Beauty is a unique industry, one that's glamorous
and intensely personal. It makes products like any other: cosmetics,
haircare and perfume. Yet these items can be
more than accessories. For some, they become part
of your identity. Of course, the saying goes,
beauty is only skin deep. But the industry is now holding up a mirror
to our changing world in terms of what we want
and the environmental impact of how it's made. On this episode of Leaders
with Lacqua Goes Green I head to Paris to meet
the man in charge of the world's
largest beauty company, L'Oreal. Nicolas Hieronimus describes
himself as a beauty junky, overseeing more than 80,000
employees over 150 countries. The beauty market is worth hundreds
of billions of dollars with L'Oreal
at the top of the tree. In a wide ranging interview, I tried to get beneath the veneer
to understand the man, the company and its efforts
to help the most beautiful thing of all, our planet. Nicolas Hieronimus I thank you so much for
joining us on Leaders. Hello Francine, very
nice being with you. I mean, this is fun.
It feels glamorous. Do you love your job? I love my job. You know,
I've been working for L’Oreal for 36 years now, so I guess it's a perfect
proof that I love it. So do you remember that
first day when you joined L’Oreal did you think, actually, I want to get to the top
and to... Why was it your... Well, I remember my
my first interviews because I was interviewing
with many, you know, consumer goods
companies. And I chose L'Oreal
not because I knew much about beauty
at the time, even though I like the importance
of looks and style. But I was struck by the fact that there was an atmosphere
of arts and creativity
in this in this big hall. We are...L’Oreal was
the owner of the Artcurial Gallery,
and there were lots of art pieces in the in the hall and lots of,
you know, glamorous people. And it felt like
a very exciting place to work with. I didn't
I absolutely did not intend or even think of
rising to the top. I just thought I was here to
learn. And L'Oreal
is a great school. How has the beauty industry actually changed the last
36 years? Is it more high end?
Has it become bigger? We talk about men
a lot more. Well, first of all, you know,
the great thing about beauty is that since the dawn of
time, it is an essential need for humanity. You look at, you know,
I don't know if you ever saw that
book we published that's 100,000
Years of Beauty. When you see that
in the caves, you could see paintings of
makeup on the bodies. Of course, in Egypt, men
and women were already using eye makeup and fragrances. So this...because of this,
because it's so much part of of being a human. It's a market that's been
constantly growing. It's the market €270 billion
and it's is growing. And our assessment
is that by 2030 it should be close
to 400 billion. And it's growing thanks to, you know,
the rise of middle classes that are aspiring to great
products. It's premiumizing. People want more
and more good products. So the prices
are going up. And indeed it's for everybody. So of course, women, but men are using more
and more beauty products. People that get old need to continue
to use beauty products. So it starts very early and you use beauty
till the end of your life. So it's a very dynamic
market to going to continue to grow
in the in the next years. But if it's lucrative
and it grows, it also means you're going
to have a lot more rivals. We are the leaders
of that market, but we have only 14%
approximately of the markets, which means that we still have 86% to conquer,
or at least some of it. There is more competition.
There's lots of brands. One of the things that has
changed over the years is that some of the barriers
to entry, like, you know, with the rise of e-commerce,
of social networks, has allowed many brands
to to appear, to be created, many indie brands, as we
call them, plus big groups. There's a lot of churn
in the indie brands. So not many appear. Few stay and the good thing is that
it forces companies like us with our big brands,
but also small brands, because we acquire
some of these indie brands, to constantly reinvent
ourselves, adapt to the new times. We are a very agile company. You have pretty formidable
competitors. You have Almay entering
the market of beauty, You have LVMH also really
trying to focus on that. Well,
there's a lot of competition and lots of people
that want to enter beauty, which proves
that it's a very lucrative, as you say,
an attractive market. But then it's a market
that requires a lot of expertise.
