L'Oréal S.A. (OR) Earnings Call Transcript & Summary

Morning, everybody. We'll start the session now, and it's my great pleasure to welcome and introduce into the conference Nicolas Hieronimus, obviously, Group CEO; and Christophe Babule, Group CFO. We'll have the presentation and then some time for some Q&A at the end. But Nicolas, over to you.

Great. Hello. Good morning, everyone. Seems there's a lot of traffic in Paris all from the other room to here. More than happy to be with you to tell you -- to give you a few news about L'Oreal, about the beauty market. And as always, we like to start with a little reminder of who we are in a video. So that's, I think, the best way to start hearing about beauty and about the L'Oreal Group. [Presentation]

So that's a good introduction of L'Oreal, and I'm going to begin with the first part, I'm going to explain how we are reinforcing our leadership in beauty. Some of the numbers in the video. We are a EUR 41.2 billion company, EUR 6.1 billion profit, over 7 billion units sold in the world across 37 brands, as you will see in a minute. We are present in over 150 countries, 90,000 employees and a bit more since we acquired Aesop and the 4,000 employees. And a market capitalization of around EUR 240 billion. We are, by far, the worldwide #1 in beauty, as you can see here. This is the WWD ranking for 2023. So as you can see, we are bigger than the #2 and 3 combined and you could almost add #4. So it's a strong leadership that we've been increasing year after year. But as you will hear, we feel there's still a lot of potential for us to both increase our leadership and gain market share. All the more, as we are #1, we have 4 divisions, as you know, mass, luxury, dermo and professional. And we are worldwide #1 in 3 out of 4. Actually, had I made that presentation last year, which I did, we were #1 in only 2 divisions, dermo and professional. Luxury was #2, and it has become, after 13 years of consecutive overperformance, #1 ahead of Estee Lauder, whereas in mass market, we are still #2 after Unilever and ahead of P&G. So it's not a grand slam yet. So you can imagine what I'm telling my mass leader. They want to be on the podium of the higher -- march at the podium like the other guys. We've been outperforming the beauty market very regularly over the last couple of years or I think for many, many years, and we've increased that overperformance in the last -- during the crisis and right after the crisis. And now we are worldwide leaders with a market share of approximately 15%. And we continue with a strong momentum. As you know, our first quarter was at 9.4% growth. The real growth because we had to forward some orders because of some IT changes in Canada and the U.S., which benefited our Professional division mostly. But so I would say our real like-for-like growth is more in the 8.1% growth than 9%. But on -- still above the market that is estimated at plus 6% after 3 months, so which remains pretty dynamic. We continue to grow both in volume and value. So it's 1/3 units and 2/3 value for the first quarter, which confirms that, of course, we continue to premiumize, to value-rize and to create more to fuel our gross margin. But at the same time, we continue to recruit new consumers, which is, of course, what we aim for if we want to increase our market share. Our sales by category is pretty dynamic all over. I mean, only skincare is not double digit and it's mainly impacted by the lackluster Chinese market where skincare is the most important category, and we'll talk about regions in a minute. And all our divisions are growing. And again, here, you have a stronger China and Travel Retail effect on Luxury. So double-digit for 3 out of 4 categories: mass market, plus 11%; dermo at plus 22% and the professional at plus 11% with a bit of help from their forward invoices. So they're closer to a bit above 6%. For Lux, it's plus 1.8%. But if you exclude Travel Retail Asia, where we are, as you know, getting a more healthy situation with the daigou crackdown, it's around 6% growth. So it's pretty consistent with the market. Our sales by region, again, shows, I think, the power of our multipolar model because you still have North Asia at slightly negative with a flattish Chinese market, a very positive Korea and Japan and a very negative Travel Retail where everybody is destocking. But on the other hand, you see that all the other 4 regions are growing double digits: Europe, 12.6%; North America, 12.3%; and emerging market both at 16%, continuing to contribute in a very significant manner to L'Oreal's growth, showing again the power of this multipolar model. So if I talk about the L'Oreal model, I'm going to dive a little bit more into it, although many of you are long-time investors in L'Oreal, so that there might be lots of things you know, but I think it's important to remind a few things. First of all, we do only beauty and we found this chart interesting because you see both our size in beauty and you see us compare to other groups that are potentially bigger in size than we are, but for whom beauty is just one of their activities and sometimes a minor one. And I think it's -- beauty is really a domain in the market, which is very unique, and you'll see that in a second. And for us, it's been a dedication for 115 years. It's our 115th anniversary this year. It's been 115 years of research with accumulation of knowledge and data. As you can imagine, it's 115 years of consumer knowledge. I would say consumers knowledge because consumers in beauty are very different from one part of the world to another, from one age to another. And it's been 115 years of creativity because, as you often hear, beauty is an offer-driven market so it's about creating desires for consumers. Beauty is a fantastic market to be in and many people want to join because it's -- if you except the COVID years, it's been a continuous growth over history and the market has more than doubled, as you can see on the screen. And it's because beauty is truly an essential need. And it's something we remind a lot, so you'll hear me a lot saying this because, for me, it's very important that everybody, of course, partners, retailers, investors, but also regulators understand the importance of beauty and that -- it's an industry that has to be protected. And you here have an example of a recent campaign we've started with The New York Times, which is really about explaining the value of beauty, both for people's psyche as well as for business. And I think it's a very important part of why this beauty market is constantly growing. It's because people need it and they can't live -- there's no civilization that have thrived