L’OREAL TRAVEL RETAIL PRESENTATION

Fasten your seatbelts and discover the world of Travel Retail, the 6th continent for L’Oréal!

L’Oréal thinks of the Travel Retail market as a 6th continent because it’s a market as large as a real continent!

A continent with:

its own borderless territory

its own economy

its own flow of inhabitants

its own population.

A 6th continent with its own capitals. Forget the geography you learned in school: the capital cities of our world are Dubai, London, Hong Kong,

Paris, Singapore, Bangkok or Istanbul…

What does Travel Retail mean ?

Travel Retail means the business undertaken in all the shops located in duty free areas or any areas dedicated to travellers:

With more than 50% in airports... But there are not only airports!

A third of the turnover is made in downtown or border shops, mainly in Asia and Latin America

There are also the sales made on board in planes

Finally, there is also the growing market of cruises in Asia, the Caribbean and Europe

The main driver of this market is therefore passenger traffic, particularly air traffic. Here, 24 hours of global air traffic. Each yellow point represents a plane.

And air traffic is continuously growing, by 5% on average per year, and represents over 6 billion international flights in 2013.

We closely monitor our consumers’ destinations, and particularly their new preferred destinations. In 2014, the cities with top figures in terms of passenger traffic are Istanbul, Doha, Kuala Lumpur and Dubai.

The Travel Retail market therefore fully benefits from the traffic growth. But more importantly, it has already grown faster than the traffic over the last 10 years and according to the forecast of the Generation Research Institute, this market is expected to double in the 10 forthcoming years.

The BEAUTY segment is historically the leading category of this channel, accounting for 30% of total turnover.

And it continues to experience strong growth: the estimated figure for 2013 is +7.4%.

L'OREAL is the historical LEADER in the Beauty category of the Travel Retail market, with over 20% market share, and it has continued to outperform again this year, with an estimated growth of 1.3 points in 2013.

In addition to turnover, Travel Retail is a strategic channel for the development and the visibility of our brands.

Travel Retail is not only an opportunity to showcase our brands but, as a historical leader in this channel, we have developed a precise understanding of our travelling consumers, shop by shop, allowing us to target the best locations.

An ideal location to come into contact with highly qualified consumers, on our Lancôme counter in downtown Hong Kong, for example, it is more than 1.2 products is sold per minute.

Regarding ARMANI, our 2 counters at Dubai airport are among the best performing points of sale for the Brand worldwide.

As for KIEHL'S, Travel Retail is, not only, one of the market that has the most contributed to the brand’s growth in recent years, but it also gives the brand the ability to recruit new consumers. In some of our points of sale, there are more than 20% of travellers who discover the KIEHL'S experience and buy the brand’s products for the first time.

Thanks to its historical bonds with retailers, L’Oréal can negotiate prime locations to establish new brands, such as this CLARISONIC space that we opened in Macau four months ago.

With the collaboration of Brands and local markets, Travel Retail therefore contributes to maximize the exposure of travellers from around the world to our brands, to increase customer loyalty but also to recruit new customers.

The Travel Retail market has undergone a profound change for several years:

- Firstly, the business model of airports is changing.

In the 1970s, this business was limited to a few multi-category stores around the boarding gates.

Today, it is the opposite: airports have become big shopping malls surrounded by boarding gates.Passengers are invited to cross the shops to arrive at the departure gate.

- The profile of travellers is also evolving, switching from businessmen of the West to fashion addict consumers from emerging countries.

Today, these Travel Retail consumers, the inhabitants of this 6th continent, are global shoppers: they are not only shopping where they live... they shop wherever they are: in their local markets, when travelling and also in the markets of their destination. First covering their region and then extending their reach to other parts of the world:

Paris is the first destination outside of Asia for Chinese tourists, but there are also many Chinese tourists in Los Angeles or San Francisco.

It is well known that Russians are very likely to travel to Turkey but in recent years, they have been visiting en masse our shops in the Middle East and Thailand.

Brazilians’ main destinations are Buenos Aires, Miami and Lisboa.

Nigerians love London, the inhabitants of the Emirates are among our best customers in India and, as for Koreans, they travel more and more to South East Asia.

The in-depth analysis of these "nationality corridors" across the world has allowed L'Oréal to develop a “tailor made” approach, a personalized approach to better engage these global shoppers, wherever they are:

with beauty consultants who speak their language and offer services tailored to their national preferences

with specific product lineups that suit their needs

with multilingual support materials

with favorite products for each nationality

and also by celebrating key cultural events relevant to different nationalities

Such as, for instance:

Celebrating the Chinese New Year in Paris CDG airport or in Haiwai, where our Chinese customers travel to.

Celebrating the end of Ramadan at DOHA airport of course, but also at Heathrow.

Celebrating DIWALI at Dubai airport, as Indians are the most numerous travellers at this airport.

Finally, for global shoppers, travelling is always associated with souvenirs and gifts. Once again, we target our products to provide them with a “tailor made” experience:

PREMIUM products such as the beautiful limited edition of CRISTAL by ARMANI available in the most selective points of sale of this distribution channel.

Or our gift sets that our global customers traditionally offer when they return from a trip.

In addition to global shoppers, the Travel Retail market is experiencing a new phenomenon: the democratization of travelling. In all emerging

countries, the members of the middle class are keen to travel outside their country.

This new influx of travellers will transform the Travel Retail market, which is now evolving from a business model focused exclusively on the LUXURY segment towards a more diversified range that can meet the needs of customers of different levels in terms of purchasing power.

The L'Oréal Paris brand is already present in the Travel Retail channel and we have decided to expand and accelerate its deployment.

Similarly, we have recently introduced in this channel the Body Shop Brand, which is very appreciated by travellers, and we have planned an acceleration of new points of sale openings.

This acceleration must benefit all the brands of the Group and it is for this purpose that the Group Travel Retail Multidivision was created in November 2013.

Based on our expertise acquired after 30 years working in the Luxury category, this will allow us to target the implementation of the various Brands of the Group, from Luxury to Mass-Market, from dermo-cosmetics to hair care products, without forgetting The Body Shop Brand.

These are significant growth opportunities for our Travel Retail business, and we can see how much this channel can contribute to the winning over the one billion new consumers targeted by Jean-Paul Agon.

Thanks to the notoriety and diversity of its unique portfolio of brands, L'Oréal is ideally positioned to offer travellers from all over the world all the products they want, whatever their beauty rituals or their purchasing power.