The Bull Club by eToro - L'avenir des cosmétiques avec Christophe Babule (L'Oréal)

What is interesting is that often people don't know all the brands in our portfolio. Looking at our recent history, we see that very large brands have continued to accelerate their growth, and that is linked to the power they have acquired today globally.

Thank you, hello Emmanuel.

Thank you for giving me this precious time. L'Oréal is a great company, leader in its sector, created 110 years ago by a researcher, a chemist. That is still very strong in our DNA; we continue to invest heavily in research. We are the world leader in beauty with the most beautiful portfolio of brands, about 80 brands today, 35 of which are global. It's interesting that people don't know all the brands. For example, we have the Luxe division with Lancôme, Yves Saint Laurent, Armani, Valentino, Prada, Ralph Lauren. Then Consumer Products with L'Oréal Paris, Garnier, Maybelline, Mixa. Professional Products with L'Oréal Professionnel, Kérastase. And Active Cosmetics with La Roche-Posay, Vichy, CeraVe. So our activity is simple: all of beauty and only beauty. We are specialists. The global market is about 500 billion euros, and our market share is over 14% and growing every year. Our goal is to grow faster than the market. In 2021, we had €32 billion in revenue, 16% growth, and very solid finances.

Thank you for that question, it's very important. North Asia (China, Japan, Korea) already represents 30% of our revenue. South Asia is also growing. Asia is important because it has half of humanity, young populations with a strong desire for beauty, often in polluted cities. Korean women apply up to 10 products a day. We focus on this region because the middle class is growing fastest; by 2030, 350-400 million more people will enter the middle class. But we are everywhere: Europe is our historical base, North America is dynamic, and we are investing in emerging markets like Africa. Opportunities remain huge.

First, let me set the scene by talking about digital in general. Digital is a strategic shift that L'Oréal took early. Since 2010, we have invested in digital. It's about content and e-commerce. We have acquired very strong e-commerce skills, especially in China. Today, over 70% of our media investments are digital. We have an ecosystem of over 50,000 key opinion leaders. Last year there were 12 billion video views from our influencers. Our websites had over 1.2 billion visits. So social media is part of a broader digital world.

Good question. In 2021, 73% of our media spending was on digital supports. Traditional media now only accounts for 27%. If you consider all promotional means, over 45% is digital. It's a major revolution in ten years, from almost zero to three quarters. This requires new skills, new techniques, and sophisticated tools to track payback in real time. We have trained 60,000 employees. It's a true revolution.

You have to look at it two ways. Yes, it's easier for a new player to get known by posting on Instagram or Facebook. But counter-intuitively, in a digital world driven by algorithms, the algorithms always favor the most powerful brands. So it's harder to dethrone big brands because they dominate search. Looking at our recent history, our big brands have accelerated their growth due to their global power, and they are at the top when people search for products.

Beauty is an extraordinary market. It has been growing consistently for 25 years at 4-5% per year, except for one year in 2001. It's driven by demographics and growing middle class. In the last two years, many phenomena have disrupted the picture. I have lucid optimism: as soon as constraints disappear, consumption returns. After COVID, we saw a massive return. The lipstick effect is real. In 2022, we see strong growth in perfumes (20%) and makeup (10%). During recessions, people are cautious on durable goods but allow themselves small pleasures.

L'Oréal's balance sheet is extremely solid. This prudent management has allowed us to navigate crises calmly. During COVID, we had enough cash to help our ecosystem. We have products that come with innovation; we launch 10-15% new products annually, which helps with pricing. We can pass on inflation to protect our margins. We optimize marketing spend. We have great flexibility to adjust investments, especially digital, which makes us very agile.

As I said earlier, we took the digital and e-commerce turn early. In China, e-commerce was already nearly 50%. That know-how was exported. COVID accelerated e-commerce sales incredibly everywhere, not just Asia. In France, e-commerce went from very low to doubled or tripled. In 2021, e-commerce revenue was over €9 billion, representing 29% of group revenue.

Innovation is at our roots. People sometimes think makeup is frivolous, but our catalog is mostly skincare, which is research. We spend over €1 billion on R&D annually, with 4,000 researchers worldwide, and 520 patents in 2021. We are among the top three French groups for patent filings. Research is not only in France; we have centers in China, North America, Brazil, Singapore. Two major trends: e-commerce and the desire for healthier products, which has boosted our Active Cosmetics division (La Roche-Posay, Vichy). We are investing in green chemistry, decarbonization, and beauty tech. We use big data and AI to accelerate innovation. We have partnerships like with Google's Verily to accelerate research. Innovation is at the heart of our strategy, and you can see it at Viva Tech tomorrow.

My pleasure.