LOREAL_Registration_Document_2017

Presentation of the Group Integrated report A CLEAR STRATEGY : BEAUTY FOR ALL

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. Estimates project that the market will double in the next 15 years. 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

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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. artist-inspired brand; or Decléor, which extends the growth potential of Professional Products to the professional skincare field. Other acquisitions aim to extend the Group's geographical footprint: in Colombia with the make-up brand Vogue, in Kenya with Interbeauty, and also in Brazil with Niely Cosmeticos, and in China with Magic Holdings. These newly acquired companies, through their integration and deployment, are helping to accelerate the Group’s penetration of their markets, and help to drive organic growth going forward. technical data, which represent a veritable asset. Advanced Research creates, develops and sources active ingredients and raw materials drawing on its knowledge of skin and hair around the world. Applied Research invents formula architectures that increase asset performance tenfold and the Development laboratories create innovative formulas with a proven superiority for each brand. This innovation model is nurtured by a constant dialogue between the laboratories and marketing to respond to the aspirations of consumers and to offer technological breakthroughs to change behaviour patterns. In the course of the past five years, R&I has become global, more open, and more customer-focused. This trend supports the Group's strategy of strengthening its global presence and extending outwards from France through six regional hubs (Japan, China, India, USA, Brazil and South Africa). These regional hubs identify the needs of consumers and their cosmetic practices. R&I has strengthened its capacity for innovation and to respond to the infinite diversity of beauty needs all over the world.

A PORTFOLIO OF DIVERSE AND COMPLEMENTARY BRANDS 1.2.4. To meet the beauty expectations of consumers all over the world, the Group has the richest, most varied and most powerful brand portfolio in the cosmetics industry. Moreover, its brands are constantly being reinvented so that they are always a perfect match with local consumer demand. New acquisitions also regularly provide valuable additions to this unique portfolio to respond to consumer trends.

Some of these acquisitions are global brands, such as the CeraVe skincare brand in the Active Cosmetics Division portfolio; or US make-up brands like Urban Decay and IT Cosmetics, which make a tremendous contribution to L’Oréal Luxe; or NYX Professional Makeup, an affordable, make-up REINVENTING RESEARCH & INNOVATION 1.2.5. Adapting to world markets Listening to consumers to improve innovation More than a century has passed since chemist Eugène Schueller invented the first harmless hair colourants and founded L’Oréal. Science and innovation were written into the Group's genetic code and quickly became one of the keys to its success. Determined to offer everyone, everywhere in the world, the best of cosmetics in terms of quality, efficacy and safety, L’Oréal continues to push the boundaries of science and to leverage its CSR (Corporate Social Responsibility) policy as a source of new innovation opportunities. Inventing beauty by meeting the aspirations of millions of women and men remains a steadfast commitment. By remaining ahead of the game in product performance, research at L’Oréal is anchored in a Sustainable Development approach. All ingredients are respectful of customers and the environment. A nexus of regional scientific ecosystems L’Oréal has a powerful Research & Innovation (R&I) model with unique expertise and a formidable bank of scientific and

REGISTRATION DOCUMENT / L'ORÉAL 2017

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