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

Good afternoon from Paris. Thanks very much for joining us on the second installment of our Let's Talk Beauty series. And first of all, big=apologies for the slightly delayed call and the technical our end. This time around, we are taking you into the heart of the reactor, our operations, crucial to supporting the continued growth of our 37 brands. I'm delighted to introduce Antoine Vanlaeys, our Chief Operations Officer, and one of the busiest people at L'Oreal. Since this mandate ranges from packaging and design and product development to purchasing, manufacturing and market logistics. In the next 50 minutes, Antoine will present the role operations plays at the heart of L'Oreal before we open up for questions. Like last time, the Q&A will be in writing. You will find the top -- at the top right of your screen the icon where you submit your questions. We will read out as many questions as time permits. And with that, over to you, Antoine.

Thank you. Thank you very much. Good morning, good afternoon, everyone. My pleasure to be here with you to present you the inside of L'Oreal operations. So maybe just a little bit of background concerning myself. So I'm the Chief Operations Officer of the L'Oréal Group since the last 4 years. I have 22 years of experience within L'Oreal, had a chance to lead the worldwide luxury operations for 5 years. And then I'll also lead the Asia Pacific operations of L'Oreal out of Shanghai for 5 years prior to taking this role. I had before that, 10 years' experience in Mars Inc., the large and respected FMCG company in chocolate and pet food. So again, my pleasure to take you through this journey of what L'Oreal operations are. So let's get started. So my presentation will be in 3 parts. First, operations at a glance to give you an overview of what it is, then inside operations to give a bit more intimate with what we're doing in L'Oréal operations and our major transformations. And of course, feel free to ask any question that Eva would relay. So let's get started. So at a glance, first of all, and this is the most fundamental contribution of operations, we are here to support the growth of the group. Operation is at the heart of the product innovation. We are indeed managing the development process and the packaging innovation process for the L'Oreal Group and the upstream part of our value chain. We are guaranteeing that throughout the entire value chain, we are developing models that are agile and competitive, delivering our consumers everywhere in the world. And last but not least, we are the guardrails of the quality, the safety and the sustainability engagement of the group throughout this chain. So you have here a slight description of our entire value chain end to end ranging from our consumers, customers up to our suppliers, and we are managing this chain end to end. As I was saying, we are in L'Oreal, together with research and innovation and our brand development marketing, creating and developing products for the group, especially in packaging and coordinating the development process. We are managing the entire supplier and upstream ecosystem relationship within L'Oreal, both in direct and indirect sourcing. We are manufacturing. I'll come back to this later. L'Oreal is an industrial company that manufactures what its sells, so we are animating the entire manufacturing footprint network of L'Oreal and animating a global fulfillment network throughout the world to serve our billions of consumers every single day. And as you see at the bottom of the chart, we do that with a constant focus and improvement on quality, safety and sustainability engagements of L'Oreal. It's a global organization. I'm very proud to lead a team of roughly 22,000 employees worldwide, organized through [ meter ] and geographical zone as per our business animation, ranging from packaging, sourcing, manufacturing, health, safety and environment. We are organized around 5 centers of excellence hubs based out of Shanghai, Mumbai, New York, Mexico and Paris. We are employing 1/4 of the employees of the group. So it's a very large workforce. It's perfectly balanced when it comes to gender, and we are very proud of this, 48% female and 52% male in an industrial environment. 4,000 engineers. So a lot of science expertise and technology within the operations of L'Oreal in 65 countries with a very diverse workforce of 137 nationalities, which is a source of creativity and strength for us. In few figures, we are selling 7,000 -- 7 billion, sorry, products every single year in L'Oreal, manufacturing close to 8 billion. We produce 83% of what we sell. And it's an important point, L'Oreal is an industrial company that conceives, develop, manufacture and serves most of what it sells in the world. It's a launch machine, L'Oréal, very, very active on innovation, 7,000 launches per year, coordinated by the packaging and development teams and impacting our entire value chain. 35,000 suppliers, 3,000 of them being direct suppliers on packaging and raw materials and 32,000 being on indirect sourcing. 93,000 people that are gaining access to work through our including sourcing program. It's one of the key dimension of our Solidarity Sourcing and social programs in L'Oreal. We're delivering every single day 620,000 delivery points, 125 million orders every single year in 8 distribution channels throughout the world. 37 manufacturing plants, 152 distribution centers globally. So this is the complete network of operations in key figures. Let me introduce you through this with a short video. [Presentation]

