L'Oréal - 2018 Registration Document

1 Presentation of the Group Integrated report

BUSINESS MODEL - A DEVELOPMENT MODEL SERVING A CLEAR MISSION: BEAUTY FOR ALL

In 2018, growth in the beauty market was between +5% and +6%. Overlapping distribution channels, and the extremely rapid growth of e-commerce, make it more difficult to estimate the pace of growth in each channel. All in all, we saw contrasting growth patterns by region and by distribution universe. Growth was robust for skincare in 2018, particularly in the selective market. This category remains the leading contributor to growth in the beauty market. Make-up also saw strong growth in 2018, but slightly lower than 2017. The selective market once again surged ahead, driven by China and Travel Retail. It was the sector that made the largest contribution to growth in the beauty market in 2018. We estimate that the pace of growth in the mass market was slightly up in 2018, although with growth limited to Japan and Russia, and with a difficult situation in Brazil. China saw strong growth in 2018 but conditions remained very tough in the Gulf States and in France. Dermocosmetics continued to grow at a steady pace. Growth in the Professional market remained limited. Across all segments, the sharp acceleration in e-commerce continued.

North America saw a significant improvement in 2018 compared to 2017 thanks to the USA. Western Europe was generally flat in 2018, due to a slowing of growth in Southern Europe and a still difficult French market. The pace of growth picked up in New Markets to account for almost three-quarters of the beauty market’s global growth in 2018: Asia had an exceptional year, driven by the very strong s growth both inside and outside China. The beauty market in the Asia-Pacific region is now worth over double the market in Western Europe; the picture in South America is more nuanced: economic s conditions were challenging in Brazil, while other countries, such as Mexico, performed well; Eastern Europe grew at the same pace in 2018 as in 2017, s in a context of slow growth in Russia.

MAIN WORLDWIDE PLAYERS 2017 revenue in billions of US $ (1)

29.4

21.5

12.8

12.4

9.2

8.8

6.3

6.3

5.8

5.4

Estée Lauder

Procter & Gamble

L’Oréal

Unilever

Coty

Shiseido

LVMH

Beiersdorf

Chanel

L Brands

Beauty market outlook Beauty is a universal aspiration that will continue to feed sustainable growth in the cosmetics market. The main drivers in the market will be accelerated growth in the middle classes in emerging economies, who will aspire to consume more high-quality cosmetic products, as well as the expansion of categories with further untapped potential in mature economies. The increase in the number of seniors, urbanisation and the development of the men’s product market will be the main drivers of growth. Estimates project that the market will double by 2030 (2) . As digital and social networks explode around the world, evolving lifestyles will see the emergence of a new era to buoy growth: the era of “social beauty”, social, connected, shared beauty. Beauty will become even more essential, as appearance

increasingly reflects people’s personality and is seen as vital both for their self-confidence and relations with others. Consumer expectations have shifted dramatically in this new era: they want more individualised relations and ongoing dialogue with the brands they use in each country; they expect personalised advice on choosing and using products; and they want an immersive and unique purchasing experience, with direct access to brands, especially through online sales channels or in specialist shops. L’Oréal is an agile and flexible organisation that is quick to react. The ability to select and continuously fine-tune advertising and communication materials to more demanding customers is part of its essential value proposition.

Source: Beauty’s top 100, WWD, May 2018. (1) Source: 2018 Paxton study for L'Oréal. (2)

REGISTRATION DOCUMENT / L'ORÉAL 2018

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