without beauty. It's a growing market, but it's a changing market. And again, that's why being a specialist is very important. This chart shows over a few years what categories were driving the beauty market growth. And it's interesting to see that in the [indiscernible] '14-'15 period, there was a huge acceleration of makeup that was mainly driven by the explosion of selfies and social network. Then you had the skincare taking over, and skincare remains always very dynamic. And what we see right after COVID, which was kind of an expected, to some extent, was a strong acceleration of hair. And that was, of course, accelerated also by the fact that the world population is getting more racially mixed, and therefore, there are more curly, long hair that are more demanding in terms of products, but also you see the incredible acceleration of fragrance. So beauty is always growing, but within beauty there are moving parts. And even within beauty, if you take a category like makeup, you will see that makeup trends change. There was the no-makeup, makeup or the nude makeup in '20. Then the return to glamor in '21 right after COVID. Then again, a new -- it was -- Euphoria played a role in influencing young teenagers on this nostalgia feel. And now there's a lot of self-expression where everybody is trying to express their individuality. So again, that's a subcategory makeup. And in this makeup, you have trends that change all the time. But beyond that, it's not just about trends in [ that year ], it's about places in the world. If I look at the world of lipstick today, and I'm not here to make a lecture on lipstick, what's interesting is that when in Asia women want matte lipstick with moisturizing textures. In the Western world, they want shine. And within shine, in America, there's a craze about lip oils. Whereas in Europe, it's more lip balms and shines. And this capacity to understand the very specificities of this market and the changes and the uniqueness I wouldn't say is an art, but it requires focus, experience. And that's why being somebody who does only beauty, but all on beauty, is a very strong competitive advantage for L'Oreal in that market versus groups that might be more diverse and work in other categories. So we do all categories. As you know, skincare is our biggest one. Fragrance has accelerated and hair and makeup are 2 and 3. And we play these categories in 4 divisions that are very complementary, of course, in terms of price points because, mass market, sales products are EUR 3 when luxury can sell a cream at EUR 400. That allows us to speak to about everyone on the planet. Of distribution channels, even though those have blurred a lot, but in terms of mission and typically if I take Consumer Product, their mission is really what we call to democratize and premiumize. So their mission within L'Oreal is to recruit as many consumers as they can. And of course, they can do it because they have shampoos and categories that speak to everyone. But they premiumize at the same time because they are here to fuel our gross margin model, and that allows them to be the #1 division in the group with a pretty decent operating margin. And they are our #1 asset to conquer new markets. And emerging markets are, of course, probably the -- where the CPD, as we call it, is going to be our #1 conquest weapon. And you can see here a few examples of Garnier, which is the #1 brand in Indonesia. And CPD is really making very strong inroads in emerging markets. And of course, they always try to -- that's why the premiumization plays a role. They're trying to take the categories up and they bring magic to retail. So that's typically the type of things we do. It looks almost like a 3D GenAI-created fixture, but it's something we do -- we've done with one of our partners in an emerging market. Luxury, well, as the #1 luxury beauty player, almost the same size, a bit more profitable. And again, you could say, well, luxury is one thing. But here, we make sure and that's where acquisition policy plays a role that we play on all facets of luxury from [ crucial ] brands like Yves Saint Laurent to timeless luxury like Lancôme or brands that are a bit more trendier like Aesop. And that, again, allows us to speak to all the beauty lovers and the luxury lovers around the world, both in stores and online, whether it's on our D2C or in Amazon where we've opened Lancôme in the U.S. last year and Kiehl's very recently. That's really a way for us to provide a luxury experience online and offline with all types of brands. Our fastest-growing division, as you know, for years, has been Dermatological Beauty, answering consumers' quest for health. EUR 6.4 billion and this division has more than doubled in a couple of years. You see the great success story here. It's really the surfing on the worldwide trend. Of course, we've got great brands for that with CeraVe, with La Roche-Posay, Vichy and a few others. Adding 100 million consumers every year, adding EUR 1 billion every year in the last 3 to 4 years. But more importantly, this division thrives on a very deep and strong and long built relationship with doctors. And that's why our medical leadership, our ability to speak to almost 300,000 health care specialists on a daily basis, dermatologists, but also GPs and pediatricians is the -- what makes this market not a totally protected moat, but a very hard market to conquer because you just can't declare yourself a derm brand. You have to build this over the years. And our fourth division, as you know, is this is where we were born. It's the Professional Products division. Starting with stylists, EUR 4.6 billion, but continuing to serve stylists. So we have this brand -- our brands in around 400,000 salons. And they also work because there are more and more independent stylists, so 3 million independent stylists in the world. But probably the secret recipe in the acceleration of this division is that next to our stylist space, which we continue to educate and create products for, we have become omnichannel because, as I said, there is this incredible appetite for premium hair care products like Kérastase or L'Oreal Professionel and that's truly accelerated the growth of this division. And has not alienated stylists around the world because whilst going omnichannel, we have cleared most of the, I would say, the gray market places that existed around the world. So in reality, for a stylist, there's less, I would say, dirty competition and more elevated ones, so they're pretty happy with this. So as you can see, we play on many different fronts. That's why we have, I think, the best brand portfolio in the industry and we keep on building it year