I hope you enjoy having a glimpse of what we do on the entire value chain. We've tried to be showing all the different dimensions of the vast operations contribution in the L'Oreal performance, both from a financial and an extra financial standpoint, as you could see in the video. Now I'd like to take you through rapidly the context in which we operate. I think it's always interesting to see where we navigate. You know this as well as me. We are working in a very ever-changing operating environment with the emergence of disruptive technologies, climate change challenges that we are facing, sustainability ambitions and, of course, an even more fragmented and volatile geopolitical and regulatory environment that we need to navigate every single day to guarantee the continuity of our operations. We are internally focused on our own business reality, which is primarily support the continued increasing sales of the group, making sure that capacity, agility, competitiveness and resilience in the way we operate guarantees that we can sustain the group's performance. We are extremely involved into the history of integrated acquisitions of L'Oreal, and you see the picture here of the one of the latest one, which is Aesop, but we are currently integrated within our operations, and you can understand, it takes some time quite rapidly, obviously, in L'Oreal to integrate the brands into our ecosystems and make them benefit from the scale and the expertise that we have in L'Oreal to accelerate their growth and improve their financial performance. And of course, the pace of the launches, 7,000 launches per year gives an incredible dynamic for the value chain of L'Oreal. It's really giving the pace about the way we operate beyond sustaining and growing our pillars. Just a reminder of the like-for-like growth of the group over the last 20 years, an average CAGR of 6% on the beauty market of 4%, so outperforming consistently the market performance. And of course, as I was saying, operations is instrumental in making sure we can continue to outperform our markets and seize every single opportunity of growth in any of the category in which we operate worldwide. To illustrate also what I was saying on integration acquisitions for operations, you see here the long history of external growth through acquisitions led by L'Oreal. It's not only about integrating these brands, as I was saying before, but it's technically something that we are mastering but also making sure that we can very rapidly make them benefit from the global footprint of L'Oreal, the scale and the power of our conception in products and purchasing when it comes to their cost of goods. The main stakes for operations, I'm not going to go into all the details, but I think it's important to summarize what are the fundamental stakes that we are currently facing within a L'Oreal operation as a major corporation. First -- and it's a fundamental engagement and even values for us, managing our core responsibilities, namely the quality of a product, the safety of these products for our consumers and the safety of our employees through the value chain. We are, of course, mastering all the risks that we may have within L'Oreal guaranteeing that on these two fronts, both quality and safety, we are reaching world class performance as per external benchmark and audits. Consumer-centric innovation. This is the name of the game in our industry to continue to outperform the markets. Consumer-centric innovation, fed by consumer insights, fed back to the conceptions that we master on packaging and making sure that we can rapidly innovate and satisfy our consumers throughout the regions where we operate. Competitiveness and efficiency, managing the value chain on sourcing, manufacturing, fulfillment requires that we are always implementing the best of technologies, the best -- leveraging the best ecosystems when it comes to our sourcing vendors, implementing the latest technology when it comes to robotics or Industry 4.0 in order to make sure that we guarantee maximum availability, top line growth best cost of goods, best cost when it comes to the indirect sources that we have and always striving for more excellence and efficiency in everything we do. Corporate social responsibility, 70%. I will come back to this. 70% of the L'Oreal for the Future engagement of the groups are delivered through the operational teams. So of course, it's a major endeavor for us to make sure that next to our performance -- financial performance, we are continuing to have a thought and operational leadership when it comes to sustainability. Agility and resilience in the very VUCA world in which we operate, we've been demonstrating through the COVID crisis that we had by design, a very resilient network, multipolar, not dependent from any source extensively. Nevertheless, we are continuing to work on agility and resilience especially in a world where digital activation of our brands is creating significant volatility in sales, requiring us to be constantly improving our agility in the upstream part of our value chain. And last but not least, digitalization of the supply chain of the value chain, should I say, because it ranges from use cases that we have throughout the value chain, but we are seizing every single opportunity of creating value through digitalization of our supply chain. I'll come back to this in the transformation of operations. These are the 6 main stakes that we have, I could have had a seventh one honestly, which is infusing everywhere. You cannot reach any of this engagement without putting a constant attention to talent, talent retention, talent development and having an operating culture where people feel enabled and engaged, and I think this is one thing that we are particularly focused on in L'Oréal. So second part, a bit more inside operation. And I'd like to take you through a journey which we think is quite pedagogic on the way a product is from a consumer back to the very early stage of its conception going through the value chain of L'Oreal with an example of an ELSEVE (sic) [ Elvive ] bottle. Please enjoy. [Presentation]

