Interview: L’Oréal’s Laurent Duffier on the business of beauty

Tell us about how L’Oréal performed in H1 2022.
This year, L’Oréal witnessed an exceptional growth of over 13.5 per cent year-on-year in comparable sales and an over 20.9 per cent increase in reported sales in the first half of the year. We are proud to be contributing to this global performance, growing twice as fast as the local market in the region, with the active cosmetics division being a steady growth driver. For the last two years, we have gained an increase in market share in the region across all four of our divisions and categories.

What have been the key drivers of growth?
The market has rebounded fast and is close to its pre-pandemic growth pace. The beauty industry has enormous potential with new beauty and skincare needs, and young demographics that need to be served.

What are some of the key trends influencing the beauty industry globally and in the Middle East?
We believe beauty is an essential human need. Feeling beautiful endows people with confidence to achieve the things they want to do in life. Consumers’ expectations towards beauty are constantly evolving, with the Covid-19 pandemic accelerating some of the pre-existing trends.

For example, women and men today look for personalised and inclusive products, which are time efficient, backed up by science, respect the environment and are made from safe ingredients. They want brands that are not only here to sell products, but also have a purpose that resonates with their values.

They search for efficient brands that can sometimes be real life changers and at the same time totally safe. This has caused a spike in demand for dermo-cosmetics, sold in pharmacies, globally and in the region. Health-conscious beauty lovers are choosing products with vitamin C, hyaluronic acid and niacinamide, which boost skin moisture and improve quality of life.

As people return to their daily routines and work schedules, we are witnessing a comeback of makeup, as well, as a social category by essence. This category illustrates what we call the “lipstick effect” and the fact that even in difficult economic times, buying lipstick is a small indulgence that almost all women can afford.

We are also seeing increased shopping activity online in the region. Consumers are increasingly turning to direct-to-consumer e-commerce, such as a brand’s website, shoppable social media platforms or marketplaces because of its convenience and the wide variety of brands it offers. We started our e-commerce journey a while ago and are fully prepared to take advantage of this trend.

Our customers also want personalised advice when choosing products, immersive and unique purchasing experiences, and direct access to their favourite brands. This is possible only through a well-established data-driven strategy and investments in artificial intelligence and other digital technologies that allow us to understand and even anticipate our customers’ needs to deliver the best service and products.

This year, we launched the first product powered by our ultra-personalisation service, Perso, in our L’Oréal Technology Incubator. The Yves Saint Laurent lipstick, Rouge Sur Mesure, takes the best of beauty tech and allows consumers to create their very own version of YSL’s iconic Velvet Cream Matte Finish lipstick in the comfort of their homes.

We have also implemented the Kérastase Hair Diagnostic Tool, where an advanced algorithm is used to analyse consumers’ scalp and hair needs, which is available in top salons across the GCC. These services are increasingly important to guide our consumers in making the most informed decisions and provide them with experiences that are as personalised as possible.

In addition to the UAE, what are the key markets in the Middle East that will fuel growth over the next decade?
The GCC economies are expected to grow at their fastest pace in more than a decade, beating other emerging markets this year. With travel restrictions easing, tourism rebounding and strong domestic demand, there will be a positive uplift in all industries, including the beauty segment.

We believe that Saudi Arabia will be one of the prominent markets for cosmetics and fragrance products in the region in the coming years. The key drivers will be the economic growth of the country with investments tied to Vision 2030 initiatives, a growing young population, a middle class with more income linked to higher participation of Saudis, especially women, in the workforce, and the sophistication of the market enhanced by social media, which drives awareness of beauty products in the country.

Consumers in the kingdom tend to spend substantially on their personal appearance, and we expect this to continue, further boosting the dynamic growth of the cosmetic and fragrances market.

Finally, the penetration of organised retail channels offline and online, with whom we are collaborating closely to provide the best possible beauty experiences to consumers, are also factors that will continue to accelerate the growth of the market.

After Expo 2020 Dubai, international events like the football World Cup, which will be held in our region this year, will certainly fuel demand in some categories, such as sun care. The most awaited event for e-commerce, White Friday, is also one of the biggest contributors to our growth for the second half of the year, with new launches, special offerings, and the maximisation of cross-selling opportunities across our categories.

How is the group leveraging its digital excellence to strengthen its e-commerce capabilities?
Digital and e-commerce are of strategic importance to our growth. E-commerce accounts for about 30 per cent of L’Oréal’s business around the world. Throughout the years, we have strengthened our digital and e-commerce capabilities to lead the growth of the market with our partners and on our brand sites. To be successful in e-commerce, you need strong hero products, great content on your platform and 360-degree marketing and advertising strategy in each category. We invest heavily in the upskilling of our teams and use a range of tools to measure the ROI of our actions.