after year. As I said, we were created 115 years ago. And we created 3 brands within L'Oreal, L'Oreal Paris and L'Oreal Professionel. So L'Oreal Professionel was 115 years ago. Kérastase was in 1964 and that was created by the L'Oreal teams. And since then, I think it's been a proven model to acquire brands to bring our scientific and our R&D expertise to this brand and globalize them, leveraging our global footprint and creating a roster of where, I think, we have 12 billion in brands right now, EUR 12 billion, and these are brands that we've expanded globally as we've done with CeraVe. Which leads me to the -- because I often get that question is, how do you choose an acquisition one? Because everybody comes to us to some extent, either to sell to us or to get the price up for other competitors. So it's always going to be there. And of course, we analyze the brands. And I wouldn't say we are totally mistake-proof, but globally we are looking for complementarity and that's where this idea, this understanding that beauty is cultural, that there are differences from one country to another, that you need different price points and categories is very important. So when we see a gap, we try to fill it. And of course, we need to -- we are buying growth. So we very rarely buy brands that are not on a very dynamic rhythm. So last 2 examples. CeraVe, that's really a brand that we grew tenfold in 5 years. It is probably one of our best records because it's been -- and it continues to grow very fast. Now it's getting closer and closer to EUR 2 billion. So we are pushing for this brand to continue to thrive, and it's really carried by a lot of strong consumer demand and great derms appreciation. And we have Aesop that we just acquired, which is really a very different brand from our traditional luxury brands. It's probably a bit trendier and a bit more on this wellness trend that we see thriving around the world and which we're going to be developing, particularly in Asia, in China, where we've already moved from a couple of stores when it was acquired to 6 now. So we are beginning to roll it out. So multiple brands, which allows us to cover the whole market, and of course, a very wide multipolar footprint, which I already discussed. But this -- in this world, that's getting both crazier and more fragmented, having these different market sizes, which, as you can see, are very balanced. The small part -- smallest part is also the biggest potential. Our emerging market at 15% of our business and already 25% of our growth. This allows us to adapt to the changing winds and conditions of the market and to truly protect what is, I think, one of the strengths of L'Oreal is our agility. And I think the agility is really part of our success secret, if I may say it. It's embedded in the L'Oreal culture from the very beginning. We push people to be entrepreneurs to take risks, sometimes to be a bit rogue, but we make sure that in the end they fit within the strategy. And it's agility everywhere. It's not just marketeers or it's in the R&I. We have 4,000 scientists, but they are split on 20 research centers, which are scattered all around the world, in Japan, America, South Africa, Brazil and so on and so forth. So that allows us to have champion consumers in every part of the world and create products for them that are adapted to the local needs and specificities. And we've evolved this R&D with a, let's say, to be even more agile and to make sure we do not miss any innovation opportunity. We've multiplied external partnerships either investing in this company through our corporate venture or just signing deals with them, that allows us to really, again, accelerate on innovation with a lot of agility. This agility is also very important in operations, and that sort of helped us during the crisis and will help us in the future. We have 37 production sites around the world, which gives us the flexibility to basically produce CeraVe wherever we need to serve consumers, and of course, strong distribution centers. And finally, agility, we used at our financial results an image with Christophe Babule and myself in the cockpit of the plane, so we won't inflict this to you again. But our ways of working, we have this cockpit where 3 of us work on a monthly basis to make sure we constantly reallocate resources to where it get the better traction. And as the world is changing very rapidly, I think that's very important. It allows us always to fall back on our feet when there is a change of faith. So if you talk a little bit about the future, we're very confident because the market will continue to grow with, we said that this year would be around 5%. It was slightly above in Q1. And I think as the effect of price increases will ease out, it will normalize a bit in the second part of the year. So 5% seems like, I would say, a good bet. So continued market growth. We have market share. We have market share opportunities all over the world. Even in Europe, we have 20%, but it's with France at 25% and a few other countries slightly below. So we know that beyond the emerging, beyond China where we're at 16%, we have market share opportunities everywhere, including in China, including in North America. And even in France, we have tried to gain share. But clearly, the biggest opportunity as it's obvious on this chart are emerging markets, growing middle classes with 250 million people that would reach the consumer base, just India and Indonesia alone, by 2030. And at the same time, they're younger, they're very tech savvy. They shop online. They look at our brands online. So for us, it's much easier to reach them and sell to them than it was 10 years, even 5 years ago. So it's really a major card in our game. And as I said, I was understating the contribution to growth of emerging at 30% in Q1, 15% of contribution to sales. So emerging market, a big priority for us. It's a mass market game, but it's also a dermatological beauty game because lots of UV, acne, skin issues, so that's great for this division. There's always a question about China where we're asked whether [ China is the next China ]. The market remains very difficult right now. When I say difficult, it's flat. So there are spikes of 1 week or 1 month to another, which -- and then it evens out. So no big news there. But we managed to continue to grow and to outperform, which is what we did in Q1 and I hope we will continue through it in Q2. But midterm and long term, we continue to bet a lot on China because if you look at China, there's a lot of untapped potential. Today, our addressable target, so people who have enough money to buy our brands are 400 million people. We know we only