L'Oréal S.A. ($OR)

Good morning, everybody. We'll start the conference now. Pens ready, Copilot is ready. Let's start. So welcome to the 23rd Deutsche Bank Global Consumer Conference. This year, we have over 120 companies attending. We have over $5 trillion market cap in those companies attending. This is the consumer conference you need to be at. Like any good product, we have our dupes. Nicolas will vouch for that as a trend in some areas, but you want to be inside the big tent, not outside looking in, especially when it really does feel like there's -- we are at such a pivotal moment, AI adoption, the conflict, the bifurcation of the consumer, the channel shifts occurring. You really need to hear how the best companies are handling these issues and you really need to be here. So it's my pleasure to introduce the L'Oreal management. To start the conference Nicolas Hieronimus, CEO; Christophe Babule, CFO; and also Omar Hajeri, the President of the Professional Products division.

Thank you, Tom. Good morning to all. Happy to be the opener of this beautiful conference. And as always, at L'Oreal, without further ado, just to put you in the mood, and little video to remind you about who we are. [Presentation]

So welcome to the world of L'Oreal. This morning, I am going to just make a few comments on the start of the year, try to explain to you why L'Oreal is today winning model. Then you'll have Omar who will present a deep dive on the Professional Products division, which has been our fastest-growing division over the last couple of years and continues to do so, and then tell you which -- that we still have a few acceleration engines for the future. So indeed, L'Oreal published its first quarter not so long ago, and it has been a great start of the year. But I would say for me, the most important element of the beginning of the year is, once again, the demonstration of the resilience of the beauty industry. Last year, we ended the year at -- the market was around 3.5%. Right now, it's shy of 4%. So more or less in line with what was the end -- the second half of last year, which shows that despite everything that Tom has been commenting upon, despite all the events, the war, the conflicts, the tensions, people continue to buy beauty because either they need it, they want it, it's a bomb on their wounds, it's something that lifts the morale. And this is why this category continues to grow, and it grows because for all the reasons I mentioned, but also because it is constantly stimulated by new products, new innovations. It's a category we have new services, whether in salons or in aesthetic clinics or even in department stores, you have new categories that are rising all the time, styling is exploding. All those supplements are back into the beauty game. And there are new technologies, LEDs are a part of the complement of what are the traditionally topical products. So it's a constantly expanding category, always innovating and always growing, which is why because I often have debates with investors about staples, which is why I'm eager to say that beauty is not staples. First of all, you can't use that to make up on, but more importantly, it's a very animated, beautiful and sexy category, which, of course, we are happy and proud to be the leaders of. The start of the year, as I said, was good for L'Oreal. We did a first quarter at plus 6.7% adjusted of our IT transformation. And the market, as I said, it was between 3.5% and 4%. And a very good start of the year overall, with growth in all regions and all divisions. If I take all the regions, as you can see, all the regions were positive with double digit in the SAPMENA region, which is emerging markets, Southeast Asia, the Gulf despite the Gulf by the way, but North Asia was positive. Europe remains very positive. North America, very dynamic above the market. The only region in the world that has shown a little slowdown at market level was Latin America, which we have continued to overperform. And in our divisions, as you can see, the 4 divisions were positive, with the Professional division in double digit like Dermatological Beauty, which was an important comeback as this division accelerated over the back end of last year. So we are back really with a very strong growth in derm beauty and luxury and mass growing mid-single digits, both gaining shares in sell-out. So it is an acceleration that has been confirmed quarter after quarter or half after half. You see the first half of last year at 3% second half at 4.9% and first quarter of this year at plus 6.7%. It's true. It was our easiest comp as it relates to last year. But it's start of the year that we wanted that we planned because like 18 months ago, when we saw that the market was slowing down a bit, and the world needed some, I would say, excitation, we really truly decided to step up our innovation plan. And we've really done it in a very significant way and it's not a one-off. It's a durable decision to step up our innovation. You see the weight of our launches in terms of extra basis points was 100 basis points more in the first half of '25, 200 basis points more in the second half and this first quarter was slightly above 350 basis points more of innovations because, of course, it takes a bit of time to get these launches ready and prepare them. So we are now, I would say, in a much more accelerated innovation pace because that's what the market needs, and that's what allows us to win and to gain share on all our categories. And that's really, to me, at the heart of the L'Oreal winning model, which is made of many things. We'll talk about research, about creativity, about the know-how and beauty that we have. But we have, I think, something that's very unique, and that's our capacity to accelerate on launches in a very short period of time, as demonstrated. I think we have a very unique combination of scale. We are a big company. We're global. We've been there for 117 years, kind of agility. We have the capacity. Our teams at L'Oreal have a capacity not only to see the trends, but