Home News L’Oreal, hair and sun-cream pioneer, hits 100 as world leader

L’Oreal, hair and sun-cream pioneer, hits 100 as world leader

Published on 10/06/2009

Paris -- In 1909 French chemist Eugene Schueller concocted a safe dye for hair, calling it l'Aureale after a popular hair style of the moment in a city which was already a byword for style and fashion.

On Thursday that business, now an empire, a top French brand and a leader in the world of cosmetics under the name of L’Oreal, celebrates 100 years of satisfying vanity and riding the long rise of spending on body care products.

Since the early years when Schueller invented new recipes by night and delivered to hairdressers by bicycle by day, L’Oreal survived through the Great Depression, two world wars and the growth of competition in ever-more prosperous economies.

However, Schueller attracted controversy for having extreme right-wing connections before and after the occupation of France in World War II.

The founding family was in the news recently over litigation between Liliane Bettencourt, Schueller’s daughter, and her own daughter Francoise Bettencourt-Myers. The daughter took court action to challenge gifts totalling nearly EUR 1 billion (USD 1.42 billion) from the family fortune by her mother to a friend, a photographer.

The Swiss food giant Nestle acquired 28.9 percent of the group in 2004.

But Liliane Bettencourt remains the top shareholder, making her one of the wealthiest women in the world with a fortune estimated by Forbes magazine in 2008 at USD 23 billion. She herself began working in the business at the age of 15, mixing cosmetics and labelling bottles of shampoo.

L’Oreal is one of three top world groups in this market which, over 100 years, reached down through the middle classes to new segments of working people in emerging economies.

Personal body care is now a multinational business.

The market for L’Oreal expanded from "gay Paris" in the early years to the globalised world of supermarkets and glamour: a story of the consumer society.

"The globalisation of the cosmetics market is just beginning…we reach scarcely a fifth of the inhabitants of the planet," chief executive Jean-Paul Agon said in remarks to mark the anniversary. The current crisis should be a stimulus and the company "has never been so much on the attack."

The group, under its previous chief executive, Welshman Lindsay Owen-Jones, turned in an astonishing run of ever-rising profits: for 23 years running it raised profits by more than 10 percent per year.

The empire now constitutes one of the biggest family fortunes in France, but in its hundredth year it too is being tarnished by the effects of the global economic crisis.

For the first time for many years, the group is closing some factories in Europe because the global economic crisis hurt profits.

The Bettencourt family owns 30.8 percent of the business. Analysts frequently raise the possibility that Nestle might make a takeover bid.

On Thursday, shares in the group were steady at EUR 55.57, but showed a fall of 10.81 percent in 2009.

Throughout the swinging twenties, Schueller developed his tiny start-up business and in 1929 set his mark on a strategy which the company since followed with great success.

It always invested heavily in research and development, basing its growth on innovation, advertising and international development. For example, in 2003, the group opened a centre in Chicago to research the specific characteristics of black skin. Today, it says it employs 3,200 people on research.

Doutzen Kroes & Laetitia Casta advertising for L'OrealIn 1934, Schueller developed Dop, the first shampoo without soap for the mass market, and when the first paid holidays for the mass of workers in France became obligatory at the end of the 1930s, the company was already on the market with the first sun cream, Ambre Solaire, developed in 1935.

The other two top groups in the sector are Procter & Gamble of the United States and Beiersdorf, which invented Nivea cream, in Germany. Under the Beauty Top 100 rankings, L’Oreal is the biggest with annual sales of EUR 17.5 billion and market share of 16.0 percent.

However, Euromonitor International analysts in London calculate different figures, saying that L’Oreal is the second leading company, after Procter & Gamble.

"In 2008, L’Oreal’s market shares increased from 10.2 percent to 10.4 percent mainly due to its acquisition of Yves Saint Laurent," said analyst Oru Mohiuddin, specialising in personal care companies.

In 2008, the company reported growth of 3.0 percent "mainly dragged down by salon hair care in the USA."

The most promising market through 2014 would be "China skin care, contributing 12 percent to overall growth in cosmetics and toiletries between 2008-2013," the analyst said, noting that the company remained the leader for hair colourants with 35.3 percent of the market.

The company, a pioneer of modern advertising, has used a long list of stars to promote its products, and in 2008 spent more than EUR 5.0 billion on advertisements.

Its slogan in recent years of world-wide growth played up to self esteem: "Because you’re worth it."

AFP / Expatica