L'Oreal is the world's largest cosmetics producer by revenue -- €17.5B($24.7 billion)*-- and a North American market share of 15.8%. L'Oreal offers products in hair care, skincare, make-up, deodorants, and perfumes through its 27 brands that span all income levels. In 2008 L'Oreal acquired Yves Saint Laurent Beauté, further increasing its cache in the luxury goods market. Its two largest competitors are Revlon (REV) and Procter & Gamble Company (PG).
Emerging markets are key growth drivers, comprising 33% of sales. The company expects this to rise to over 50% in ten years time. . In addition China may become its third largest market by year's end. . Two more markets that it has penetrated include men, who have shown an increasing amount of attention to cosmetics, and an older population that has an interest in anti-aging products.
|Year||Revenue (€ millions)||Revenue ($millions)||Operating Income (€ millions)||Operating Income ($millions)|
LRLCY reported €9.67 billion in sales, which was a 6.3% increase from the same period last year like-for-like, which is based on comparable structure and identical exchange rates. Gross profit was €6.89 billion, which is 71.3% of sales, compared to 70.2% in the first half of 2009. Net profit was €1.41 billion, which is a 16.5% increase from the same period last year. During this period, L’Oreal USA acquired Essie Cosmetics, a prominent nail color business, on June 25th, 2010. Essie’s net sales in the last 12-month period were $28 million and it’s expected to bring future growth to L’Oreal USA.  On June 1st, 2010, L’Oreal USA also acquired 100% of the capital of C.B. Sullivan for its SalonCentric division in order to extend LRLCY’s US hair salon distribution network. By division, professional products, consumer products, luxury products, and active cosmetics reported 5.3%, 5.6%, 9.7%, and 4.7%, respectively in sales growth like-for-like.  By geographic zone, Western Europe and North America recorded growth of 2% and 4.9% respectively in sales growth, like-for-like. All of the new markets (Asia/Pacific, Eastern Europe, Latin America and Africa/Middle East) except for Africa/Middle East had double digit sales growth, like-for-like. 
LRLCY reported €17.47 billion in sales, which is a .3% decrease from 2008. LRLCY also reported €2.58 billion in operating profit, which is a 5.4% decrease from 2008. By division, professional products, consumer products, luxury products, and active cosmetics reported -3.3%, 1.5%, -2.2%, and -4.3% respectively in sales growth, like-for-like. By geographic zone, Western Europe, North America, and new markets/rest of the world reported -6.3%, -3.4%, and 7.2% respectively in sales growth, like-for-like. New markets are growing especially well, strongly due to launches tailored to suit local consumption habits. Operating profit as a percentage of sales was 14.8% this year, down from 15.5% of 2008. These relatively negative figures are attributed to the effects of the 2008 recession. L’Oreal sought to mitigate these effects by broadening their consumer base internationally and increasing their investments in research & development and advertising & promotion. Among this results of increased R&D were Inoa by L’Oreal Professional, Genifique and Absolute Precious Cells by Lancome, which all achieved success globally upon their launch.
L'Oreal sells products to both professional stylists and non-professionals. Its outlets range from drugstores to department stores to its own boutiques. The France-based company has worldwide presence, with 68% of 2009 sales coming from the North America and Western Europe. L'Oreal has responded to the recession that began in 2008 through marketing its products more aggresively and introducing new ones that will compel consumers to buy. In addition, its international presence has increased as generation of new wealth in areas such as Asia have increased citizens' spending power and thus their consumption of cosmetics.
L'Oreal operates the following business divisions:
The consumer products segment sells its goods through mass-market drugstores. It achieved annual growth of 3.2% like for like.
The professional products segment produces products that are used by professional stylists in hair salons. It achieved annual growth of -3.3% like for like.
The luxury products division sells its goods through a smaller collection of department stores and the boutique's own retail locations. It achieved annual growth of -9.0% like for like.
This segment produces skincare products sold in pharmacies and specialty drugstores. It achieved annual growth of -1.5% like for like.
The Body Shop and Dermatology are individual stores owned by L'Oreal and contributed $138 million to total group operating income in 2009. 
As emerging markets in Asia, Africa, and South America grow, income growth will spur consumption. This presents an opportunity for consumer product companies like L'Oreal, and L'Oreal is already reaping the benefits. Eastern Europe, Asia and Latin America have the fastest-growing sales, ranging from 15.8% to 21.5%.
