How L'Oreal Sculpted The Cosmetics Industry

How L'Oreal Sculpted The Cosmetics Industry

Whether or not you wear makeup, chances are you're familiar with the 112 year old cosmetic giant L'Oréal, and you may even regularly use products owned by the L'Oréal Group without even knowing it.

Beginning back in the early 1900’s, L'Oréal began to transform the cosmetic industry. As of 2021, the beauty group has acquired multiple brands, owns countless products, and is a household name throughout multiple countries. 

If you’re unsure of the market share that L'Oréal holds, take a look at these key company stats:

Throughout this study, we’ll cover how L'Oréal went from a French chemist’s dream to the world’s leading manufacturer of cosmetic products over its 112 year run. 

A Young Man’s Dream to A Global Sensation

In 1881, two pastry shop owners in Paris, France welcomed a child into the world, as most parents do, with no idea of whom that child would grow up to be. Living a humble life, they taught their son the rewards of working hard and he, in turn, excelled in academia and helped them around their shop. 

Just 19 years later, a young man by the name of Eugene Schueller would join the Institute of Applied Chemistry in Paris, France. Likely inspired by his parents' entrepreneurship, Eugene was full of ambition and drive. After graduating with a degree in Chemistry in 1904, Eugene went on to work as an assistant in a lab. 

Eugene-SchuellerSource

Standards for beauty at this time were significantly different than what we know today, with hair dyes containing strong and harmful contaminants like lead. So Eugene began to concoct beauty solutions that would promise risk-free hair dyes to women with his knowledge of chemistry.

By 1907, the path to the L'Oréal Group had officially begun. After multiple mistrials, Eugene found a hair dye solution that was up to his standards and began selling the products to local salon owners around Paris. 

First, he sold these products under the brand name of Auréole, then two years later as Société Française des Teintures Inoffensives pour Cheveux (French Society of Harmless Hair Dyes). By 1912, just 5 years after he began his experiments, the brand would take on the name of L'Oréal and begin to sell hair dyes throughout France, Austria, Holland, and Italy. 

After going off to serve in World War I and returning to run the company, L'Oréal expanded again to offer their products in 17 countries worldwide.

Chapter summary— At 25 years old, with a little bit of know-how and a lot of ambition, Eugene Schueller embarked on a journey that formed the basis of the company that would dominate the beauty industry over the next 100 years. 

The Formative Years

Following the war, beauty trends were changing again and the market began to grow, offering L'Oréal an ever-growing client base to support their expansion. The growth in the market and L'Oréal’s position as a non-toxic hair dye supplier put the company in its first acquisition position. Eugene saw a need in the market for options in products and the company 

In 1928, L'Oréal acquired Monsavon, a company that sold traditional bath soap. Monsavon soup can still be purchased today, along with shower gel.

Marketing in the 1930’s

While Eugene was a chemist and academic, he had a knack for marketing and business. As L'Oréal continued to expand, take on greater investments, and sell to more consumers, Eugene used the tools of the time to market L'Oréal with a method widely used in the beauty industry today. 

Eugene had custom poster ads created by popular artists of the time and invested in launching a magazine that was designed for women. Votre Beauté could be credited for the development of beauty standards through “pop-culture” as fashion and beauty magazines during this time began to widely shape cosmetic trends in France, and Votre Beauté was one of the first. 

1930s LOreal ad

As an owner of a popular publication with a vested interest in women’s desire to maintain their beauty, Eugene was in a spectacular business position. As trends and influence were pushed through magazine articles, L'Oréal was ready with combative beauty products every step of the way. Trends like platinum blonde hair or a dedication to “keep the grey away” created a widespread desire and demand for hair dye and marketing to women specifically suddenly became very profitable. 

Identifying a Problem & Providing a Solution

With a foolproof marketing strategy and a huge consumer base, L'Oréal began investing into and growing their product offerings. The company began to further niche down in their marketing and developing products for certain instances or for certain ages. 

In 1935, L'Oréal brought the very first sun-protecting lotion to the market—sunscreen. Designed to apply when vacationing or spending extra time in the sun, sunscreen began to take off and would find itself an essential beauty regimen in the decades to come.