I hope it made you understand a bit more in detail all the steps of the value chain that we are making for all the 50,000 products that we are actually selling for the 50,000 references, SKUs that are sold by L'Oreal every single day in the world. So at the heart of operations starts with the creation process. The creation process -- value creation process is consumer-centric in L'Oreal. It's a combination of the work between operations team on packaging and development, R&I, research and innovation teams for the formulation and the brands, of course, for the concepts and the equity of the products that we launch. More precisely, mastering the packaging conception for us is a competitive advantage. We have a quite unique setup in the industry of having more than 1,000 engineers globally located that are considering the products that we are selling and assisting the marketing and the countries in the launch process of our products. We have 4 fundamentals that are critical. Safety, mastering this packaging conception, sorry, is a fundamental element to guarantee the safety of our products, the quality of our products, the responsiveness of our value chain as we design the capacity to serve this product, and of course, the profitability. By design, you can very early in the stage of the conceptions guarantee the landed cost of any of the products that we are launching. But beyond these 4 fundamentals that we master, we are also extremely focused on consumer centricity, guaranteeing that these designs are sustainable by design, but design to performance is at the heart of the evaluation for our consumers as well as design to experience. So making sure that these products are not only guaranteeing the first 4 steps, but also at the same time, satisfying our consumers and increasing our growth. As I was saying, it's 1,000 engineers globally that are managing this development and packaging process for 7,000 launches every single year. I'd like to take you through an example that illustrates quite well this value chain. This is the product -- launch product, sorry, the latest fragrance product that has been launched that you can see on the screen. You see first that it's a 100% in-house design. And as I was saying, this in-house and guarantees that we can be fast to market that would be right in quality, but the conceptions guarantees that we master our cost of goods. It's all internally designed. Then we develop this packaging components with probably one of the most advanced and best ecosystem of suppliers that you can find in our industry for example, this bottle of the Prada fragrance has been developed with [indiscernible] with a very famous fine glass maker out of France. We are manufacturing them. We are manufacturing this product fragrance in Aulnay-sous-bois in France, close to Paris. We have 2 large fragrance plants in L'Oreal. They are both located in France as the made in France for fragrance is very important for the equity of our brands, using the most advanced technologies when it comes to fragrance production. Actually, it's a plant that is very convenient to visit if any of you is passing by Paris. I'm sure that Eva will be delighted to take you for a tour on this industry of the future plant. And of course, design to sustainability. I think it's a good example to show that L'Oreal is deadly committed to ensure that we are improving our global environmental footprint. And you see here the example of not only the bottle but all the bottles of fragrance that we are selling today are refillable and you see the gesture of refilling with the refills above. And just to give you an idea, having a 50 mL bottle of Prada fragrance, if you buy a 100 mL refill and you use it twice to refill your empty bottle, you reduce by 44% your environmental impact, so this is very meaningful. And we engage and support our consumers in changing their behaviors when it comes to consumption. Sourcing. So we are heavily relying on an ecosystem of vendors that is quintessential for the performance of L'Oreal. We engage with them on a very long-term relationship. We are always looking for mutual benefits in the relationship that we have with them. We are never tactical, always strategic, and we engage them in 5 key dimensions. We are rewarding them for the innovation that they bring to L'Oreal in a very open innovation mindset. We are committing them to sustainability goals, and this is something that is increasingly taking a large share in the evaluation that we make for them. Competitiveness, of course, we are looking for the most efficient suppliers in near-shoring most of the time of where we operate, and that's very important. We believe that the operational excellence of the best suppliers is a guarantee for long-term competitiveness of our sourcing. Supply chain and services because in a world where agility is -- and resilience are key, we have to ensure that our suppliers are also investing dramatically in their capacity to react in front of the very high volatility of our sales, especially in our categories like makeup, but are by definition, extremely volatile. And of course, quality, which is a license to operate. If you want work with L'Oreal, the quality of what comes into our plants has to be absolutely