DoruCrinta

WalterPerie

FabioD’Agostino

UBI – Marketing Intelligence

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Cosmetic Sales Growthby geographic zone (in million)

First half 2004First half 2003

Identity

Estée Lauder

L'Oréal-- Founded in 1907 by Eugène Schueller, in Paris

-- 1909 “Société Françasie de Teintures Inoffensives pour Cheveux

-- 1920 L’Oréal already sells in Europe, Americas, Russia and Far East

-- Founded in 1946 by Estée and Joseph Lauder, in NYC

-- 1960 first international office in London for Europe

-- 1961 in Honk Kong for Asia/Pacific area

Who, when and where

Estée Lauder L’Oréal

1974 Sold stake to Nestle

1907 founded - hair dye company

founded – pure cosmetics company 1946

Aramis division is created 1964

Clinique division is created 1968

1970 +Biotherm

1977 + MarieClaire Magazine

Prescriptives division is created 1979

1980 + Vichy, +Metabo-Juille

1982 +Armani parfume license

1984 +Cosmetic operations of Warner Communications (RalphLaueren, 1/2 Jean Lanvin parfumes, part of Helena Rubinstein)

-> Established the Fragrance division1988 +Complete acquisition of Helena Rubinstein

1989 +LaRochePosay (stake)

+Yue-Sai (China)2004-> Sean John joint venture

- Jane mass cosmetics brand

+Mininurse (China)2003+Darpin (France), +Michael KorsFragrances(US), +Rodin & Fields (US)

+ARTec (US)

-> Inneov share

2002+Kate Spade Beauty – full license (US)

-Marie Claire, -Lanvin 2001

- +Biomedic,Shuuemura (stake), Ylang SA (Argentina)

2001-> Gloss.com –joint venture with Chanel and Clarin

-> Elca Cosmetics – joint venture with SARANTIS (GR) for distribution in EEMarket

+Kiehl’s, +Colorama (Revlon-razil), +Response(Sweden), +Dermablend

+Matrix Essentials, +Carson,

-> Participation in CPGMARKET.COM

2000+Bumble and bumble (stake) (US)

+Cela Cosmeticos(Chile,Peru,Bolivia)

+Full control LaRochePosay, +PHAS

-> Joint venture for CADAMUJER.COM

1999+Stila(US), +Jo Malone (UK)

+SoftSheen1998+MAC (complete)

1997+Dona Karan – full license, +Aveda, +Sassaby Inc (Jane brand)

+Maybeline1996

1995+LaMer (France), +Bobbi Brown

1994+MAC(stake) (Canada)

+Redken1993+Tommy Hilfiger –full license (US)

1990Origins division is created

Evolution

Comparative facts

2500No of research employees400

515(2451)No of patents(2003)(17)

3.3R&D as % of turnover1.3

14Turnover (billion$)5

“'Where the future is always present”

L'Oréal

Mission“Bringing the best to everyone we touch”

Estée Lauder

3000*New products300

22200

5

9 42No of factories

14Turnover (billion$)

50500Employees

* formulas (#new products - not available)

Estée Lauder BrandsTu

rnov

er (b

illio

ns)

0.3

0.6

1

premium / luxury professionalurban / consumer

L’Oréal Brands

Turn

over

(bill

ions

)

premium professionalurban / consumer

2

1

0.5

4

IdentityGeography

Where are they?

Source Euromonitor

MAIN COSMETICS MARKETS IN 2003In billions $

* France, Germany, UK, Italy and Spain Source Euromonitor

US 45.4

Japan 21.9

Brazil

7.3

China 6.0

Russia 5.3

* 48

€ 7,221€ 3,784

Western EuropeNorth America

Rest of the World

€ 2,669

Source L’OrealTotal Cosmetic sales €13,704,096

+6%+4.9%

Cosmetic Sales 2003in millions

$1,506.4$2,931.8

Europe, the Middle East & Africa

Americas

Asia/Pacific

$657.8

Source Estée LauderTotal sales $5,096

+7%

+14%

+9%

Cosmetic Sales 2003in millions

The world’s largest C&T markets in 2003 ...

