UBI Marketing Intelligence Doru Crinta Fabio D Agostino Walter Perie
Cosmetic Sales Growth by geographic zone (in million) 4.000,0 3.750,0 3.500,0 3.250,0 3.000,0 2.750,0 2.500,0 2.250,0 2.000,0 1.750,0 1.500,0 1.250,0 1.000,0 750,0 500,0 250,0 0,0 First half 2004 First half 2003
Identity
Who, when and where Estée Lauder -- Founded in 1946 by Estée and Joseph Lauder, in NYC -- 1960 first international office in London for Europe -- 1961 in Honk Kong for Asia/Pacific area L'Oréal -- Founded in 1907 by Eugène Schueller, in Paris -- 1909 Société Françasie de Teintures Inoffensives pour Cheveux -- 1920 L Oréal already sells in Europe, Americas, Russia and Far East
Evolution Origins division is created Estée Lauder +Tommy Hilfiger full license (US) +MAC(stake) (Canada) founded pure cosmetics company 1946 +LaMer (France), +Bobbi Brown Aramis division is created 1964 Clinique division is created 1968 +Dona Karan full license, +Aveda, +Sassaby Inc (Jane brand) +MAC (complete) +Stila(US), +Jo Malone (UK) Prescriptives division is created 1979 +Bumble and bumble (stake) (US) +Cela Cosmeticos(Chile,Peru,Bolivia) -> Gloss.com joint venture with Chanel and Clarin -> Elca Cosmetics joint venture with SARANTIS (GR) for distribution in EEMarket +Kate Spade Beauty full license (US) +Darpin (France), +Michael Kors Fragrances(US), +Rodin & Fields (US) -> Sean John joint venture - Jane mass cosmetics brand 1990 1993 1974 Sold stake to Nestle L Oréal 1907 founded - hair dye company 1994 1995 1996 1997 1970 +Biotherm 1998 1999 1977 + MarieClaire Magazine 2000 1980 + Vichy, +Metabo-Juille 1982 +Armani parfume license 1984 +Cosmetic operations of Warner Communications (RalphLaueren, 1/2 Jean Lanvin parfumes, part of -> Participation in CPGMARKET.COM Helena Rubinstein) 2001 -> Established the Fragrance division 1988 +Complete acquisition of Helena Rubinstein 2002 1989 +LaRochePosay (stake) 2003 2004 +Redken +Maybeline +SoftSheen +Full control LaRochePosay, +PHAS -> Joint venture for CADAMUJER.COM +Kiehl s, +Colorama (Revlon-razil), +Response(Sweden), +Dermablend +Matrix Essentials, +Carson, -Marie Claire, -Lanvin 2001 - +Biomedic,Shuuemura (stake), Ylang SA (Argentina) +ARTec (US) -> Inneov share +Mininurse (China) +Yue-Sai (China)
Comparative facts Bringing the best to everyone we touch Estée Lauder 5 1.3 (17) 400 300 Mission Turnover (billion$) R&D as % of turnover No of patents(2003) No of research employees New products 'Where the future is always present L'Oréal 14 3.3 515(2451) 2500 3000* 9 No of factories 42 5 22200 Turnover (billion$) Employees 14 50500 * formulas (#new products - not available)
Turnover (billions) Estée Lauder Brands 1 0.6 0.3 urban / consumer premium / luxury professional
Turnover (billions) L Oréal Brands 4 2 1 0.5 urban / consumer premium professional
Identity Geography
Where are they?