sell, I mean, at least in a measured way, to 100 million. And as you can see, our market shares in Tier 2 and 3 cities and 4 and 5 is very much lower than in Tier 1. So the name of the game for us is mainly through digital, but also through brick-and-mortar to go and conquer market share beyond Tier 2 -- Tier 1 cities. Another growth opportunity for the group are boomers. We are lucky to be in a category that you continue to use and sometimes you need even more when you grow older. So you see the numbers on the chart, and we are clearly making sure that our brands that have been recruiting people from their very young age continue to sell to them and to create specific products for boomers as we do for Gen Zs, 100 million people more by 2030. And of course, they buy more categories than before. They're more involved in skincare than ever because they see the impact of the environment on their skin. And they represent 12% of beauty spending. So they are a great target for us because then we can loyalize them. There's one caveat though, maybe because it's something that's been a topic of discussion for the last couple of weeks is these brands or retailers that target very, very young kids, like 10 years old, 12 years old, twins. And we've made it as part of our policy to not to go specifically after this group of consumers unless for products that are really necessary for their health like a sunscreen on the beach. But we don't do that. By the way, our Kiehl's brand did a campaign, which I love and I posted on it because I think it's kind of cool and it's a nice way to -- as you see, a 12-year-old wanted to buy antiaging creams or wanted to go into surgery. We make campaign to say, guys, kids should be kids and ice cream is better than antiaging cream. And it's something we implement beyond the campaigns in terms of our choice of influencers, the way we market our product. There will be a time where they'll be old enough to buy our brands, which we're not making them specific targets. Men are great growth opportunity and that's one, by the way, of the secrets behind the success of dermatological beauty because this is the most unisex category of products. It's very gender-neutral: packaging, formulas, no fragrance. So it's very different from buying a Lancôme cream. And of course, we are growing in fragrance. Finally, I have confidence in our financial strength, which is illustrated in our famous virtuous circle. We have very high gross margin, which allows us every time the top line growth, which is our priority to invest both in A&P and to deliver financial performance for our shareholders. We've been doing it -- if you take the numbers between '29 (sic) [ 2019 ] and '23, as you can see, very strong growth, 38% growth on top line on 4 years, 90 basis points of gross profit expansion, 160 basis points of A&P and 120 basis points of profit. So we continue to fuel the model, to nurture the growth whilst delivering profit with a very strong financial situation. Our leverage is at 0.5%, so very, very, I would say, decent, if I may say. And to continue to support our dividend policy with a 10% increase of dividend versus the previous year plus a loyalty bonus of dividends. So if you can look at the comparative performance versus the CAC, L'Oreal has been -- has proven to be a good stock over the years. To conclude, a little word about the future. We continue to invest in R&I. Every year, it's -- we make it 3% of our business. But as you can see, it has doubled on these charts. And that fuels our capacity to offer innovative products for consumers. This is the chart what I was talking about, so [ we'll go ] from EUR 680 million to EUR 1.2 billion. We constantly bring groundbreaking innovations to the market. This might look like a cream, a shampoo and a lipstick, but every single one of them is a truly innovative, breakthrough product that makes a difference for consumers and that's why they pay a premium for them. We have invested a lot in Beauty Tech. This is a little image of our intervention with Barbara Lavernos at the CES in Las Vegas where we did present a number of tech innovations and showing our leadership in Beauty Tech. And we use tech at all levels of the company. GenAI has become an incredible way to boost the creativity of our marketeers even though we don't use GenAIs to create advertising images to sell beauty, to sell fake beauty with real product. But we use it for packshots, for example, for inspiration. We use AI in tech to boost our agility on A&P. You're familiar with this BETiq program that we have started to help us allocate with the best ROI all our A&P, which gives a good improvement of 10% to 15% to the productivity of our A&P, and we're just beginning to roll it out. It should reach around 60% of our A&P at the end of this year. We use Beauty Tech to give personalized recommendations to consumers. We are introducing this spring a GenAI-powered chatbot. But it's more than a chatbot, it's a real conversation with consumers to help them make their choice in the jungle of products. That's extremely helpful. We presented it again at VivaTech. We are venturing into tools with the AirLight Pro, which is a new hairdryer that is both more -- saves energy, protects the hair and saves time to dry. So I think it should be a good success. And tech allows us also to transform ourselves into our sustainability route. We have very strong commitments as it relates to CO2 emissions, and we stick to it. We measure every year. Some are harder to achieve than others. But we got AAA by CDP for the eighth year in a row this year, only company in the world. And we've submitted, unlike some of our competitors, a new trajectory to Science -- to SBTi that was validated to reach net zero. Probably not a walk in the park, but the whole company is determined to make the transformations that are necessary to achieve that goal. So to finish and to conclude, and I'm sorry about the timing for questions, but I'll extend a bit if necessary. In summary, what I'd like to say about L'Oreal is that we have -- there's no other company like that because, yes, we are a pure player in beauty. That's true. There's at least 1 or 2 others. We're also a luxury company with an entire division dedicated to luxury. We have become a more and more medical company where the importance of science and research is playing on its role. We are, of course, an FMCG company that allows us to speak to everyone especially in terms of inflation. And we are becoming a beauty tech company so that allows us, I think, to play on many fronts and hopefully to continue to create value for our investors and to create this beauty that moves the world. Thank you.

