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Insight Information in Category Management Co-operation

Xavier FILOU General Manager of Corporate Trade Relations L’OREAL

Copresident ECR France

2009 Key Figures

World’s number 1 cosmetics group

23 international brands(1)

130countries

67,500employees

17.5 billion euros of sales in 2008

patents registered in 2008674

(1) Brands with annual sales of more than 50 million euros.

Hair salons Mass market Selective Pharmacies

Present in 4 key distribution channels

A Pure Player in Beauty

Excluding soap, toothpaste and razors. Provisional estimates for 2008. Source: L’Oréal estimates

20081993 1994 1996 1997 1998 1999 2000 2001 200320021995 2004 20062005 2007

+5.5%

+3.0%

A resilient cosmetics market… Annual growth rate of + 4.5 % over the last 15 years

(1993 – 2008* - Annual growth rate)

World’s number 1 cosmetics group

L’Oréal

Procter & Gamble *

Unilever *

Estée Lauder

Avon

Beiersdorf

Shiseido *

Johnson& Johnson *

Kao Corp.*

Chanel *

0

5

10

15

20

25

30

Sal

es i

n b

illi

on

US

do

llar

s

25,81

19,8

15,55

7,84 7,6 7,03 6,49 5,8 5,564,43

* estimates

WWD Beauty Biz Ranking Sept. 2009

2008 Sales

« Beauty’s Top 100 »

in US $

L’Oréal market share* 2000–2008Based on estimates of the worldwide cosmetics market updated in 2007

14.3%

15.2%15.8%**

13.8%

* Excluding soap, toothpaste and razors. Source: L’Oréal estimates.** 2008 with YSL Beauté over a full year

Constantly improving its worldwide positions

2000

11.0%11.7%

13.6%

12.4%13.2%

2001 2002 2003 2004 2005 2006 2007 2008

MIZANI

A unique portfolio of strong and complementary brands

LuxuryProducts

ActiveCosmetics

The Body Shop

ConsumerProducts

ProfessionalProducts

1.2 billion

X 2

2.5 billion

Our ambition: double our consumer base

Accelerated urbanisation: … 60% of the population will be city-dwellers in 2020

X 2

> 60 years< 25 years

€ 87.3

€ 25.1

Average skin care expenses per consumer in France, by age

Source: TNS Worldpanel France - 2008

Women over 60 years old spend twice as much on facial skincare as women under 25 years old

Cosmetics’ usage, by age and by category European Health & Beauty Survey – Men - 2007 - IPSOS

Men: the potential of the new generation

* H&B Survey - 2005

CleansingProducts users (%)

Moisturizingday cream users (%)

20 – 29 years old

50-59years old

15 %

23 %

17 %

30 %

20 – 29 years old

50-59years old

Accessible innovation

Opening up new categories

1

2

3

4

5

Accelerating globalisation

Reducing costs and streamlining organisational structures

Strengthening business drivers

Increasing

our

consumer

base

5 strategic thrusts

Breakthrough innovations at the heart of each market14

Breakthrough innovations at the heart of each market15

Breakthrough innovations at the heart of each market16

Category Management at L’OREAL today

The explanatory factors of the Category Management birth

Markets complexity– New products, growing segmentation

Necessity to develop markets, then growth, and to optimize assortment

Evolution of purchasing behaviors– A more and more informed, volatil, fickle , and clever purchaser. – Planned, timely, immediate, conditionned, identified purchases...

Necessity to fit to trends consumption System of information explosion

– Scanning, panels, loyalty card… New information to use

Today, Category Management is a tool of differenciation, in full transformation.

It is a strategic function of General Management

N°1 worldwide, we are bearer of responsabilities vis-à-vis consumers and retailers

L’action opérationnelle et ciblée :

- Coordonner les chantiers trans-Affaires et les actions spécifiques enseignes (op événementielles, Club Beauté, ECR…)

La stratégie catégorielle :

- Identifier les leviers de croissance par catégorie et par enseigne (Revues de marché et de performance)

- Influencer le distributeur dans la construction de sa stratégie catégorielle (assortiment, merchandising, valorisation…)

- Coordonner les projets, assurer le suivi, la mesure des résultats et la mise en place d’éventuelles actions correctives

L’expertise Hygiène Beauté :

- Définir et exprimer la vision stratégique de L’Oréal sur l’HB

- Anticiper les évolutions de marchés, les mutations de la distribution et les initiatives des concurrents

- Développer des partenariats sur le rayon HB avec nos clients

Visionglobale

Stratégieciblée

Actionspécifique

Category Management Scope of ActionsCategory Management Scope of ActionsThe Hygiene-Beauty Expertise:-To define and express the strategic vision of L’OREAL on HB-To anticipate market evolutions, distribution changes and competitor’s initiatives-To develop partnerships on HB department with our customers

The category strategy:-To identify the growth driver by category and by banner (market and performance review)-To influate the retailer in the building of his category strategy (assortment, merchandising, valorisation...)-To coordonate projects, to ensure the follow-up, the measure of the results and the implementation of possible corrective actions.

The operational and focus action:-To coordonate the « trans-affaires » projects and the specific actions for the retailers (special events, Club Beauté, ECR,... )

L’Oréal’s mission To understand the shopper ( Study market background

Hygiene-Beauty Men and Women) : – Perception of hygiene-beauty today– Expectations to anticipate consumption changes

To understand the categories

The contribution of brands and innovations

To understand the shopperMain teachings of the study shared with retailers

(1/3)

The consumer’s perception:– HYGIENE-BEAUTY: avoid naming

=> The BEAUTY contains henceforth the whole offer

– The consumer lives the Beauty experience as a pleasure of recentring on himself. => SELF CARE caracterises the values associated to this universe

– Today and in an-ill assorted way, the department does not reflect the evolution towards dream, sensorality and the pleasure conveyed by the products and brands’ communications.