also to react very quickly, either geographically or by category when trends evolve or when there's a need to do more. And I think that's what really allowed us to outperform our peers. And if I look here at the WWD ranking in terms of beauty players, you can see that obviously, we are by far the biggest. But if you look at the track record in terms of CAGR over the last couple of years, last 3 years exactly, we had a CAGR of plus 6.6% over the last 3 years, whereas the sum of all our followers was at half that growth speed. So it means that despite being big, because of this agility, because of the acquisitions we make, and I'll say a word about it, we have this capacity to overdeliver despite being already the leader of this market. But I would say with only 15% market share. So there's still room to grow, and that's what we intend to do. And one of the ways for us to grow, of course, is organic growth. And there is acquisitions. They are at the heart -- I often get questions about acquisitions. Out of the 40-plus brands that we have at L'Oreal, only 2 were created by L'Oreal, Kerastase and L'Oreal, the rest were acquisitions made over the course of history. And if I take the last 10 years, around 1/4 of our growth has been generated by the acquisitions, which means that close to 3/4 were done by the organic growth of our brands. But it is something that we continuously do, and we made a few important acquisitions or deals last year. Because we are -- because beauty is a very, very diverse market in terms of consumers, expectations, price points and personas, architypes of beauty, which is why, and that's a chart I showed here for the first time in this conference last year, we have a very big portfolio of brands, but this portfolio of brands addresses different types of beauty from more to less premium or from more glamorous to more health-oriented. And depending on the categories, the times of year and the countries, you will have different type of expectations. And this portfolio is being rolled out as we speak. And you can see that only part of it is everywhere. So part of the work that our teams are doing on the ground is constantly assessing which brands can we launch and is it relevant for our consumers? Not all brands are relevant for all consumers. We have a Korean makeup brand that's probably never going to be a big success in France, but it's great for Southeast Asia. So that's the work we do. And this occupation of the beauty playground allows us to have a multidivision category strategy and allow us to win on all categories. An example is Fragrance, where actually it's only 1 division -- it was only 1 division where we have a 22% market share. And as you can see, we continue to outpace the market with Libre from Saint Laurent has become the #1 female fragrance in the world, and we have great successes from Prada, Valentino, now expanding ESOP into fragrance. But we really truly cover with our divisions the full price brackets. We've launched on NYX, which is a mass market brand -- mass market makeup brand, Mist that's very affordable. We are launching Mist on brand at Lancome or even Valentino, so we should to be able to attract younger consumers and counter for the most expensive fragrances. But on the other end of the spectrum, you have people that want to have exclusive fragrances that are much more expensive, which is where the acquisition of Creed makes total sense, the acceleration we're right now making on ESOP and a few other brands. We do that in every category. It's true in makeup, where we are the world #1, and we have clearly been accelerating product launches, both in mass and luxury to satisfy all consumer price points. And a brand like NYX is doing phenomenal as well as Saint Laurent, so the two extremes in terms of price coverage. Probably the 2 categories where we have, I would say, the biggest or the largest number of divisions trying to occupy the playground are skin care and hair care. On skin care, we are the leaders by 15%, and we have 4 brands in the global top 5. And what's interesting is that one is from our mass market division, L'Oreal Paris, two are from our dermatological beauty division, La Roche-Posay and CeraVe and one is from our luxury division. All different price points, different types of beauty approach, and that's how we grow and became by far #1 of the skin care market. And we had lost a little bit of market share last year. We've reaccelerated again. It has proven to be effective on Elvive, which is now back to double digits. And again, when we see that the market is a bit slower, we double down on innovation. And last year, we innovated on dermatological beauty. Start of the year, we've had many initiatives on Lancome, on Kiehl's, on Helena Rubinstein and on our mass market brands to accelerate again on skin care. So it's, again, multi-division, different price points, innovation stream to occupy the market. And the one category where we've really clearly had our best overperformance over the last 3 years is hair care. And hair care, as you can see, we've been growing at 13% last year, twice the market speed, still doing it this year and it was already the case at the end of 2024. Market share of 16%. And here, it is where we truly have the best multidivision strategy because we have mass markets and mass markets' flying right now, was in Brazil, on Spain last week and in the U.S., Elseve or Elvive depending on the name of the brand, it's like growing high double digits and really becoming a leader in many countries. But we're also addressing the more medical part of hair care, antidandruff antihairfall in pharmacies with the dermatological beauty division, and CeraVe launch is an example of that. And of course, where we have the best performance right now and an absolute stellar success is in the professional premium hair care division with brands such as Kerastase and Redken and the likes, but to tell you more about that before I come back to conclude, I would like to hand over to Omar, who is the President of this beautiful division.

