Chairman of the Board of Directors, L'Oreal
Leaders with Lacqua: Jean-Paul Agon, L'Oreal Chairman & CEO
Jan.14 -- Francine Lacqua speaks with the CEO of L’Oréal about the future of the beauty industry, leadership in the sector and the pandemic.
About Jean-paul Agon
In a June 2020 interview, Agon expressed confidence in the beauty market's ability to recover from the coronavirus crisis, stating that L'Oréal has historically seen a strong bounce back after crises. He described the situation as a supply crisis rather than a demand crisis, noting that consumers in China were eager to buy beauty products once restrictions were lifted. Agon acknowledged that the speed of recovery would depend on the duration of the pandemic and its economic impact, but argued that beauty products are inexpensive items that consumers may use to indulge themselves after a period of frustration. In earlier appearances, Agon emphasized the importance of digitalization for L'Oréal, stating in 2018 that "the future of beauty will be digitalized" and that the company's profit margin had accelerated alongside its digital efforts. He also discussed the company's decentralized operational structure, which allows local adaptation to consumers. In 2015, Agon spoke about L'Oréal's "Sharing Care" program, which aims to extend social benefits to employees outside France, arguing that economic and social performance are intrinsically linked and that companies have a duty to share social advances globally.
Transcript (58 segments)
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Narrator0:12
L'Oreal is synonymous with beauty. The world's biggest cosmetics company has been fronted by some of the planet's most famous faces, including Penelope Cruz, Jennifer Aniston, and Beyoncé. It caters to people in more than 150 countries with brands including household names like Lancôme, Maybelline, and Garnier. And behind it all is Jean-Paul Agon. His mission to bring beauty to everyone. Right after graduating with a business degree, he joined L'Oreal at the age of 22. And he's been there ever since. He climbed the ranks from positions in sales and marketing to president of L'Oreal USA in 2001. He would be named chief executive of the whole company just 5 years later. Under his tenure, L'Oreal has nearly doubled its global revenue and expanded its footprint in Asia. We spoke to Jean-Paul Agon on Leaders back in 2017. But how has being a leader changed since then? And what lessons has he learned? Jean-Paul Agon, the chief executive of L'Oreal, joins us on Leaders with Lacqua.
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Francine Lacqua1:22
Jean-Paul Agon of L'Oreal, thank you so much for joining us on Leaders with Lacqua. You look at the numbers, and you know, the number of mascaras that you sell a week or a year is absolutely astonishing. Did you ever think that L'Oreal would become so big?
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Jean-Paul Agon1:35
I don't know. I joined L'Oreal 42 years ago, and it's true, you're right. It's a good question because at that time it was much smaller. Now we sell 7 billion products a year. We have more than 1.2 billion consumers. I don't remember exactly where we were 40 years ago, but probably a much smaller company. But still we have room to grow; we have only a 13% market share in the world. So the best is yet to come.
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Francine Lacqua2:07
I mean as you said you've been in charge for 40 years. How have you changed as a leader?
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Jean-Paul Agon2:13
No, I've been in charge for 14 years, but I've been at the
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Francine Lacqua2:16
But you've been at the company, yeah,
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Jean-Paul Agon2:17
40, yes. I think we changed many things. I'm proud of all the changes that we made at L'Oreal. We even made a revolution, the digital revolution. L'Oreal is now clearly ahead of the pack in terms of digital and e-commerce because we were the first to make the move. We are ahead in terms of sustainability and ethics. So, I think that on the most important transformations of the world, we were able to transform the company to make sure that we are always leader in the field.
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Francine Lacqua3:00
What was the hardest thing about your job? When you talk about the digital revolution, I mean that must be online sales, but also advertising spending. Because I guess you spend less with magazines and more with influencers.
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Jean-Paul Agon3:11
Oh, yes. Now we spend more than 60% of our media on digital. So, it has been a real big change in the past 5 to 10 years. Everything is changing. What's fascinating in the world of today is that you cannot just rest one minute or one day. It's a permanent evolution. If you want to be ahead of the curve, you have to always try to anticipate what's going to happen and be the first to take new initiatives and new directions. That's the most fascinating part.
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Francine Lacqua3:48
So what's the trend or direction that you're looking at now? What's the next big thing?
