L'Oréal Awaits New Chief's Style

26 April 2006

Investors and analysts are looking to the handover of power at the top of French cosmetics giant L'Oréal as a means of boosting growth.

Incoming ceo Jean-Paul Agon, whose appointment was confirmed at Tuesday's annual meeting, has a tough task to increase sales in a stagnant Western Europe and in the US, where rival Procter & Gamble has made serious inroads.

Sir Lindsay Owen-Jones, now in the chairman's seat, recorded 21 years of double digit net profit growth - up 10.3% to $2 billion (€1.16bn; £1.12bn) in 2005 - as he created the world's biggest cosmetics business.

However, some experts believe he should have invested more euros in advertising to hike sales. Growth last year was a disappointing 4.8%, down from 8.9% in 2002.

Comments Maurice Lévy, chairman of French advertising group Publicis: "The big question is what is the leap that L'Oréal will have to make in terms of growth, in terms of development, in terms of products, in terms of new horizons?"

One of these new horizons is the acquisition of ethical beauty retailer Body Shop for €940 million [WAMN: 20-Mar-06], which Agon will now integrate into the business.

But the new chief does have a major success story of his own, launching L'Oréal's Asian operations from scratch. He took the business into China in 1997, making it a cornerstone of the company's strategy.

As part of his push for sales growth Agon is now expected to use two recent Chinese acquisitions, cosmetics brand Yue Sai and skin-care line Mininurse, as a means to negotiate better distribution for the global brands such as L'Oréal Paris and Maybelline, and to expand L'Oréal's shampoo offering in the Chinese market.

Agon also sees potential in new customers such as "seniors", men and emerging markets.

His progress during the coming year will be observed with interest.

Data sourced from Wall Street Journal Online; additional content by WARC staff