Key Facts and Figures 1st cosmetic group worldwide

1 century of expertise in cosmetics

23 international brands

19.5 billion euros of sales in 2010

130 countries

66,600 employees

612 patents registered in 2010

DIVERSIFICATION STRATEGY

Entering three kinds of industry:

Cosmetics

The Body Shop

Dermatology “Closely-related”

Offering different product lines through four market lines:

COSMETICS INDUSTRY Professional Products

COSMETICS INDUSTRY Consumer Products

Luxury Products

COSMETICS INDUSTRY

COSMETICS INDUSTRY Active Cosmetics

THE BODY SHOP

A chain of cosmetic stores specializing exclusively in hair and skin care products

based on natural ingredients.

Operated a total of 2,550 stores in 62 countries worldwide by the end of 2009.

DERMATOLOGY

Galderma Laboratories: a joint venture with Nestle. It

boasts three of the top 25 best-selling drugs.

It specializes in skin diseases and skin infections.

REASONS OF DIVERSIFICATION

Part of L’Oreal Long Term Strategy

Meet Consumer Needs

Exploiting Relevant Economies of Scope

Strengthening External Growth

1

3

2

Internal Growth

Resources

Asset

External Growth

Diversification (M & A)

Alliances

STRATEGIC CHOICE

GROWTH STRATEGY “Merger and Acquisition”

Reaching a critical size for exploiting

economies of scale.

Satisfying local needs.

Creating a portfolio of distinctive but complementary products and brands.

Quickly acquiring new resources and technologies.

Overcoming the entry barriers.

Objectives:

Operating in different geographical markets from those in which L’oreal is already operating.

CHARACTERISTICS OF COMPANIES ACQUIRED

Offering products that complete the L’oreal portfolio brands or products.

The Body Shop: Enters India Easily

ROGER&GALLET: Produces Pharmacy Fragrance

Operating in geographical markets in which L’oreal intends to

reach leadership position.

Having high technology and competences related with L’oreal products.

CHARACTERISTICS OF COMPANIES ACQUIRED

Inneov: Number 1 in Spain

Vichy: Advanced Skincare Technology

ACQUISITION PREPARATION FLOWCHART

Preparation (Gather

information)

Similarities with L’oreal

Characteristics

What is the Objectives?

Final Preparation

Decision (Implementation)

IMPLEMENTATION

L’Oreal has acquired more than 25 brands with different market segments (see acquisition timeline).

Each brands contributes a different advantage for L’Oreal long term strategies.

The Body Shop makes L’Oreal distribution broader.

ACQUISITION TIMELINE

Professional Products

Consumer Products

Luxury Products

Active Cosmetics

The Body Shop

1990 1995 2000 2005 2010

RISK MITIGATION STRATEGY Innovation and Patent

2001 2003 2005 2007 2009

Registered patents

493 515 529 576 674

R&D expenditures (mill. Euros)

432 480 496 560 609

R&D employees 2,743 2,921 2,903 3,095 3,313

Increasing patent rights on its inventions.

Rebuild the products to get customers’ attention.

Patents, R&D Expenditures and Employees at L’Oreal

MARKETING MITIGATION Market different product with different target market.

Develop a clear positioning statement as a current market leader.

Try to be the first mover – to gain more market share before other.

MARKETING MITIGATION

PRODUCTS STRATEGY Collaboration with Channel Partners

Market Research Agencies

Licensee

Hair Salons Mass Market

Department Stores,

Perfumeries

Pharmacies, Dermatologists

Retail Partners

-50% GREENHOUSE

GAS EMISSION

‘ALIGNING WITH NATURE’ STRATEGY

Reducing impact on natural capital.

Responsible sourcing.

Eco-designing new ingredients.

Addressing controversy on ingredients.

Protecting the global system.

Commitment to Sustainable Development:

-50% WASTE

GENERATED PER FINISHED PRODUCT

-50% WATER

CONSUMPTION PER FINISHED

PRODUCT

Target for 2015

Target for 2015

Biomethanisation Unit at Libramont Plant: 100% Green Energy

NEWEST ACQUISITION: PACIFIC BIOSCIENCE LABORATORIES

Date of Acquisition: Dec 15th, 2011.

Intermediated by L’Oreal USA (the franchisee).

Products: Sonic Skin Care Devices (Patented).

Channels: Dermatologists and Prestige Retail. Main Market: US. Reasons behind Acquisition:

Pacific Bioscience Laboratories’ Expertise in Devices.

QUESTIONS? Thank You for Your Attention