Around the same time, they introduced a hair product specifically for children. They began to focus on groups and areas of the population that had not been actively marketed to in the mid-1900s. This method of marketing would contribute greatly to the coming years of product development—and not just for L'Oréal and the beauty industry. Businesses today still use problem/solution and niche marketing when selling a product or starting a business, L'Oréal was just one of the first. 

Chapter summary— L'Oréal began to rethink marketing, business, and product development in a way that had not been done before and that had implications on the way we’re advised to do business today. By controlling a portion of the media, the beauty-giant-in-the-making told their audience what their problems were and offered a direct solution, creating a century-long domino effect. 

Expanding L'Oréal at All Costs

World War II Couldn’t Stop the Beauty Industry

While much of the world—and L'Oréal’s customer base—was experiencing economic depressions and the effects of World War II, the interest and demand for products in the beauty industry did not falter. It’s likely that in a time of deep depression and warfare, the products brought to market by L'Oréal continued to be successful because of the self-esteem boost that the beauty industry provides to women. 

Amongst the unrest, Eugene Schueller was also thought to be linked to Nazi Germany and, at the very least, thought to be a Fascist-sympathizer. This associate did not contribute a loss in company revenues either and it’s been speculated that these connections actually contributed to L'Oréal’s continued success during the war. 

Although skepticism remained, Schueller was awarded an “Advertising Oscar” in 1953, just four years before his death. It cannot be denied that Schueller’s marketing strategy for L'Oréal was creative and ahead of its time, as Schueller was the first to use catchy jingles or influential resources to promote a beauty product. 

LOreal hair dye ad 1930sSource

The Way to the Top

In the wake of a world war, L'Oréal stood strong. The ambitions of leadership led the company to continue to expand its offerings and attempt to leave no niche un-targeted. Research and development had expanded to house a team of more than 20 chemists, dedicated to creating breakthrough products that the market didn’t even know it needed yet. 

Since this first widespread expansion of research and product development, L'Oréal has kept the same tune throughout the company's entire life. After 100 years and more than a few brand acquisitions, L'Oréal consistently spends a considerable portion of its revenue on developing transformational products for the beauty industry. 

Within just 5 years of the war, L'Oréal’s research and development department had grown to more than 100 chemists. Soon, hair products began to emerge that was the first of their kind. Over the next 10 years and beyond, L'Oréal would continue a pattern developing revolutionary beauty products, ultimately shaping the method of the company.

As of 2021, Innovative Research and ever-expanding knowledge are a part of the company's core mission and they are dedicated to maintaining their position as an industry leader and innovator. Their commitment to research is heavily marketed as a pillar of their brand and bodes well for them in the cosmetics industry, as a desire for trust in products has steadily grown in the market over the years. 

Alongside their commitment to research, L'Oréal takes a strong position in the development of knowledge. They’re dedicated to learning more about the body and how it reacts to certain treatments so they can keep up with the trends of the clean beauty industry while maintaining and growing their customer base. 

Building a Top-Notch Team

Alongside the expansion of research, came the expansion of the team. Two additions that are credited greatly for the growth and long-term expansion of L'Oréal would join the company at this time. Francois Dalle and Charles Zviak came on board right as Hollywood and Mass Media were beginning to take hold—a crucial time for the beauty industry. 

Francois Dalle 

Francois Dalle Source

Francois Dalle would join L'Oréal working as a chemist for Monsavon in 1942, where he would go on to be named director of L'Oréal just 6 short years later. When he joined, what he claims as a small business would begin to become the global beauty giant we all know today in as little as 10 years. 

Francois’s position in the French company would showcase his ability to lead with intuitive and strategic decision-making, just as Eugene Schueller. After Schueller’s death in 1957, Dalle would become the head of L'Oréal, where he remained for nearly thirty years. Within his first 10 years of running the company, L'Oréal would begin making masterful acquisitions and start a prominent name for itself across the globe. 

Throughout his time as the company’s leader, L'Oréal released the first of many industry standard products today. In the same year Dalle began to lead L'Oréal, the company launched the first-ever hairspray, L'Oréal Net. 

