tv Leaders with Lacqua Bloomberg February 15, 2018 10:30pm-11:00pm EST
>> it is 11:30 in hong kong and 12:30 p.m. in tokyo. prime minister shinzo abe has roda for a second term as bank of japan governor. the government wants to maintain the banks unprecedented monetary stimulus. this morning they said he is in no position to discuss the program. but he did reiterate japan's economy is recovering. kuroda's reappointment provides stability for japan. and with one thought likely to step down from the pboc, he presented unprecedented stimulus
at the meeting in 2013, all of that with accelerated asset purchases 18 months later. by negativelowed rates in january 2016 and reduction in the yield curve control. the rba governor said he expects the next rate decision to be an increase. philip lowe said australia's labor market is noticeably stronger. and he sees household incomes rising for some time to come. let's monetary stimulus would be appropriate at some point. let's get a quick check on the markets. near session highs, -- 1.5%.s up one the nikkei just over 1.5%. utilities leading the way. up nearly 3% in terms of sectors, followed closely by information, technology, consumer discretionary, as well as consumer staples. u.s.gpy is where the
. asx 200 at near session lows today. we will have an update of the top stories in 30 minutes again. this is bloomberg. ♪ ♪ francine: founded more than a century ago from humble origins, l'oreal is now the world's biggest beauty products company, specializing in cosmetics, hair, and skin care. it boasts an international portfolio of 34 brands and has a market cap of 105 billion euros. at the helm, a man who has dedicated his entire career to the company. over four decades he has covered all facets of the business. today on "leaders with lacqua," we meet jean paul agon, chairman and ceo of l'oreal.
thank you so much. jean paul: pleasure. francine: what happened to l'oreal in the last 10 years? innovation? your share price has grown. was it exciting times? jean paul: very exciting. i started as ceo 10 years ago. it has been 10 years very exciting. of course, we had crisis in 2008 and 2009, but globally the business has been very good. we have been growing, acquiring brands, launching new products, gaining market share everywhere, in europe, usa, china, so very exciting, fantastic. francine: what has been the most fun? jean paul: the most fun has been the past three or four years. thanks to digital revolution, everything has been transformed. as i tell my teams, i think this industry, our business, our company has more chance in the past three years than in the previous 30 years, so it is an amazing time, extremely exciting. francine: is this the way you sell, or the way people look at makeup?
jean-paul: no, in fact it is the relationship between brands and consumers. in fact, digital has completely transformed the relationship between the two. before that, you know, brands were talking to consumers, pushing to all them information or whatever, but now the consumer has taken the power. the consumer decides how he wants to see the brands, what he wants to know, what he wants to discover them. digital creates a relationship which didn't exist before. francine: isn't it difficult to control your brand? jean-paul: yeah, but at the same time it is more exciting, and it enriches the relationship. so now thanks to digital we can communicate the content of our brand, we can do tutorials to explain how the products work, how they should be used. we can have a personalized relationship with the consumers. it is a completely new dimension. it is much more rich and
exciting. francine: so what sells at the moment? is it the luxury brands or more the consumer brands? jean-paul: this year, luxury has been booming everywhere, mostly with chinese consumers. you know chinese consumers are fantastic. they love beauty. they love luxury. they love our brands, and our business with chinese consumers everywhere has been booming. ♪ francine: l'oreal's global reach stretches across 140 countries. about two thirds of its sales are generated outside europe. much attention has shifted to china, where strong demand for high end lipstick and perfume is driving growth. >> [speaking chinese] francine: in 2015, china surpassed france to become the group's second-biggest market behind the united states. some of the success is being attributed to selfies, with
camera-conscious millennials buying more makeup than ever before to look good instantly. have you had to adapt to the chinese market? jean-paul: yeah, in fact the products we sell, not for all brands because luxury brands are the same all over the world of course, but brands like l'oreal, maybelline, and the products we sell in china are made in china and formulated by chinese in our chinese labs. francine: because of regulations? jean-paul: not only. we want to create a product absolutely right for them, especially skincare, because their needs, their skin, their aspirations are specific, are different. we formulate in our chinese labs. we manufacture in chinese factories, and l'oreal paris is the number one beauty brand in china. francine: i have also been reading that one of the most popular products is actually a homemade range of cosmetics wear which is favored by the wife of president xi.
