|BUSINESSWEEK ONLINE : JUNE 28, 1999 ISSUE|
|INTERNATIONAL -- EUROPEAN COVER STORY
L'Oreal's Owen-Jones: 'I Strive for Something I Never Totally Achieve'
L'Oreal Chief Executive Lindsay Owen-Jones has turned the French cosmetics company into a global force by distilling the cultural cachet of different countries into its vials. He spoke with Paris Bureau Chief Gail Edmondson at the company's headquarters in Clichy about how to balance L'Oreal's growth with the creativity so crucial to its success. Here are edited excerpts of their conversation:
Q: How has L'Oreal achieved 10 years of top-line growth superior to the cosmetics industry?
A: First, you have to have an army of people who share the obsession to grow the company. They have to have the right to err. Otherwise they are afraid to take risks. You will never see a bloodbath of people at L'Oreal as a result of something gone wrong.
Q: What have you changed at L'Oreal over the past decade?
A: I tried to bring more focus to the company through a huge pruning of brands and activities. We focused on five core businesses and technologies -- hair color, hair care, skin care, color cosmetics, and fragrances. Then we concentrated on 10 global brands, which now make up 85% of sales. A whole list of brands has disappeared. It's focus and then extreme drive on the remaining products to take them global.
Q: How do you fight the complacency that threatens a successful company?
A: I'm a very critical person, and I'm a perfectionist -- I strive for something I never totally achieve. But then I transmit that striving to the rest of the organization, which is so busy trying to do better that it doesn't have time to be pleased with what we have.
Q: L'Oreal's debt level is quite low. Do you intend to make acquisitions?
A: Ideally, we would have more debt today. We are constantly looking for acquisitions that will complete either our brand portfolio, our technology families, or our geographical presence. You can expect to see us continuing to make regular small- to medium-sized acquisitions. There are not many opportunities in this industry to make megadeals. This is true for us and for others.
Q: Do you have a preference or priority for the next acquisition?
A: No, it's strictly [opportunistic]. This industry, to some extent, has consolidated already.
Q: What do you see as your toughest challenge moving forward?
A: Competition is going to be even fiercer in the future than it has been because this market is going to continue to attract strong players. There is also a challenge in reconciling the irreconcilable. Many requirements for survival in the next century are going to be size-related. On the other hand, the imperative for size is balanced by the need for genuine innovation, creativity, flair, intuition, imagination, taste, a sense of what is cool and what is not, and those are not qualities which go with huge companies. That's going to be a major challege.
Q: How do you keep creativity flowing?
A: The key to that is the unique combination of delegation and control. The only way to favor creativity in large corporations is to favor multiple brands in different places which compete with each other. L'Oreal favors self-competition of its own brands. It sets one research center against another research center, one marketing group against another marketing group. They fight among themselves and in so doing, we hope, also beat the competition.
That's why it was so important for me to create the second whirlpool of creativity in brands in the U.S. I think that if we had continued to handle only brands out of one huge creative hub, Paris, with ever huger labs, ever more marketing teams coming from the same people with the same mindsets and the same backgrounds, ultimately it would have slowed.
Q: You say research is critical to L'Oreal's success, but don't all large cosmetics companies have equal access to good research? Isn't the emotional importance of a brand much more important than the technology, which consumers assume all leading brands have?
A: If you say it's more important, I disagree. If you say it is just as important, I totally agree. It's strictly survival of the fittest in this area. All brands are obliged to more clearly define who they are. You either have a strong personality, or you disappear.
Q: At some point, don't all these brand images start to blur?
A: Absolutely not. Just take L'Oreal and Maybelline, which in the U.S. have for the last two years been the two fastest growing brands. The two brands have never been more distinct -- L'Oreal from France, supreme elegance, high prices, sophisticated packaging, sophisticated models. Maybelline, on the other hand, America, value, street-smart as opposed to traditional elegance. New York as opposed to Paris. Wider distribution. They are two totally complementary and different brand positions, and we can take them around the world together.
Biotherm is extraordinarily successful with a much younger customer than Lancome, [and it's] about 25% to 30% cheaper than Lancome. Biotherm is younger, cheaper, no makeup, pure skin care, less anti-aging, more freshness and youth.