You know, we only do beauty. And we've been
doing beauty for 114 years. And there are more
than tricks of the trade. It's about research. It's about knowing the skin,
knowing about hair. It's also about
understanding the cultural differences
around the globe, because you can have
global brands, but you always have to adapt your beauty offering
to the local specificities with a climate,
religion, culture. And this is
something that you... that you do not improvise. And by the way, many of the brands
that are created, small brands,
have a very hard time expanding
beyond their home market. And as far as the big groups, they are very strong
competitors, but we are gaining
share every year. So I guess we are doing
a bit better. What will grow the most? Well, right now and
for the last couple of years and probably for the next couple of years, the fastest growing division has been
dermatological beauty because
there is a very strong desire for healthy beauty products
that are both safe, that are solving
your skin issues. And, you know, whether because of the environment,
because of the UV rays, because of stress,
there's lots of skin issues that need to be addressed by products
that are designed by and with dermatologists and
prescribed by dermatologists. So brands like CeraVe
or La Roche-Posay are just, you know,
going through the roof. But it's also influencers,
right? Yeah, it's influencers, but influencers, you know,
in the end they are, they're a new way to engage
consumers. But influencers, of course,
they can be remunerated. But in the end, most of the organic content and the most powerful
content is sincere and genuine, and consumers
want authenticity. So influencers
are just a way to amplify
the quality of the product so that dermatological
beauty super strong, but also L'Oreal Luxe. For the last decade,
I had the pleasure to to be running this this division has been the number one
growth driver of the groups with the acceleration in China in particular,
where we have more than 30% market
share of the luxury market. And that's bigger margins? It's bigger margins. The success
is the success of quality. In the end, in this world
where people are, have growing expectations,
sometimes in inflationary times
like this one, they pay more attention to how
they spend their money and they want
their money's worth. So they're always going to
go for products that deliver both on efficacy
but also on pleasure of use. And as we, as you know, we spend €1 billion
every year on research. We make sure that we do
create the best products and that when people try our brands
they stick to it. So that's the number one
recipe of our success. I mean, there's also
the lipstick index, which I've always been
fascinated by. So in hard
economic times, actually, the sales of lipsticks
go up. The lipstick index proves
right every time. And it has proven right,
even in the... So is it going up or down? ...post-COVID? It's going up. It's going up. It's continues
through to the only moment when it was actually not a good moment for lipstick is when we're all wearing
masks or staying home or both. So now that masks are off,
in most countries. People wore perfumes,
didn’t they? Fragrance is the most
spectacular post-COVID acceleration. We we expected fragrance to come back
because just of social life resuming. But we see that there's
been an an augmentation
of the role of fragrance precisely about this,
from smelling good to feeling good and today
whether in America, in Europe, and of course and we're very interested
in China, there's a fragrance
explosion. And as we are the worldwide number ones
in fragrance, we are very happy
about this. If you're Mediterranean, it's I guess, more likely
that you grow up wearing a fragrance maybe every day,
maybe from teenage years. Are there parts of the world
where actually, you know, that's only
starting to be adopted now? And is that really the
market you want to be in? People
used to have one fragrance. My mother, I offered her
all the fragrances of the L’Oreal Group, I never managed to get her to use something else
than a fragrance, which is actually not
a L'Oreal one. So a lot of people where wearing the same fragrance
all their life now the younger population,
they have two, three, four or five fragrances
because they will have one for work,
one for to meet the parents, one to go on
a date, etc., etc.. So increased
consumption. But the part of the world where it's new and growing
very fast is China. China was not a fragrance
market. It was mainly
a skincare market. And then the makeup market
and fragrance, which is still only 10%
of the total selective market but is
growing high double digits. And that's really been something that's
happened over the last three or four years. And as the Chinese consumers
are both sophisticated and like premium, but also they do not know
the fragrances as as well as European
consumers. They go for the premium
end collection, what we call collection fragrances,
which are more expensive, but also that describe
what you're going to smell. And this has to be in store. Yeah. Do people actually
buy it online? They go. To stores, they try, they smell, to get,
you know, some advice. And then depending
on the experience, either
they come back to stores or they repurchase online. If they
if they like a fragrance, then it's easy to repurchase
online. Coming up,
Nicolas Hieronimus explains the importance
of trying every single product
that L'Oreal makes, as well as
a few from his competitors. Nicolas Hieronimus has spent
nearly four decades working at the biggest beauty company
in the world, L'Oreal. The industry
is surprisingly resilient, but the company takes
nothing for granted. Spending around €1 billion
in research and development every year. I ask him about the changes
he's seen and the key to prolonged success. You seem to love
your products. I love my products. Do you try them
all? I try them all. I try my products.
