Leaders with Lacqua: Nicolas Hieronimus L'Oreal Incoming CEO & Jean-Paul Agon L'Oreal Outgoing CEO

As the world's largest beauty and cosmetics group, L'Oreal has been keeping faces fresh for more than a century. Now it's time for a fresh face at the top. After 15 years at the helm, the chief executive Jean-Paul Agon is handing over the reins to his deputy Nicolas Hieronimus. Having spent his entire career with the French firm, working across all countries and categories, the 57-year-old is steeped in L'Oreal's history and tradition. But he takes over at a time of great change in the world, with the pandemic, digital technology, and the ever-increasing importance of sustainability and ethical business practices presenting new challenges for the modern chief executive. So what's his game plan, and what parting advice can he expect from his long-time mentor?

Joining me on the special edition of Leaders with Lacqua are incoming L'Oreal chief executive Nicolas Hieronimus and his predecessor Jean-Paul Agon. Nicolas, thank you so much for joining us on Leaders with Lacqua. Now I know we're going to have a great conversation over the next 30 minutes to talk about some of the things ahead for you, Nicolas, and some of your achievements so far, Jean-Paul. But on this month where you stepped down, is it bittersweet?

And what are you most excited about? You've been deputy chief executive for four years. You're only the sixth chief executive in 111 years. With that, of course, comes a lot of responsibility.

Yeah, it's a great responsibility. And first of all, I must say it's a great honor to have been chosen to be the next CEO of L'Oreal, a great honor to follow in the footsteps of Jean-Paul, who's been challenging me and grooming me for many years. And what I'm very excited about, what I'm most excited about, is about beauty in general because I think it's a fantastic industry. There are many, many things to invent. The beauty of the future will be different, but it's still an industry that contributes to people feeling great about themselves, expressing their individuality, and that's very exciting in itself.

So Jean-Paul, when did you start working on a succession plan?

I know you're just starting out, Nicolas, but when will you start thinking about succession? When I speak to chief executives, they say you can plan for crisis, you can be nimble, you can create a great organization, but succession is one of the hardest things to do and get right.

Well, you know, I guess I'll have a few things to do in the first weeks, but I'll be thinking about succession pretty soon. And I think it's one of the most important responsibilities of a CEO because this company has been successful for over 110 years, and we have to prepare for the continuation of this success. But what makes me very positive about this prospect is that I know that L'Oreal has an incredible pool of talents, and I'm really sure that once again I will be able to find within the company somebody great to follow me.

How important is it, Nicolas, that it's someone internally? When you were groomed and then became deputy chief executive, what were some of the advice that you heard? How were you prepared for the job that you're about to take?

Well, you know, I was prepared through a long-standing career at L'Oreal. I started at L'Oreal in 1987. I was 23 years old, so I'm 57 now, 34 years in the company. And in these 30 years, I had many different jobs, many different experiences, countries, and brands. And that's what prepares you. There's no teaching to become a CEO. You learn on the job, and you learn through experiences that you've gone through. I've been managing countries like Mexico or the UK, I've been leading big brands like L'Oreal Paris or Garnier, and recently divisions. And that's what you learn. And then I guess for the rest, I've also learned a lot from Jean-Paul because I've been working next to him for the last 13 years in the executive committee, four years as his deputy. And just by observing the best, you learn some of the tricks and some of the great things to do. And I think I've had a great master.

Was there ever any doubt that it had to be someone from the inside?

So what was the most important process, Jean-Paul, you think of choosing Nicolas to succeed? Is it that you have to have enough managers, a talent pool in the kind of medium base so that you can grow them up? Is it a four or five year process? What have you learned at your time in charge? What's the secret sauce to choosing the right woman or man?

Do you remember? I'm sure you do remember, but can you share the moment or the day that they told you you had the top job?

