The boss of L’Oréal, the world’s largest beauty company, has admitted in an interview with MarketWatch that pollution is good for business.
Jean-Paul Agon, chief executive and chairman of the parent company behind the Maybelline, Garnier and Lancôme brands, also said millennials are buying more cosmetics to try to replicate the digitally enhanced images they have created of themselves for social media when they venture into the real world.
But when asked if pollution was good for business, the L’Oréal (PAR:FR:OR) lifer, who has been with the French-listed company for 41 years, said: “Yes, but we are not encouraging it. ... Where there is pollution, we want to protect our consumers.
“When you live in a city your skin, your hair is challenged more than if you were living in a rural area, so you need more shampoos, conditioners, skin care, hydrating creams, anti-UV, etc. Urban life means more socialization, and more socialization means more beauty consumption.”
Millennials want to match their online looks in the real world
He also insisted that a trend among millennials to digitally enhance their looks on social media, such as Instagram and Snapchat(TICKER:SNAP), is not making beauty products redundant but actually boosting business. “The more you make yourself look really great online,” he said, “the more you have to work on yourself when you go out, because if, when people meet you, they discover that you are completely different from what they thought, then you have a problem.
“If they want to use filters to look better online, they have to do something in real life also to look better, and that is why they use more cosmetics, more makeup, more skin care, more everything.”
Hollywood star Kirsten Dunst signed up as L’Oréal brand ambassador
L’Oréal, which has just signed film star Kirsten Dunst as a brand ambassador , has been embracing innovation itself , and Agon can see a day when consumers 3D-print their lipstick and buy beauty ranges for their pets.
Agon spoke to MarketWatch in Vancouver, Canada, ahead of a keynote speech to the Consumer Goods Forum, and the company has since posted its half-year results .
L’Oréal saw a 12.1% rise in half-year operating profit to €2.8 billion ($3.1 billion) on the back of a 10.6% increase in reported sales to €14.8 billion.
Disappointing makeup sales in its key U.S. market, though, caused the company to miss some analysts’ second-quarter growth targets , wiping 4.1% off the shares on the day of the earnings report. This is after a good run that had seen the shares lifted more than 96% over a five-year period, compared with a 53% rise by the Dow Jones Industrial Average (DOW:DJIA) .
North America contributes 25.7% of group sales, less than the 28.4% of sales that come from Western Europe.
“We are doing everything to restimulate the [U.S.] market: repositioning and innovating,” Agon said in a follow-up call, after the financial update. “Internally we are perfectly on plan for this year for the group - this first half is one of the best we have ever had. There are bright spots and less bright spots, so pretty normal.”
‘Immune to crisis’
Back in Vancouver he made the investment case for the business, saying it is attractive because of the diversity of its product range and its geographical spread. “We are the No. 1 beauty company, but mostly because we cover all channels, all categories, all geographies, all consumer needs, all psychographics,” he said.
“I would say that the beauty business is pretty immune to crisis. That is why, by the way, as you know, the price-to-earnings ratio of a company like L’Oréal is pretty high. . . because investors and analysts acknowledge the fact that, whatever happens, L’Oréal will be able to keep growing, keep developing, and keep increasing its profitability.
L’Oreal’s main rivals are Estée Lauder (NYS:EL) , Coty (NYS:COTY) (NYS:COTY) and Shiseido (TKS:JP:4911) .