By Pete Born
with contributions from Jennifer Weil
 on December 10, 2015
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Appeared In
Special Issue
Beauty Inc issue 12/11/2015

Jean-Paul Agon is an explorer at heart, as he traipses across untested markets, tapping into unfamiliar cultures, seeking out differences in human behavior and shaping a new world of beauty consumerism, both in the flesh and online.

Agon, the chairman and chief executive officer of the world’s largest beauty company, is waging a quiet revolution by trying to add one billion new faces to L’Oréal’s customer rolls, faces not usually associated with the headquarters in Paris and New York.

This story first appeared in the December 11, 2015 issue of WWD. Subscribe Today.

“It will mean creating a new L’Oréal,” says Agon, who can easily be in Kenya or Silicon Valley or Mumbai or sailing his boat through the Greek Islands. His impact on beauty — both on L’Oréal and the industry overall — has been equally as far-flung, as others follow the global pathways he forges.

A recent autumn day found Agon in the U.S., leading a squad of 20 executives, some from France, on a reconnaissance mission into northern New Jersey mall country.

Methodically they moved through Garden State Plaza in Paramus, pausing to hear managers give a rundown on their businesses, or to huddle around a competitor’s counter and trade notes, as the group caravanned from one brand to another through Macy’s, Sephora, Kiehl’s, The Body Shop, Nordstrom and Neiman Marcus. Store visits are a long-standing inbred habit of generations of L’Oréal executives, but Agon pursues the practice with renewed gusto.

Business is generally good, at least in the prestige market, and he mostly cheers the teams on. He becomes clearly elated over the news that The Body Shop’s sales trend has leapt off the balance sheet following an August renovation.

“I always said I was sure this would be successful,” Agon says of the often sluggish retail chain that L’Oréal acquired nearly a decade ago as he began his tenure as ceo.

That Agon is acutely interested in the fortunes of The Body Shop, despite its diminutive size compared to the L’Oréal empire — it comprises just 3.9 percent of the total business—is typical of the hands-on ceo.

“He stays close to the business,” says Karen Fondu, president of L’Oréal Paris USA, who worked with Agon when he led L’Oréal USA from 2001 to 2005. Citing his “commitment to excellence, incredible energy and strategic insight,” Fondu says, “There has never been a meeting when I didn’t walk out saying, ‘Why didn’t I think of that?’”

“He has a great vision for the company, for brands and for the way of working as well,” says Frédéric Rozé, president and ceo of L’Oréal USA.

Today’s mall visit is indicative of how Agon keeps the pulse of the global industry. Store visits double as reality checks and even as inspirations for future acquisitions, leading to insights not easily made in the C-suite. “It’s not based on numbers; it’s based on what you see in the store,” Agon says. “What I see is a market that has changed more in the past three years than in the past 30 years,” he continues, noting in particular the rapid fragmentation and segmentation of the businesses.

A new kind of consumer has emerged, one with different expectations, Agon says, and digital is a completely new game. The veteran executive — he started his career at L’Oréal — is clearly energized by the evolution. “The market today is much more exciting,” he says. “There is a new type of competition. Innovation has to be much faster. You have to be much more agile, much more nimble.

“I am more optimistic than ever because the beauty market has great perspectives,” Agon continues. “We see with the evolution of consumers around the world, the use of beauty products will just grow. It’s amazing — the growth of the makeup market, which is very linked to the digital era,” Agon says, pointing to the simple example of the practice of taking selfies. “The more that people take photos of themselves, the more they care about the way they look. There are some basic trends right now that are really in favor of the development of beauty products worldwide.”

Agon is equally as bullish on the opportunities afforded by emerging countries, noting that he spends about 40 percent of his time traveling. “What you see everywhere is a real appetite of women in these countries for beauty, even more than in your so-called developed countries,” he says, musing that perhaps African women have the keenest appetites for beauty products.

Women in South Africa change their hairstyles on average 8.5 times a year, Agon says, and those in Kenya do it as much as 14 times a year.
But the uncharted terrain he compulsively explores is not just cosmetics selling floors or chunks of geography. In late October, Agon led his entire executive committee on a one-week tour of Silicon Valley. “We want to be at the forefront of the digital revolution in the beauty industry,” Agon says.

Agon has been given good marks for making inroads into the digital space. “He understood that everything is going to change very quickly,” says Robert Salmon, a retired L’Oréal veteran of 37 years, whose last position was in the inner management circle as vice president of strategic planning.

“L’Oréal has caught up with its peers and probably somehow positioned itself ahead,” agrees Celine Pannuti, an analyst at J.P. Morgan Cazenove. “The digital revolution is a cornerstone of the group’s strategy that fits well with its entrepreneurial culture.”