Yeah, I remember it very well. It was a very solemn ceremony with the nomination committee when they announced to me that I was the chosen one and what were the reasons why they chose me. And of course, there was a lot of solemnity, so I didn't jump on my chair. I just felt the pride. I remember back 34 years ago when I first entered the Saint-Jean Schueller in Clichy, the head office of L'Oreal. And also I felt, beyond the pride, the honor and the responsibility both towards this nomination committee, towards the shareholders, and towards the 85,000 employees of L'Oreal, many of whom have worked with me across pathways. So it was a moment of great pride, satisfaction, but also a great responsibility.

And at this point, what do you think will be your biggest challenge for L'Oreal in the next 10 years?

Well, you know, my biggest challenge is to continue what we've been doing for the last century, which is growing regularly, outperforming the market, delivering steady growth of top line and profits, and continuing to invent new beauty products or services that satisfy women's and men's beauty dreams or beauty expectations. And that's going to be, as always at L'Oreal, a combination of science, because we are a company that was founded by a chemist, based on science, science amped up by technology, but also creativity. And I think this magic mix between real science and flair is what makes L'Oreal unique, and that's what will allow us to invent the beauty of the future.

Jean-Paul, you will be remembered, your legacy will be for the person that brought L'Oreal to China successfully. Is there anything that you or somebody had told you when you started out as chief executive?

Up next: the global pandemic has seen mask-wearing become the new normal, not exactly good news for a cosmetics maker. How is L'Oreal responding to the challenge, and how quickly does it see the market recovering? We are convinced that when the pandemic is over, when people get back to a normal social life, when they meet each other, the party makeup will bounce back.

What good is a perfect shade of lipstick if your face is covered? As a world was told to mask up, L'Oreal had to switch up. Repeated store closures caused by lockdowns meant that selling online became even more important. Now the company is predicting a roaring 20s for makeup and fragrances. My conversation with the outgoing chief executive Jean-Paul Agon and the incoming chief executive Nicolas Hieronimus continues.

We believe that, and we have evidence, that makeup as a category will bounce back as it always had. You know, makeup of all the beauty categories is the most cyclical one because it's related to fashion. And right now, the mask fashion is not really favorable to makeup. But we know that and we are convinced that when the pandemic is over, when people get back to a normal social life, when they meet each other, the party makeup will bounce back. And actually, when we see the first results from countries where the pandemic has been kind of contained, I'm thinking of Israel where the vaccination level is high, Australia, and even recently in the USA, we see the makeup market accelerating strongly. So makeup will come back. Now, as far as other trends or categories that are going to be impacted by the COVID pandemic, very clearly skincare in general will be the fastest growing category. And beyond the skincare category, there is a strong expectation of safe products, products which are transparent about their composition. And that is very well illustrated by the fantastic success we have with our active cosmetics division. A brand like CeraVe, which you may know, which is typically a skincare product prescribed by dermatologists, it's doubling its turnover last year and again first quarter. So there is a very strong expectation from consumers of products to treat themselves, but also of products they can really trust. And that's going to be, I think, one of the strongest trends of the years to come.

And you've got social media changing everything. It's changing the way that people shop, what they see, what they have access to, and it's also changing the way that certain makeup brands, smaller makeup brands, actually distribute and sell directly to the consumer. What does that mean for L'Oreal?

Well, you know, it's new competition, and there's always been new competition. We often say we love competition because it keeps us on our toes. There's always something to learn from a new way to engage the consumer. But in the long run, what we see is that our biggest brands, brands like Lancôme, L'Oreal Paris, Yves Saint Laurent, Armani, if you take the last decade, they've grown faster than the average of the market because they've learned the ways of working with influencers, engaging consumers on the social networks. But at the same time, they keep the benefit of their scale, their media power, their roots, and the trust they build with consumers. So we see this new competition as exciting, sometimes challenging, but it doesn't make us fear at all. And we are actually beating the market. The growth we published a couple of days ago is twice the estimated growth of the beauty market for Q1 2021. And globally, I think that's going to continue.

You could, I think your online sales at L'Oreal at the moment are about 30%. How fast do you think they can increase? And again, a lot of your sales also happened in airports, and it's unclear what the future of the travel industry looks like from here.