Source Euromonitor
MAIN COSMETICS MARKETS IN 2003 In billions $ US 45.4 * 48 Russia 5.3 China 6.0 Japan 21.9 Brazil 7.3 * France, Germany, UK, Italy and Spain Source Euromonitor
North America 3,784 +6% Cosmetic Sales 2003 in millions +4.9% Western Europe 7,221 2,669 Rest of the World Total Cosmetic sales 13,704,096 Source L Oreal
Cosmetic Sales 2003 Europe, the Middle East & Africa Americas $1,506.4 $2,931.8 in millions +7 % +14% Asia/Pacific $657.8 +9% Total sales $5,096 Source Estée Lauder
The world s largest C&T markets in 2003... US$bn % vs 0 % vs 97 USA 45,4 0,7 24,3 Japan 21,9 3,2 8,1 France 12,1 5 33,6 German 11,6 1,4 22,8 UK 10,1 4,7 21,6 Italy 8,5 2,5 27,4 Brazil 7,3 12,2 113,7 China 6 7,8 63,2 Spain 5,7 5,6 56,7 Russia 5,3 14,3 1,3 Source Euromonitor
Identity Geography Finance
Market In which market do the two groups operate and compete? L'Oréal Active in three main fields Cosmetics and Toiletries Consumers Luxury Professional Active (Cosmeceuticals) Dermatologicals Estée Lauder Essentially active in one field Cosmetics and Toiletries Consumers Luxury Professional Active (Cosmeceuticals) Pharmaceuticals
World market for Cosmetics & Toiletries $201.000 million 4,8% growth in 2003 Cosmetics & Toiletries Market Market 2003in million 02/03 97/03 Baby care $3.476,10 5,4% 42,20% Bath and shower $20.701,20 3,3% 24,80% Deodorants $9.242,80 6,6% 38,30% Hair care $42.491,80 4,3% 34,80% Color cosmetics $28.055,00 4,6% 37,70% Men s grooming $16.221,20 7,3% 47,80% Oral hygiene $20.335,90 3,5% 27,00% Fragrances $22.408,90 3,5% 27,30% Skin care $38.481,40 6,8% 43,60% Depilatories $2.559,50 4,3% 68,00% Sun care $4.302,50 7,8% 55,10% Note: Sum of sectors is greater than the market size because men s toiletry products are included in men s grooming and in the relevant toiletry sector. Baby care Bath and shower Deodorants Hair care Color cosmetics Men s grooming Oral hygiene Fragrances Skin care Depilatories Sun care Source: Euromonitor Interbational
L'Oréal Cosmetic and Toiletries Steady Growth in all sectors 'Active comsetics' +16% High growth in Asia East Europe Latin America Decrease in North American market 7.500,0 Cosmetic Sales Growth by operational division (in million) Cosmetic Sales Growth by geographic zone (in million) 7.000,0 6.500,0 6.000,0 5.500,0 5.000,0 4.500,0 4.000,0 3.500,0 3.000,0 2.500,0 2.000,0 1.500,0 1.000,0 500,0 0,0 Professi onal product product s Cosum er product Luxury s Active s cosmetic O th er First half 2004* First half 2003* 4.000,0 3.750,0 3.500,0 3.250,0 3.000,0 2.750,0 2.500,0 2.250,0 2.000,0 1.750,0 1.500,0 1.250,0 1.000,0 750,0 500,0 250,0 0,0 Western Europe North America Rest of the World First half 2004 First half 2003
0,0 L'Oréal Dermatology Galderma Joint-venture with Nestlé (1981) Sales decreased United States 140,0 130,0 120,0 110,0 * in million ** 50% share Dermatological Sales Growth Germany 100,0 90,0 80,0 70,0 60,0 50,0 40,0 30,0 20,0 10,0 First half 2004 First half 2003
L'Oréal Pharmacology Sanofi-Aventis Capital structure at 31 August 2004 250,0 225,0 200,0 175,0 150,0 Pharmaceuticals Profit Share Sanofi-Aventis First half 2004 First half 2003 63,46% 5,59% 6,19% 10,41% 12,99% Public Total L'Oréal Kuwait Petroleum Corporation Sanofi-Aventis Employees 125,0 100,0 75,0 50,0 25,0 0,0... l Oréal has given its full approval to the offer made by Sanofi-Synthélabo for Aventis... L Oréal intends to keep its shares and will record its share of the dividends paid by Sanofi-Aventis in its consolidated income statement...
