L’Oréal, Unilever, Estée Lauder — a look at their business resilience in the first half of 2020
We’ve compiled details on the digital strategies and business developments of the six cosmetics companies that made the most sales in the first half of 2020*. This period has been marked by city lockdowns and curfews and an abrupt shift towards working and shopping online, all brought about by the coronavirus pandemic. Major reforms in the beauty industry have also been called for, including the rebuilding of supply chains that have become too globalized and a push towards greater beauty diversity, driven particularly by the Black Lives Matter movement. In this article, we’ll look at the top three companies: L’Oréal, Unilever, and Estée Lauder.
* This ranking is from Beauty Packaging’s Top 20 Global Beauty Companies.
In February 2020, with the COVID-19 pandemic has swept across the globe, all beauty companies found themselves plunged into crisis-management mode. They took initiatives to support charities through cash and product donations, planned the restructuring of manufacturing work, and took successive measures to protect retail workers who were most at risk. At the same time, the way consumers shopped for and used beauty and personal care products overall changed dramatically, prompted by months-long city lockdowns and curfews, bans on overseas travel, and the closing of retail stores. As a result, most sales numbers declined in the beauty field.
During this crisis, Unilever saw overall flat sales in the first quarter, however, revenue in their beauty and personal care divisions rose by around 2%. This was thanks to their anti-bacterial soap brand Lifebuoy seeing particularly good sales along with Vaseline as well. L’Oréal’s China business returned to growth, as the company had predicted, and while their overall global sales have been decreasing, their various measures have been well received, putting their share price well on the road to recovery. L’Oréal’s stock price survived well, achieving 6% growth in the six months since January 2020 — in comparison, Unilever was minus 3% and Estée Lauder was down 10%.
Black Lives Matter (BLM), the new global movement to abolish discrimination against black people, has also had a large impact on the beauty industry. So far, the industry in the US had made efforts at correcting problems with racial discrimination and child labor and had worked at diversifying the workplace. However, this time the movement brought forth protests on social media that claimed the skin-whitening market is based on white supremacy and that diversity of skin color is not being respected. As a result, brands have been starting to withdraw from the skin-whitening market.
1st place: L’Oréal
Tackling the pandemic and accelerating their digital transformation, L’Oréal still maintains top of the pack
L’Oréal’s December 2019 results, announced in February, had an 8% increase like-for-like of 29.87 billion euros, their largest sales growth rate within the past decade. Also, their operating profit increased by 12.7% to 5.54 billion euros, and their operating margin was a record of 18.6%. Their Luxe division, which includes brands Lancôme and Yves Saint Laurent, saw double-digit growth and reached record sales of 11.01 billion euros with a 17.6% increase.
Sales increases were achieved in all divisions. In their Consumer Product division, aimed towards the mass market, L’Oréal Paris fought hard for a 6.0% increase in sales of 12.74 billion euros, and their Professional Products division, aimed at salons, had an increase of 5.5% with 3.44 billion euros.
Geographically, new markets, including Asia, the Middle East, and Africa, saw a 20.5% increase in sales of over 14.02 billion euros. Sales through e-commerce grew to 15.6% of overall sales. With this, despite the pandemic sweeping the world, L’Oréal was confident in both sales and profit increases this fiscal year, and they saw the effect on their China business and travel retail division in Asia as only temporary. However, their results of the first quarter (January to March 2020) that were announced in May showed that sales had declined by 4.8% from the previous year to 7.22 billion euros.
On the other hand, L’Oréal sees the majority of consumer behavior as being conducted online even after the pandemic has subsided, as CDO Lubomira Rochet mentioned in an interview with the Financial Times, “the crisis has profoundly accelerated the digital transformation of the beauty sector — in e-commerce, we achieved in eight weeks what it would have otherwise taken us three years to do.” Accordingly, L’Oréal has been implementing such marketing tools as virtual try-ons of makeup and hair colors and 1-on-1 beauty consultations through video chat.
Additionally, as a result of shifting from conventional advertising to online ad marketing and increasing the share of the online budget from 50% before the pandemic to 70%, their online sales in April 2020 saw a 300% increase in Latin America and a 400% increase in Africa and the Middle East.
However, L’Oréal isn’t just trying to boost their sales, they’re also actively rolling out support for people who’ve been affected by the spread of COVID-19. They’ve donated 250,000 dollars to Feeding America as well as a million euros to an organization that supports those who’ve suffered under the pandemic, and have partnered with and donated 200,000 dollars to the Professional Beauty Association. They’ve continued production of hand sanitizer, and in Europe, they’ve not only distributed it freely to medical personnel working in hospitals, nursing facilities, and pharmacies but also to all those working in food retail. Furthermore, they’ve taken measures to protect professionals in beauty salons.