Charles Zviak
 

Charles Zviak began with Monsavon in 1945 and worked closely alongside Dalle in research and development. Their dedication to innovation and revolutionary product development ultimately gave L'Oréal the positioning they had in the market.

Zviak continued to work alongside Dalle throughout their rise in the company. Over the next 30 years, the team would bring about the products that would position L'Oréal as the industry leader that it would come to be. 

After Dalle left office in 1984, Zviak led as CEO for the following four years. During this time, the company would begin to market cosmetic products to men, further their product development and expansion, and officially become a world leader in the beauty industry. 

Increasing Distribution

Shortly after the war, L'Oréal continued expanding into new countries and increasing their distribution. The goal of L'Oréal became clear: dominate the market. L'Oréal would continue to expand throughout the 1950’s and largely used the world’s booming marketing capabilities to their advantage. 

By this time, L'Oréal was a global contributor to the cosmetics industry on at least three continents: Europe, North America, and South America.

Chapter summary— Armed with effective leaders with intuitive business ability, L'Oréal was in the perfect position to step up and lead the beauty industry through history. The unique expertise and standard that L'Oréal was able to bring to the cosmetics industry led the company to success, despite scandal and global events. 

Inheritance and Company Politics 

After Schueller’s death in 1957, Liliane Bettencourt inherited her father’s company. At 35, she became the heiress to a fortune in the making. While she owned the majority share of the company, Francois Dalle made executive and operational decisions for the company that ultimately led to its overall success. 

Before her father’s death, Liliane married a man named André Bettencourt, from whom she got her name. Like Schueller, André Bellencourt had strong ties to the Nazi government, a fact that holds space with theories and accusations about L'Oréal’s early contributions. Despite these accusations, Bettencourt had a spot on L'Oréal’s board of directors throughout their term of highest growth. 

Going Public

In 1963, under the leadership of Francois Dalle, L'Oréal went public on the French stock exchange. The Bettencourts maintained their majority share in L'Oréal but going public positioned L'Oréal to make strategic and successful acquisitions in the years to come. Over the next 10 years, Dalle would lead L'Oréal to acquire several brands and further the company to its billion-dollar valuation. 

Today, the industry leader has a market cap of 225.7 billion US dollars and continues to grow its share prices. From March 2020 to June 2021, shares of L'Oréal ADR increased by nearly $50 to a total of $91 per share. This current share price is the highest and most consistent increase the company has experienced since June 2000, where the stock was valued at $160 per share and fell to just $16 per share in a matter of days. Over the last 20 years, L'Oréal has experienced steady growth in stock returns, with their largest increase in decades taking place amidst the COVID-19 pandemic. 

In Ties with Nestlé

In 1974, a portion of the Bettencourts’ ownership in L'Oréal was sold to Nestlé, the world’s largest food company, as a means to protect the company with Nestlé’s resources. Nestlé would not become a majority shareholder, the Bettencourts kept majority ownership and still have it today. 

Since the 1970’s, the market and consumerism has greatly changed. While Nestlé stepped in to help protect L'Oréal in the 70’s, the company had not yet seen the massive expansive growth they would experience in the coming decades. L'Oréal’s success in expansion was largely due to Nestlé and the Swiss company’s connections to overseas markets. Although they were a major contributor to L'Oréal’s growth, L'Oréal would grow to surpass Nestlé in market returns. 

By 2018, the beauty giant was producing a 15% return for shareholders, while Nestlé shares produced an 11% return. In 2014, the Bettencourts initiated their first buyback of Nesté’s stake in the company. L'Oréal purchased back 8% of the stock that had been sold to Nestlé 30 years prior, increasing the Bettencourts’ stake in the company by 3%. 

Loreal shareholder groups ownership chartSource

Chapter summary— To fulfill the dream of market domination, L'Oréal began to build professional alliances and make decisions that put the soon-to-be conglomerate in the position to rise to their current state. The decision-making by leadership allowed L'Oréal the opportunity to advance into foreign markets and produce the funds necessary to make their future acquisitions. 