jean paul: still the number one beauty brand in china, the preferred beauty brand by the chinese women is l'oreal paris. they call it with the chinese name. it is beautiful, by the way. no, it is great, because l'oreal paris is the number one brand for chinese, for americans, for europeans, for russians, everywhere. so it is -- francine: not bad. jean-paul: yeah, not bad. francine: so tell me about your success in china. is it through distribution, ads, through celebrities? what is the attraction for your brand by the chinese? jean-paul: the reason of the success for our brands everywhere is always the same. it is number one quality. you know we, for all our brands our absolute priority is the quality and safety of our products, and it is something the chinese respect a lot.
it is very important for them. number one, innovation. innovation is extremely important. it is an industry where you have to innovate a lot. you know, more than 15% of our products every year our new in order to keep innovation flowing very strongly. of course, it is the imagery of the brands, you know, brands like giorgio armani and l'oreal paris, it is beautiful imagery, and chinese consumers are very sensitive to that. they like it. francine: is the u.s. a tough market? jean-paul: the u.s. this year is a bit tougher, a bit softer, let's say, certainly softer than china, but it depends. last year, the u.s. was very good. so every year, it is funny, because every year the market roughly, globally is more or less growing at 4%, but it is never made exactly the same way. francine: how difficult is it to predict what will work and what will not? why am i using this mascara, not
the other mascara? why am i using this foundation, not the other? jean-paul: again, it is very, when you know well your consumers, when you understand the desires, when you can guess their dreams or expectations, then you can really create what they will love. francine: what will the next four years bring? is there a specific market that you think will grow more? is it, for example, men's cosmetics, or something else? jean-paul: digital will be the most important element of transformation in the markets, so definitely we are going to see the e-commerce growing. for example, e-commerce in china is already more than 30% of our sales for our mass-market brands, so it is huge. so we are going to see digital growing. we will probably see new channels emerging like specialty stores, our own stores. we are very big, also a growing segment is travel retail, you know, the stores in the airports, because more and more people are traveling, so i think
there will be new channels. in terms of the regions, the emerging markets are still growing. and our categories are growing too. makeup has been booming for 2-3 years. i think it will keep booming. skincare is growing too, so honestly i am very optimistic about the short-term, middle-term, long-term possibilities of this industry. francine: what do you think you spend most of your innovation on? is it, for example, making lipstick that lasts longer? is it kind of changing at a little bit? i know you have so many products. jean-paul: and a few secrets. francine: but you can tell us. we are amongst friends. ♪
cell phone for example, simulate the application of the makeup on your face. and you see yourself with the lips covered with the lipstick you want, the shade you need, the powder, the mascaras. you know i did a demonstration of that to my board completely made up. it was, they were ecstatic. francine: was that for the launch of the app? jean-paul: yeah. francine: so they said, yes, fantastic. jean-paul: i wanted to share with the board the fantastic progress of technology. it is amazing. ♪ >> oh, it looks pure red. wow. the lipstick is moving with my mouth, and i know i don't have any on. >> it is like amy winehouse. i can't help looking at myself. francine: this is amazing because you have also been having to change your research and development. how much of the overall costs goes on actual digital products? jean-paul: difficult to say because it is everywhere in every brand in every division, but what i can say is that now more in terms of media, one
third of all of the media we do now goes on digital. in terms of e-commerce, 7% roughly of sales that we do are in e-commerce that we do for digital. it is growing 30% a year, so there is a shift happening, which is extremely fast and extremely strong. francine: the company that invented the platinum blonde is constantly innovating and developing new products as consumer demand changes. at its lab in paris, scientists have studied more than 7000 types of hair and are now experimenting with 3-d printing. the hope is to one day help people suffering from hair loss. l'oreal has already created fake skin to avoid testing products on animals, and invented a uv patch to monitor exposure to the sun's rays. jean paul: we are the number one r&d facility in the world. we are spending 3.5% of sales in research and innovation, and
obviously the most important are hair, skin. hair is where we invent and create new formulations for hair care, hair color, all types of hair products. francine: you also have a patch? jean-paul: a uv patch. francine: you put it on to see when you are over exposed to the sun. jean-paul: it is a creation that was made two years ago that we presented at a consumer show in vegas last year. and it is a uv patch. you put it on your skin. it is linked to your cell phone. and it calls you or it rings when your exposure to uv has been too high. it is a fantastic tool. francine: do think there will be more of a trend between the cosmetics and the health care? jean-paul: yeah, absolutely, and also with internet. this triangle between beauty, health for the skin or hair, and the internet of things is creating new opportunities that
are going to be very useful for consumers. francine: what to do like about your job the most? jean-paul: i love understanding people. i think that one of my strengths is the capacity of empathy with consumers. so i have this capacity to understand, to feel, to guess what consumers want, what is their desires, sometimes their dreams, and then to be able to formulate products that will respond to these dreams. francine: do you believe you have to take risks to innovate? jean-paul: yeah. francine: do you? jean-paul: of course. because every innovation by definition is a bet. every launch is a bet. it is like a new film or a new movie or new music, you never know in advance, but that is the magic of it. francine: so what do you think you spend most of your innovation on? is it, for example, making lipstick that lasts longer?