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Jean-Paul Agon3:53
There are several, but one thing that is very important for me is that I believe that beauty is going to become very much tech, like medicine is becoming medtech or finance is becoming fintech. I want L'Oreal to be the champion of beauty tech. I think that beauty will be beauty tech tomorrow, and I want L'Oreal to be the pioneer, champion, and leader of beauty tech. It's very exciting.
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Francine Lacqua4:19
So give me an idea of exactly what this will entail. I know you have a laboratory where you make skin. Is it the kind of thing where you go through a computer and they tell you, 'Look, you've aged prematurely, so you have to get this cream.' Or is it something even more sophisticated?
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Jean-Paul Agon4:35
More sophisticated. It's more holistic and sophisticated. In a way, it's the alliance of a top-performing digital ecosystem and transforming a company into an intelligent company where data circulates completely across the company, where artificial intelligence is used in every department, and where everything is completely connected. This combination of external relationship through digital and internal transformation and use of data is really the future.
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Francine Lacqua5:15
But so, how will the relationship with the customer change? Will beauty become much more about health care as well?
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Jean-Paul Agon5:22
I don't know if it's going to change. The easiness of the relationship will change. Eventually, this beauty tech system could lead to an individual relationship with every consumer we have. In the next 5 years, we will have a direct connection with each of the 1.2 billion consumers on the planet. That's going to be very interesting.
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Francine Lacqua5:54
How much is social media changing? How much do you now prefer TikTok, for example, to an Instagram?
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Jean-Paul Agon6:01
It changes every day, so you have to always adapt. At L'Oreal, we let our brands do these initiatives and adapt to different social media. Some of our brands are more related to Facebook, some others are more related to TikTok. On TikTok, it's still very recent and the collaboration we have with them is still small, just a few million dollars. But they were very instrumental in the huge success of our brand CeraVe. CeraVe is a new health skin care brand that is super successful in the US and TikTok was part of that. Now it's the same for La Roche-Posay. We try to manage things across brands and with different partners well.
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Francine Lacqua7:01
What has surprised you the most within your time as chief executive of L'Oreal?
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Jean-Paul Agon7:08
The speed of change has really accelerated. The speed of change of the world is amazing. For example, the digital tsunami happened, we anticipated it but I didn't think it would come so quickly. The rise of e-commerce is very quick. The transformation of China is something amazing. So the speed of change is really something that fascinates me.
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Narrator7:47
Coming up, beauty in the age of coronavirus. We talk how the industry has been managing through the pandemic. What we saw right after the reopening of salons is that there was a rush to go to the hairdressers and that everybody was very happy to go back.
Beauty may be in the eye of the beholder, but these days the eye beholds through Zoom. The COVID pandemic has shut down hospitality, retail, workplaces, and salons, forcing the beauty industry to embrace do-it-at-home like never before. People have been forced to become their own hair stylists, and this season's hottest new lipstick will get covered up by a mask. So, how is all this chaos affecting the beauty industry? L'Oreal is the biggest beauty company in the world and the chief executive, Jean-Paul Agon, has had to get creative. The company has rolled out digital color matching and ramped up its online presence to keep consumers shopping. The company's e-commerce platform has almost doubled during the pandemic and its share price ended 2020 higher.
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Francine Lacqua9:05
You don't think people will buy less lipstick because frankly we're wearing a mask, we don't go out as much. So actually maybe some of our tastes can change over time.
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Jean-Paul Agon9:13
No, I don't think so. On the contrary, I think that there is a frustration today by women not being able to use cosmetic or makeup. Exactly like there was a big frustration during the period when you couldn't go to hairdressers. What we saw right after the reopening of salons is that there was a rush to go to the hairdressers and that everybody was very happy to go back. I think the same will happen with makeup, even with lipstick. When COVID is gone, this will be the lipstick failure. The great time for lipstick and makeup.
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Francine Lacqua9:53
Do we shop differently? Are you going to have more of a push online? And how much has that increased compared to pre-pandemic levels?
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Jean-Paul Agon10:01
The real fundamental change of the market is in the way to shop. Before the pandemic, e-commerce was for us already growing fast, plus 50%, but it was at 15-20%. It grew very quickly during the crisis, and now we are at 30%. There has been a complete change of behavior during the crisis, and I think this change will stay.