Diversification & Acquisitions

In his time as leading chairman, Francois Dalle would see L'Oréal through a number of powerful company acquisitions that helped to diversify L'Oréal’s market reach and product offerings. Research and development expanded again and again until the department housed 1000 employees by the start of Zviak’s reign in 1984. L'Oréal was growing and it was not stopping. 

After L'Oréal went public, Dalle acquired 18 companies from 1964-1984, ranging from self-care products providers to over-the-counter drug manufacturers. In an effort to expand L'Oréal’s network and access to industry tools, the diversification of L'Oréal began the growth of many household brands that are still popular today. 

Most notably, L'Oréal purchased its first key cosmetic brand in 1964. This luxury cosmetic line went by the name of Lancôme and remains an industry leader in today’s 21st century beauty market. In the same year, L'Oréal would expand from hair and cosmetics to perfumes when they purchased Jacques Fath perfumes Laboratoires d’Anglas. In 1965, Garnier was purchased by L'Oréal, followed by a fashion and perfume brand, André Courrège, and French skin care company, Biotherm, in 1970. 

In 1973, L'Oréal would go on to break into the pharmaceutical space with their purchase of a controlling stake in Synthélabo, which would later merge with Sanof, to form Europe’s sixth-largest pharma company, Sanofi- Synthélabo. Brands Gemey, Ricils, and Jeanne Piaubert were also picked up the same year. 

The following year would be when L'Oréal began its alliance with Nestlé. In relation to Nestlé’s influence on L'Oréal’s growth, it’s important to note that at the time of Liliane Bettencourt’s share sale to Nestlé, current L'Oréal CEO, Francois Dalle was on the Nestlé board of directors

Over the next four years, Dalle would leverage two mergers and 5 company acquisitions before leaving L'Oréal in the midst of acquiring household name Ralph Lauren in 1984. In the four years following that Charles Zviak led the company, no company acquisitions had been made, but strides were being taken in research and the company was further positioning itself as the key player in research and innovation. 

Lindsey Owen-Jones

Lindsey Owen-JonesSource

From 1988 to 2005, Owen-Jones led The L'Oréal Group into the 21st century, acquiring more companies along the way, and even breaking into the film industry for one year when L'Oréal controlled Paravision. Keeping a majority stake in Paravision International, L'Oréal refocused and began to acquire more companies in the beauty space. 

L'Oréal would go on to acquire 13 more companies and 2 major licensing agreements throughout the length of Owen-Jones term. Relationships with brands like Georgio Armani and Viktor & Rolf led to the diversification of L'Oréal’s high-end portfolio, while acquisitions like EpiSkin and Maybelline worked to directly grow the company in either research capabilities or considerable profit margins. 

From 2006-2018, L'Oréal would make at least 16 more acquisitions and release several of their old holdings. Brands acquired during this time include: Urban Decay, NYX Cosmetics, CereVe, Essie Nail Polish, and PureOlogy. Amongst these common holdings, L'Oréal continued to expand into foreign markets with strategic purchases like the $840 million dollar buy of the Chinese cosmetic company, Magic Holdings. 

Chapter summary— Everyone can be your customer, you cannot be everyone’s brand. This may as well be L'Oréal’s take on business as a whole. Over the life of the company, the strong commitment to acquisition and diversification proves that L'Oréal is no longer the hair dye company of the early 1900’s, but an industry solution for a variety of businesses. 

The Rise to Conglomerate

While many historical factors have contributed to L'Oréal’s century-long success, there are a few takeaways that any business can learn from. Without a solid foundation and successful business practices, a company does not continuously grow over the course of a century. The following key components should be in place to achieve the level of success that L'Oréal has. 

Strong Brand Image

Over the years, L'Oréal has developed and maintained a strong brand image that contributes to their customer loyalty and increases their brand recognition. L'Oréal began as a company for women, with a mission to bring them the best cosmetic products possible—and that’s just what they’ve done. By instilling the importance of providing beauty solutions to every woman, (in any market, at any price point) and never wavering in their initial purpose, L'Oréal has maintained their place as a go-to cosmetic provider for women around the world. 