Agon also was an early pioneer on the frontiers of corporate responsibility and sustainability. Carol Hamilton, the newly named group president of L’Oréal Luxe USA, remembers trying to gather support in 2002 for her Ovarian Cancer Research Fund program, when Agon was still freshly at the helm. “He was the first ceo to embrace philanthropy and really understand it,” Hamilton says, citing Agon’s Sharing Beauty With All program, which includes sustainability targets and philanthropic programs. “He’s brought global leadership and then expansive leadership beyond business results through his understanding.”

But it is Agon’s worldview and his reinvention of globalization that sets him apart from the pack. Like other young executives at L’Oréal, he toiled for much of his career in the shadow of his predecessor, Sir Lindsay Owen-Jones, who took a French-oriented export company and built it into a global monolith and industry leader.

Agon went a step further in 2011, when a few months after adding chairman to his ceo title, he unfurled a doctrine of “universalization.” This coincided with creating a goal of adding one billion new L’Oréal consumers, doubling the company’s customer base, by 2020. “It’s going to be a universal company,” Agon says during a wide-ranging and detailed interview recently. Noting that he redefined the company’s fundamentals in 2009 and 2010, he says, “The mission we defined was [one] as beauty for all… bringing the best of beauty to all consumers wherever they are, wherever they shop, whatever company they live in — men and women, all ethnicities, everything.”

He was raising his flag atop a foundation built by Owen-Jones, who first decreed that L’Oréal should be truly multiethnic and offer all schools of beauty — European, American and Asian. Agon’s vision takes globalization down to the grass roots and colors in a new world. “In many countries all over the world, more and more consumers want products and brands that are relevant to them,” Agon says. “Sometimes the big brands don’t feel relevant for each consumer. Sometimes consumers turn to local brands that they feel understand them better.
“The universalization idea is a way to compete with the local [brands] because we want to make sure that our brand, even if it’s an international brand, is also at the same time relevant market by market. Each year it proves to be even more right.”

Agon’s first proposals made six years ago now echo across the industry with competing marketers referring to the need for “local relevance.” He explains the way the theory works in practice, using L’Oréal Paris as an example, which Agon says is the number-one beauty brand in the world with sales of more than 5 billion euros [$5.3 billion at current exchange]. The brand’s product catalogue is very different in France versus India versus China versus Brazil. “It’s not always the same products, it’s definitely not the same formulas,” Agon says. “It’s the same brand, the same vision of beauty, the same psychographics in terms of consumers, but it is adapted to the local needs because a woman in Rio doesn’t have the same needs or desires or dreams as a woman in New York or Shanghai or Mumbai, so you need to have big brands that have a global appeal and a global equity. But then you need to be able to adapt the brand continent by continent.”

He adds, “The new game is that consumers all over the world want great products; they want innovation, but they also want relevance. By definition, it’s difficult to be with one formula in our industry [and be] relevant to everyone.”

In order to produce all this relevance, L’Oréal has created a network of research and development hubs stretching from the U.S. to France to Japan to China to Brazil to India and finally South Africa, which is in preparation.

Agon recently went on a tour of Kenya, South Africa, Angola, Ghana and the Ivory Coast. “That’s the future of beauty, too,” he says.

Analysts applaud the strategy. “He made L’Oréal more global and local at the same time, to conquer new consumers in emerging markets with beauty products from L’Oréal, but at the same time to tailor products to address the different needs and meanings of beauty in emerging markets,” Pannuti says. “That is the concept of ‘universalization,’ which resonates even more at the moment, when there has been increasing pressure in emerging markets because consumers are coming back to core values, core identities and in some instances relate better with local brands.”

The spark that touched off universalization was the call to attract another billion consumers. “All of this is very consistent,” Agon reflects. “It means the L’Oréal we will see now is a completely different L’Oréal, where we will have as many Chinese consumers as Americans and as many Indians as Europeans.

“That’s also why I insisted five years ago on this idea of a billion new consumers — because I understood that it was something very simple to make everyone internally at L’Oréal understand exactly that the new L’Oréal, we have to build it. It’s going to be different, but in order to build it, we need everyone mobilized. We need the mobilization of scientists in R&D to understand that now we don’t do hair care or skin care for Caucasian people, but we do it for Latin American, Asian and African people. So it is different.”

Hamilton says, “He’s totally a global leader. Jean-Paul has transcended French culture. He is truly fascinated with and embraces local culture. He doesn’t try to gloss over the differences, but to understand them and use them to drive the business. When you are with him you feel that he understands the world in a very big way. That is something he brought to the company. It also allows him to see things through local eyes.”

Agon says, “You need to have this passion and this curiosity because it’s all about curiosity, the curiosity about understanding the differences between people, the different habits, the different attitudes to translate that into trends or products or ideas.”

During a period of ups and downs for the global beauty industry, the strategy is working. Since Agon became ceo in 2006, overall sales derived from new markets have grown to 39.6 percent of L’Oréal’s total 2014 turnover of $29.94 billion. “All these new markets have become the number-one region of L’Oréal, which was not the case 10 years ago,” he says.