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Francine Lacqua10:37
How do you adapt? If I'm looking for a color, either a foundation or lipstick or something else, it's so much harder to choose it on the internet.
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Jean-Paul Agon10:44
Not at all. Thanks to the technology we have, thanks to the Modiface acquisition we made two or three years ago, if you shop on e-commerce, you can simulate on yourself with the virtual reality system, simulate the color on your lips or eyes, and you can try all colors. So thanks to technology, trying products on internet is as good as trying in stores.
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Francine Lacqua11:21
How will the beauty market be in two or three years? Let's say the pandemic has a minimal effect, which you seem to be saying. What will be different in two or three years?
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Jean-Paul Agon11:32
It's too early to tell because we will see at the end of the crisis if behaviors change. But I would bet they won't change fundamentally. I have been through many crises and every time people said after it would be completely different, and finally it was not. I think that besides what we discussed about people shopping much more on e-commerce, in terms of categories, appetite for beauty, consumption, it will not be very different. The differences will be more or less the differences that would have happened anyway: more appetite for natural products, clean beauty, natural ingredients. That existed already. The crisis is more an accelerator of trends than a disruptor.
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Francine Lacqua12:29
How much of your sales are you expecting to do online in three or four years from now?
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Jean-Paul Agon12:34
We are going to be very soon at 30%. Maybe one day, in the next 10 years, it will be 50%. That's possible. That's already what we are doing in China. In China we started from almost scratch 5 years ago, from zero, and we will be at 50% this year. It's phenomenal for a brand like Maybelline, the number one makeup brand in the world. We do 70% of our sales of makeup in China on e-commerce. So it's a real complete transformation.
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Francine Lacqua13:14
Do Chinese consumers buy beauty products differently to Europe? I know there are questions about testing on animals. But fundamentally, is China a template of what you want to replicate across the world, or is it just a different, bigger market?
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Jean-Paul Agon13:29
No, it's not a template to replicate. It's just ahead. China today is probably the most advanced country in terms of digitalization, e-commerce, habits, etc. Consumption in China is very much ahead of what we see everywhere else because young Chinese adapt very quickly to changes in technology. When you discuss with young Chinese consumers and ask where they shop, they say online, of course. If you tell them they could also buy in stores, they say, 'Ah, I didn't know.' It's a real change of mindset happening in China.
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Francine Lacqua14:20
If we look at the various segments of beauty products that you have, including hair products, what will accelerate the most in the next three to four years? Is it skin care? Is it something you want to be a real leader on?
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Jean-Paul Agon14:33
Skin care is definitely booming. Skin care is a very important category all over the world, very important in Asia. It has always been very important. It was not that important in North America, but now it's growing very fast. It's growing everywhere. Skin care, with this new concern about health and the health of your skin, quality skin care is super important and growing very fast. It's our number one category now at L'Oreal. We are the number one manufacturer of skin care and I expect that to continue to grow.
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Francine Lacqua15:19
What does it mean for possible M&A? Is there anything you'd be looking to buy because valuations are quite cheap because of the pandemic?
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Jean-Paul Agon15:28
Nothing is cheap because of the pandemic. It's not even cheaper, but that's not the issue. The issue is to find something strategic and interesting for the future. We did an acquisition during the crisis, we bought an American skin care brand called Thayers, a very nice brand in America, in May in the middle of the lockdowns. So we keep doing M&A. This brand will be very interesting for the future. We are always looking for new opportunities.
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Narrator16:07
Up next, green beauty. We talk L'Oreal's sustainability push and why it matters to shoppers.
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Jean-Paul Agon16:14
Consumers want to make sure that the product they are buying comes from a very serious and responsible company. That's a very important element for them. That's why we are communicating more and more. It's not at all greenwashing.
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Narrator17:00
Whatever shade of lipstick is in season, one thing's for sure, it'll be green. Sustainability was one of the key buzzwords of 2020. And L'Oreal chief executive Jean-Paul Agon promises his company's commitment to the environment is real. He says we're in a climate emergency and have one decade to act. L'Oreal says it will help its 1.5 billion consumers make sustainable choices and limit the impact of its cosmetics products. But, can makeup and packaging ever truly be green if so much of it may end up in landfills? Jean-Paul Agon pledges a more beautiful future for all.
