Chairman & CEO, L'OCCITANE Group, L'OCCITANE Group (L'Occitane International S.A.)
L'Occitane Executive Chairman and CEO Reinold Geiger on company strategy
When Reinold Geiger put his money into L'Occitane en Provence, he thought he'd be a hands-off investor. Looking back he realises it takes a tough man to build a successful skin care company.
About Reinold Geiger
Reinold Geiger, Chairman and CEO of L’Occitane Group, has described the company’s origins as beginning in Provence, France, with the production of essential oils from local plants and flowers, later expanding into natural-ingredient cosmetics. He stated that formulating such products was more costly and difficult, and that the company attracted “purists and idealists” who wanted to improve the environment. Geiger said the company focuses on supporting women in need and people who are blind or visually impaired, particularly in underdeveloped countries, noting that “every minute in the underdeveloped countries you have one child who is losing his sight because he has no medication.” Geiger has discussed his approach to turning around the company, saying that when faced with the choice of reducing costs or increasing sales, he decided to focus on growing revenue. He described the early years as “real hard suffering” before the business took off. Geiger also noted that while larger competitors may have many brands, few individual brands generate over a billion euros in sales, and L’Occitane is now developing three smaller brands. He attributed the company’s ability to compete with larger players to its entrepreneurial culture, where employees work autonomously, and said that for a smaller company, “presentation nützt sowieso nichts” (presentations are useless) and one must keep the process in mind.
Transcript (40 segments)
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Interviewer0:06
East is east and west is west and the twain shall never meet. That's according to an old country and western song. But a skincare product from Provence has changed all that. Nearly half of L'OCCITANE sales come from Asia, and the company is listed on the Hong Kong stock exchange. Here to tell us is the chairman, CEO, and chief shareholder of L'OCCITANE, Reinold Geiger, and he joins us now on INSEAD Knowledge. Welcome.
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Reinold Geiger0:32
Hello. Nice to be here.
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Interviewer0:36
You did say towards the end of last year that sales in China were beginning to drop. Is that part of the reason?
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Reinold Geiger0:42
No, there was a different reason. During one year, the rules changed for importing new products. You have to get a homologation, so we couldn't introduce new products into China for about 12 to 15 months. As a company, we renew our products quite a lot, so we didn't have enough to sell. That was the main reason for the smaller growth. We still had growth of about 40% in China last fiscal year, and over 50% the year before.
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Interviewer1:26
But it wasn't an easy entry for you into Asia. You were losing a lot of money initially, but you saw something there and persisted. What did you see and how did you do it?
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Reinold Geiger1:36
The first time I went to Asia was about 25 years ago. I was fascinated by the work people were doing. I thought they would be successful and rule the world, so I wanted to get involved in business there. But customs are different. When we opened our first store in Hong Kong and Tokyo, nobody was buying. You need brand recognition in Asia. As long as you don't have it, few people come. We insisted, gave samples, and little by little, people started coming. It took three to four years of hard suffering, and then it suddenly took off.
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Interviewer3:03
So you must have lost money there. How did you stand that?
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Reinold Geiger3:08
We were making money in other countries but losing money in Asia. The auditor from the Big Five came to see me and told me to stop activity in Asia because it would kill the company. After 20 seconds, I told him that I decide where we do business, and he should just take care of the accounts.
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Interviewer3:47
Yeah. So what is the shareholder structure? Do you have a holding company? How much of the shares are listed?
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Reinold Geiger3:53
We have a holding company which is mainly the different people from the company. Below is the operational company. About 30% is listed on the stock market, and 70% belongs to the holding company. I own a little more than 57% of the holding company.
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Interviewer4:21
There's a bit of interesting history. You bought the company because you were interested, and then you thought it needed more work. Can you give us a thumbnail sketch of your entry into the company? Did you see yourself as a skincare magnate?
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Reinold Geiger4:35
No. In the beginning, I was supposed to be only an investor and a minority shareholder. The company was doing very badly, and it looked like I was going to lose my investment. So I ended up working in it. At least I couldn't blame anyone else if it all went down the drain.
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Interviewer4:59
Do you use the products? I cannot use any other products. You're a great advertisement for them. That's why I was wondering. Um okay, in terms of opening shops, I feel as though there's one on every corner in Paris. How many more? What's the situation with shops? Are you worried about saturation?
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Reinold Geiger5:29
We have three countries where we are saturated: France with 130 stores, Hong Kong with 22 stores, and Taiwan with 60 stores. In all other countries we can double or more than double the number of stores. In the United States we have 175 stores, and mass market companies have 2,000 stores. We are not mass market, but we can make 300 or 400 stores. In China we have about 100 stores, which is very small. Our limitation is the people we can train to run the stores. So we are still only in the beginning of our development.
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Interviewer6:46
How do your airport shops do?