irreproachable say that. We are -- I'll give you here an example on the fragrance business again, but I could do it in any other category that shows that it's always a combination when we work with our suppliers of finding the best suppliers when it comes to savoir-faire and expertise. When you are acting as we do on the Luxury division, for example, we need to make sure that we have the best when it comes to the quality of the product that we put on the market that we have the most advanced savoir-faire, the ability to craft products at scale that are really unique. And that's what we're doing with most of our packaging suppliers. Capacity and agility, we have witnessed and recorded fantastic growth in the fine fragrance business over the last few years, and we have been also able to engage this ecosystem to make sure that we could react swiftly to the increase in capacity that was needed to meet the growth that we were enjoying and it continues to ride. And of course, sustainability. I was giving you the example of the way full conception and consumer engagement. We are making sure that we drive sustainability for the usage of these fragrances. But at the same time, we are encouraging all our suppliers to also themselves engage through a sustainability journey. And for example, for glass, we are giving long-term perspective to our glass suppliers so they can convert, for example, their furnace from gas to electrical furnace with an electrical mix that is step by step being decarbonized. So we are looking in the end to have glass that will be made with a carbon neutral approach. The manufacturing footprint of L'Oreal. So it's a wide manufacturing footprint, 37 plants worldwide, geographically located in all the areas where we operate because there's 2 fundamental things that we believe in L'Oreal. First, we believe that we should manufacture what we sell. We conceive what we sell. We manufacture what we sell. And 83% of what we sell is manufactured within L'Oreal plants. It guarantees quality, safety, agility, innovation, cost competitiveness, and we think it's a competitive advantage. 8 billion products every year. And as you can see on the map, they are geographically located close to our sales market because we also believe that we need to act regionally when it comes to the manufacturing footprint in order to guarantee proximity, resilience, superior agility and of course, the sustainability of the way we operate to limit international transportations. Sorry, I will come back. Because there's a movie coming. So just I don't see the next slide on the presentation, sorry. I will give you an example of this. You will see in the plant, it's a plant of Rambouillet in France. It's a hair care plant, but we could do the same in the Florence, Kentucky or Suzhou, China or Sao Paulo in Brazil. Large hair care plants of L'Oreal. You will see like any other plants in any of the technology where we operate that these plants are having the latest cutting-edge technology implemented to guarantee a superior performance effectiveness and quality of anything that we do within these plants. They are organized globally by technology, also to guarantee that we have concentration of expertise, the maximum yield on the assets that we put in place and the scale that we want to reach originally. So let's dive into the movie of Rambouillet. [Presentation]

All right. And just to, on a personal note, I like very much this plant. I know all the plants of L'Oreal, have been visiting every single plant in the world many times. But this one is particular because I was a UP manager in this plant 20 years ago, and I recognize some faces. And also one thing that you can see on the video, which I think is quite striking within L'Oreal operation, and it's not just for manufacturing is that you can see the engagement, the joy that people have to work for us and I really mean it. I mean we had -- it's interesting. We had the Finance Minister of France, Bruno Le Maire, that once made a quote a year ago when he was visiting us and was saying sometimes as a Finance minister of France and it's difficult, I'm a bit depressed. And if you want to get your moral up, go and visit a L'Oréal plant that when I had the chance to go with him in the Vichy plant that we have in the. So I really think it's a good testimony about the quality of the engagement of our teams that are making every single day a very strong difference and I pay tribute to them. On the supply chain side, we have a global fulfillment network which is once again located, of course, where we sell our products. We have 152 fulfillment centers globally. 35% of them are internally managed, mostly in Western Europe and North America, addressing our 8 distribution channels. We are delivering 620,000 delivery points, and as I was saying earlier, for 125 million hours every single day. It's a distribution footprint network that is evolving over time regularly and has been accompanying over the last few years, the fantastic rise of e-commerce in particular, and direct to consumer. I'll come back to this in the video that you will see next because it's a video about the China fulfillment center. We are going through a massive transformation on the fulfillment network, taking, first of all, the absolute necessity to make sure that we can deliver the last mile and master this last mile whenever it's needed on marketplaces like Tmall or TikTok, for example, where we our mastering directly the relationship with the end consumer, and that's an expertise that we've been developing over the U.S. and China. And today in China, it's a significant part of the business where we are basically mastering all the end of the value chain in a very agile and resilient manner. And it's also an era where at the moment, we are significantly investing into robotics and automation because there's a transformation ongoing. We can see at scale, at cost today, having transformative technologies that are arriving when it comes to fulfillment. And you will see we have done this in multiple places. We have done this recently in China. I just would like to share with you a concrete example of something that is existing today in Shanghai that is serving part of our fulfillment in China, and I think this is the future for the L'Oreal network. [Presentation]