Asked how many new consumers L’Oréal has acquired of that one billion target, Agon replied, “We don’t know the number exactly day by day because by definition we can’t count them. In the past five years [since the goal was announced], we probably have gained something like 150 million, 200 million customers.”

He adds, “There are a little bit everywhere, mostly in the new markets. The growth we are having is due to new consumers. If you take China, it’s obvious. I started China in 1997, so we did zero business [then]. We are going to do this year more than two billion euros — probably 100 million new consumers to the company since we launched in China.

“China has become our second country,” Agon says, noting that new consumers have also come from India, Mexico, Indonesia, Thailand, Turkey, Colombia and Peru.

He also says whenever L’Oréal has made acquisitions, those brands have brought new consumers along with them. Those include Nice & Lovely in Kenya, which Agon estimates sells 40 million units a year, netting out to maybe 20 million new consumers.

International experts point out that in order to prosper in the emerging world, the company also has to diversify its manufacturing capacity by building plants that can make products that retail for as little as $2 each. Agon says that the last four factories that L’Oréal built are located in emerging markets, including Indonesia and Russia.

The company has been decentralizing everywhere. Only 9 percent of L’Oréal’s global sales are done in the home market of France, and 75 percent of the business is done outside the euro zone, according to the company. The U.S. has become more important in the last five years, with gains made by brands such as L’Oréal Paris, Maybelline and Garnier, as well as key acquisitions like Urban Decay, Clarisonic and NYX. The U.S. market is 25 percent of the total business of L’Oréal worldwide, which is as much, exactly, as the total euro zone. “We are more a dollar company [than a euro company] because there are many other markets that are linked to the dollar — China and Hong Kong,” Agon says.

When that monetary linkage is factored in, 40 percent of the business is done in dollar-oriented countries.

Beating at the heart of the U.S. expansion is the West Coast with its promise of a digital future. “California is a place where there is a lot of creativity and new ideas probably linked from everything that is happening [there] from Silicon Valley to Hollywood. It is especially true of makeup. Urban Decay and NYX Cosmetics are two California-based companies and they have a new type of creativity and freedom, which is digitally based and very exciting,” Agon says.

He continues, “Makeup is very digital today and if you want to touch beauty junkies, it’s not with traditional TV anymore. Even a brand like NYX has integrated digitally everywhere. When they invent new products, they discuss the ideas with their bloggers and vloggers.”

Digital is also an effective medium for hair marketing. “If you want to change your hairstyle, you just go on the Internet and see examples and how-tos, tutorials and what products to use. It’s fantastic,” he says.

When Agon became ceo in 2006, Owen-Jones was in the process of acquiring The Body Shop, which some financial analysts have taken a dim view of. One financial source called the move “terrible,” but the retail chain’s fortunes appear to be turning, as indicated by the New Jersey mall tour.

Agon explains that it is a tiny proportion of the business and therefore manageable. He also maintains that young Millennial consumers are seeking the five qualities in a brand that The Body Shop happens to represent, including natural ingredients, ethical principals, environmental awareness, efficacy and value relative to price.

“The problem is that we have to represent the brand so that it looks new and it doesn’t look like the old Body Shop,” Agon says. “That was The Body Shop of our mothers or the Millennials’ mothers and they want their brand. I was really enthusiastic when we saw the store in the mall because it’s exactly that. When you enter, you don’t have the impression that it’s the brand of the Seventies that has been refreshed. You have the impression that this brand has been created the week before.”

Agon admits The Body Shop “is not growing at the same pace as the company, but I would bet that next year or the year after, we will be back in the average rhythm of L’Oréal.”

His other acquisitions have received much higher marks. Jack Wiswall, a former president of the Designer Fragrance Division who retired from L’Oréal USA in 2006, says one indication of Agon’s passion for the business and drive is his love of giving birth to brands.

“He loves building businesses,” Wiswall says. “He loves to get these smaller companies. That is a change from [Owen-Jones] because OJ was really the man who wanted brands that the world knew. Jean-Paul wants brands that he can nurture and make huge around the world.”

But for all of the talk of brand-building, what makes Agon smile the most broadly is the topic of the consciousness raising programs he has initiated. Instead of having a Champagne-fueled party in 2009, when L’Oréal turned 100, teams of employees around the world organized community projects, such as repairing roofs in Peru and helping children in Thailand. The event was such a success, that it is being repeated as Citizen Day. In one of the more unusual moves, Agon also initiated an Ethics Day. He organized a Web chat with 45,000 or 50,000 employees and fielded questions. Agon says the employees sent in 1,000 questions on ethics and he managed to get through 150.

It pays off. According to the company, L’Oréal has been named by Ethisphere as the world’s most ethical company six times.

Asked what is the one achievement he wants to be known for during his tenure, Agon refers to his dedication to sailing. “I consider myself to be the skipper of the L’Oréal boat,” he says. “We are crossing a large ocean sometimes with easy weather and sometimes with difficult weather. My responsibility is to skipper the boat and bring the crew to new horizons.”

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