Estée Lauder Cosmetics and Toiletries Cosmetics Sales Growth by geographic zone Cosmetic Sales Growth by product $6.000,00 $5.500,00 $5.000,00 $4.500,00 $4.000,00 $3.500,00 $3.000,00 $2.500,00 $2.000,00 $1.500,00 $1.000,00 $500,00 $0,00 North and South America Europe Middle East -Africa Asia - Pacific First half 2004 First half 2003 First half 2002 $6.000,00 $5.500,00 $5.000,00 $4.500,00 $4.000,00 $3.500,00 $3.000,00 $2.500,00 $2.000,00 $1.500,00 $1.000,00 $500,00 $0,00 Skin care Mak e-up Fragra nce Hair care Othe r First half 2004 First half 2003 First half 2002
Financial Health Estée Lauder L'Oréal FULL YEAR PROFIT/LOSS 30JUN2004C 30JUN2003C 31DEC2003C 31DEC2002C Revenue 5790m(USD) 5096m(USD) 14029m(EUR) 14288m(EUR) Operating Result 644m 503.7m 1819m 1778m Pre-Tax Profit/Loss 616.9m 495.6m 1869m 1698m Net Attributable 375.4m 302.2m 1491m 1277m BALANCE SHEET Cash 611.6m 364.1m 554.1m 544.4m Current Assets 2199m 1844m 6875m 6842m Fixed Assets 1508m 1505m 8136m 8130m Total Assets 3708m 3349m 15012m 14972m Current Liabilities 1322m 1053m 3260m 3827m Long-Term Debt 652.6m 512.7m 759.1m 825m Total Liabilities 1959m 1554m 6875m 7539m Minority Interests 15.5m 12.3m 11.9m 11.9m Shareholders Equity 1733m 1423m 8124m 7421m Estée Lauder s net profit: +19.5% L Oréal s net profit: 14.3%
What about stock value? Estée Lauder New York Stock Exchange Source: bigchart.com
What about stock value? L Oréal Paris Stock Exchange Frankfurt Stock Exchange Source: bigchart.com
Identity Geography Finance Demographic
Age Pyramids USA, Europe15 and Japan Source European Commission Employment & Social Affairs
CHINA Male Female Source: United Nations (1999): World Population Prospects.
Changes in Population Pyramid-India (1971-2016) Source: Technical Group on Population Projections, Registrar General of India (RGI) 1996
Worldwide, the population will age.
Identity Geography Finance Demographic Market Trends
Estée Lauder Turnover Trends L Oréal Turnover Trends
Industry evolution The rise of upper mass products Emerging markets will outpace Fast innovation and new retail concepts will boost market penetration Real term global sales expected to grow by 2.9% annually, for the next four years Shift from ingredients towards cosmo molecules Beauty Silk of Far East goes West again.
Market volume trends
Forecasted growth per cosmetic categories
Identity Geography Finance Demographic Market Trends Values & Ethics
L Oréal and the society SHE policy Strict rules about Safety, Health and Environment Energy and water cosumption Atmospheric discharge L Oréal-Unesco Partnership For women in science "Science is the root of all progress and the contribution of women is essential to its future". Lindsay Owen-Jones
Estée Lauder and the society Packaging Strict protocols to encure environmental criteria fulfillment Conform to ISO 14001 The Estée Lauder Companies realizes that in order to ensure the long-term success of our Corporation, our financial goals need to be integrated with the human and ecological impacts of our business. Edward M. Straw
L Oréal and Estée Lauder According to All For Animals based in Santa Barbara, California (http://www.allforanimals.com/) both L Oréal and Estée Lauder DO NOT test their products on animals!
Identity Geography Finance Demographic Market Trends Values & Ethics Competitors
Existing competitors Alberto-Culver Elizabeth Arden Avon Beiersdorf Chanel Church & Dwight Clarins Colgate-Palmolive Coty Del Laboratories Dial Gillette GlaxoSmithKline Intimate Brands Johnson & Johnson S.C. Johnson Kao LVMH NuSkin Mary Kay Cosmetics Oriflame Pfizer Playtex Products Revlon Schering-Plough Shiseido Unilever Procter & Gamble Wella
New competitors/products Sensient technologies, Symrise,Fimenich, Givandan, Human Pheromon Sciencies Co., Radiancy - ingredients Elizabeth Taylor (Curious), Ted Barke, Vera Wang, Kenneth Cole, Oxford Industries fragrances Cosmetochem, Imaginetix(Celadrin), Inerparfums, Helix Biomedics, Universe Cosmetics, Healthspan, Disperse Technologies, DNAcare Systems, Croda haircare, Rohm and Haas haircare, Dow Corning hair Janson-Beckett Cosmeceuticals (OkuSil), NeoStrata skincare, Inamed (Hylaform anti-wrinkle treatment ), Arch Personal Care Products - 'genetically-guided' skin care, Valeant pharmaskincare, Omega Pharma, Artdeco skincare, DHC Corporation skincare, Juvena skincare, Miss Sixty, N.V. Perricone(Clinical Creations), Klein-Becker (StrivectinSD), Philosophy, Laboratoires Sérobiologiques, Tolsom/Quixtar, Classified Cosmetics Shaklee Corporation - colour cosmetics, SkinMedica cosmeceuticals, Gel-Del Technologies (CosmetaLife botox alternative), HauteFaceCosmetics-ethnic, Laboratoire Pharmygiène's sun products, City Lips -lips cosmetics, OT Over Time teen products Natura Cosmeticos Brazil, Kose Japan, Kalina-Russia, G&D Cosmetic(China) -green fields
Identity Geography Finance Demographic Market Trends Values & Ethics Competitors Distribution
Distribution Channels Retailers EL Travel retail division Own Shops Pharmacy EL bought Paris-based company Laboratoires Darphin. E-business EL e-commerce business grew 36% in 2003 L Oreal e-learning, business simulations and virtual seminars.
