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L’Oréal Navigates Uncharted Waters

Nicolas Hieronimus, L’Oréal deputy chief executive officer, discusses the group’s operations during the coronavirus pandemic and shares thoughts about the future.

PARIS — L’Oréal smoothly shifted gears to help mitigate the impact of the coronavirus crisis in all four of its divisions and throughout markets globally.

Out of the 88,000 employees at the world’s largest beauty company, about 56,000 have had to work from home, but were fully equipped to do so during the pandemic. Thirty-nine percent of the group’s factories ran at 60 percent of their capacity on average during the first few weeks of the lockdown, then geared up to reach an average of 80 percent.

Meanwhile, more than 20 L’Oréal factories began producing hydro-alcoholic gel, sorely needed in hospitals and for other front-line workers, as part of the group’s solidarity plan that was first launched in Europe in mid-March and later rolled out worldwide.

Credit facilities were given to some of L’Oréal’s most compromised business partners, including small hair salons and perfumeries, as part of the program for which teams were set up.

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“All this was done incredibly fast,” said Nicolas Hieronimus, L’Oréal’s deputy chief executive officer, in charge of divisions. “Very typical of L’Oréal is we get onto a big idea — it’s an idea that’s maybe strategized centrally, but then every country, every region, every division implements and adapts it to local needs.”

Here, the executive delves into the group’s strategy during the pandemic, discusses learnings and how the beauty business overall might evolve.

WWD: What have been keys to L’Oréal running smoothly during the COVID-19 crisis?

Nicolas Hieronimus: What keeps L’Oréal functioning in this period are the very qualities that make L’Oréal what it is, which is a blend of extreme reactivity and agility, solidarity both between the teams and with the world, anticipation and incredible passion.

What also makes L’Oréal unique is our global organization. We are both a global company with a global strategy, but also with a strong empowerment left to individuals and to countries, where there is a pretty high level of decentralization. That gives us a lot of agility.

We often refer to L’Oréal as a flotilla of small boats, which go in one direction but with the autonomy of maneuvering. In this incredible period, in this very major crisis, being able to react, to adapt, to take action fast and smoothly with everybody being aligned is very important.

WWD: What were some of the structures put in place when the pandemic started?

N.H.: There was a crisis committee that was set up in the very early days, when the COVID-19 crisis hit China. [L’Oréal chairman and ceo] Jean-Paul Agon created the crisis committee, which he chairs with a number of people ­— myself, Barbara Lavernos for operations, finance, etc.

The executive committee of the group, which normally meets once a month, meets every week to discuss the global state of the business, actions to be taken. Obviously, we focus a lot of time — whether it’s the crisis committee or the executive committee — on what has been our number-one priority from the very first days of this crisis, which has been the safety of our employees, whether they’re office employees or people who work in factories or in warehouses.

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We dedicated a lot of time to ensure that our employees’ safety was absolutely guaranteed. We also took care of their emotional and financial security, because we communicated quite early that we would guarantee our employees’ fixed salaries and employment until the end of June, which we hope will be the end of the crisis.

I have a quick catch-up with the four division heads about twice a week. That’s very short, but just to share about the issues, opportunities and action plans. We have other types of taskforces, both to prepare for the coming out of confinement and also to try to prepare for the rebound of what will be the next stage of our beauty industry after this crisis.

So it’s very agile. We do a lot of virtual meetings. We communicate a lot with one another.

WWD: Where are decisions taken?

N.H.: It really depends on the decisions. I will give you two examples. The decisions that are related to the safety of our employees are centrally made, and there is absolutely zero compromise. Jean-Paul Agon is personally involved in making sure that every single employee of L’Oréal around the world is protected exactly the same way. Those decisions are implemented locally. We adapt in every country [in compliance with] the local governments’ [rules].

Then there are business decisions, which are taken according to the situation in each country. Each country is empowered and autonomous in making its business decisions in order to fulfill consumer needs, to protect and manage the P&L.

So there is a global strategy, but there are very local, agile decisions.

WWD: What learnings came out of China, where the health crisis first hit, that L’Oréal then implemented elsewhere?

N.H.: First of all, what happened in China allowed us to get ready for Europe. [For instance, we] learned from China that hospitals would need our support. We also learned from China that we had to get ready with large-scale home-working technologies; all the office staff was equipped with both the software and training for how to use it. So when confinement happened in Western Europe, we were ready.

Even while managing the business in the confined economy, we learned a lot from China. We could have guessed ­— but it was very obvious from our Chinese learnings — that e-commerce was going to be the way for consumers, whose desire for beauty has not vanished, to buy products.

We saw how some of our brands were truly successful in selling products in China, and we set up the same type of measures in Western Europe and in America.

We are monitoring very [closely] what’s happening with the Chinese post-confinement consumer behavior — see how consumers are shopping, what type of products they are really eager to buy and how we should prepare for that. So there are learnings from China at every level.

Nicolas Hieronimus
Nicolas Hieronimus Jean Baptiste Huynh/Courtesy

WWD: What are some early indications of how Chinese beauty consumers are shopping today?

N.H.: I am very impressed by and very happy with the performance of L’Oréal in China during the first quarter, because on a market that was estimated to be double-digit negative, we managed to have a positive quarter in China.

January was great in China. February was terribly negative. It started to pick up a little bit in March, and we expect our business to continue to improve in April.

In terms of categories, you see different things, but it’s clear that first of all during the confinement, hair-care and skin-care products continued to be in demand. Skin care accelerated right after the confinement.

Makeup is the category that has been the most severely hit, and that’s the one that is probably going to pick up last ­— all the more since people are wearing masks all day long. So it will take, at least for lip makeup, a bit longer to pick up.