So you saw this fulfillment center of China. We are currently implementing a second one in that one. We've signed the memorandum of intent with the Chinese authority recently. We have more than 26 fulfillment centers in China. These are the largest ones that you saw but guaranteeing an absolute resilience and agility in this network. You could see also the impact of robotics that is really changing the game when it comes to fulfillment operations, not to mention the fact that this is also from day 1, of course, 100% renewable energy, as you saw, which is a commitment that we take for all our sites. Major transformation in front of us next to the 6 challenges, main changes that I was explaining before. Two of them that I'd like to dive into with you. The first one is digitalization of operations end-to-end, and the second one is our sustainability commitments. Digital transformation, I'm going to be, as I'm always, extremely pragmatic and down to earth being a poet and a peasant as we say in L'Oréal. The first digital transformation around data, AI and GenAI is a fantastic potential for L'Oreal, like many companies in the world, and we are really ensuring that we can see everything that starts from day 1 to create value on an end-to-end performance within operations. But very pragmatically, it starts with First Data. We are a data-rich company. We want to be a data-first company and a data-driven company. And we are putting a lot of efforts within operations on all the data domains of operations to make sure that we are extracting qualifying and exposing our data at scale in a global data platforms of the group in order to be able to feed all the use cases that the group can have, and you have a list of some of them on the left-hand side to make sure that we can augment our employees in everything that they do. We can power decision analytics at a different scale and making sure that we can improve our performance constantly. So data-first strategy is really important and is the bedrock of anything if you want to be achieving sustainable value within AI and GenAI. And that's true for the group, and it's shared assets that operation has a key role to play as we are representing 30% of the data of the group. Alongside to this and also benefiting from the other data domain from the other parts of the organization, we want to make sure that we augment our value chain. An augmented value chain for us is quite specific, and we've been very mindful about the way we invest behind these technologies. We have extensive learning expedition, understanding of what works and what doesn't work, being humble enough to look and see what the others have been doing, what works and what doesn't work to make sure that we are not chasing toys and noise, but making sure that we can create value behind the use case that we promote. And in operations, they're fairly limited, but they are very impactful in magnitude. The first one, of course, is advanced analytics. We are augmenting in this S&OP process in any decision making process, in demand sensing, everything around the data analytics, use cases that are along the value chain. End-to-end planning is another key dimensions where we want and we are investing heavily when it comes to AI, not GenAI, but AI. The ability to seize the sales volatility in our markets, the ability to propagate these signal throughout of this value chain, to deploy our inventory in a smarter way is at the heart of the efficiency of global supply chains tomorrow, and we are actively working on this as part of our AI use cases. Risk management and resilience working on different dimensions on how AI and advanced software because it's not just AI, it's also advanced application, can help us to understand and map better our upstream value chain beyond Tier 1 that we know extensively, but Tier 2, Tier 3 and suppliers to map them in order to ensure that this trustability gives us better agility, more resilience and also help us to trace all the impact that we can have from a sustainability standpoint and social standpoint on the industry part of the value chain. GenAI-augmented creation process. I'll come back to this with an example of tomorrow and of course, consumer experience, which is also an area where GenAI this time will disrupt drastically the way we engage with our customers and our consumers. An example, a very pragmatic example that you can see here is the way we are using MidJourney, in our UX design labs under the packaging expertise that we have in order from an inspiration some products that we have, different applications and visuals that we craft and select in MidJourney to come back with GenAI to the proposal of certain features, shapes and functional -- sorry, devices to serve our products. Not all of them will be used. I'm not sure we're going to have a perfume in a duck shape tomorrow, but it's just to show that we are heavily using GenAI to help us in our creation process. And that's very true for us. You can also imagine as part of the