is it changing it a little bit? i know you have so many products. jean-paul: and a few secrets. francine: and a few secrets, but you can tell us. we are amongst friends. jean-paul: we are working on all categories. we are 3500 researchers from many, many different departments, and they are all working on all types of cosmetics, skin care, hair care, hair color, sun care. and because, fundamentally as i told you, we really believe first and foremost in terms of efficacy and quality. so the mission of the company, which is beauty for all -- is is also not only beautiful, but the best of beauty, the best quality, the best performance, the best efficacy, the best safety. and that keeps us busy. francine: 3500 researchers. jean-paul: yeah. francine: how long does it take from, i don't know, who has a concept to the product being on the shelf for someone to buy? jean-paul: it depends.
they can be really quick, when the formulation is easy. it can take six months. or when, for example the marketing guy has as a vision, has as a dream, but the labs don't know exactly how to formulate it, it can take two years, three years. it really depends. >> mega volume on top, mega volume on bottom. share it with your friends and buy makeup instantly. francine: one of the criticisms often leveled at the beauty industry is that it is only for young people. is there any truth in that? jean-paul: no, of course not. it would be stupid. because we are addressing all needs for all people, and look at our ambassadors. for example, jane fonda, helen mirren, they are not millennials, so, no, obviously not. francine: do you sell more to millennials or to people of a certain age? jean-paul: we sell to everyone.
it depends the brand. some of our brands like urban decay are more targeting young people. biotherm or l'oreal paris may target other categories of consumers. but no, no, we cover the whole scope of consumers. and in terms of age, in terms of diversity, in terms of countries, chinese, brazilian, europeans, everyone. it is beautiful. francine: how do you sell to the emerging markets? jean-paul: we adapt. we adapt the products that we sell, of course. we make sure they are affordable and that people can buy them. brazil for example is very interesting. because brazil is the country in the world where the hair is completely unique. because it is such a mixed country in terms of ethnic origins that the blend is completely amazing, and you have
to create for brazilian hair care products that are completely specific. and, by the way, it is very interesting because sometimes they are the most demanding consumers, and so when you can create in brazil a product that is good for them, then you can make it for the world because it is going to be great for everyone. francine: do you think generation x cares more about this than millennials? jean-paul: there is an urgency clearly. we are not talking anymore about a potential threat. there is a clear and present threat. ♪
francine: for jean-paul agon, life at l'oreal began in sales 39 years ago. he quickly understood the power of advertising. >> read my lips. i am worth it. ♪ francine: the company obviously thinks it is worth it, spending more than $8 billion a year selling and marketing its brands, a third of that on digital media.