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Reinold Geiger6:48
The travel business is a very important part of the business. We started this about six or seven years ago in a significant way. You need to have a brand that is recognized and well known because people who travel don't shop around. We now have a chance to be successful in airports, and it is true. It's mushrooming.
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Interviewer7:25
You're kind of a serial entrepreneur. You tried a bunch of different projects and started in packaging successfully. Can you give us a little history up to the point where you bought into L'OCCITANE?
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Reinold Geiger7:40
When I was 23, I started a tour operator business because of my passion for skiing. It didn't work out due to Mrs. Thatcher's strikes. I had to cease and work to pay back my dad. Then I started a distribution company with friends, but it often doesn't work out when friends start a business together. I left and started a packaging company by coincidence. It became a leader in cosmetic packaging in Europe and the US. After 10 years, I wanted to do something different, so I sold the company and tried to be an investor. I invested in L'OCCITANE, and it turned out not to do well. I started getting involved and found it a lot of fun. The finished product is much more exciting than packaging. It's very much a coincidence.
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Interviewer10:10
Well, you don't give up. You've cited several instances where you saw a problem and left, but you keep coming back. Is that an entrepreneurial trait?
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Reinold Geiger10:23
Freedom is that. I think if you give up you go bankrupt. There were so many occasions where I was in a dead end with no solution. You just must be an optimist and attack it from a different angle.
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Interviewer10:44
Have you had many offers for the company?
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Reinold Geiger10:46
No, because we absolutely don't want to sell the company. We have many people who contact us, some even write in newspapers that they are going to buy us, but we don't talk to them because it's not the subject.
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Interviewer11:08
What about succession? You have sons. Are they going to take over? Are there people in the company who can take over?
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Reinold Geiger11:13
I have two sons who work in the company today. I don't know whether they will become the shareholders or run the company. That's something different.
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Interviewer11:30
What kinds of corporate projects do you do that might be classified as socially responsible? A lot of what you use is natural, much before socially responsible became a trend.
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Reinold Geiger11:41
The company was built like that. It's in the DNA. We always cared about the environment and respecting people. A good example is our successful line based on shea butter, which we have had for 25 years. The founder went to Burkina Faso to help them make soaps. He found that shea butter had fantastic properties. We eliminated the middleman and now have 13,000 women collecting and making shea butter. We pay them about two and a half times the market price. This completely changes the lives of their families because the women keep the money and use it to educate their children. We also have built schools and support doctors to help children with nutrition.
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Interviewer14:52
Let's talk about entrepreneurship. Do you think of yourself as an entrepreneur?
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Reinold Geiger14:58
No. I think it's too pompous to call oneself an entrepreneur. But it's the description people understand. I just wanted to have no boss and do things by myself. I was not motivated to become rich. If you're lucky and the company does well, you create wealth, but it's virtual because I'm not selling the company.
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Interviewer15:44
Why do you think you were successful? You must have seen a lot of people fall by the wayside.
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Reinold Geiger15:57
I think because I'm a very simple person. I don't complicate things too much. Maybe not too intelligent. When you're too intelligent, it's difficult.
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Interviewer16:13
Does it have anything to do with skiing? Skiing downhill racing, you're fearless because of skiing.
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Reinold Geiger16:20
I love taking risk. I love skiing between two crevasses on a glacier. It's exciting. You don't want to fall down. I just was happy like that. The packaging company I sold to a big group, and I worked there for nine months. I was not happy because there was so much work done for appearance, waste of time, company politics. I just wanted to work and progress. So I left and started another small company which didn't work. But because it didn't work, I had no secretary, no nothing, but I was happy.
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Interviewer17:33
And now, clearly you've been to INSEAD, you have an MBA. What did you learn that helped you?
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Reinold Geiger17:43
Before, I studied engineering and had no finance or commercial education. I thought I could read a balance sheet but I couldn't. The business education was extremely useful. What was fascinating was studying different actual cases. It gives you a broad variety of what people did, what made them successful or failures. Afterwards you forget most of it, but it helps you develop a company. You have spontaneous reactions, and it certainly helped.
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Interviewer18:57
What are you most proud of?
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Reinold Geiger19:01
I'm most proud of the company having survived up until now, and that we have a group of people who are having a ball going to work on Monday morning. They are happy and not sad that the weekend is over. They enjoy their weekend as well.
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Interviewer19:24
Let me just end by asking you what advice you would offer for an aspiring entrepreneur, somebody who wants to start their own business.
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Reinold Geiger19:41
I think he must be a dreamer and have a vision. Vision is a pompous word, but must think where he sees himself in five or ten years time. Not be low-key and modest with his ambition. He must go for it.
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Interviewer20:05
Reinold Geiger, thank you very much for being with us on INSEAD Knowledge.
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Reinold Geiger20:07
Okay, a pleasure. Thank you.