US$bn % vs 0 % vs 97 USA 45,4 0,7 24,3Japan 21,9 3,2 8,1France 12,1 5 33,6German 11,6 1,4 22,8UK 10,1 4,7 21,6Italy 8,5 2,5 27,4Brazil 7,3 12,2 113,7China 6 7,8 63,2Spain 5,7 5,6 56,7Russia 5,3 14,3 1,3

Source Euromonitor

IdentityGeography

Finance

MarketIn which market do the two groups operate and compete?

● Active in three main fields

– Cosmetics and Toiletries

– Consumers– Luxury– Professional– Active (Cosmeceuticals)

– Dermatologicals– Pharmaceuticals

● Essentially active in one field

– Cosmetics and Toiletries

– Consumers– Luxury– Professional– Active (Cosmeceuticals)

L'Oréal Estée Lauder

World marketfor Cosmetics & Toiletries

Market 02/03 97/03 Baby care $3.476,10 5,4% 42,20%Bath and shower $20.701,20 3,3% 24,80%Deodorants $9.242,80 6,6% 38,30%Hair care $42.491,80 4,3% 34,80%Color cosmetics $28.055,00 4,6% 37,70%Men’s grooming $16.221,20 7,3% 47,80%Oral hygiene $20.335,90 3,5% 27,00%Fragrances $22.408,90 3,5% 27,30%Skin care $38.481,40 6,8% 43,60%Depilatories $2.559,50 4,3% 68,00%Sun care $4.302,50 7,8% 55,10%

2003in million

Note: Sum of sectors is greater than the market size because men’s toiletry products are included in men’s grooming and in the relevant toiletry sector.

● $201.000 million● 4,8% growth in 2003

Source: Euromonitor Interbational

Cosmetics & Toiletries Market

Baby careBath and showerDeodorantsHair careColor cosmeticsMen’s groomingOral hygieneFragrancesSkin careDepilatoriesSun care

L'OréalCosmetic and Toiletries

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Cosmetic Sales Growthby operational division (in million)

First half 2004*First half 2003*

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Cosmetic Sales Growthby geographic zone (in million)

First half 2004First half 2003

● High growth in● Asia● East Europe● Latin America

● Decrease in North American market

●Steady Growth in all sectors●'Active comsetics' +16%

Prof

essi

onal

pr

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ry

prod

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Wes

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Eu

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Nor

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Amer

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Res

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the

Wor

ld

L'OréalDermatology

– Galderma● Joint-venture with Nestlé

(1981)– Sales decreased

● United States● Germany

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Dermatological Sales Growth

First half 2004First half 2003

* in million** 50% share

L'OréalPharmacology

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Pharmaceuticals Profit ShareSanofi-Aventis

First half 2004First half 2003 63,46%

12,99%

10,41%

6,19%5,59%

Sanofi-AventisCapital structure at 31 August 2004

PublicTotalL'OréalKuwait Petroleum CorporationSanofi-AventisEmployees

... l’Oréal has given its full approval to the offer made by Sanofi-Synthélabofor Aventis ... L’Oréal intends to keep its shares and will record its share of the dividends paid by Sanofi-Aventis in its consolidated income statement ...

Estée LauderCosmetics and Toiletries

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$500,00

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Cosmetics Sales Growthby geographic zone

First half 2004First half 2003First half 2002

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Cosmetic Sales Growthby product

First half 2004First half 2003First half 2002

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Financial Health

FULL YEAR PROFIT/LOSS 30JUN2004C 30JUN2003C 31DEC2003C 31DEC2002CRevenue 5790m(USD) 5096m(USD) 14029m(EUR) 14288m(EUR)Operating Result 644m 503.7m 1819m 1778mPre-Tax Profit/Loss 616.9m 495.6m 1869m 1698mNet Attributable 375.4m 302.2m 1491m 1277mBALANCE SHEETCash 611.6m 364.1m 554.1m 544.4mCurrent Assets 2199m 1844m 6875m 6842mFixed Assets 1508m 1505m 8136m 8130mTotal Assets 3708m 3349m 15012m 14972mCurrent Liabilities 1322m 1053m 3260m 3827mLong-Term Debt 652.6m 512.7m 759.1m 825mTotal Liabilities 1959m 1554m 6875m 7539mMinority Interests 15.5m 12.3m 11.9m 11.9mShareholders Equity 1733m 1423m 8124m 7421m