Launch Strategies

Throughout the “early years” of the French beauty industry, L'Oréal made history by launching the first of several products that are widely manufactured and in demand today. From releasing the first sunscreen to introducing the first-ever hairspray, L'Oréal was leaving impressions, no matter their strategy. However, this particular circumstance could not always be the case. 

Over the decades, L'Oréal maximized its position in the industry by strategically launching new products. As far back as the 1930’s, Schueller was using clever means to launch L'Oréal products and his successors followed suit. 

Universalization is a prime strategy L'Oréal uses to successfully market and launch its products. While this strategy greatly benefits L'Oréal, universalization benefits the consumer just as well. This strategy represents the respect and acknowledgment of the differences in experiences that individuals across cultures face and aims to offer proper solutions to the proper demographic. 

Their commitment to research, combined with their dedication to inclusion, is what has allowed L'Oréal to expand into 150 countries around the globe. 

Effective Positioning

In keeping with their brand image, L'Oréal’s commitment to research and development is what has carried them over the last 100 years. If not for their relentless pursuit to discover beauty solutions for multiple demographics, L'Oréal would never have expanded to the point that they have now. The high standards that have been in place since 1909 have remained as high as when Schueller was selling Société Française des Teintures Inoffensives pour Cheveux to local French salons. 

The positioning of the brand has resonated with every leader after Schueller and continues to strengthen well into the 21st century. 

Maximizing Circumstance

As history played out and the rise of mass media began, L'Oréal used every trend and every influence as an opportunity for growth. From the Jazz Age through the 1950’s, the leadership at L'Oréal understood the importance of keeping with—and sometimes leading—the trends of the time. Similar to the way Votre Beauté influenced the early patrons of L'Oréal, Hollywood began to grow in popularity, greatly influencing the spread of fashion trends. L'Oréal maximized this, and continues to do so, by developing products that fit the beauty trends of the time.

Creative Marketing

Dating back to Votre Beauté and L'Oréal’s artist commissioned posters, Schueller’s knack for marketing and maximization of the mass media industry as a growth tool is an incredible success story for businesses everywhere. In a time where women were hardly viewed as a customer pool, Schueller did something that had never been done before and it paid off in droves. This early expectation of how L'Oréal would interact with their clients would eventually become the template for modern-day advertising. 

The theme of intuitive marketing combined with cutting-edge and never-before-seen products gave L'Oréal the brand direction that would lead them into the 21st century. 

Powerful Management

Since its formation, L'Oréal has been headed by powerful and decisive leadership that has steered them to become the conglomerate that they are today. Eugene Schueller coined early examples of the L'Oréal approach, but every leader after him has reigned in the legacy of their successor and strove to build L'Oréal by massive amounts. 

After Lindsey Owen-Jones' turn of the century term, L'Oréal’s most recent CEO took over the company from 2006 to May of 2021. Jean-Paul Agon is credited with leading L'Oréal into the digital age, where the team again used the tools at their disposal to maximize their market reach and became the leading cosmetic brand in China. 

While each successor after Schueller played an integral part in the company’s journey to conglomerate, Agon took the company from a 46 billion dollar market cap in 2006 and increased that number by more than quadruple. At the end of his term, L'Oréal’s market cap was around 230 billion dollars and has increased by more than 60 billion dollars in the three months since his resignation in May of 2021.

Chapter summary— L'Oréal’s success was not a “luck of the draw'' anomaly, but a strategic build of a company across generations of powerful leaders with strong ambition and a clear brand vision. Throughout each term of leadership, L'Oréal embraced the world around them and maximized their brand by staying relevant, making intuitive decisions, and widely diversifying their market reach. L'Oréal’s ability to grow with its consumer base and intuit the needs of a niche effectively created space for decades of beauty entrepreneurs to come. 

The L'Oréal Group

Client & Competition

After 100 years and just as many strategic decisions, L'Oréal has expanded to house 36 brands and thousands of products under their conglomerate wing. Their commitment to diversification in demographics, product opportunity, and varying industries has given the beauty giant the tools they need to be successful in every market. 