Q: What went wrong with Biotherm's launch in the U.S.?
A: Some years ago, the American team felt they had to change the personality of Biotherm to make it acceptable to the U.S. market. I think the changes made were not very successful. The distribution at the time was not particularly well managed.
But it's a good example of sheer determination and perseverence. We kept it going exclusively in Florida, where it had a good following. Then we relaunced it gradually in a few select stores in California, but this time on a true, worldwide youth model, and now it is the hottest brand in California. It's only a question of time before it will be rolled out again throughout the U.S.
Q: What about Helena Rubinstein -- some have expressed confusion about this very dramatic advertising with green lipstick and white eyeshadow for a luxury brand. What's that all about?
A: It's not actually incoherent. That has to do with some rather fixed ideas amongst industry observers who have not necessarily seen how fast this market is changing. For example, is it incoherent for younger people to buy luxury cosmetics? Why? Perhaps it was 10 years ago when luxury was equated to the middle-aged customer. But sorry, the biggest luxury consumers in all of Asia, which is one of the strongest luxury markets in the world, are between 20 and 25. This is why the Guccis and Pradas have taken the luxury-goods market by storm. The worldwide luxury consumer no longer equates to a middle-aged lady. She can be. But she can also be young and trendy.
So the whole idea that it is incongruous for Helena Rubinstein to be cutting edge in terms of image and makeup...is out of date by about 10 years. On the contrary, it's very good, original positioning for Helena Rubinstein to be the coolest of the traditional luxury brands.... I loved [the advertising]. I just thought it was outrageous, which is exactly what it was designed to be, which is what I want.
Q: L'Oreal's brands rank 10th overall in Japan. Can you move that up?
A: That is changing very quickly. We took a long time to disentangle ourselves from a traditional licensee agreement in Japan. It took us a long time to get our own business established, fully controlled. Now we have it growing quite quickly.
Q: What about competition from direct marketing?
A: We are the only large cosmetics company which sells through normal outlets and also has direct marketing. It's a $160 million business, and it's growing very rapidly in France, Germany, and Japan. And by the way, we are doing a lot of electronic business thanks to the French Minitel system, just a crude form of the Internet. So we are already in direct marketing, we know the economics of it. Before you get too caught up with the notion, you have to be aware of the simple economics of putting everything into a little box and sending it to somebody.
Q: Were Maybelline sales in China hurt by the U.S. bombing of the Chinese embassy in Belgrade, given the brand's emotional appeal of American urban chic?
A: No, it wasn't. I thought it was going to be, but there was some question about how spontaneous all these riots really were.... A huge number of Chinese people basically love things American, the American lifestyle, the American way of doing things. So you can both be angry with a nation and like its people. It's not like our products come with an American flag. It's more subtle. It's just part of a brand's personality. You don't actually buy a country -- you buy the virtues of a country, like German engineering, Swedish steel, British country-club atmosphere.
Q: When you take to the streets and look in shops and talk to people off the street, what are you hoping to discover? Have you ever had a revelation as a result of these encounters?
A: I am looking for two things. Does the theory match the facts, and do the facts match the theory? We have this great strategy back in the head office of how we are going to do it worldwide. But when you go out and look at what's happening, is there a big gap between your projections and the reality of what you see and hear? It's so important to have a world vision because otherwise, decentralized consumer-goods companies with many brands can fracture into as many little parts if somebody isn't pulling it back the other way the whole time with a central vision.
Q: What's your definition of beauty?
A: It's an appearance that makes other people feel a sensation of harmony or pleasure. But I don't think this industry is about beauty. It's about feeling better about ourselves. It's not just about the vanity of looking pretty.
Q: What are your hobbies?
A: When I get out of this office and [after] all the compulsory reading I have to do, my No. 1 priority is to get on a sailboat or a helicopter -- something that takes my total attention [and] is outdoors, competitive, and takes my mind off the business.
Q: You are a big fan of New York. What draws you to that city?
A: It's a place for those who are competitive, and I have that weakness. The fact is that New York is a magnet for the world's talents, and anybody who hasn't gone and exposed themselves to the burning rays of New York's sun hasn't really taken the plunge.
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ONLINE ORIGINAL: L'Oreal's Owen-Jones: ``I Strive for Something I Never Totally Achieve''
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