Agon navigates U.S. for L'Oreal

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Jean-Paul Agon was only 24 when L'Oreal offered him the job of general manager for Greece. "What I didn't know at the time was that the business was very tiny, in very bad shape, and that five other people had declined the position," he said, laughing, during a presentation at the Wharton Marketing Conference Oct. 15 in Philadelphia.

That he succeeded is obvious from the fact that he became president of L'Oreal USA 20 years later, taking on a roughly $4 billion unit of the $16 billion global beauty power.

He did so only weeks after Sept. 11, 2001, and as global rival Procter & Gamble Co. was ramping up its drive to overtake L'Oreal as global beauty leader. But Mr. Agon's L'Oreal has fared well, gaining share, for example, in three of the four major mass categories. In an edited interview with Jack Neff, contributing editor of Advertising Age, Mr. Agon discussed how L'Oreal has succeeded despite the challenges.

AA: Beauty-care advertising rarely wins awards. Why do you think that is?

Mr. Agon: I can't speak for the industry, but for us the priority is to communicate well to consumers what our products do. ... Because our products are so much about innovation, we think the exciting part already is the product. And we have generally confirmed before we launch that we have something that really is new, different, better and exciting. ... So we try to concentrate on making sure the message is clear. Of course it's nice. Of course it's pleasant. But the innovation, I think, is much more important. Not to say that there's more creativity needed in the advertising when there's less innovation in the product ... but, why not?

AA: Are the media you use to reach consumers-primarily TV and print-losing their effectiveness? If so, how are you addressing that?

Mr. Agon: I'm not a media expert. But, sure, the rules are changing. I do believe that TV and magazines are very important media if they are well used. Not the usual, conventional prime time. There are better, smarter ways to use TV and magazines. On top of that, there are new media-the Internet, buzz marketing. We are discovering with some of our brands you can also be successful without advertising. Our Kiehl's brand is extremely successful, growing very fast, and has no advertising at all. So, the world is changing, but we are taking that quite cautiously. We don't burn what we have loved.

AA: Hair color is one area that seems particularly perplexing. It's shrinking despite the aging of the population. Where is that business going?

Mr. Agon: It's important to know that the mass hair-color channel has doubled dollars in nine years. ... So it's not completely strange that there's a pause in growth. Reason two is that we have seen transfer of use to salons. It may be because the salons are offering a new type of services and it's time for the brands to offer them, too. For example, we believe highlights are a new trend, and we will launch very a soon a new highlight product that I think could really bring back some consumers from the salon to retail. When the market is tough, people automatically think the market is broken. I don't think that at all. ...

AA: The L'Oreal Paris brand is experimenting with retail stores of its own. Strategically, is this primarily to look at a new distribution channel or to develop ways to work better in the channels the brand already is in?

Mr. Agon: The No. 1 reason is to connect better with our consumers. We have ... market research. But when you have the possibility to talk to consumers directly it's even better. ... No. 2, it's also interesting in terms of merchandising. When you think about the L'Oreal Paris brand, hair color is in the hair-color section, skin care is in the skin-care section ... so we want to see how the consumer reacts when she has a complete vision of the brand.

AA: Could this evolve into a L'Oreal section in mass outlets?

Mr. Agon: Why not? Some retailers have come to us and been very interested, saying maybe we could do a store within a store.

AA: I heard from an analyst recently that P&G, with its run up in marketing spending, has left its competitors with a choice of losing market share or issuing earnings warnings. I wanted to get your take on that.

Mr. Agon: It has not proven to impact us. I think a recent good example is [Garnier] Fructis. When we launched Fructis last year, this competitor doubled its spending in the shampoo category. And it has not at all stopped Fructis or even limited the success. ...

I think there is room for everybody. And consumers are clever. They know how to recognize an interesting new product. As long as you have enough money to reach them, even if your competitor is spending two or three times this amount, the consumers already have seen you.

Fructis has been an example of extremely good product with a reasonable [advertising] investment. Not small, but not crazy. The latest Nielsen shares are 6.2% or 6.5% after 18 months. We believe the most critical part of marketing is to start with something that's interesting to the consumers. If you do, with a reasonable amount of advertising, you do your job. If you have something that's not interesting, it's going to be tough and you're going to need three times more money.

AA: You've talked about taking the Japanese vision of beauty global with Shu Uemura. Others are trying to as well with different brands. ...Why do you think it will be possible?

Mr. Agon: If you take a French brand or an American brand or a Japanese brand, it's a different taste of beauty. Our mission is to give everyone in the world choice. And our ambition is to make our Japanese brand the most international Japanese brand.

Maybelline now is No. 1 in China, No. 1 around the world. It's quite fascinating, when you think of it, that it was a French company that made an American brand No. 1 in China. ...We will take our time, but we want eventually to make Shu Uemura the No. 1 Japanese brand in America.

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