L'Oreal eyes higher revenues in India

Image: Joshua Navalkar

Jean-Paul Agon, chairman and CEO of L'Oreal

 Q. There has been optimism among global companies since a new government took charge in India. L’Oreal has said that the country will be among its top five markets by 2017. Are you on your way to achieving that?
We have always been very optimistic about India. The Indian people,
too, are upbeat and it is fantastic because economic development is linked to optimism. India is the most important reservoir of people for L’Oreal. I don’t know if India will be among the top five markets by 2017, but it will definitely happen. The objective of the team here is Rs 7,000 crore in revenue by 2019. India’s long-term potential is the most important thing for us.

Q. Will L’Oreal move more manufacturing operations to India given the recent ‘Make in India’ campaign?
It could, but at the moment, it is mainly ‘Make in India’. Eventually, the investment that we make in India can be used to serve other countries.

Q. Have you decentralised decision-making to ensure that the best decisions are taken by people on the ground and not by those sitting in your headquarters?
Absolutely. This is part of our ‘Make in India’ strategy. People who are here should be able to decide what works here. In India, we have our own laboratories, marketing teams and factories, and it is in their hands to ensure we are successful. For instance, we are the number one make-up manufacturer in the world. But when we started in India, we did not think that the make-up market here was an opportunity for us. It was the decision of our team here to ensure that make-up is one of our priorities in India. It decided to invent products that are innovative and relevant to Indian consumers. And so, they came up with the Colossal Kajal, which is under a global brand, Maybelline of New York, but its success is because of the decisions we took here.

Q. Consumers in this part of the world are very fashion conscious…
Not fashion conscious, but beauty conscious, especially people from India, China and Brazil. Which is why I believe the best is yet to come. The second thing is that consumers in India are very demanding. They have this beauty tradition and they know how to recognise good quality. At the same time, since the average income is low, they have to make sure that the product they buy is the best.

Q. As more and more sales come from developing countries —Unilever’s being the most talked about example—a lot of consumer product companies have tried to shift the centre of gravity to the developing world. What are your thoughts?
Each company has its own plan. The history of L’Oreal is very different from that of Unilever. L’Oreal started in Europe and then went to Latin America and Asia. We are developing very fast in these markets, and Asia is now the number one region for us—more important than Western Europe or North America. The developing world is now 40 percent of our sales. But from an investor point of view, it is good to be balanced in terms of regions and channels—mass, luxury, salons and so on. And this gives us steady growth.

Q. Several companies have now begun to shift their best talent and R&D to this part of the world. Is L’Oreal doing that too?
Yes. We have redefined our main objective as ‘Beauty for All’. So, we now serve both men and women. And we redefined our strategy as ‘universalisation’—a strange word that I invented. We defined this to mean globalisation while respecting the differences and desires of consumers around the world. Beauty is very different from detergents and other categories: It is diverse because of the skin people have, the climate they live in and also as a result of their tradition and culture.

Q. As the chief executive of a large global company, how concerned are you about the recent growth scare and the fact that Europe is not growing?
For the moment, the changes that have happened are favourable for us. It is true that the world is getting more unpredictable, but falling oil prices are actually good for us. This should translate into an increase in consumer purchasing power. In many parts of the world, lower petrol prices should result in increased consumption. The other good news is the strengthening of the US dollar and the weakening of the euro. The euro has been overvalued for many years, and this was a competitive disadvantage for us in the last decade. So, for the moment, the volatility is favourable for us.