BBC News  Sep 29  Comment 
Hair follicles created by a process similar to 3D printing could one day be used as implants, beauty giant L'Oreal has said.
The Economic Times  Sep 26  Comment 
"Mercury traces were below detectable levels in all of the tests, a table levels in all of the tests," a L'Oreal spokesperson said.
CNNMoney.com  Sep 20  Comment 
Read full story for latest details.
The Hindu Business Line  Aug 24  Comment 
Pegs its latest product BBlunt Salon Secret in a new pricing strategy
Benzinga  Aug 17  Comment 
Deutsche Bank maintained its Buy rating and $32 price target on Coty Inc (NYSE: COTY) after it reported fourth quarter EPS of $0.13, $0.07 above Street. Management expects Coty standalone organic growth to turn positive in the back half of...
SeekingAlpha  Jul 29  Comment 
newratings.com  Jul 25  Comment 
CLICHY (dpa-AFX) - L'Oreal (LRLCY.PK) said that it agreed to buy IT Cosmetics, one of the fastest growing prestige beauty brands in the United States, for a cash purchase price of $1.2 billion. The brand will continue to operate out of its...
SeekingAlpha  Jul 22  Comment 
Reuters  Jul 22  Comment 
Cosmetics company L'Oreal has agreed to buy IT Cosmetics, a U.S. maker of beauty products for women with severe skin conditions, for $1.2 billion, the French firm said on...


L'Oreal is the world's largest producer of beauty and personal care products (e.g. perfume, makeup, shampoo).


L'oreal first emerged in 1909. Even in its early beginnings, the company emphasized the importance of research. By 1984, the company had around a thousand researchers on its payroll. Today, that number hovers around 2,700.

L'oreal entered the crucial Japanese market in 1963 in a partnership with Kose, one of Japan's more prestigious brands. In 1976 and 1978, these companies formed the Lorecos and Lancome brands. They split in 1999 because the Kobayashi family was not interested in handing over the company. L'Oreal is constantly interested in new acquisitions. In 2007, the company bought The Body Shop. This acquisition marked the company's expansion into more interest-specific types of products. It seems likely that the current management will be looking to both expand its present product lines, as well as acquire more already established brands.

FY06 was a surprisingly good year for the company -- it's been recovering from a slight sales dip, and presently has no obvious issues. At the same time, it's not the most dynamic of stocks.


L'Oreal is constantly innovating its product lines. These product lines include Giorgio Armani Parfum, Garnier, and Maybelline, lines whose products span across many aspects of the beauty industry, including hair, skin, and cosmetics. Interestingly, L'Oreal was one of the first HPC companies to really bring nanotechnology to bear on its product lines; it remains a industry leader in terms of research and development.

Money Flow

The Japanese market is hugely significant for home and personal care markets. Even though Japanese consumers aren't the largest market for European HPC companies, they set the industry standard for quality products. While L'Oreal is considered a more international company than companies like Estee Lauder, only 9.5% of its sales come from Asia. L'oreal's popularity in Europe has decreased slightly over the last few years, but that looks to be recovering. In Q1 2006, almost half of L'oreal's sales came from western Europe.

The company recently suffered some issues with product distribution regarding its Professional line, which primarily affected its North American market. Consumer interest in this product line wasn't actually affected by this, so the company is looking forward to a better year in 2007.

Trends and Forces

Older Women and Men Will Drive Cosmetics Demand

Traditionally women aged 15-30 formed the consumption base for cosmetics companies. Since 2001 7 million new men consumers entered the cosmetics market. This growth is shown in the accompanying table. Men are beginning to purchase facial skincare products.

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Emerging Market Growth Will Increase Global Disposable Income

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. Each year 60 million new consumers achieve an income level that allows them to buy more sophisticated cosmetics products.[2] This demand growth will be seen in both the middle and high income segments of the consumer population as seen in the table.


Japanese home and personal care companies are posed to enter the world stage as major competition for L'oreal and other Western companies. These Japanese companies emphasize innovation, and are looking to enter the international market. They have already established footholds in China, the Middle East, and Europe. While the domestic Japanese HPC market is itself faltering, you can't afford to discount its importance to the industry as a whole, especially since it remains the largest personal care market in the world. Also, keep in mind that the Japanese market doesn't speak to the overall health of Japanese companies. Several, like Kose, could pose serious economic threats to Western companies in the future.