We have been the first in the market to bring ‘live commerce’ events in 2022. This innovation allows customers to directly and seamlessly buy the products presented by influencers during an online show. Using the latest technologies available, we also continue to introduce new digital services to the region to assist consumers in choosing products that match their preferences. For instance, during Ramadan, we created an AR-powered virtual mall in partnership with Snapchat that featured a beauty corner exclusive to Kérastase, YSL Beauty, Vichy and NYX, delivering a seamless shopping experience to consumers at home.

Moreover, in response to the common challenge that consumers in the region face with identifying the right skincare routine, we launched Skinconsult AI by Vichy, a skin analysis tool developed by dermatologists to detect, analyse and provide a customised skincare regimen, available right on your smartphone. We also launched – at YSL Beauty – the world’s first fragrance immersive technology supported by neuroscience to help consumers find their fragrance of choice. By wearing a headset device and smelling different fundamental fragrance accords, the new EEG technology displays an emotional response to the scent, providing consumers with a bespoke and scientifically based product recommendation.

These beauty tech innovations will continue to play a huge role in the years to come.

Tell us about the company’s focus and investment in research and innovation.
As the brainchild of scientist Eugene Schueller, L’Oréal was born – more than 100 years ago – on a foundation of science and innovation.  Beauty never stands still. And neither do we. We invest EUR1bn each year into research and innovation to make sure we address our consumers’ needs. This makes us the largest investor in skin and hair research in the world.

We have 4,000 scientists working in 30 disciplines in 21 research and innovation centres around the world. In addition to that, we have 497 patents registered to date and are pioneers in ‘green sciences’, which we harness to meet our sustainability goals while offering consumers safe and effective products.

We also have a robust beauty tech strategy, aimed at revolutionising the way we respond to the diverse needs and aspirations of our consumers. We leverage artificial intelligence and data to create inclusive experiences and personalised products for them. Through our investment fund BOLD, we also collaborate and invest with startups to invent the new products and services of tomorrow.

How is sustainability playing a part in operations and your product offering?
At L’Oréal, our purpose is to “Create the Beauty that Moves the World”. Therefore, we have always been committed to protecting the beauty of the planet by fighting climate change, respecting biodiversity, and preserving natural resources. For example, we have already reduced the emissions of our industrial sites by 87 per cent compared to 2005 while, within the same period, increasing our production volumes by 37 per cent. This proves our ability to decouple growth from our impact on the environment.

In 2020, we launched ‘L’Oréal for the Future’, the second phase of our sustainability programme, achievable by 2030. This is our pledge to use technology and green sciences to make better products – for us and our world – and minimise our carbon footprint.

L’Oréal for the Future 2030 targets were created to offset the impact of our operations on biodiversity, water, climate, and resource utilisation, as well as that of our 1.5 billion consumers. Through these science-based targets, we aim to achieve a total and radical reinvention of our global business and to limit our impact within which humanity can continue to develop and thrive for generations to come.

For instance, by 2025, all of L’Oréal’s sites will have achieved carbon neutrality by improving energy efficiency and using 100 per cent renewable energy.

In terms of our product offerings, 100 per cent of our plastic packaging will be refillable, reusable, recyclable or compostable by 2025, and 100 per cent of the plastics used in L’Oréal’s product packaging will be either from recycled or bio-based sources by 2030. Finally, 95 per cent of our ingredients in the formula will be bio-based, derived from abundant minerals or from circular processes by 2050. In line with our global framework, we have implemented a ‘3Ws’ strategy in the region, focusing on women, water and waste.

Helping women has always been a natural focus for us and we are doing it in many ways. We are empowering them through our ‘Beauty for a Better Life’ training programme, delivering high-quality, free vocational training to help them gain employment or create their own businesses in the beauty industry. We also encourage them to embrace scientific careers with our ‘L’Oréal-UNESCO For Women in Science’ programme that recognises exceptional scientists each year and grants them endowments to pursue their research.

To date, we have awarded 40 winners from the GCC in the past nine years. We also raise awareness of the street harassment plague and provide training on how to handle these situations with our ‘L’Oréal Paris Stand Up’ programme. We had the biggest training on this theme at Expo 2020 Dubai last year.

In terms of water, we work with salons to help them reduce their environmental impact by installing water-saving innovations, such as the Gjosa showerhead that can save up to 60 per cent water and encouraging them to use recycled and recyclable materials in the interiors of salons. We also provide our consumers with products that reduce water consumption such as solid shampoos.

As for waste, Garnier continues to contribute to a plastic-less future through its ‘Green Beauty’ commitments.

The brand partnered with Naqaa Sustainability Solutions and has already recycled 30 tonnes of plastic bottles in Saudi Arabia last year.

We live in a truly beautiful world, and believe it is our responsibility to do everything we can to ensure it stays beautiful.