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We see some categories, like here in Europe, that have strongly accelerated, such as home hair color.

China was among the luxury market’s growth drivers, and after the crisis people go back to luxury. Obviously, the market growth has not yet reached the level it had prior to the crisis, but we see luxury consumers coming back, so that’s pretty encouraging.

WWD: What have been some of the biggest challenges for L’Oréal while the crisis escalated and now, looking at the de-confinement in various countries around the world?

N.H.: The major, if not the sole, preoccupation of everybody has been, is and will be the safety of our employees. We have 88,000 employees around the world, and when we saw this crisis happening, our biggest challenge — that I think we’ve tackled in the best possible way, with no complacency — has been and is to ensure that our employees are safe.

Jean-Paul Agon was one of the first ceo’s in the world to make the decision to ban travel, way before it was implemented or even asked for by governments, [for example].

It’s a challenge when people are going to get back to work. We see from the learnings in Korea and China that you can’t have everybody in the office at the same time. You want to make sure that people get all the protection equipment and gel that they need to be sure they’re totally safe when they work.

How do you keep all your factories working…whilst making sure that our employees are totally safe?

Then, if we look at business challenges, they are very different from one division to another. On the one hand, you’ve had two divisions [with retail footprints that closed]. If you take the Professional Products division, hair salons were closed all over the world. For the Luxe division, airports and travel-retail shops were closed, as well as most perfumeries and department stores.

On the other hand, you’ve got the mass-market channel, where stores remain open. Consumers’ number-one priority may be other items, but they shop beauty there. And for the Active Cosmetics division, which sells its products in pharmacies, most pharmacies around the world, or drugstores, are open.

The challenges are pretty different, so then the reaction of each division is different. Take the example of the Professional Products division. On the one hand, business-wise, they’ve been focusing on the salons that were open and trying to boost the e-commerce part of their business.

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But on the other hand, they have been putting an extremely high level of energy into making sure that their partners from over a century were taken care of, protected. That was an important part of the solidarity plan. We decided to freeze all the payments that our small salons had to make to us, so that they would not have cash-flow issues.

The Professional Products division set up online training programs to help the stylists continue to improve their craft and to learn new things — whether management or the best way to do certain types of hair color — while they were stranded at home. It has helped them prepare for their reopening. When salons reopen, we will provide them with the sanitizing gels and masks they need to be ready for their clients.

The division has also struck deals with an online booking platform in Europe to help salons facilitate the pre-booking of consumers when they didn’t have the system to do so.

At the other end of the spectrum, you’ve got the Consumer Products division, which is providing the cashiers and other employees of supermarkets and hypermarkets around the world with sanitizing gel because these guys are working every day, facing consumers, and want to be protected. At the same time, we are making sure that we ship our products — our hair-color products, our shampoos — that we activate consumers on digital with the right messaging. And it’s the same for the Active Cosmetics division.

That’s the power of the L’Oréal model where yes, we are pure players in beauty, but we have four divisions with different categories, different price points, different distribution channels, which allows us to play the beauty game in different ways and to adapt it to the different realities of each business.

These are very big challenges, and each division plays its cards in a different way. In Chinese the [word] for crisis is the same as for opportunity.

It’s true we see that, for example, with e-commerce. L’Oréal had been one of the early movers into the digital arena with a strong bet on digital content, digital media, which is over 50 percent of our media spend. E-commerce last year was already 15 percent of our business, and clearly, we’ve been focusing a lot on e-commerce activation and continue to do so during the crisis.

During the first quarter, e-commerce continued to grow at plus 52 percent and reached almost 20 percent of group sales. So it’s big progress. Obviously, it doesn’t offset all the closures of brick-and-mortar, but it allows us to over-perform the market, and it’s an extremely good omen for the future because it’s probably amongst the things that this terrible crisis will have changed. It will have accelerated further the transition to online sales for consumers.

WWD: What are some of the key priorities for L’Oréal looking ahead this year?

N.H.: Number one, the priority is our employee safety. We’ve ensured pretty well business continuity during the confinement, and now, the next priority is to be ready when hopefully — as soon as possible — the crisis is over or at least is mitigated, and people can go back to life that is as normal as possible. And then to be ready for that with the right products, the right offers, the right messaging and the right partnership with our retailers, salons, pharmacists or perfumeries, to make sure they can also recover in the best possible way.

WWD: How else do you think beauty consumption will change post-pandemic?

N.H.: We do not have a crystal ball, but there are a few things that I feel personally. The first is that the appetite and the desire for beauty will be stronger than ever after the crisis.

For over 100,000 years, beauty routines or beauty products have been essential to, an intricate part of humanity. I am pretty sure that as soon as people can have access to products, they will want to go back to using those that make them feel good, feel beautiful, allow them sometimes to seduce. After a long period of social distancing, I’m pretty sure that seduction will be an important thing.

So I am very confident that the appetite for beauty and beauty products will come back because, in the end, this is not a crisis of demand. It’s a crisis of supply. It’s just that people basically cannot have access to some of the products they want.

The second thing is that this crisis will probably be an accelerator of some pre-existing trends. These will be obviously e-commerce, but [also] sustainability, protecting the planet and product safety will be even more important. Today, people are concerned about their health.

These mega-trends had been spotted by L’Oréal and where we jumped on the bandwagon very early on.

L’Oréal has been putting consumer safety at the very heart of its preoccupations for over 110 years, through its R&I science and the hundreds of controls done all along the development process of our products.

Because of its DNA, flexibility and agility, L’Oréal has been very well-equipped for such a crisis. We are confident that we come out of it even stronger.

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