By controlling a range of brands, from low end to high quality, and offering cosmetic products to men, women, and children around the world, L'Oréal has effectively positioned itself as a company that has a product for everyone. 

beauty companies owned by brand infographicSource

Throughout the lifetime of L'Oréal, only a handful of other beauty conglomerates have managed to race them to the top. Almost any product that can be found on mainstream shelves today is controlled by L'Oréal, Estée Lauder Companies, Coty, Unilever, Procter & Gamble, Revlon Inc, or Johnson & Johnson. 

Divisions of a Conglomerate

To adequately maintain the success of 36 brands, The L'Oréal Group is divided into four divisions: L'Oréal Luxe, Consumer Products, Active Cosmetics, and Professional Products. 

L'Oréal Luxe consists of 26 of The Group’s most exclusive brands, including industry pillars like Lancôme, Keihl’s, Giorgio Armani, Prada, Valentino, Mugler, and YSL, and Ralph Lauren. This division is dedicated to bringing the best and most high-quality brands to their consumers while implementing recycling initiatives and sustainable formulas within the L'Oréal Luxe brands. 

The Consumer Products Division aims to bring quality beauty products to all consumers, regardless of financial state. With common drugstore brands like Maybelline New York, Garnier, and NYX, L'Oréal strives to create affordable and accessible cosmetic options for the larger beauty market. 

The L'Oréal Group’s Active Cosmetics Division houses treatment brands that can have been proven to achieve results in acne or problem skin with science. This division is singularly focused on innovation and understanding the skin so the R&D teams can create the most effective and healthy beauty products on the market. Well known brands in this division include CeraVe, Vichy, and La Roche Posay. 

The Professional Products Division in The L'Oréal Group could arguably be noted as the company’s first division. The Professional Products teams actively seek to bring the best hair care products to the industry and to industry professionals. Brands like Kérastase, Redken, and Pureology are all controlled by this division. 

Each division also deploys its own sustainability initiatives, with varying accomplishments across all of the brands. From recycling programs to job creation with sustainable sourcing, The L'Oréal Group continues to invest in research in all areas, including product solutions that will reduce plastic consumption in the beauty market. 

The Future of the Group

As of this writing, L'Oréal holds space as the 33rd most valuable company globally and is not likely to stop now. With a change of leadership in May of 2021, Nicolas Hieronimus became the next CEO of L'Oréal, following a four year stint as deputy CEO to Agon. Hieronimus has made his intentions for the company very clear and shares views much like those of his mentor. 

Nicolas HieronimusSource

Under the leadership of Hieronimus, The L'Oréal Group will continue to be committed to universalization and focus on achieving industry leaders in each country that represent the demographic of the country. 

In an ode to good faith, The L'Oréal Group will also expand on eco-conscious initiatives like its L'Oréal for the Future commitment that will work to further reduce the conglomerate’s ecological footprint over the next decade. L'Oréal was already a favorable and eco-conscious company, as they have consistently worked to increase sustainability over the last 15 years, significantly increasing this focus and producing favorable results year over year. 

Heironimus has vowed to upkeep this trend and continue to defer to science as the leading driver in the company’s position. 

Recap

Growth by the numbers

Year

2020

2013

Availability 

150 Countries

70 Countries

Industry Market Share

60%

40%

Number of Employees

85,087

77,452

Sales 

$33 Billion 

$27 Billion 

Key takeaways

L'Oréal has had a profound impact on the beauty industry, from creation to advertising to inclusion, the now multi-billion dollar conglomerate should be recognized for its contributions. From their start as with historical product innovation and a commitment to research, L'Oréal contributed greatly to the development of the beauty standards that are still present today. 

Eugene Schueller’s initial targeted marketing in the 1930’s spawned an advertising trend that would be continued across industries and imitated over and over again in the beauty market. Had L'Oréal not played a significant part in the development of the beauty industry and inspired products around the globe, it could be argued that the market may not have grown to what it has today. 

Over the course of 80 years and 5 visionary CEOs, The L'Oréal Group was not only able to stay afloat as the years went on, but consistently gain, grow, and evolve to be the industry leader the market was looking for. Their pristine ability to intuit the needs of consumers, listen to feedback, and transform with the times has been a crucial element in their rise to global success. 

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