The footholds in China are of the most concern to Western companies like L'oreal. Asia is an important growth market for European HPC companies. In FY '05, 9.5% of L'oreal's group sales came from Asia, and in the first quarter of FY06, almost 10% of their group sales came from Asian markets. Despite this success, L'oreal's Asian sales came to only 7.8%LFL last year. The rising success of Japanese HPC companies in Asia could really affect the success of Western companies in that area. Also, the rising success of other Western companies could affect L'oreal's Asian group sales. Proctor and Gamble, Unilever, and Estee Lauder are all major forces in Japan, which could be a foothold into the larger Asian market.

L'Oreal specifically has many brands turning a profit in Japan. Lancome and the various L'oreal series comprise about 55% of their Japanese sales. While L'oreal has a great deal of prestige in Japan, it might be on the decline in terms of department store sales. Right now, L'oreal is not the most competitive company in Japanese HPC market, but executives say that the next few years will bring a lot of growth into that particular market.

L'Oreal might be facing some issues in the UK, where its acquisition of The Body Shop was met with some controversy. Some consumers expressed concern that The Body Shop would become less socially aware because of its acquisition by L'oreal. Despite this, the acquisition opens up new distribution channels, and might be part of a larger plan. The company also acquired Beauty Alliance, a major distributor of professional hair care products.

Another factor impacting L'Oreal's sales would be the leading lipstick indicator. This is the idea that a consumer will increase their consumption of less expensive luxury items, such as lipstick, during a time of social upheaval. Lipstick sales did increase after 9/11, but it remains to be seen if that trend continues, or has a specific impact on L'oreal's financial success.

  • Kose

Strong, consistant growth. L'Oreal might be a more prestigious brand, but Kose has been expanding faster in Japan. L'oreal and Kose are tied in terms of the department store placement at 11%. L'oreal and Kose used to have a partnership, but have since split apart. Kose's looking to acquire, partner, and expand.

  • Kao

Kao is ambitious. It's been gaining prominence, and is poised to present a serious threat to Western companies. Brands like Jergen's, John Frieda, Curel, and others have become more popular in the US and Europe. In fact, about 16% of Kao's consumer product sales came from Western markets. This high sales rate is actually accelerating.

  • Unicharm

This is another company that's going for gold. In order to become more competitive, Unicharm has been changing its products and revamping its product-lines. Unicharm focuses on products related to feminine hygiene and adult incontinence, and recently took over Shiseido's feminine hygiene line.

  • NuSkin

Nuskin draws about 50% of its revenue from Japanese consumers. It's the 4th largest network marketing company in the world. A network company has a business model sort of like Avon or Amway, relying on individual and regional sales. It is not a competitive model in terms of research and development.

  • Estee Lauder

Estee Lauder has a higher rate of exposure in Japan. About 13.5% of their total group sales came from the Asian market, in comparison to L'oreal's 9.5%. It's a prominent brand that's looking to promote many of its stronger selling lines to the Asian market. For example, the company is planning on opening several new Aveda locations.

  • Shiseido

While Shiseido might be a familiar brand to shoppers with access to Sephora or Ulta, its reliance on third party distributors adds an extra expense to its operating margin. Despite this disadvantage, Shiseido's rates are on the rise in Asian and markets European markets. Also, about 30% of its sale come from abroad -- 9% of those sale are actually from North America. Shiseido is Japan's leading personal care compant, with a 15.8% market share. Its new CEO is going for blood, with massive line restructuring. So far it's experienced slow sales growth, but it's definitely not a company to be discounted. Shiseido was one of the cosmetics companies tapped by Japan's Ministry of Economy to participate in a "department store of the future" project.

  • Lion

Another Japanese competitor that could become a major competitor, but only if it receives a major overhaul. It's a definite target for acquisition, especially since the quality of its products are not the overall issue affecting the company's success.

  • Pola

A prestigious company in Japan. Pola produces some fantastic products, and is moving towards global relevance. In order for that move to be successful, Pola would need to partner with another larger company.

  • Proctor and Gamble

Proctor and Gamble treats Japan as one of its key markets. It's got a great reputation as an employer, which is a huge boost in that market, since company reputation can really affect sales. It distributes a total HPC line, from skincare to hygeine.

Avon, Clarins, Beiersdorf, Henkel, Unilever, and Milbon all have a presence in Japan, but aren't in the same league as the companies mentioned above. Milbon and Henkel might be tempting acquisitions.



  1. LRLCY 2007 Annual Report, Market Trends, pg. 31
  2. LRLCY 2007 Annual Report, Market Trends, pg. 31
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