I try competition just to make sure
we have the best. And sometimes, you know,
we see an interesting company of products that
we have, too, to step up to. But most of the time
I use our products. Yeah. How much do you use
them for? I mean, this is very
practical advice, but to know whether
a product works or not, is it two weeks,
three weeks? Do you have to
give it a couple of months? I use my products every day
and in any product it depends
on the categories. But you you have you have two ways to assess
a product. One is what we call instant
gratification. So would you. Do like it. You like it smell good? Does it make your
your skin more, more supple or less itchy if you've got an issue? And then you need usually you need six weeks. If you're talking about
anti-ageing products, you probably would need
six weeks to to see a real, you know, wrinkle reduction
or age spot reduction. So you have to and
you have to have several. You're like a beauty junkie. I am a beauty junkie. I run the number one
beauty company in the world, and so I have to be a beauty
junkie. And but it's fascinating
because it's, you know, I guess you
use beauty products. It's a it's a very nice
little treat that you take care of yourself
every day. We talk a lot about
self betterment today. People are very much
into fitness, into making sure that they look
better or feel better. And beauty products are really part of that of that routine
and that spirit. So I love it. And male skin
care has actually come quite a long way with that. The biggest... what's been
your biggest surprise of how I guess beauty's changed
the last ten years? What's the biggest
transformation happening in beauty
is what we call BeautyTech. It’s the help of technology
to augment the performance of beauty products,
either through diagnosis or through even personalized
made to measure beauty products. And that's probably
the future of beauty. So is this AI? I mean, you spend
enormous amounts out of your sales
in marketing, but also developing
like R&D, I think 30%. Well, we spend 1
billion in R&D, 3% of our
turnover in different, you know, A&P,
advertising and promotion. It depends in the countries. But somewhere between 25
and 35%, depending on the on the countries
and the number of categories we have to animate. But we also spend more than €1 billion every
year in tech and technology. And that's
where...that's our pledge to become the leader
of BeautyTech and here we, indeed we use AI we use the AI to augment our
our researchers, to invent new ways to formulate
products to go faster. We use AI to, Indeed, to have
to provide the best advice. So color matching. Color matching, skin care. Skin care
diagnosis is very important in the end, you know, consumers are passionate
about beauty. You know,
beauty is the number one topic of conversation
on TikTok, for example. It's something that impassions people,
but it's a jungle out there. There's so many products. So you need to help people
choose. So curation
is a very important part. And to to help people
make the right choices, you need some sort of either
diagnosis or virtual try on
so that they see which which shades
are going to fit better. Same for hair. So technology
is a great help not only to create
new products, but also to make consumers
happier about the products. So how does it fit with something like Aesop,
would you buy you bought for a significant amount of
money but expect to grow it much more,
which is much more traditional,
high end premium brand. I think it's a brand
and of course it's a brand that's a natural ingredients-based brand, so it taps into many of the
ascending trends. So it's a beautiful brand,
fantastically developed by the teams
that are in charge and who we are going to be
welcoming at L'Oreal and, a great experiential brand. So I'm very,
very excited about it. And as it's a brand that's
just has two stores in China and is not present in travel
retail, we have lots of growth
opportunities for it. So you really try
the products or use the products
before any acquisition. Of course I try. I try. I actually as far as Aesop
was concerned, I tried
it before there was even a possibility to acquire it. But yeah, you have to try the products. Of course
beyond trying, when we make
any acquisition, we have the formulas
analyzed by our labs, making sure
that they are both good products, that they are true
to what they say, which is not always
the case from self. For some of the indie brands and that they are checking all
the regulatory boxes and, you know,
authorized ingredients. And then of course we try it
because. You know, you need to know. You need to know and then
and you need to love the brands you work for. And what kind of
leader are you? How would you define
yourself? How would others define you? I'm a competitor,
I love sports. And I, you know,
I try to be demanding for myself
and demanding for everybody because we have, you know,
big goals to achieve. Being number one
and increasing our gap with competition
is not that easy. So you need to be really
passionate about it. And I would say I'm I believe a lot
in the power of the team. I'm a...
