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WWD Milestones issue 06/01/2009

The transformation of L’Oréal into an international beauty giant turned on a number of pivotal factors. One of the most decisive moments — its entry into China—arrived with a light touch.

This story first appeared in the June 1, 2009 issue of WWD.  Subscribe Today.

So much so that Lindsay Owen-Jones, the charismatic, 63-year-old master architect of L’Oréal’s rise to dominance as chief executive officer from 1988 to 2006 and now the company’s non–executive chairman, still smiles at the memory. Back in the early Nineties, executives knew they were going to have to make a high-impact, high-profile entry into China to create desire for its products. After all, they were entering a market where daily needs often were difficult to fill, and discretionary items were a pure luxury. “We said, ‘OK, we’re going to put up the biggest single advertising sign in the world in the Bay of Shanghai with “L’Oréal, because I’m worth it,” in Chinese,’” Owen-Jones recalls, adding that the plan was to get a foot in the door “by just putting the name L’Oréal in the sky alongside Sony or Hitachi.”

To heighten the effect, Paolo Gasparrini, president and managing director of L’Oréal China, organized a ceremony on the top floor of the Peace Hotel so Owen-Jones could throw a switch to dramatically illuminate the sign.

“We pulled the lever and nothing happened — except that, from behind a screen in the corner of the room, you could hear a little voice saying, ‘Turn the bloody thing on, you fool,’” Owen-Jones continues. “The switch was connected to nothing. But there was a guy on a phone… telling the guys to light the sign.” When the truth had sunk in, “the whole room collapsed in a fit of giggles.”

This was the company’s grand entrance to what Owen-Jones predicts “will one day probably be the biggest single L’Oréal company in the world. If we had missed that boat, that would’ve been really critical.” Instead, the reality is much brighter. “All of the L’Oréal brands have been extremely successful there. It has made a huge difference to the perspectives of our company today,” he says.

China’s mushrooming growth illustrates Owen-Jones’ feeling that what burst last fall was more than an economic bubble. The financial boom of recent years may have been considered a bubble, but “it was the opening for hundreds of millions of people around the world to a better life, to more prosperity, to greater hopes,” Owen-Jones says. “It’s a bit like the toothpaste that you can’t put back in the tube.”

To that end, he dismisses doomsday talk. “There’s a huge aspiration of hundreds of millions of people to reach decent economic levels and lifestyle standards,” he says, noting that governments will work hard to preserve those gains “if only just to maintain some sort of social peace.”

Owen-Jones knows better than most the challenges of maintaining forward momentum. During his tenure, he forged L’Oréal into a multinational, multiethnic, multichannel beauty behemoth, one whose geographic reach is unmatched. The transformation involved a massive reengineering of L’Oréal’s vast array of brands as soon as Owen-Jones took over.

He describes the L’Oréal he inherited as “an extremely dynamic, culturally boiling sort of creative company.”

“It was a little confused… in that my predecessor’s great talent was this fantastic dynamism, in which he had a new idea every day and he applied all of them,” Owen-Jones says of L’Oréal’s second ceo, the legendary François Dalle. “By the end of the Eighties, we were drowning in too many projects.” Moreover, Dalle had established a code of internal self-competition, which made the brands tougher and more resilient, “but we were wasting 50 percent of our energy fighting amongst ourselves.”

Worse, brands such as Garnier, in an effort to emulate the leading L’Oréal brand, came to resemble it and an element of sameness pervaded the group. “We hadn’t quite organized our brands into a rational portfolio with each one of them taking a certain space, either psychologically in its profile, or practically in terms of pricing and distribution,” Owen-Jones says.

To that end, he repositioned many brands and acquired others. Among those repositioned was Garnier, which was recast into a greener, “more sensible, down-to-earth” line. “It’s the girl next door,” Owen-Jones says.

Key acquisitions included Maybelline, which L’Oréal acquired because of its ability to sell huge volumes of mass market makeup. “We had to find something different to get into China,” Owen-Jones says. L’Oréal’s brands, honed by years of internal competition, were deemed “too sophisticated.” Owen-Jones recalls thinking that, “if [Maybelline’s previous owners] can sell makeup out of Memphis, Tenn., we can sell that to China. It’s a sensible makeup for the sensible masses. We made it a little bit more glamorous, but what I wanted was precisely the down-to-earth, sensible mascara and no-nonsense approach to makeup.” His instinct proved correct: Today it’s a market leader in China and the number-one mass brand in the world.

That single-minded obsession with beauty and a passion for innovation have enabled L’Oréal to endure and succeed for a century, Owen-Jones says. Those characteristics were instilled in the company at its birth. Owen-Jones refers to an early photo of founder Dr. Eugène Schueller posed in his lab. The caption underneath proclaims, “A product of French science.”

“This was the guy who said the opposite of ‘we sell hope in a jar.’ Owen-Jones says. “He said, ‘No, we sell high technology, which we then dress up and try to make look attractive and relevant and fun. But this is a serious business; it’s about quality and innovation.’”

When the conversation switches to the question of his legacy, Owen-Jones counters that the real question is what will remain. There’s the massive brand reengineering and globalization, of course. Hand in hand with that is the diversifi cation of L’Oréal’s population.