During 2008, however, the economies of major markets such as North America and Western Europe slid into a recession. North American sales decreased by 0.2% whereas Western Europe sales increased by a relatively modest 3.6%. The segment that had the smallest sales increase was luxury products--as consumers in North America and Western Europe cut back on their spending, the first products that they decide to go without in order to save money are specifically luxury products--they instead either trade down to lower-priced goods or forgo them altogether. The benefit of its international exposure means the effects of poor sales do not have as high an impact as it would on a company that is based solely in North America or Western Europe.
L'Oreal projects that by 2025 41.5% of all the people in Europe, the US, and Japan will be over 50 years old (34% were over 50 in 2005). As the baby boomer population ages, the total number of Americans older than 50 has increased at a faster rate than the number of Americans younger than 50 (5,757 per year compared to the under-50 set, which increases at an average rate of 1,677 per year). In addition, the median age for Americans has increased steadily from 2000 to 2008. This is a promising trend for L'Oreal because older age groups demand more cosmetics, especially anti-aging skin care and other age related products. Despite the fact that worldwide demand for cosmetics, skincare and haircare products has slowed in 2008, L'Oreal's market share has increased 0.6% to 15.8%
The usage of male cosmetics has grown considerably over the last two decades. From 2002 to 2005, sales of men's grooming products increased from 24% to $5 billion. That number is expected to double in 2009. 89% of men polled in the United States and Europe believed good grooming was important for their professional success, and 70% of them shopped for their own skincare products, as opposed to only 48% in 2008. Cosmetics companies have even begun to penetrate the over-40 market, which is not as saturated as the women's and young men's markets. In 2008 more than 3,600 men's skin care products were launched worldwide. There are two key reasons why the male demographic is receiving so much attention from cosmetics companies: first and foremost, it is still not as saturated as the female market. More importantly, men have proven to be more loyal to specific products and brands than women are, who are more likely to switch to whatever the next trend is. Therefore cosmetics companies are trying to appeal to the male market in order to secure long-term loyal customers. With some exceptions (Maybelline, Lancôme, Shu Uemura and Kérastase) L'Oreal's brands cater to both men and women. L'Oreal also spans different income levels, from affordable lines (Matrix) to luxury products (Yves Saint Laurent).
Neither Procter & Gamble nor Revlon are in direct competition with L'Oreal. Cosmetics makes up a small portion of Procter & Gambles business. Revlon, on the other hand, only sells cosmetics. Delivering new and innovative products is key in any beauty or fashion industry, and cosmetics is no different. Of the three, L'Oreal spends the most on R&D as a percentage of sales: L'Oreal (3.4%), Procter & Gamble (2.5%), Revlon (1.8%), Avon (0.6%), and Estee Lauder (1.1%). L'Oreal is more specialized than Procter & Gamble, and outspends Revlon on R&D, and both facts help L'Oreal remain a leader in the cosmetics market. On the basis of revenue, L'Oreal is much larger than Revlon, Avon and Estee Lauder, therefore L'Oreal has more money to spend on marketing which is an extremely important factor to success in the cosmetics industry. Although L'Oreal is dwarfed by Procter & Gamble on a sales basis, the majority of Procter & Gamble's R&D and marketing expenses go to its other product categories that form a more significant portion of its revenues.
Avon and Estee Lauder are cosmetics companies and thus in direct competition with L'Oreal. LRL dwarfs both companies in terms of revenue and spends more on R&D. However, Avon is much different from the other two companies due to its business model. Avon relies on individuals to sell its products door-to-door or to acquaintances. In this model each Avon representative is considered an independent contractor and receives a commission based on a percent of sales. This direct-selling method is meant to eliminate the middle man and decrease costs, thereby increasing the company's profits. Estee Lauder, on the other hand, produces and sells its goods wholesale to department stores and independent boutiques like Sephora. Like L'Oreal, Estee Lauder has a combination of luxury and middle-priced goods in order to appeal to as many consumers as possible.
|'||2009 Revenue ($mm)||Operating Income ($mm)||Operating Margin||% Sales Americas & (Asia) ($mm)||Major Brands/Products|
|Revlon (REV)||1,295||171||13.2%||58% (21%)||Revlon, Almay, Charlie, Bozzano, Ultima II|
|Procter & Gamble Company (PG)||79,029||16,123||20.4%||43% (17%)||Pantene, Crest, Tide, Downy, Bounty, Folgers, Gillette|
|L'oreal (LRLCY) ||24,725||3,840||15.5%||24% (32%)||Garnier Fructis, L\'Oreal Paris, Maybelline|
|Estee Lauder Companies (EL)||7,323||418||5.7%||47% (18%)||Clinique, Bobbi Brown, M.A.C., La Mer, Aveda|
|Avon Products (AVP)||10,382||1,018||9.8%||18% (12%)||Avon Color, Avon Wellness, mark.|