Estée Lauder L'Oréal

Estée Lauder’s net profit: +19.5%L’Oréal’s net profit: 14.3%

What about stock value?Estée Lauder

New YorkStock Exchange

Source: bigchart.com

What about stock value?L’Oréal

ParisStock Exchange

FrankfurtStock Exchange

Source: bigchart.com

IdentityGeography

Finance

Demographic

Age Pyramids – USA, Europe15 and Japan

Source European Commission Employment & Social Affairs

Source: United Nations (1999): World Population Prospects.

CHINA

Male Female

Changes in Population Pyramid-India (1971-2016)

Source: Technical Group on Population Projections, Registrar General of India (RGI) 1996

Worldwide, the population will age.

IdentityGeography

Finance

Demographic Market Trends

L’Oréal Turnover Trends

Estée Lauder Turnover Trends

Industry evolution

The rise of upper mass productsEmerging markets will outpace Fast innovation and new retail concepts will boost market penetrationReal term global sales expected to grow by 2.9% annually, for the next four yearsShift from ingredients towards ‘cosmo’moleculesBeauty Silk of Far East goes West again.

Market volume trends

Forecasted growth per cosmetic categories

IdentityGeography

Finance

Demographic Market Trends

Values & Ethics

L’Oréal and the society

SHE policy– Strict rules about Safety, Health and

Environment– Energy and water cosumption– Atmospheric discharge

L’Oréal-Unesco– Partnership “For women in science”

"Science is the root of all progress and the contribution of women is essential to its future".

Lindsay Owen-Jones

Estée Lauder and the society

Packaging– Strict protocols to encure environmental

criteria fulfillmentConform to ISO 14001

“The Estée Lauder Companies realizes that in order to ensure the long-term success of our Corporation, our financial goals need to be integrated with the human and ecological impacts of our business.” Edward M. Straw

L’Oréal and Estée Lauder

According to

“All For Animals” based in Santa Barbara, California (http://www.allforanimals.com/)

both L’Oréal and Estée Lauder

DO NOT test their products on animals!

IdentityGeography

Finance

Demographic Market Trends

Values & Ethics

Competitors

Existing competitors

Alberto-Culver Elizabeth Arden

AvonBeiersdorf

Chanel Church & Dwight

Clarins Colgate-Palmolive

Coty Del Laboratories

Dial Gillette

GlaxoSmithKline Intimate Brands

Johnson & Johnson

S.C. Johnson Kao

LVMHNuSkin

Mary Kay Cosmetics Oriflame

Pfizer Playtex Products

RevlonSchering-Plough

ShiseidoUnilever

Procter & GambleWella

New competitors/products• Sensient technologies, Symrise,Fimenich, Givandan, Human Pheromon

Sciencies Co., Radiancy - ingredients • Elizabeth Taylor (Curious), Ted Barke, Vera Wang, Kenneth Cole,

Oxford Industries –fragrances• Cosmetochem, Imaginetix(Celadrin), Inerparfums, Helix Biomedics,

Universe Cosmetics, Healthspan, Disperse Technologies, DNAcareSystems, Croda –haircare, Rohm and Haas –haircare, Dow Corning –hair

• Janson-Beckett Cosmeceuticals (OkuSil), NeoStrata –skincare, Inamed(Hylaform anti-wrinkle treatment ), Arch Personal Care Products -'genetically-guided' skin care, Valeant –pharmaskincare, Omega Pharma, Artdeco –skincare, DHC Corporation –skincare, Juvena –skincare, Miss Sixty, N.V. Perricone(Clinical Creations) , Klein-Becker (StrivectinSD), Philosophy, Laboratoires Sérobiologiques, Tolsom/Quixtar, Classified Cosmetics

• Shaklee Corporation - colour cosmetics , SkinMedica –cosmeceuticals, Gel-Del Technologies (CosmetaLife –botox alternative), HauteFaceCosmetics-ethnic, Laboratoire Pharmygiène's –sun products, City Lips -lips cosmetics, OT Over Time – teen products

• Natura Cosmeticos –Brazil, Kose Japan, Kalina-Russia, G&D Cosmetic(China) -green fields

IdentityGeography

Finance

Demographic Market Trends

Values & Ethics

Competitors Distribution

RetailersEL Travel retail divisionOwn ShopsPharmacy

EL bought Paris-based company Laboratoires Darphin.E-business EL e-commerce business grew 36% in 2003L’Oreal e-learning, business simulations and virtual seminars.