I believe in the collective, you know, for all my youth,
I was doing collective sports and today
I'm a passionate cyclist and some people think cyclists,
cyclism or biking is is a solo sport. But actually if you watch
the Tour de France you’ll see it’s really a team sports
where you have to protect yourself from
the wind, help each other. So I like to build teams
that are complementary, empower them. I listen a lot to
what my teams have to say and build complementarity. So I like to surround myself
with very strong people that may be stronger
than I am in some, in their
particular area. And we work together
really at making this this great
company continue to succeed. So what do you think is
the secret sauce of L’Oreal to, you know, always keep
this competitive advantage? Well, I think, you know, if I take the top
300 managers of L'Oreal, the average tenure is
18 years in the company. So you have this very strong corpus of people
that share the same passion and the same way
to do business. We constantly
bring in new people, even at higher level,
to rejuvenate the blood. But we have this
very strong culture and this indeed, the secret
sauce is this at all level. You have very passionate,
competitive people that love beauty
and that have fun. I think part of the
secret is that we have fun. Coming up, Nicolas Hieronimus on the challenges
of going green, including the company's
target to use 100% recycled plastic
by the end of the decade. Nicolas Hieronimus oversees a vast portfolio
of beauty products with a constantly changing landscape of science
and environmental demands. He tells me
how L'Oreal is reacting to the climate crisis and how the challenge
is reshaping what it means to be a chief executive. You talk about this
big sense of purpose. What does that mean
for sustainability? We started working on
sustainability topics in the early 2000’s. We had our first sharing beauty
with our program in 2013 and then and that led us
to reduce our CO2 emissions
by 90% whilst increasing our production by 45%. So we've
really managed to decouple CO2 emissions from growth. So we are of course, enticing and stimulating our suppliers
who also need to do their their sustainability transformation
to do it as fast as possible because
they are our impacts. But also we are investing to to help consumers contribute
because in the end, for example, if you talk
about packaging or plastic, the best way to reduce plastic is is to convert as
many consumers as possible to refills and or...
So recycling. All our new fragrances. You probably saw
the new Prada Paradox, which is a great success
by the way. You there is the fragrance, but then you can buy refills
which are much lighter than glass and packaging. So you keep your original
bottle. And today, 25% of our Luxe
portfolio is refillable. So now it's about, you know, convincing
consumers to change. We're also launching
products that are not rinsed products to it
to avoid water consumption. And we are in our advertising again,
trying to convince consumer to reduce their water
consumption. So it's across
the whole supply chain. We have to act.
So what's the hardest? Yeah, well, there are many, many things
that are difficult. For example,
if I take plastic, we've we've committed
to have 100% recycled plastic by 2030. Today the availability of
recycled plastic is not big enough for us
to transform everything. We have 80% of our PT but for other parts of the plastic,
it's not yet available. So we are co-investing and
and we are investing, we are our own VC in new technologies
that will provide ways to recycle plastic. So some things have not been
made available yet technologically. But I guess I believe in human
creativity and innovation that provide us,
will provide for solutions. But packaging
is one issue. And of course we we work
continuously on water, both on our own consumption,
but that's kind of, I mean, quite easy to do. But also on the on changing
consumers habits. Is there
a segment of the consumer that's more in tune with with maybe buying
products that seem greener? Well,
the younger generations are more, of course, paying more attention
to sustainability. And so they are looking at
brands that are that are greener. But you have to make sure you're authentic because
they hate greenwashing. But what is very important to remember
is that none of them, whether they’re young or not, will ever sacrifice product
quality and efficacy to sustainability,
which is why, you know, part of the big transformation
of our our R&I where it is this billion euro
we spend every year, most of it is is spent
on transforming our formulas from petrochemicals
to bio-sourced ingredients
and green sciences. But without losing
the efficacy. And I think that in the future, if
you talk about competition, the winners will be, and it's very difficult
to achieve, those who can create products
that are both green, effective and safe. I know how hard it is. So I don't think many
that do not invest so much in research
will manage to do it. Where will you be
in five years? Where will you be in
five years? Well, you know, in
five years, if 2030, let's talk 2030. You know,
the market should be maybe 380 or €90 billion. So L'Oreal, I hope
that L'Oreal would be above €60 billion and and continue
continuously growing. But more importantly, in the end, you know, I consider that my role, of course,
is to grow the business, But it's a legacy. I'm the 6th CEO in 114 years,
and my objective is to leave the company in even
greater shape than it was. And maybe one of the things
that have changed, if I could end with that,
is that probably, you know, a couple of years
ago, being a CEO was about beating
the others. It was winning the game
against the others. We still have to gain
and to win and to win share, but more and more
we have to work. And that goes back, ties back
to the collective idea. We have to work together. And I, I like the idea that
sometimes I take my phone and I will call the CEO of of one
or two of our competitors to work together at creating
solutions for the world. We've launched this consortium
to create the Echo score, which will be
an international standard for products and themes
of how sustainable they are for consumers to be able
to make the right choices. And I like
when we as an industry, we not only make sure
we make people look good, feel better,
but also we work together having positive impact
on the planet. Nicolas Hieronimus, thank you
so much for joining us. Thank you very much
Francine. It was a pleasure.