Identity Geography Finance Demographic Market Trends Values & Ethics Competitors Distribution Customers
Consumer transformation trends Research will be hastily applied due to demanding customers Elder people will demand increase share of the pie New attitudes will shift perception of age Simplifying consumer choice The whealthchare pursuit will boost large market areas like cosmetic supplements or cosmetic surgery
Customers do change At home salon experience Teens the new family budget dictators The beauty goes beyond skin The power of example You can take it with you
Completed! Identity Geography Finance Demographic Finance Values & Ethics Competitors Distribution Customers
SWOT Estée Lauder Strengths Management expertise Marketing ability Large market share R & D advantage Established brands Weaknesses Complex structure Lack of focus Selling costs are 20% of net sales Management structure under reorganization after the death of founder, Ms. Estée Lauder Opportunities Growth opportunities in China, Russia,Eastern Europe, Brazil and India Pick-up of travel Availability for strategic alliances in the electronic commerce area Plenty of candidates for acquisition Threats Exposed to crisis events (SARS, recession, terrorism etc) causing downturn in travel Downturn in department store sales Other competitors Americans stagnating spending on cosmetics
SWOT L Oréal Strengths Size Diversification Global coverage People R & D advantage Established brands Weaknesses Dominance of Gesparal, L Oreal s main shareholder Room for margin improvements Dependency on American market Potential changes in shareholder structure (Mrs. Betancourt s age) Opportunities Opening markets due to WTO expansion Increased return on R&D investments Positive trends for cosmetic products in its portfolio Threats Strong Euro. Discounters cutting down profit from mass market products. Strengthened competitors Sluggishness of European market (especially France and Germany)
Innovation radar L Oréal Estée Lauder
Evaluation Factor Geographical Brands & Products Trends Finance Values & Ethics Distribution Customers L Oréal +++ ++ ++ +++ + ++ ++ Estée Lauder ++ +++ + ++ + +++ +
Estée Lauder hot topics Watch out for predators Resolve the weakness in male and ethnic portfolios Positioning forces it in a follower position for emerging markets Open up management structure to new people Invest the cash or loose
L Oréal hot topics Balance European market revenue Win China and create the first Chinese global brand Prepare for shareholder shakeout and EU scrutiny Expand research by acquisition and investment Attack the African cosmetics market for the ethnic products
Sources Industry reports from Merill Lync, Morgan Stanley, Deutsche Bank, JPMorgan L Oreal Study - Fabien Blanchot & Michel Kalika, 2003 - Université Paris-Dauphine http://www.elcompanies.coom http://www.loreal.com http://www.cosmeticsdesign.com http://www.colipa.com http://www.manyworlds.com/ http://www.ctpa.org.uk/page.asp?section=2&page=3 http://news.surfwax.com/beauty/files/estee_lauder_perfume.html http://www.academic.marketresearch.com/product/display.asp?productid=143435&prid=1111111 http://www.cpcpkg.com http://strategis.ic.gc.ca http://www.findarticles.com/p/articles/mi_m0bek/is_6_8/ai_62408616 http://www.in-cosmetics.com http://www.cosmeticpackaginganddesign.com http://www.ced-lyon.com/gb/dermocosmetologie/recherche.html http://databases.cosmeticsbusiness.com/web/ http://www.allforanimals.com/