jean-paul: when i was 20 years old, i was in business school and at the end i knew i wanted to do marketing. and for me beauty is the supreme art of marketing, because it is marketing that is not only about understanding, but also emotion, guessing, creation, so i think it is fantastic, marketing. there is no better marketing than beauty marketing. francine: from the 20-year-old jean-paul agon, what have you learned about yourself? jean-paul: my god, a lot, because it was a long time ago. it took me many years to get where i am today, but i was always passionate. i think that the incredible part of l'oreal is that every day is a new adventure. every day is a passion. it is a company made of really
passionate people, and every new mission is an adventure. francine: so what are you like as a leader, micromanaging or overview? jean-paul: you know, i like overview. from time to time, i'm tempted to do micromanagement, but when i do that, my chiefs say, you know, jean-paul, you should not bother with that. let us do it. francine: do you review, though, the end product every time? or how does it work? jean-paul: i have meetings with all the brands. not all the time of course. i travel in many, many countries around the world, and i am just trying to help to make sure that we are going, taking the right directions, pushing the right innovations, understanding enough the consumers we are dealing with, trying to pilot the ship. ♪
francine: l'oreal's sharing beauty with all program launched in 2013 was designed to transform the business. jean-paul agon was determined to make the company ethically and environmentally sustainable. it has been recognized for its efforts, awarded a aaa for water management, climate, and action against deforestation. so when did you start thinking about sustainability? jean-paul: a pretty long time ago, you know, especially when i came back from the usa and i took over as ceo. i really understood at that time that for companies like l'oreal, especially because we are the leader of the beauty industry, we had to make sure that also we would do the best and the most to make the planet a beautiful place. francine: what started it? is it because you say we sell so much so we have to make sure it does not go to waste? or is it also because consumers want something sustainable?
or is it because the employees you hire want something more sustainable? jean-paul: very good, very good point. i think it is all of that. first, we have a moral duty. secondly, it is what employees are asking for. third, it is what consumers want. four, because it is what society expects from a big company like us. so that is why we really went in this direction. francine: does it make a difference for the consumer? i remember you telling me maybe a couple of years ago that if a consumer has a choice of a sustainable shampoo or a shampoo that makes our hair better, we will always go for the shampoo that makes our hair better. jean-paul: yeah, but now what we want to do is make a shampoo that makes the hair better and sustainable. in fact, you are right. our vision is we have to find a way that is not opposite, that it goes in the same direction. and it is the same for economic performance. for example, the performance
should not be opposite to the economic performance. in fact, we are able to prove that. in the past 10 years, we reduced our carbon emissions by 67%, while at the same time we were able to increase our production by 30%. francine: how do you do that? jean-paul: we work a lot. we transform all our factories. we have now 10 sites that are carbon neutral. we completely transform the way also we engineer with water. we have what we call dry factories, that they don't use water at all. they completely recycle the totality of the water that they use. we eliminate waste. so it is a comprehensive effort on all fronts to transform completely the way we produce, we distribute. francine: shareholders are behind you every step of the way for sustainability? jean-paul: yeah, yeah, absolutely. i think our shareholders are proud of what we do.
i cannot say that they are pushing us hard to do it, but they are happy and proud. francine: do think generation x cares more about this than millennials? the younger you are, the more you think about this? jean-paul: i think that everybody now cares. i think it is very well understood that there is an urgency, clearly. we are not talking anymore about a potential threat. i mean there is a clear and present threat to the planet, and if we are not all doing the maximum in the very short term, it is going to be very difficult, so i think every generation now understands that. francine: if i speak to you in five years, what will be your story? jean-paul: in five years, probably i will tell you that the most important mission has been the transmission, because of course i will not be ceo forever. i will be, by the way, very glad to pass the baton one day to my
successor. francine: if you think a lot about succession, what kind of successor would you like, and what would you like your legacy to be? jean-paul: i would be proud to have been able to adapt l'oreal to the new world. i think that we are living in a very special period. the world tomorrow will be very different from the world we knew a few years ago, and my absolute priority right now is to adapt, transform the company in order to make it as successful as a leader in the new world as it was before, and i am very confident about it because that is what we are doing. you know, we are doing a cultural revolution, a digital revolution, a sustainability revolution, and so l'oreal will be a fantastic company. and then someone else will take the baton and will drive the adventure further. francine: jean-paul agon, thank
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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. alisa: i am alisa parenti in washington and you are watching "bloomberg technology." let's start with a check of your first word news. a federal judge in florida has ordered a suspect in wednesday's deadly shooting rampage at a florida high school to be held without bond on 17 counts of murder. authorities say 19-year-old nikolas cruz opened fire in the same school from which he had been dismissed. they added that they are 15 rifle used in the assault was purchased legally by cruz. nikolas cruz also reportedly had ties to a white nationalist group. a member of the militia group called the republic of florida told the associated press that the 19-year-old previously took part in paramilitary drills with the organization. the senate has rejected a bipartisan proposal to provide