sourcing dimension that we are also looking at the way this is disrupting all the creation process for the value chain at our suppliers because it's also a way to create value in a significant manner. The second use case that I'd like to illustrate is around digital supply chain. I was speaking earlier of next gen supply chain planning, understanding and capturing sell-out signals, propagating them, planning differently, augmenting all the planning heuristics that we have along the chain with decision, intelligence tools like area, for example, understanding where our process can be improved with selling these tools, for example, deploying our inventory in a more dynamic way to ensure that we can always respond to sales and maximize availability while lowering inventory is exactly what we're doing with next gen planning supply chain, which is something that we are currently conducting. The other one is advanced customer care. We have some pilots starting traditional order to cash processes is evolving towards what we call advanced customer care because it's not anymore about being lean and efficient on the transaction or backbone of the group. This will continue to be optimized as we did in the past but it's also the way to use GenAI to engage differently, 24/7 with our consumers and our retailers in order to increase our capacity to grow. And this dimension is reaching a new level, if I may, with GenAI chatbots that we are currently implementing with [indiscernible] for example. The second key transformation that we've been acting on for more than 20 years, it's not new, but it's accelerating, and we continue to drive is the L'Oreal for the Future transformation where operation, as I was saying before, accounts for 70% of the group's commitment on climate, on water and biodiversity on resource preservation and on social impact. It is, and you've probably been exposed to this before, set within the planetary boundaries ambition. SBTi targets for climate, for example. On climate, we have, and I'll come back to this later, already reached 91% of the energy that we use on our Scope 1 and 2 is renewable energy. On water, I think I'll come back to this in the next coming slides. So I don't have to describe anything in detail, but on water biodiversity resource and social impact. We are striving. We are leading in the industry. You know that we are AAA on CPD for 8 years in a row, which is on climate, water and forest, which is a dimension of resource preservation and biodiversity that shows that from an external perspective, L'Oreal is recognized as a thought leader and more importantly, for achiever when it comes to sustainability commitment. On renewable energy, as I was saying, 2 key figures, and it's always the same pace. It's not only about moving to renewable energy, I come back to this, but first and foremost, is on resource preservation and reducing the impact that we have. Since 2019 in absolute value, our CO2 emissions are reduced by 74% -- minus 74% in absolute value on our Scope 1 and 2, showing that this is possible to decouple completely your growth from your climate CO2 impact. And at the same time, the remaining part has been shifting towards 91% sourced from renewable energy. And we will reach 100% in 2025 for the full year. And I'm confident that this objective will be reached this year. Second dimension, which is becoming more and more important but has been on the agenda of L'Oreal for a long time, and that will come next to climate, I think one of the key topic of the future is water. L'Oréal has been committed since 2005 on water reduction and expressed in terms of liters per finished goods that we sell. We want to continue by 2030 to reduce by 30% the amount of water that we use, water withdrawal as per our figures of 2019. And more importantly, we want to make sure that 100% of our sites, our plants and our DCs operated by L'Oreal are using recycled and reused water in their industrial processes. Today, we have 14 sites, 5 sites that are 100% reaching this goal, that are 100% of the water used for industrial processes on these sites is totally recycled, meaning apart from the water that goes into the product. which is, of course, demineralized and treated -- its filtered, sorry. And the water that is used in the showers for our employees, 100% of the water that we use in our plants to clean our vessels to manage our processes is totally reused in a loop. And for the total sites of L'Oreal, this year, it's 49%. And we are very confident that we're going to continue to invest to reach 100% of renewal water throughout the world in 2030. On the resource preservation and the eco-design strategy of the group, we are also extremely committed. The motto is reduce our impact and reduce the use of materials like we do in plastics, for example, committing to reduce by 20% the plastic, the weight -- sorry, of packaging per milliliters of formulas that we are using. When we have reduced, it's to replace these materials by recyclable -- recycled, sorry, material, like we do in plastic or in glass. And finally, make sure that by design, all the products that we put on the markets are recyclable, and that's what we do throughout the chain. We have some significant results. You see them here for some of them on the plastic, in particular. So it's less plastic, better plastic. On the plastic dimension, you can see it on the top left of the chart, L'Oreal has reached at the end of 2023, 32% of the plastic that we use is from PCR, post-consumer recyclable plastic. It's close to 80% on the PET, and we are growing very fast on the PP and the PE that we are using. Just to give you a sense of comparison