Good morning, everyone. I'm absolutely delighted to show you how the oldest division of L'Oreal, the founding division, has been able during the last years actually to reinvent itself and put the division on a strong trajectory in terms of growth. So we are the oldest, we have been founded 117 years ago. And since our foundation, actually, we have one mission, which is to serve the professional hair dressing market. A very fragmented one. There is more than 2 million salons in the world, 7 million stylists. It's quite a fragmented industry in France. Just to give you a perspective, there is more salons than bakery. So it's quite an important element. But it's an industry also which is generating quite a large business because the sell-out of this industry is EUR 140 billion in terms of services. But this industry has been going through to deep massive transformation during the last 10 years. The first one, that is only visible when you are in this industry is that this industry is fragmented, but it's going through a hyperfragmentation because we see the rise of self-employed stylists everywhere in the world. They represent today more than 60% of states in the U.S., more than 60% of stylists in the U.K. But this phenomenon of self-employed stylists is going everywhere. So for a manufacturer like us, it means that our customer base is hyperfragmenting during the last 5 to 10 years. So I will show you how we have adapted successfully to this transformation. The second big element, which is explaining actually that hair care is booming everywhere in the world is the change of consumers and the change of the habits of consumption of consumers all around the world. The first element that you need to have in mind is that women have long hair everywhere in the world. It's 79% of women in Europe. And this number has moved by 8 points in terms of penetration during the last 5 years. More than 83% in U.S., 94% in China, and it's across every type of consumers. Boomers in the U.S., women about 60 years old, where 10% of them 15 years ago, had long hair. Now they are 60%. The second element that you need to have in mind is that the mixed hair population makes by itself that we have more women with curly hair. It's 1/3 of the millennials that today have curly hair in Europe. And this type of long hair and curly hair are demanding more hair care product, more treatment. The second phenomena that we see everywhere in the world is the sophistication of hair care routines. We call it the skinification of hair care, meaning that in the routine of a woman today, they are using not only shampoo and conditioners, but also treatments such as serums, oils that has become embedded in the routine of women all around the world. Just an illustration. If you look at Europe, France, more than 72% of women actually have a routine of more than 3 steps, which is quite phenomenal. The last element, women are ultra-connected. And I can tell you that the appetence, the desirability for hair care is big. When you look at the number of conversations that we have online on #hairstyling, it's more than 13 billion views every month on hair care, it's 6 billion view every month. And these women that are not only connected, but they buy online and a big proportion of them. In the U.S., almost 1 in 2 American women has bought a hair care product online during the last 6 months. It's a big phenomena. It's a big shift. So when it comes now to our professional selling hair care market, it's a market of EUR 13.5 billion. And this market has grown steadily at 3% during the last 10 years year-on-year. But one element which is that you have to notice is actually that we see a strong acceleration of hair care on that market. That moved from a year-on-year growth from 2019 -- 2015 to 2019 by 4%, to now during the last 5 years an acceleration at plus 7%. The second element in our professional hair care and professional industry is that we see the rise of new channel being e-commerce and selective retail. Now if we look at the weight of this channel, they represent 38% of the total value of the market, when they were representing in 2017 only 16%. So this market has become extreme omnichannel. On that market, we have drastically accelerated our growth. Our CAGR was from 2015 to 2019, a CAGR of 2.1%, and we have totally step changed our growth on that market, growing at 7.8%. And as Nicolas showed you, the start of the year is very promising because we are now growing at plus 13.1%, so we keep accelerating. And we keep accelerating by gaining massive market share. We reached in 2025, our record market share of 27%. For you to have some perspective, which is higher