and skin care; it manages about 13% of the
world’s cosmetic sales. In 1999 it gathers about 42 000 employees all around the world and entertained
networks among, pharmacies hairdressers and beautyshops, among mass sale enterprises and
among subsidiaries. Internationalisation has been completed on a commercial level for cosmetics:
Europe sales generated 56% of L’Oréal turnover in 1999 instead of 90% in 1988, whereas the
United States grew from 1,5% to 27%. The 2000 figures confirmed this evolution: North American
provided 30,3% of L’Oréal’s turnover, western Europe 50,6% and the other parts of the world6
19,1%: this balance between the European basis and worldwide expansion enhances the success of
the strategy entertained since a quarter of century: ‘the French touch’ is now shared by worldwide
consumers!
A sign of its true internationalisation is the very multinationalisation of its management: its
chairman is from Welsh origins; the task forces are being more and more mingled. The research centres
are more and more ‘globalised’, that is managed along specialities through specialised units: ten
cosmetic and dermatology research centres are the key basis of L’Oréal’s innovation (six in France,
two in the United States, two in Japan), but the group has set up links with several University
research units, in France or in China, for instance. This explains the innovative ability of that think
tank forces (2 300 researchers at all), with 2 000 patents registered through the last decade of the
20th century and nearly 40 000 international extensions.
Globalisation is mixed with local developments: Japan and China benefited from specialised
entities dedicated to Asian moods and lifestyles; in parallel and somehow competition with Paris,
New York has been transformed into a second world concept centre for L’Oréal in order to get more
adapted to American way of life and to manage Cosmair and Maybelline heirdom. But globalisation
becomes an irresistible trend as competitiveness implies that profitability be provided by the
intensification of L’Oréal’s wealthes, that is brands. More and more brands are emerging as world
brands – while some of them disappear into oblivion… –, therefore offered and managed all over
the world: then most important brands (eleven, precisely, in 2000) became “ umbrella brands ”, each
one covering a large range of products (L’Oréal, Laboratoires Garnier, Maybelline, Redken, Lancôme,
Helena Rubinstein, Biotherm, Vichy, Ralph Lauren, Georgio Armani Perfumes, La Roche-Posay) in several
specialities and on several markets (professionals, individuals, etc.).
For instance marketing and innovative L’Oréal’s skills have promoted the U.S. brand Maybelline
along a spectacular way: “Maybelline’s share of the nail-enamel market in the U.S. has climbed from
3 % to 15 % since 1996. Altogether, over the past three years, Owen-Jones has almost doubled
Maybelline’s sales, from 320 million dollars to 600 million, and pushed the brand into more than
70 countries. Sales outside the U.S. market now make up 50 % of total revenues. ”7 From a North
American brand Maybelline is being transformed now into a worldwide brand, agreggating well
established trademarks like Gemey in France, Jade in Germany and the one acquired only in 2000-
2001 in Argentina, Miss Ylang, which will all disappear in a few years ahead whilst Maybelline will
become a world brand covering middle-high ranges of products for women’s beauty in mass retailing
networks.
The group has too more insisted on the development of its luxury division (17% of L’Oréal’s
turnover in 2000) as a substantial profit margin giver…: Lancôme, Helena Rubinstein, Biotherm are
L’Oréal’s own brands and products, whereas Giorgo Armani, Cacharel and Ralph Lauren perfumes
are franchises trade marks; and it became a key owner of Japanese Shu Uemara in 2000, in order to
use it as a lever to enlarge its Asian market share.
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“A growing portfolio of international brands that has transformed the French company into the
United Nations of beauty”8! “L’Oréal’ s success is proof that when done right, global branding can
speed growth in mature consumer-market companies even when global markets themselves are
shaky […]. Its secret: conveying the allure of different cultures through its many products. Whether
it’s selling Italian elegance, New York street smarts or French beauty through its brands, L’Oréal is
reaching out to more people than just about any other beauty-products company in the world […].
L’Oréal’s strategy positions it beautifully to profit even further when the middle class begins to grow
again in emerging markets.”9 With a 10,7 billion euros turnover10 in 1999 (12,7 billions in 2000),
L’Oréal has well matched Schueller initiatives and hopes: after he had built a “French touch” company
for half a century, its successors have transformed L’Oréal into an “international beauty” company;
90% of its turnover are now achieved outside France. But an institutional corporate communication
operation, launched in 1997 - “Parce que je le vaux bien” or “Because I’m worth of it” –,
still insisted on “ L’Oréal-Paris ” as the ‘French touch’ has never been equalised in women’s dreams…
– all the more that French and international top models sustained the campaign.
Conclusion
Innovation and commercial skills had been the key tools of promoting L’Oréal through beauty and business
history; but “the French touch” which had been merely exported among bourgeoisies or hairdressers
(through ‘agencies’) has been transformed into a real transnational development. Solid research teams, a
huge network of controlled subsidiaries with three basic ‘domestic markets’ (France, Western Europe,
North America, before Eastern Europe, Asia and South America became new targets), a buying spree of
companies all over the world and a huge commercial move were the tools to that achievement. The cornerstone
might still be anyway ‘the commercial touch’, some way of commercial efficience which helped
the group to extend its market shares rapidly and massively; one example is provided thus by the
American case: whereas Bristol-Myers-Squibb was the leader in the United States for the hair-color products
owing to its division Clairiol, L’Oréal managed to shake over that position and to overpass Clairiol11
in 1998, before deepening its advance to a ten points leading market share in 2001…
Moreover globalisation did rebuild the firm’s organisation itself: research is managed on an international
level along specialised lines; New York and Paris (next: somewhere in Asia?) are both centres
of development; brands are managed on an international level and have created their own world
market along specialised networks, trade-marks’s reputation, advertisement stars, multigenerational
segmentation, etc.; some plants have been “regionally globalised” as in every globalised firm: since
1999 the Spanish Burgos plant delivers any products linked with the professional markets (hairdressers,
etc.) for the whole European area and is equipped with a logistics delivery centre used to
the ‘just-in-time’ new industrial civilisation.