with all the major FMCGs of the world, there is 90 [ symmetries ] of the Ellen MacArthur Foundation that are publishing the figures. The average of the 90 main companies that are part of Ellen MacArthur Foundations are reaching an average 10%. We are 32%. So L'Oreal is not only the most advanced in terms of progress, but also one of the most advanced when it comes to commitment of 2025, which is 50%. And we are very confident we are going to reach it. But we're not going to stop there. We want to make sure we can move from mechanical recycling of plastic to advanced recycling and advanced recycling means that the feed can be very different in nature, not disruptive to the food industry in order to make sure that through advanced enzymatic processes like Carbios where we invested or LanzaTech, we are making sure that we can move to advanced recycling and have a much wider feed that guarantees accessibility and price for recycled materials. Last but not least, we are, of course, at the same time, through our packaging expertise, making sure that we invest into the future, we have a packaging science center located between New York, Paris and Shanghai that is actively looking with our upstream ecosystem to new materials. We're working on paper bottles and you see it's not mock-ups, it's real products with [ carton ] tubes from Albea or the paperboard from Paboco, where we're working as a consortium. We are also working on biomaterials, so they come from algae or from [ esk ] from different cereals to make sure that they can replace plastic over time and make sure that we are guaranteeing that we will use 100% recycled -- recyclable and biosourced materials in the future. And last slide is on being ready for the future and all what you've seen in terms of expertise and performance is primarily driven by our teams. And I may, as I said in the beginning, extremely proud to lead the 22,000 people worldwide that are every single day, making sure that we can sustain the growth of the group guaranteed to come from the responsibilities to our consumers. And I'd like to pay tribute to the engagement, their expertise and their passion that they demonstrate every single day. Thank you very much. I hope you find it interesting and I'm ready to take any of your questions.

So thank you very much, Antoine, for this very comprehensive tour of the operations. We've had quite a few questions, and I think we have time for about three of them. So several investors and analysts have asked us about the switch to more natural ingredients, what that does in terms of sourcing and how you manage that in a manufacturing context, as the industry moves to more clean beauty and also how you interact with the I&I department on that road?

Thank you for the question. Just maybe put two things in perspective already. The first thing is that 66% of the ingredients that we use in our formula today are biosourced of natural origin. So that's important. We have made a long journey. And of course, what remains is either abundant minerals, and that's okay for us but also some that are based on fossil and mostly petrochemical ingredients. And we are, as you said, actively working on transforming this. We work hand in hand, of course, with R&I advanced research of L'Oreal is actively scouting and developing alternative material, bearing in mind that they not only functionally replacing some of the materials of petrochemical origin but also at the same time, improving the performance of our products. So we are looking for gainers in terms of step change in performance. And actually, it's quite fascinating. It's a very, very active ecosystem. We are connected, of course, historically with most of the very large chemical companies, the Croda, BASF, Evonik, of this world, of course, are working extensively with us, and they are also acting very much on this ecosystem. But we have a very advanced ability to scout the potential performance of such a new innovative ingredients and molecules coming from biotech. Biotech and Green Tech start-up ecosystem is very dynamic. And everywhere in the world, we are very much [indiscernible] with them. So then it goes through a funnel of evaluation. And when that's something that really not only can replace some fossil ingredients but at the same time, improve the performance of our products and give us an edge when it comes to competitiveness, we are investing with them. We have some vehicles to do it. We give a long-term. partnership. And when we want to get scale because very often it startups, then we are also making sure that we have [ tripartite ] agreements; L'Oreal, the start-up and the large chemical company that has the scale and the assets to produce at cost is working together. That's exactly what we're doing. We are confident. And actually, I was in a meeting yesterday. To be very honest, I was in the meeting yesterday talking with the Head of Advanced Research in L'Oreal, and it's fascinating. It's moving at light speed. We are very much in advance in the pipe of innovation. It takes years to qualify raw materials and make new formulations. In our industry, we are looking ahead beyond 2030 already to make sure that we will be able not only to meet our commitment. But once again, find new areas of performance that are disruptive and probably can give us a competitive age.

Great. Thank you very much. You've talked about acquisitions in your presentation. Can you maybe elaborate a little bit the role that operations play when we acquire a new company? And maybe look at the recent example of Aesop that you have managed, what do we bring to the table that previous owners had not have been able to do?