than the fourth next market share of our competitors combined. So we are an absolute leader on this professional hair care market. And this has been done definitely by embracing the ominchannel landscape in which we are. As you can see on the chart, we keep accelerating on the hair care market that we add up on it e-commerce and selective retail, which has been massive accelerator for us. The reason of success: number one, we have the most powerful portfolio of our industry. Going from brands which are accessible in terms of pricing like Matrix to ultimate selective, high-end champion such as Kerastase, our brands are culturally relevant. They are touching any type of consumers with a strong appeal of Gen Z. And last but not least, I would say, these brands are benefiting from incredible power of the R&I of L'Oreal. Thanks to R&I, the most advanced discovery in hair care category, unmatched performance. And I have to say also, we benefit also from the science of perfume that the L'Oreal Group has because our formula smells extremely good. So the other element of success as it was mentioned prior is our omnichannel strategy. We are building equity in new channel and desirability and recruiting at scale new consumers, being on e-commerce, being in selective retail, and this is why we are saying that our omnichannel strategy is a winning one, whilst also continuing to accelerate in salons as well. I was mentioning before the hyperfragmentation of the market that we are exposed to. What the division has done during last year is actually to transform itself from a salon model to a stylist-centric model. We have become completely of this scope. We've launched some platforms, online platforms, e-commerce platforms, such as L'Oreal Partner Shop, saloncentric.com. So it means that we have made our product accessible to any stylist whenever he wants. And these platforms are present in more than 36 countries in the world. We have digitalized our education, launching online education platforms, completely demultiplying our capacity to educate stylists. We were educating 900,000 stylists in 2019. We are now educating more than 2.5 million stylists. And last but not least, we kept our strong striking power in the field. We have more than 2,000 sales representative in the world, but also stores in the U.S. that are giving us an incredible competitive advantage. But one element that you need to get in mind is that this transformation, an O+O transformation, has been also very strongly driven by data. We have now in our database more than 3 million stylists out of 7 million stylist worldwide, which gives us an incredible competitive advantage to reach the professional hair dressing market. So we are growing fast, but I can tell you, it's not going to stop because the outlook are very good. When we look at the stage of premiumization of the hair care market, we are still in an early stage. When you compare the premium skin care market and total market versus the premium hair care market on total markets, on skin care, premium represents 50% of the value of the market. In hair care, it's only representing 25%. If I want to give you an illustration in volume, if you look at the most advanced premium market in the world, which is the U.S., only 1 out of 10 products sold in the U.S. is a professional hair care product. It shows the incredible potential of recruitment that we have still in front of us. And we are going to grow in retail, but also in services, as Nicolas was mentioning prior. We strongly believe that the future of hair care will pass also to services in salons. What you can see on the chart here is the latest concept that we have launched in Saudi, which is a salon totally dedicated to hair care treatments. And hairstylists are going to play a very important role in terms of prescription because we are also giving to hairstylists some devices which are powered by AI to do the best prescription and recruit new consumers in salon under the hair care category. We have also another engine of growth for the division, which is styling. We just acquired Color Wow, which is the ultimate worldwide junction in the styling category, only present in U.S. and in U.K. And we are, as we speak, deploying Color Wow everywhere in the world and it's going to give us an extra boost because the styling market has been growing -- over the last couple of years, growing at plus 6%. So next to hair care, we have now styling, which is going to be a very strong layer growth. So as you can hear, we are set for success, set for accelerating growth, and we will definitely keep significantly outperforming the professional hair care market. Thank you.