But all over that, well over world-wide expansion, L’Oréal altogether as a trade-mark reference –
as both L’Oréal ranges for professionals and individuals provided 25 of the 71 billions francs
turnover of the group in 2000 – and a company’s image has been preserved. Conversely Coca-Cola
is (almost) a single trade-mark-single-product group, no buyer does know anything about Unilever
or Procter & Gamble12 whilst buying their beauty products. Only Nestlé or – still far away as a wellknown
world brand, even as its Paris centre has been launched in the 1990s – Shiseido managed to
balance their own trade-mark and their ranges of brands, and Danone is hardly trying to learn it
since the 1980s in front of strong foodbusiness competitors.
Anyway a subtle strategic difference prevents any confusion between L’Oréal and its French competitor
LVMH. First of course L’Oréal had kept its core business of “beauty’ products, either on the
highest levels of consuming trends or on mass markets, along brand names and distribution networks,
whereas LVMH has gathered a large range of luxury and middle-high-levelled products, from
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perfumes to spirits and Haute Couture. Even if both companies do entertain common market segments
and may use similar marketing methods, they are deeply different. Moreover LVMH gave
priority to a dualist strategy; as it reinforces its products ranges and brand names, along a policy of
fashion, it has in fact built in the meanwhile a strategy of controlling and developing all by itself specialised
distribution networks for its beauty and perfumes products, like the beauty shops chain
Sephora or the luxury products chain DFS all over the world, as it intended to cash any piece of the
profits margin from the conception of the product and of the trademark down to the consumer, all
along the production and the distribution process.
Conversely L’Oréal kept its core strategy and skills of inventing products and building their brand
name and aura without trying to reach the consumer itself through it own distribution networks; it
uses prescriptors of its products – hairdressers and petty or hypermarket retailers – and respect their
independance, even if its marketing forces are in charge of enhancing L’Oréal products among them
and to push consumers to ask for the group’s brand names; its chairman reaffirmed its desire to keep
its ‘industrialist’ profile. That strategy might seem anyway less capital consuming than the huge offensive
launched in the 1980s (and especially since the 1990s for beauty products) by LVMH. Last one
might pretend that although L’Oréal might be perceived as more linked with “the French touch” and
the Paris image, it has much more developed a worlwide strategy of aggreggating world brand names
and thus has mixed ‘global’ and ‘local’; LVMH might appear as a pure international promotor of
French brands –Yves Saint-Laurent, champagne, cognac, wines, perfumes, Louis Vuitton, the perfumes
of its Haute Couture divisions – and less internationalised in its range of products and trademarks
– except for the Spanish one, Loewe a recently some italian ones. This proves that groups which
might appear similar are entertaining in fact different strategies, cultures, skills.
NOTES
1. Cf. Patrick Eveno, “La construction d’un groupe international : LVMH”, in Jacques Marseille (ed.), Le luxe en France, du siècle
des Lumières à nos jours, publications de l’ADHE-Association pour le développement de l’histoire économique, Paris, 1999, pages
291-321.
2. This text has been written by Hubert Bonin, professor at Bordeaux Political Sciences Institute, owing to documents provided by
Carole Pailher, one gradutate from that very Institute, and Nadine Polakowski, both officers at L’Oréal’s documentation & communication
entity. H. Bonin assumes any responsibility for the development of that text.
3. After several years in the selling division from low levels upwards, L. Owen-Jones managed L’Oréal-Italy in 1978-1981, then
presided over Cosmair-US in 1981-1984, before becoming vice-president and chief executive officer of L’Oréal in 1984 and reaching
to the chairmanship in 1988, up to now.
4. Cf. Béatrice Peyrani, “85 millions de jeunes Chinoises dans la cible de L’Oréal”, L’Expansion, 17th December 1998, n°587, pages
66-68.
5. We will not here tell anything about the control of pharmaceutical company Synthelabo, since 1973, which merged with Sanofi
in 1998, into Sanofi-Synthelabo, where L’Oréal keeps still 20%.
6. Japan : 407 millions euros, others parts of Asia : 469 millions ; Latin America : 791 millions ; eastern Europe : 239 millions ;
the global turnover reaching 12,3 billions euros in 2000.
7. Business Week, “L’Oréal, the beauty of global branding” ,18th June 1999.
8. Business Week, 18th June 1999.
9. Ibidem.
10. L’Oréal’s consolidated turnover grew from 27,1 billions francs in 1989 to 70,5 billions in 1999 and 12,3 billions euros in 2000.
11. Procter & Gamble has just bought the Clairiol division from Bristol-Myers-Squibb in May 2001 for a 4,95 billions dollars fee.
The Clairiol division is second to L’Oréal in the world for hair color products.
12. The share of Procter & Gamble cosmetics, body-care and beauty products (Pantene, Head & Shoulders, Vidal Sassoon) and health
products in its global 39,9 billions dollars turnover reached 28,32% in 2000 – with only 18,6% for the cosmetics, body-care and
beauty products division itself – the major part coming in fact from housekeeping products (30,3%) and food business (11,5%).
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