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Francine Lacqua17:38
In the past when we used to speak about sustainability, you always told me that this was a cause that was important to you, but you couldn't translate it or you couldn't really see it in consumer sales. Has that changed?
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Jean-Paul Agon17:49
Slowly. The fact is that we are doing the change anyway. We announced our new plan L'Oreal for the future, which is a very important and ambitious plan for the next 10 years. We are very committed. As you know, we were the company most recognized by the CDP with four years in a row with a triple A on all aspects of sustainability. We keep pushing for it. It's true that now we are communicating it more on our brands. Each of our brands communicates with its consumers about what they do and what the group does in terms of sustainability. It becomes more and more an important factor for consumers.
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Francine Lacqua18:31
So what's important for the consumer? Is it the recycling? Is it where you go to get the products? Is it the supply chain? Is it animal testing?
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Jean-Paul Agon18:39
It's a bit of everything. Animal testing is over now, it has been for many years. But now it's about plastic, the quality of the ingredients, how we source them. It's also how the company behaves. Consumers want to make sure the product they are buying comes from a very serious and responsible company. That's a very important element for them. That's why we are communicating more and more. It's not at all greenwashing or commercial intention. It's to inform consumers well.
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Francine Lacqua19:22
And this translates into sales?
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Jean-Paul Agon19:26
Yeah, I hope so. For the moment we don't do it for that. We do it in an effort of transparency and communication. But ultimately I think sustainability of the behavior of the company will translate into sustainability of good sales.
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Francine Lacqua19:46
How much more work do you need to do on diversity and inclusion to be in a place where you're happy with L'Oreal?
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Jean-Paul Agon19:54
We are pretty good already. We were recognized as one of the top 10 companies in terms of diversity and inclusion worldwide recently. We started on diversity many years ago. When I was in the US in 2004, I created the first chief diversity officer. It has always been a top priority in our ethics. We did intense training for all our managers, 20,000 people, already 15 years ago. This is super important. It has to be a permanent effort because you have to repeat it and make sure it's a priority for the company. It's very much at the top of our priorities.
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Francine Lacqua20:47
But you need to work on two fronts, right? Part of it is keeping that culture at L'Oreal to ensure gender and diversity inclusion among staff, but also what the beauty industry portrays in campaigns.
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Jean-Paul Agon21:04
Absolutely, but that has been taken in charge by our brands. Our different brands are really mirroring society now. The beauty they express is a real complete diverse and inclusive beauty. It's a very important point, but it has been taken in charge by the brands.
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Francine Lacqua21:27
Do you think 2020 was a turning point because we talk more about diversity and race?
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Jean-Paul Agon21:33
In general it was a turning point, but honestly not really for us because it has been an effort we started almost 20 years ago. It was a reminder that we have to push always stronger. It was a positive reminder that you never do enough. So I think it's good.
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Francine Lacqua21:59
L'Oreal is so big and you have so many brands all over the world. How difficult is it to get a firm handle on the supply chain and on diversity inclusion efforts?
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Jean-Paul Agon22:12
It's very simple. Even if we have many brands, the backstage is common. It's the same factories, the same team, the operation team, the sourcing team. We have one sourcing team for all brands. When they have clear instructions and directions, they apply them strictly for any brand in the portfolio. That's why the measures we take are always very strictly applied. There's no room for doing differently.
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Francine Lacqua22:55
How much are you spending on research to make sure that your packaging is sustainable and recyclable?
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Jean-Paul Agon23:03
We do a lot. We try our best. For example, we are doing partnerships with companies. We are beauty manufacturers, not plastic manufacturers. Packaging is something we buy. But we help our suppliers develop new technologies. For example, we helped a small French company called Carbios in Lyon who invented a completely revolutionary way to dissolve plastic: an enzymatic system that makes plastic disappear so you can completely recycle it. That's the way to participate in the ecosystem to change packaging in general.
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Francine Lacqua23:54
Monsieur Agon, thank you so much for your time.
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Jean-Paul Agon23:56
Thank you, Francine.