I think it's a good idea to invite my presidents of division to this type of conference because they make public commitments on acceleration, which, of course, everybody has taken note. So at least it's good for next year's budget to hear that. So how are we going to continue to accelerate or to drive growth on such a big company? Well, there are many growth drivers that I can share with you. First of all, as we've already discussed here, the number of consumers who are going to be entering the beauty market, having the purchasing power to do so is very important. We have 400 million new consumers that are entering the growing middle classes in emerging markets. You have 125 million people that are going to be in age of consumption, so somewhere between 16 and 25. And of course, as the population ages, and we are one of these categories that you continue to use until you die. You have 170 million people that are 60-plus and people living until 100 years old that are going to be using beauty. And our objective at L'Oreal is indeed to increase the number of consumers that we have to reach 2 billion consumers in the next decade. Today, we estimate that we have approximately 1.2 billion to 1.3 billion consumers using at least one L'Oreal product around the world, and we are on a recruitment mode to increase that number. And we do that through several strategies. The first one is affordability, indeed. On top of our very premium brands and luxury brands, we are making sure that consumers can enter the market either with mass market products that we have in our mass brands, also specific formats such as this Mini Kerastase that allows people to discover the professional quality and of course, also through e-commerce, which represents 30% of our business today and gives us a fabulous penetration tool to recruit, particularly in the emerging markets. Now it's not just about units. It is also about value. And the great thing is that the beauty market is constantly sophisticating. You've seen it in hair care, where the number of products used, the quality that people are looking for is increasing constantly. And today, hair care has become a very profitable category, which probably it wasn't 10 years ago, but it's happening across many categories. So if we look at body care, body care was super basic and body care is increasingly sophisticating because people are paying more attention than ever at their body. I'm not even talking about the GLP-1 usage that generates some needs to firm the skin and to use more moisturizers. But this market is valorizing, as is the fragrance market, with a strong rise of oat perfumery. So we have really a market that both has more consumers coming in and prices going up with consumers sophisticating as they discover more and more beauty products. Another driver of the market growth is the fact that there is an increasing diversification of what I would call cultural expectations. Beauty has always been very cultural. But I would say it's a market that was dominated by a couple of countries, France, Italy, where many of the categories were born, but it is really expanding to many sources of inspiration. Of course, you've heard about Korean beauty, about fragrances from the Middle East or even Chinese brands that are growing. And we are part of that game. We are part of that game, first of all, with our brand portfolio. I've shown you another way to look at our brand portfolio, which is from its countries of origin. And as you can see, of course, we have, first of all, many American brands, which makes us a force to reckon with in the North America, European brands, but we also have Korean brands, Chinese brands, Japanese brands, ESOP as an Australian brand. And of course, we make sure that these brands are more connected to their original culture than ever. And as if it weren't enough, I think one of the L'Oreal strengths has always been to be able to adapt to the local taste and the local culture even with its global brands. And here, what I have on the screens are 2 examples of the L'Oreal Paris brand and how it communicates to local consumers tapping into very important cultural festivals or moments like Chinese New Year with a very specific commercial or Diwali in India. These are with local celebrities, local teams that do local creation, and that allows us to really be often seen as local brands, even though we could be from France or Italy or the U.S. And the fourth driver of acceleration is longevity, which is this new word you heard a lot about, but it is about the fact that people not only know they are going to be living longer, but they want to live longer, better and healthier, and it's redefining skin care. We've been investing a lot in understanding the mechanism of what happens at cellular level and what makes your skin age and how you can not just correct it, but anticipate it. And that is driving a lot of innovations that have just begun to appear on the market, like the new Longevity MD Lancome skin care line that's doing phenomenal and that make people use all sorts of, I would say, routines or techniques to protect their youth. It can be diagnostic tools, which is where our beauty tech investments have allowed it to propose very sophisticated recommendations. Of course, topicals, which remain the heart of our business, but devices or supplements, which are now