On May 12th, the company’s board of directors decided to abandon dividend increases and cut the 2020 compensation of group chairman and CEO Jean-Paul Agon by 30%, showing them as a company that can fulfill their social responsibility.
On top of this, in June they announced their sustainability vision for 2030 “L’Oréal for the Future” to strengthen the company’s commitment to sustainability and social inclusion.
2nd place: Unilever
Responding to the pandemic with integrity through protecting supply chains and other initiatives
In the midst of the coronavirus pandemic, ex-CEO of Unilever Paul Polman said that now more than ever was the time for companies to be more conscientious. The Unilever led by new CEO Alan Jope, who has inherited Polman’s initiatives, has put into action successive new measures, which include financial support to small-to-medium-sized enterprises, in the hope of protecting supply chains that have been hit hardest. They’ve also promised up to 3 months’ worth of pay to employees who’ve been unable to perform their jobs due to the pandemic, and this has included contract and part-time staff.
In addition, the pandemic has exacerbated the existing societal problems of inequality and social division has led to the expansion of the BLM movement. Due to Facebook and Twitter’s insufficient handling of social media posts associated with social division, including allowing posts that incite hatred, Unilever declared that they will suspend advertisements on those platforms.
According to AdverTimes, Unilever’s 2018 advertising budget was the fourth largest in the world at 8.5 billion dollars. This decision from such a major ad owner prompted over 400 major companies on July 1st to also suspend advertising on Facebook, demonstrating Unilever’s presence as a leader of “companies of integrity” that has influence beyond simply the consumer goods industry.
Also, in March Unilever Japan took the plunge to change its company-wide hiring processes so that gender-related information such as names and photos were excluded to eradicate unconscious bias. This stance of taking the initiative to change convention to build a better society was met with much praise.
In Unilever’s 2019 year-long results that they announced in January 2020, their sales had increased by 2.9% to 52 billion euros while their operating margin was 19.1%. This growth was driven by new markets (5.3%) and home care (6.1%). Beauty and personal care saw a 2.6% increase of 21.9 billion euros, and this was mainly thanks to the double-digit growth of Dove. For their “Prestige” brands, the strong performance of acquired brands Dermalogica, Hourglass, and Living Proof ensured a continuation of double-digit growth.
The results of their first quarter of 2020 (January to March), which were announced in April, revealed flat sales that were impacted by the pandemic. Sales had 0.0% growth and amounted to 12.4 billion euros across Unilever overall. With restrictions on going out, consumers tended to stockpile hair care and deodorant products and also used these products less. Also, with two-thirds of sales being from real stores, the drop in consumption was not directly dealt with. On the other hand, the migration of consumers to online shopping was abrupt, with online sales increasing by 36% in Q1. This trend is expected to continue further and Unilever plans to strengthen its e-commerce capabilities.
3rd place: Estée Lauder
Still work-in-process to transform into a stronger company and deal better with the crisis
Before the pandemic, with its well-balanced product and geographical portfolios, Estée Lauder was often recognized as a brand of excellence that stood among major companies with its strong sales and scope for increased dividends. However, once the Chinese market closed down due to the spread of COVID-19, their share price suddenly fell. Their sales as well, which had been in good shape up until then, dropped 11% to 3 billion dollars in the third quarter of 2020 (January to March 2020) as a result of store closures and restrained consumer spending, particularly of high-end goods. These poor Q3 results stood out all the more in comparison with their performance in Q2 of 2020 (October to December 2019) that had a 15% increase year-on-year of 4.62 billion dollars.
With the widespread reduction in air routes around the world, sales in airport duty-free stores, which are the main part of Estée Lauder’s profits, were largely impacted, making their shift to online shopping a matter of urgency. It was Estée Lauder’s previous chairman Leonard Lauder who proposed the “lipstick index” based on the idea that during times of recession, more affordable, comparatively cheaper luxury goods — such as lipstick — sell better. However, the company’s current handling of the crisis, in comparison to rival companies, is appearing not as sophisticated.
Press releases denoting changes of important company roles have also continued throughout the first half of 2020, and the market is watching to see if they can spring back to the crisis-handling Estée Lauder of yesterday. On the upside they’ve taken supporting measures in response to the pandemic, similar to other companies, and have also been taking actions towards diversity, declaring their objective to have their ratio of black employees better reflect the US population at all levels of the organization by 2025.
Text: Ching Li Tor
Original text (Japanese): Yukari Akiyama