Thank you very much, Nicolas, and we will open up to questions. But maybe if I could just start with one. You mentioned the overall beauty market growth is the growth of the beauty market matching your expectations that you had at the beginning of the year. And maybe could you make some comments perhaps about China and how quickly you think that may recover.

Well, first of all, overall, the beauty market is indeed hitting the growth rhythm that we're expecting. We said 4% or 5% and right now we're at 6%. I think we -- I think 5% remains a good bet, as I said. Clearly, it's not as always unfolding exactly how we expected. China remains very stable. So there, right now, we're in the middle of 6/18, but it's very hard to compare because before it was very concentrated on a couple of day, now it's expanded on over a month. So I don't know. I'm not -- it's growing, but -- so online is growing right now. Off-line is negative. The overall picture of the Chinese market is, right now, it's stable. The U.S. market has slowed down a little bit, particularly in makeup. Europe remains extremely dynamic. Emerging markets where we have a low share, remaining very dynamic. So overall, a bit as I explained, it doesn't really happen as -- exactly as we planned it at the beginning of the year, but it happens and our footprint allows us to seize all the growth opportunities.

And when you look at that footprint in China and how you capture the spend -- aggregate spend between the entire ecosystem of mainland, Hainan, other Travel Retail, offshore, et cetera, how do you see that evolving in terms of the channels, which you are...