Yeah, it's a very good question. As far as e-commerce is concerned, it's true that I remember when Jean-Paul declared 2010 the year of digital, we didn't really know what he meant, but we just jumped on it with all the passion and agility of the L'Oreal teams. And today, you're right to say that e-commerce is almost a third of our sales. Our estimation, it's hard to predict, but we have to get ready. It's possible that e-commerce will represent up to 50% of our total sales, and that might not be too long away from now. So it's important for us to be ready in terms of teams, supply chain, systems. But I think it's quite possible that we live in a perfectly balanced online-offline world where consumers will be looking for experiences in brick-and-mortar stores and enjoy the convenience of buying products from the comfort of their home. So 50% doesn't sound like a stupid number. As far as travel retail is concerned, it's true that today people don't travel, although we see travel picking up a little bit in Asia. So as far as air traffic is concerned, people debate whether it's going to be back to normal in 2023 or later. What we think is that the beauty market within travel retail will recover faster because people who travel, mainly the Asian consumers, will now represent the vast majority of the travel retail market. They love beauty, and they'll be buying beauty products in airports. And beyond airports, there is this new great place that you've heard about called Hainan, a great island on the south coast of China which is a duty-free zone, where hundreds of millions of Chinese are going. And when I see the numbers from Chinese New Year, it was a great shopping moment for them. So that's going to be also part of the rebound of the travel retail market.

Up next: sustainability, ethical business practices, and inclusion are all hot topics for consumers and of key importance to modern day businesses. We look at the challenges of being a chief executive in 2021. Very clearly, the beauty of the future will have to be more inclusive, more generous, more sustainable.

Being a chief executive in 2021 means more than just focusing on the bottom line. Consumers are increasingly demanding that companies respect the environment as well as the constantly evolving social landscape. Outgoing chief executive Jean-Paul Agon tells us how the pressures of the job have changed over the last decade, and his successor Nicolas Hieronimus looks ahead to the priorities of the future.

What's the difference in being a chief executive in 2011 and being a chief executive in 2021? The chief executives now have to have an opinion and actually say on things that are politics, on things that are diversity and societal changes.

Nicolas, you also started a lot of social and environmental ambitions at L'Oreal, which is more and more at the forefront of how we shop and in the minds of the shoppers when they choose products. How will you continue that?

Well, I think it's a very good question, Francine, because very clearly the beauty of the future will have to be more inclusive, more generous, more sustainable. Two-thirds of consumers declare they want to buy products from brands whose values are aligned with theirs and that have a positive impact on the world. So this is definitely something I want to strengthen even more. Today, very clearly, consumers want on the one hand very effective products, and that's going to come from our science, from our beauty tech where we're going to be amping up our traditional research and development with new technology, with augmented reality, etc. And on the other hand, generous causes, commitment towards society, sustainability. And that's going to be the two legs we're going to be running on, and that's going to be the beauty of the future. So you can count on L'Oreal to be very committed to the world and to society in general.

One of the things we haven't discussed, which I imagine is the worst nightmare of a chief executive, is some kind of reputational damage. So what kind of advice would you give to Nicolas on how to preserve the reputation of L'Oreal?

If we have this conversation again in five years, how do you think your industry will have changed?

Well, I think our industry will have changed a little bit in the way we discussed previously. It will still be growing, and that's the first important thing. This industry is a relentless quest. Since 100,000 years, when we could see on caves drawings of women painting their bodies with little white pigments, to today, beauty has been a relentless quest. So the market will be bigger. That's a fact. And then, as discussed, it will be a market that will be more digital, with probably more personalized products provided by online diagnosis powered by artificial intelligence. It will be a market that's greener, with both packagings and formulas being ever more sustainable, and we're going to be leveraging the green sciences for that. And it's going to be a beauty that is safe and very inclusive. One of the beliefs we have at L'Oreal is that we do not want to impose a single model of beauty. And I think beauty in five years will be even more diverse than it is today. And that's great because that's what beauty is: allowing everybody to express their own individuality.

How do you see it changing in the next five years?

Well, thank you so much both of you for joining us today.