Being a Welshman running a venerable French company (he even had a knighthood) was the best argument he had to demonstrate that L’Oréal was a level playing field. “It was a company that was going to try and become a global company with a global culture,” Owen-Jones says. “It wasn’t going to be anymore a French, quote-unquote, company.”

One problem is that a multicultural organization lacks a center of gravity, he notes. Most U.S. companies can count on 50 percent of their business being done in their home country. “At L’Oréal, we’re down to 10 [percent] for our country of origin,” he says.

“Ultimately you have to invent something new and the one thing that people have in common is their difference,” he continues. “It’s a positive thing that you’re striving for and it’s fun.”

Owen-Jones’ bedrock commitment to diversity was highlighted one November night in 2005 in New York when he received the International Leadership Award from the Anti-Defamation League at a gathering of leaders of the Jewish community, including Nobel Laureate Elie Wiesel, who praised Owen-Jones as “a special individual.”

The executive acknowledges feeling moved that night. “Periodically, criticisms have been made about the political sympathies of our founder, just like in the States, with Henry Ford. We’re talking about the time before and during the Second World War,” he says, declining to elaborate further. In the past, there have been allegations of right-wing or pro-Nazi sympathies of a few figures, at one time linked to L’Oréal, at least two of whom later apologized.

It happened “before I was born. There’s absolutely nothing you can do about that,” he continues, although he vigorously moved to rectify any lingering impressions. “What you can do is to be absolutely unambiguous about your personal commitment to this company being exemplary in its attitude towards discrimination of any kind,” Owen-Jones states. “That’s what the ADL is all about. But also towards Israel because it is in some ways a symbol of your good faith towards the community, and the Jewish community, in particular,” he adds. “So we invested in Israel.” He points out that L’Oréal acquired a 93 percent stake in a company called Innerbeauty, now known as L’Oréal Israel. “We made Israel into our platform for the whole region. Very few western companies actually use Israel as a platform.

“It was very moving that [ADL national director] Abraham Foxman and his people recognized that effort,” he says. “For me to receive that prize, it tied in with everything I felt about diversity, about nondiscrimination, about some of the things I’d done as a Brit managing a French company to try and make it a happy community for everybody — that made it very special.”

In terms of legacy, Owen-Jones also thinks he’ll be remembered for turning over control of the company to “a good person” at age 60, “earlier than I had to,” referring to his successor Jean-Paul Agon.

Asked his view of how events are unfolding, he notes that L’Oréal has gained such consistency over the years that the company is expected to be “not only recession-resistant but infallible.”

“In a crisis of this proportion, it’s really good that he should be 10 years younger than me, very energetic, very powerful. It confirmed that I did the right thing and that he has handled it very well,” Owen-Jones says.

“It’s a very difficult balance to keep between how much you change, how much you keep,” he continues. “In times of crisis, there’s always a temptation to throw everything away. You’ve got a very fine balance to strike, between using all your energy to protect the company short-term and preparing for the future, because you’ve got to be ready to come running out of the starting blocks when the economy gets going, and nobody knows when that can be.”

His advice to Agon: “To keep his own self-confidence and his own gut feeling. The lucky thing is that he had two very successful years before running into this wall of economic gloom and doom.”

When asked about rumors that he is getting more involved in management beyond his chairman’s role, perhaps at a request of the board, Owen-Jones responds with an incredulous outburst of laughter: “No way. It’s not going to happen. They wish, or they fear—I’m not sure which.”

He admits there are days he misses the action of being in command. “But I’m a realistic guy,” he points out. “I know very well the excitement of calling the shots and justifying them, but it’s totally linked to another reality. Being the ceo of a large, publicly quoted company today is a 24-hour-a-day job, weekends included. It’s totally exhausting; it’s many hours of misery as well as excitement.”

Asked if there is one lesson he learned as ceo, Owen-Jones replies: “The thing that you most keenly feel is really how little power you exert. People only do things because you are able to articulate a convincing, credible and interesting vision of the future for them, what you expect of them and what they have to do to get there. People don’t obey blindly anymore. It’s not the Prussian military.”

Just as it is important for L’Oréal executives to keep stoking their passion for innovation, Owen-Jones sees it as critical for the industry as a whole to maintain a strong, creative pulse. Acknowledging the incredible consolidation within the last decade, he adds: “It’s still all down to creativity, intuition and taking decisions quickly. Those are things that small companies tend to do bigger and better than big ones. The challenge for the big companies will be to make sure that those qualities are still alive in their organizations, despite their size.”

Owen-Jones himself seems more relaxed since settling into his new role. After spending much of his life relaxing behind the wheel of a Formula One racer and whizzing around a grand prix track at 180 mph, he has settled for more pastoral pursuits.

When he was ceo, Owen-Jones often vowed to fire any executive who whiled away enough time on the golf course to gain a good handicap. Yet now, he proudly proclaims, “Believe it or not, yesterday I won my first golf-playing trophy.” Owen-Jones, who still races sailboats, took up the sport only two years ago and is clearly pleased with the results. “This is not the U.S. Masters,” he quickly points out. “This is the tiniest, most local event for which I am proud to say that I won a cap and a T-shirt.

“You can be reassured,” Owen-Jones declares, “that until my last breath, I’ll be competing at something.”


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