integrated into the L'Oreal categories of products that we are launching on several brands. And because we want to stay always at the forefront of these trends, we clearly invest. We invest in longevity, in understanding more longevity, more aesthetics, so it's L'Oreal Advanced research. We are one of the only beauty groups that has an advanced research, working upstream, trying to understand, create new molecules and understand the mechanisms of skin. We, of course, have announced a partnership with Kering on longevity, which we are just beginning to work on. And we have this investment in Galderma, which is very important for us to be both in the cockpit of this beautiful company and to understand more what are the mechanisms and the recipes for success in the world of aesthetics and be, of course, associated to this part of the business as we are with brands like Skinceuticals today sold and prescribed by derms. So really longevity is going to be a strong accelerator for the growth of L'Oreal. And then, of course, I couldn't make this presentation without talking about AI. AI is truly going to power up beauty, to augment beauty in many ways. So we've embarked a few years ago now on AI and now generative AI. I think the R&D of L'Oreal was working with AI already a long time ago, but it's really a big acceleration now. And we have organized to really focus on our AI and transformation with 3 pillars. One is the consumer engagement, how does the consumer look for products, get informed about products, how we improve and increase the efficacy of all our functions in the group. So it goes from BETiq, which is our AI-powered prognostic prediction tool for our A&P investment that really creates a lot of productivity. It's about creating content in our AI factories internally. And of course, it's our big IT transformation to create the backbone of this. And the third part, of course, is AI for our employees. We've trained more than 65,000 L'Orealans how to use AI with the L'Oreal GPT. They have a test that can help them assess their own mastery, and we provide more and more sophisticated learning. So it is really transformative. And probably the part where it is the most transformative is on the way people look for beauty. They are now more than half of consumers, especially the younger ones, do not go through the search bar. They ask questions to large language models. And of course, we want to make sure that we become the reference source of knowledge for all LLMs. So we have multiple partnerships with all the big AI companies to make sure that the combination of our beauty know-how and their computing power allows consumers to find the best answers in their beauty quest. And of course, the best answers have to be the choice of a L'Oreal product. Finally, as I said, AI is a big accelerator of our discoveries. Our R&I was at the forefront of this technology adventure. We have partnerships with companies like IBM to create formulas and we work with NVIDIA, too. And that allows us to increase, in a very spectacular way, our capacity to create new products, to scan molecules, to create the molecule that will make this new cream that indeed works on making your skin stay young or reset it. And in the last 12 months, we've tested more molecules than in the last 5 years. So it's an incredible acceleration. We use digital twins. And frankly, again, if you combine our data with this computing power, it's a fantastic competitive advantage. It allowed us last year to be named #1 most innovative company in Europe across all sectors. But more than that, it's what lies behind the acceleration in product launches and innovation that I've shown at the beginning of the presentation, and that allows us to accelerate our outperformance versus the market. So lots of possibilities to accelerate, lots of sources of growth, consumers, valorization, cultural relevance, AI to accelerate and augment, both the consumer and our employees. But I would say the one thing that -- and I tried to do a video, which I couldn't do to show you that, the real secret sauce of L'Oreal, I would say it all the time is the L'Oreal culture. For anybody want to spend some time at L'Oreal, it's a very unique blend of passion, energy, search for excellence, competitive fighting spirit. I put here a few images we had last week or 10 days ago our worldwide meetings where all the leaders of L'Oreal come to Paris to be presented the next year's plans by the brands, and they see all the brands that you know. And they spent a week, all the country managers, in a room where they see like a fireworks of initiatives, of engagements, of communication. And I can tell you that the energy, not just the parties at night, but the energy in the room and the passion these teams have for beauty, which they all specialists of is absolutely uncomparable. And I think in the end, that's the one reason why I truly believe that L'Oreal will continue to grow and to outperform the beauty market, a beauty market that will indeed continue to be extremely dynamic and that is not just a staple. Thank you so much.

Thank you very much, everybody, for attending. We've come to the end of the time for the presentation. The company will also be attending meetings over the course of the next couple of days to ask questions. But Nicolas, Christophe and Omar, thank you very much indeed for your time.