We're not the only one to manage acquisitions. So we have to be very humble about the process, but we have a very thorough process given the number of acquisitions that we've done in the past in order to make sure that the sequence of integrating a new company, respectful of its DNA, its equity, very often the management that we are keeping onboarded is continuing to strive because we're making this acquisition because they have a big potential to grow. That potential to grow has to be augmented and not diminished in any single way. So, how do you make sure that you integrate them from a system standpoint. So that's mostly working with the IT teams, but all the connectors that we need in order to be able to -- for them to operate. And then for operations, it's mostly making sure that we can integrate them rapidly in our global subsidiary ecosystem, but often, these entities have a very limited sales footprint. So reaching the global footprint of L'Oreal and deploying this brand goes through, of course, [ S&OP ] and the fulfillment capabilities of L'Oreal. That's the downstream activation part, if I may. On the upstream part, it's where are the synergies and where can they benefit from our expertise when it comes to packaging and development or expertise when it comes to sourcing, having access to better conditions when it comes to our vendors. And of course, when it makes sense to incorporate them into our manufacturing footprint. And I can tell you from the vast experience that I have in that, I've never seen any of our acquisitions, where there was not significant potential on cost, agility, compliance when it comes to -- when they integrated the L'Oreal ecosystem. And that's what we're trying to do, and that's what we're doing currently with [indiscernible].

So there's quite a lot of fascinating questions in the pipeline. I'll give you one last Antoine, and then we'll get back to the outstanding questions directly. Could you outline where you are in the journey to digitalize your manufacturing footprint and supply chain? How long does this journey take? And how will the supply chain look like in 5 years' time?

Again, we have the -- as I was saying, we believe that manufacturing what we sell is quintessential. So -- and again, I invite any of you to come and visit a L'Oreal plant. You will see that this is really cutting-edge technology. I think people that don't know, but when they come out of this, they are very impressed by the quality of the people, by their engagement and the assets that we operate. It's extremely highly automated and robotics everywhere. You will go in our plants, all the floors are managed by AMR, automated mobile robots, of course. Because we believe that this is the way to drive the efficiency, the productibility in everything that we do in our plants. Industry 4.0 for us was mostly about this edge, it already started 10 years ago. Where we see a difference is in the planning ecosystem today, and we're speaking about digitalize. It's a journey of multiple years given the size of our footprint. Also, as I was saying, being mindful of choosing the battles that are really making a difference. We are really evaluating carefully before implementing at speed and at scale the transformation. The way we are managing information because very often, when you think operations, you think about physical assets. You think about a plant and you think about a fulfillment center. And that's very true. And in this one, it's mostly about robotics, what we're doing today. And as I was saying, very, very much fast changing in the fulfillment dimension. But the flows of information, the connection of the flows that we manage in operation physical flows, information flows, financial flows that we are managing within operations, this flows, and most of the engineers that we have in operations are working beyond our computers today in most of their jobs. So managing this information is quintessential. And that's where digitalization, AI and GenAI, AI in particular for operation is making a big difference. So I don't know if I'm exactly responding to your questions, but beyond these obvious robotics and cutting-edge technologies is the application suite that we put in place to transform the digital backbone of L'Oreal. You know that we are working on moving to S/4HANA on a global ERP platform, but that's the transactional backbone of the group. It's a big endeavor, but that's what we're doing today. And that's a fundamental layer to make sure that we can scale the advanced application and the analytics tomorrow. So that's one thing that we are heavily involved to because we touch every single flow of the group with forecast to stock or order to cash processes. But at the same time, we are investing, as I was saying, in next-gen planning, for example. Tools like O9, OMP, Kinetics. These are the kind of tools that we are evaluating in order to make sure that we can make a step change in the way we connect demand sensing in our markets to the production planning of our plants and our suppliers. And while you do that, you reduce lead time, when you reduce lead time, you increase agility and you reduce stocks. And that's exactly what we're driving. And that's one of fundamental disruption that we see in front of us in order to manage an increasingly complex supply chain to give an example.

Thank you very much, Antoine, for this fascinating look under the operations [ bonnet ]. And thank you all of you for joining us. Our time is up. So thank you very much, and looking forward to seeing you all very soon.

Thank you very much.