Distribution Channels

IdentityGeography

Finance

Demographic Market Trends

Values & Ethics

Competitors DistributionCustomers

Consumer transformation trends

Research will be ‘hastily’ applied due to demanding customersElder people will demand increase share of the pieNew attitudes will shift perception of age Simplifying consumer choiceThe ‘whealthchare’ pursuit will boost large market areas like cosmetic supplements or cosmetic surgery

Customers do change

At home salon experienceTeens – the new family budget dictatorsThe beauty goes beyond skinThe power of exampleYou can take it with you

Completed!

IdentityGeography

Finance

Demographic Finance Values & Ethics

Competitors DistributionCustomers

SWOT Estée LauderStrengths• Management expertise• Marketing ability• Large market share• R & D advantage• Established brandsWeaknesses• Complex structure• Lack of focus• Selling costs are 20% of net sales• Management structure under reorganization after the death of founder, Ms. Estée

LauderOpportunities• Growth opportunities in China, Russia,Eastern Europe, Brazil and India• Pick-up of travel• Availability for strategic alliances in the electronic commerce area• Plenty of candidates for acquisitionThreats• Exposed to crisis events (SARS, recession, terrorism etc) causing downturn in

travel• Downturn in department store sales• Other competitors• Americans stagnating spending on cosmetics

SWOT L’Oréal

Strengths● Size● Diversification● Global coverage● People● R & D advantage● Established brandsWeaknesses• Dominance of Gesparal, L’Oreal’s main shareholder • Room for margin improvements● Dependency on American market● Potential changes in shareholder structure (Mrs. Betancourt’s age)Opportunities● Opening markets due to WTO expansion● Increased return on R&D investments● Positive trends for cosmetic products in its portfolio

Threats● Strong Euro.● Discounters cutting down profit from mass market products. ● Strengthened competitors● Sluggishness of European market (especially France and Germany)

Innovation radar

Esté

eLa

uder

L’O

réal

Evaluation

+++Customers+++++Distribution++Values & Ethics+++++Finance+++Trends+++++Brands & Products+++++GeographicalEstée LauderL’OréalFactor

Estée Lauder hot topics Watch out for predators Resolve the weakness in male and ethnic portfoliosPositioning forces it in a follower position for emerging marketsOpen up management structure to new peopleInvest the cash or loose

L’Oréal hot topics

Balance European market revenueWin China and create the first Chinese global brandPrepare for shareholder shakeout and EU scrutinyExpand research by acquisition and investmentAttack the African cosmetics market for the ethnic products

Sources• Industry reports from Merill Lync, Morgan Stanley, Deutsche Bank, JPMorgan• L’Oreal Study - Fabien Blanchot & Michel Kalika, 2003 - Université Paris-Dauphine • http://www.elcompanies.coom• http://www.loreal.com• http://www.cosmeticsdesign.com• http://www.colipa.com • http://www.manyworlds.com/• http://www.ctpa.org.uk/page.asp?section=2&page=3• http://news.surfwax.com/beauty/files/Estee_Lauder_Perfume.html• http://www.academic.marketresearch.com/product/display.asp?productid=143435&prid=1111111• http://www.cpcpkg.com • http://strategis.ic.gc.ca • http://www.findarticles.com/p/articles/mi_m0BEK/is_6_8/ai_62408616• http://www.in-cosmetics.com• http://www.cosmeticpackaginganddesign.com• http://www.ced-lyon.com/gb/dermocosmetologie/recherche.html• http://databases.cosmeticsbusiness.com/web/• http://www.allforanimals.com/