Well, right now, if we take the things in order, so what's flattish right now with a few spikes is the Chinese market. And I believe it's going to continue to grow because as the Chinese consumer gain more confidence in their future, we know they love beauty and we see at every festival there is this appetite for beauty. So -- and looking ahead in terms of middle classes, I think China will accelerate. I don't see a major acceleration this year. Hainan is a bit disappointing. So we've -- as you know, we have many brands have cleared their inventory. But Hainan is a bit disappointing because there's a lot of tourists, but the conversion into sales is a bit lower than what we expected, at least in beauty. Maybe they buy other categories. But on the other hand, we see Japan, Hong Kong, that are way more dynamic than we expected, probably because some of the daigous have moved around. But -- so overall, the Chinese ecosystem is in line, I would say, with these careful scenarios that we have put. But looking ahead, I think that as the market normalizes, we will have -- we'll see growth in the market. And what's most important is that we continue to grow. We continue to gain share, whether on luxury or dermo is right this [ line ]. I was -- dermatological beauty was a bit behind in China. It was the channels, and I would say, the consumer's appetite was a bit less into this type of products, more into more glamorous things. And now probably after COVID, again, the quest for health is more important. So we see these brands are gaining traction. So overall, I'm confident with the overall Chinese ecosystem, but it will be -- we're hoping for a big rebound after COVID. It's going to be more slow burn.

The growth in the emerging markets has obviously been very strong. Do you get the same operating leverage? Is it the same sort of profitable growth that you see elsewhere?

Yes. Well, we -- I think one of the -- what's magic with the emerging market is that this growth is coming at a time where you have this young generations that has entered the middle classes, that has money, they work. There's more and more women that work, which is, for us, a criteria we look at, the percentage of women at work. And there is money, it's middle classes. And now they have access to our brands through digital. And that allows us because, overall, e-commerce is a bit accretive versus brick-and-mortar. So the fact that our growth is overweighted in -- on digital in these parts of the world kind of balances out the fact that we start from a lower base. So I think in terms of -- we managed to have truly profitable growth in these regions. It's still overall a bit dilutive, but very close to countries like China and others. So it's very promising.

And we've had some comments on different growth rates between higher-income consumers [ and those ] asset-heavy consumers and the lower-income and asset-light. Is that something that you're seeing an increasing disparity or not?

Not really, frankly, because we see both. If I take our region, SAPMENA region, so it's South Asia, Pacific, Middle East, North Africa, we see both a very strong growth of CPD. And we see that, for CPD, we have -- we've been creating smaller format so that the out-of-pocket remains affordable even from the beginning of the middle classes. But we see that -- on the other side, we see that our luxury brands are exploding. That fragrance consumption is also growing very fast there on a much lower base. So proportionately, it's more of a mass market, but it's a market that premiumizes at every level. Kérastase is doing fantastic in South Asia. So I think, overall, we managed to create this profitable growth.

And I think you're probably one of the companies people expect to see the earliest gains from AI in some of our coverage. And is that something that we'll be able to see tangible gains this year and next year?

