Chairman of the Board of Directors, L'Oreal
L'Oreal CEO Agon on Uncertainty, Travel, China, E-commerce
Feb.12 -- L'Oreal Chief Executive Officer Jean-Paul Agon says he's "positive, optimistic and confident" the beauty market will bounce back this year. Speaking to Bloomberg's Emma Chandra, Agon also discussed travel retail taking time to resume and the rise of consumption in China.
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 (10 segments)
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Interviewer0:00
L'Oreal reporting a much better than expected quarter when it comes to e-commerce digital sales in China. You stopped short though of giving specific guidance for 2021 though, saying you expect growth to continue into this year. But not giving those specific numbers suggests there may be a sense of uncertainty. Where does this lie? Are there areas that you are more sure about and areas that you are less sure about?
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Jean-Paul Agon0:27
The situation is, as you know very well, very pretty uncertain. But we are positive and we are optimistic and confident. We think that the beauty market is bouncing back. We think after a year where it was at minus eight percent, we think it's going to be in positive territory this year. And we always have as an ambition and a commitment to overperform the market. So it means that we are confident in our capacity to grow ourselves this year and also to improve again our profitability, as we have been doing every year for many, many years.
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Interviewer1:08
Are you concerned at all though about the direction of travel in Europe? You mentioned those restrictions caused by the pandemic. We're not really seeing those lifting much of the continent still under movement restrictions, people still having to wear masks, travel, air travel in particular not likely to come back this year, might even be next year. Does that concern you at all, particularly when you look at beauty and also then the lux business?
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Jean-Paul Agon1:36
Well, you know, it's true that the fact that you cannot travel doesn't help. And for example, our travel retail business has been really down. But we have been also able to demonstrate, you know, in Q3 and Q4 last year, that even with travel retail down, we are able to grow the rest of the business. You know, we did a plus 4.8% growth in Q4 in 2020 with a very difficult travel retail. So it means that I'm sure that we will be able to grow our business even without travel retail for the first few quarters. And when travel will be back, it will just be an additional element of growth for the remaining of the year.
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Interviewer2:22
You also mentioned China and the spectacular performance, you called it, of China since it's come out of lockdown restrictions. Much of the corporate world really pinning its hopes on China being the engine of growth going forward. Are you confident that it can continue to be that engine of growth? And do you have any concerns at all about geopolitical tensions? We're certainly seeing the Biden administration in the US perhaps continuing policies that are more hardline when it comes to China. Are you concerned at all about trade disputes re-emerging?
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Jean-Paul Agon2:57
No, we are not worried at all. You know, first, our beauty business is relatively immune to international relations. China, the beauty market has been growing for many, many years. We know that the rise of consumption in China is a priority for the Chinese government, and beauty is an important part of consumption because it helps people in their daily life for the quality of life and for their everyday happiness. So I'm very confident about the rise of the beauty business, the beauty market in China for the next few years. And we have also demonstrated that we are growing much faster than the market itself. You know, in 2020, the market in China was only plus 4%, which is already good because it was the only country in the world to have growth, but we were able to do plus 27%. So our capacity to overgrow the market, to outgrow the market, is immense. And we still have a market share which is pretty reasonable in China, so we have a huge runway for growth for many, many years in China.
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Interviewer4:11
L'Oreal wants e-commerce to become 50% of sales over time. What is the strategy for achieving that? What will that do for market share, for margin?
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Jean-Paul Agon4:21
Our strategy is to do what we have been doing for 10 years, which is to be always ahead of the game in e-commerce. You know, we were the first company in 2010 to really embrace e-commerce and digital as a priority and as an opportunity for the group. We always considered e-commerce as a priority for all our businesses worldwide. And the good thing is that definitely the pandemic has accelerated the trend. You know, I think we have gained three or five years in terms of acceleration of e-commerce for our business. And we are, I would say, much ahead of our competition in terms of e-commerce. And it's true that now it's 27%, and we see the day, we don't know exactly when, but when it could be 50% of our business. So we are maximizing it everywhere because e-commerce is an alternative option for consumers on everything, for all divisions, for all regions, for all countries. So we are just maximizing this opportunity everywhere we can. And it has, as you said rightly, it has some very good impact. First, it democratizes beauty. It helps consumers all over the world to have access to beauty in an easier way. And it's also good for margin, so it's a win-win.
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Interviewer5:53
Certainly a win-win if it's good for margin. I can imagine that. Mostly I got you are stepping back as CEO later this spring. You've given your final analyst presentation for the company. What do you think was your proudest achievement over the last 10 to 15 years? And where do you think your successor can really make his mark?
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Jean-Paul Agon6:14
You know, I have several reasons for pride. Number one, of course, the company has been very successful this past 15 years. We multiplied by more than 3.5 times the value of the company, the value of the share. We increased our market shares, we strengthened our leadership. But I would say that what I'm the most proud of is not that, which is already good, but it's not that. It's more the fact that I wanted to make L'Oreal also exemplary in terms of extra financial performance. And I wanted L'Oreal to be exemplary in terms of sustainability, of gender equality, in terms of ethics, in terms of social welfare. And we have been recognized recently by all the older standards as one of the best companies in all of France, by Bloomberg by the way in terms of gender equality, by the CDP. We are the only company in the world to have been recognized with a triple A five years in a row by Ethical Quote on ethics. So I'm very proud of that. I think that L'Oreal today is a super performing company, but not only in business, not only in sales and profit and share value, but also in terms of extra financial performance, in terms of ESG as we say today. And I think I'm happy to pass that to my successor.