Strategy

How L’Oréal USA conquered the US market

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Frédéric Rozé

L’Oréal USA has established itself as L’Oréal’s number-one international subsidiary. A key driver in the Group’s growth of recent years, it reported €6.2 billion in sales and nearly 6% growth in 2016. Frédéric Rozé, Executive Vice-President of the Americas Zone, explains the reasons for L’Oréal’s success. 

A long and tenacious conquest to become leader

“L’Oréal USA is a leader for us in two respects”, Frédéric begins. “Not only is it the Group’s biggest international subsidiary, but it is also number-one in America, which is the world’s largest beauty market.” In 2016, L’Oréal USA generated sales of €6.2 billion for the Group, or three times more than France. As a matter of fact, the Group’s dollar sales now exceed sales for the entire eurozone.

L’Oréal did not get off to a quick start in America, however. “We set up our first US business back in 1953 in a small depot. It was pretty slow to get off the ground”, chuckles Frédéric. “In 1980, after more than 25 years, sales were still just $175 million – well short of other leading markets”. It all took off in 1990, when the Group reported €1 billion in sales for the first time. “Thirty years on, we have 10,000 employees and five plants, where we make most of the products sold in the US. The manufacturing facilities also produce for our US brands, which are exported worldwide”, says Frédéric. Thanks to these performances, L’Oréal is now the leader on this market, reporting annual growth of some 6%, or about 1.5 times better than the local cosmetic market. “The Group which is number-one on the US market is almost twice as big as our biggest competitor!”

An acceleration boosted by strategic acquisitions

As Frédéric sees it, this success and this acceleration over the last 30 years can be traced back to several factors: “Our perseverance and our spirit of conquest in all Divisions allied to strategic acquisitions.”

In the luxury sector, L’Oréal Luxe is gaining ground and adding new market share every year. “In men’s and women’s fragrances, we are in pole position thanks to the success of Viktor & Rolf’s Flower Bomb, Lancôme’s La Vie est Belle but also Mon Paris by Yves Saint Laurent, with YSL posting 26% growth in 2016”, explains Frédéric. More recently, a historic milestone was reached as Lancôme took the number-two spot on the US selective market, a signal achievement that rewards years of hard work. Building a leadership position has taken time in the mass market as well. A minor player at the start, L’Oréal Paris has carved out its place after decades of unstinting efforts. In colour products, for example, the brand took 27 years to overcome its long-term rival! The Active Cosmetics Division can point to a more recent track record, having established itself by developing the drugstore dermocosmetics category through Vichy and La Roche Posay. Frédéric tells us that Professional Products is another leading division: “L’Oréal is the salon leader, as we are the only ones who can reach out directly to stylists through our network of distributors”, he says.

Strategic acquisitions have further boosted the divisions’ positions. In the cosmetics sector, L’Oreal recently acquired CeraVe, which will enable the Division to almost double its turnover. In makeup, the Consumer Products Division has moved to the forefront through key brand acquisitions. “We bought Maybelline New York some 20 years ago and turned it into America’s number-one makeup brand. More recently, acquisitions such as Essie, a nail polish specialist, and especially NYX Professional Makeup, an extremely successful makeup brand, have driven our growth”, explains Frédéric. In the luxury sector, the Group just completed its biggest ever US acquisition with the $1.2 billion takeover of IT Cosmetics. This prestige makeup brand, which was developed in collaboration with leading plastic surgeons, is the perfect choice to round out the division’s brand portfolio.

Priorities given to Research & Digital

Huge investments in Research & Innovation and digital have played a big part in L’Oréal’s success story.

In R&I, the Group’s US research centre is working to grow the major American brands. “Our New Jersey facility has 400 researchers, making it the Group’s second-largest research team after the Global Research Centre in Paris, with which we work very closely”, says Frédéric. To tap into the Silicon Valley ecosystem, the Group has also set up an incubator in California. “Our people there worked with Kérastase to develop the world’s first smart brush, which took the CES innovation award in Las Vegas”, he explains.

To make its presence felt on a highly connected market, L’Oréal has also made digital a top priority. “We are ahead of the curve in our sector, especially when it comes to e-commerce, where the Luxury Division has been a pioneer. Its sales now represent 17% of turnover.” Staying ahead of the curve also means recruiting and enhancing talents. “Through the Women in Digital program launched 5 years ago, we are bringing to light women who are behind technologies which are revolutionizing the beauty industry.”

A promising Western conquest

The Group’s efforts are bearing fruit. Today L’Oréal USA is not just the leader on the US market, it is also playing a pivotal role in the Group’s growth. Maybelline New York is now the world’s number-one makeup brand, with leadership positions on key markets such as China, and its sales have increased eightfold since its acquisition. Other example, Kiehl’s, which L’Oréal bought in 2000, now top $1 billion, 24 times more than before the brand was acquired.

Even so, the campaign to win the west is far from over. In fact, it is just getting started, according to Frédéric, who has these words to say in conclusion: “Our potential is huge. We have market share of just 14%, compared with 20% in Western Europe. We’ll do everything we can to reach the same level of market share on this side of the Atlantic”.

 

Products & Services | May 2017