Well, first of all, you're not seeing it, but there is -- there are already many tangible gains from AI, which we've been using now for many years. Think about research, for example, or operations, it's not GenAI, but today, our researchers are powered by AI in order to formulate faster. And particularly when you take -- when it's about reformulation because, of course, we have to create new products, but in a changing environment and regulation world where you have to create green formulas and replace ingredients that are a bit less good for the environment, it's hard just to do it manually, if I may say. When you are helped by AI, you go much faster. So we have, for example, a tool that's called fast color that allows to reformulate hair color, which is the most complicated of all categories. Supply chain benefits from it. But it's true that moving ahead, we will see even more benefits. I mentioned 2 examples in my presentation, one is content creation and the other one is A&P allocation, which both are very linked. Content creation when -- in a world where consumers discover our products on a multiplication of social networks from TikTok to Snapchat, Instagram, et cetera, which are local sometimes and where consumers who are relevant and always different content, it goes so much faster. I showed an example. You put a bottle of Kérastase, you put it on the Eiffel Tower, on the Taj Mahal, next to -- on Piccadilly Circus, et cetera, this is done in a snap and suddenly you've got content for each country that is relevant, that is on brand codes and that is done at a very limited cost. So you gain speed and costs. So we are beginning with this technology and I think it will show great at both, again, agility, speed and savings. And on A&P allocation, as I mentioned, we've been working for a few years now on training that algorithm that helps us allocate our A&Ps. We've tested in pilot in a few countries and now we're beginning the rollout because the results are really great. As I said, it's 10% to 15% improvement on productivity of our A&P. It can go higher, but then doesn't happen every time because after a while you are where you should be in terms of efficacy. So it delivers. And more importantly, the teams use it because one of the fears I had is that you give a marketeer who's tried all these years in all his career on being the expert on how to engage with consumers and create the best campaigns, we could -- have been afraid that they see the machine as a competitor and something that diminishes their importance. And I mean, it's become so complex compared to when I started that they are very happy to use it. And actually, they are requesting the rollout to accelerate. So we'll do what we can, as I said. Probably 60% of our A&P will be covered by the end of the year. So it's more 2, 3 years' progress. I think by the end of 2025, we'll cover 100% either directly or by reproducing what big countries are showing. And that's going to be delivering value. So that's, for me, a way because, as you could see, we've increased a lot our A&Ps over the years that has fueled our growth model. So I have absolutely no regrets, on the contrary, for this strategy. But we think we can continue to increase the absolute value of A&P and either stabilize or even lower the percentage points in the P&L, which, in the end is potentially good for profit or for fueling new brands. But as always, we'll do the best of both.

We're very tight on time. But if I can ask one more question. The importance of Amazon in beauty going forward which you've staged Lancôme on the premium beauty section you're putting Kiehl's on. How important do you see Amazon beauty going forward?

Well, I think it's very, very important because it's a way to reach consumers that are premium consumers. I think everybody here in the room uses Amazon. I have no doubt that -- even I was a bit for many years I was a bit resistant because -- I was also resistant for my brands because I really wanted to make sure that the way the brands were exposed was really up to what we expect, particularly for luxury brands. And they've really worked hard at convincing us and we've really worked together, it's a very strong partnership. And now frankly, the way Lancôme is expressed in -- on Amazon is as good as on our own D2C and we constantly work on improving it. And we know it reaches consumers that were either not buying the brand or that were buying the brand on what I would call unofficial channels, including on Amazon because in the end we all knew that most of the brands we didn't want to give to Amazon were on Amazon and resold by other vendors. So now in this partnership, we managed to claim this and we claim the marketplace. We improved the brand image. And overall, it makes both of us very happy because I think they make more margin with us than we did with this [indiscernible]. They guarantee quality and authenticity to their consumers, and we can reach people that love our brands. And typically, on a brand like Lancôme who has always been struggling a little bit in the Sephora world, full of indie brand for teenagers, Lancôme makeup has really -- is having a new youth, if I may say so, by being present at Amazon because then its power and clout expresses itself. So it will be an important player as long as, as always, the way the brand is treated is respectful of its strategy and of its equity.

Okay. Well, we've run over time, but thank you very much, indeed, allocating a bit more of your time today. And thank you very much, everybody, for joining the session as well.

Thank you very much.