Source : Etude Fond de marché L’Oréal 2006

To understand the shopper Main teachings of the study shared with retailers (2/3)

Shoppers’ expectations :

– Expectation of a priviledged and differenciated space within the shop=> a real « bubble of pleasure »

– Desire for an atmosphere inviting to escape and focus on oneself– To make an area with appeal stand out:

=> Good deals corner : promotion area=> Innovation theatralisation=> Brands speaking=> Special performance of « self image » categories

Source : Etude Fond de marché L’Oréal 2006

To understand the shopper Main teachings of the study shared with retailers (3/3)

3 universe of « Self Care » well differenciated:

– Take « Self Care » with a moment of pleasure and preparation of oneself – Take « Self Care » working and playing with self image – Take « Self Care » in the secret of a relation with our intimate body

A specific and independant area : For Men

Source : Etude Fond de marché L’Oréal 2006

POLE SEDUCTION

PÔLEFRAICHEUR

PÔLEHOMME

PÔLE INTIME

Parfums Femme

MaquillageColoration

Soins visageSoins corps

Solaires

Acc. chev Coiffants

Bains DouchesSavons

Déodorants

DentifricesBrosses à dents

Rasage fémininDépilatoires

Hygiène intimePréservatifs

Hygiène féminineIncontinence

MouchoirsCoton et coton tige

1ers soinsSoins du cheveu / Shampooings

Gels douchesShampooingsDéodorants

RasageAprès-rasageSoins visage

Parfums

4 univers différenciésrépondant aux attentes consommateurs

MON UNIVERS BEAUTE

Understanding the shopper A study used to lay the foundations for hygiene-beauty department

02.2010L’Oréal DPGP / Essential keys

1. To select CATEGORIES that will be actor of the universe

Make-up, Perfums, Hair colorant, Hair care, Shampoo, Styling, Hair accessories, Deodorants,Bath, shower, Soaps, Skin care, Body care, Sun protection, Female care, Oral Care, Foot care…

NEED FAMILY PLEASURE FAMILY

2. Bring together categories by FAMILY

3. Family repartition according to distribution areas

Understanding and working the categories« Essential keys » factor of differenciation and profitability

02.2010L’Oréal DPGP / Essential keys

4. To create ‘’Boutique’’ surroundings

Understanding and working the categories« Essential keys » factor of differenciation and profitability

02.2010L’Oréal DPGP / Essential keys

5. Visibility of the whole universe

6. Fluidity and free movement among the departments

7. Clean & Lighting

Understanding and working the categories« Essential keys » factor of differenciation and profitability

FLUIDITY OFFLUIDITY OFCONSUMER FLOWCONSUMER FLOW

PLEASURENEED

IMPORTANCE OFIMPORTANCE OFNEW LAUNCHESNEW LAUNCHES

ORGANISATIONORGANISATIONOF THE CATEGORIESOF THE CATEGORIES

VISIBILITYVISIBILITY

02.2010L’Oréal DPGP / Essential keys

Ideal practice

The deployment of category management by L’OREAL with retailers

Asia – Latin America - Europe – East - West – France

(Wal*Mart International)(Latin America, USA)

(stores)

(region)

(formats –CRM)

(small formats)

(formats – future – new countries)

(nobody is forgiven)

(Droguery-Market)

CHINA . WAL*MART

UK . ASDA

ARGENTINA . WAL*MART

MEXICO . WAL*MART

UK . TESCO

HUNGARY . TESCO

DI . Belgium

The deployment of category management by L’OREAL

with retailers in Asia

Chine . Beijing.

Argentine .

Indonésie .

Singapour .

Turquie .

BulgarieBulgarie

The deployment of category management by L’OREAL with 3 ECR France partners

Flash on ECR Flash on ECR The 4 areas of in 2010The 4 areas of in 2010

Focus on

Consumer

Connected Business

Information

Share our Supply Chain

Prepare People

Organisation of the new international maturity cards

Category management?

Categories?

ECR definitions of category management

Category : A category is a distinct, manageable group of products/services that consumers perceive to be interrelated and/or substitutable in meeting consumer's needs

Category management : Category Management is a retailer - supplier process of managing categories as strategic business units, producing enhanced business results by focusing on delivering consumer value.

ECR Europe – Rapport des meilleurs pratiques du Category Management (1997)

Men category Market

Men category Market

Men category Market

Men category Market

Overall results

Store average : sell-out x8

CARREFOUR Market advantage for the whole category:

– Panels : +10%– L’Oréal Group : +11.8%

CASINO in CLICHY

CASINO in CLICHY

CASINO in CLICHY

Perspectives Casino 2010

A know-how... Casino in Clichy (-22% before reorganization)

Perfumery at + 66.4% in turnover / PGC Store + 27%# customers + 29% (+15% pdv) Spendings + 29.2% Average price + 14.1%

24-nov-08 au 22-nov-09 (52 semaines) + 66.4%

Weight Perfumery Clichy 7.3% vs 5.4% CasinoContribution Parfumery growth T/O 14%

Seconde réalisation Asnières Parf +26.9% vs +8.7% pdv

LECLERC in FRANCONVILLE

New generations

LECLERC in FRANCONVILLE

LECLERC in FRANCONVILLE

New generations

LECLERC in FRANCONVILLE

New generations

LECLERC in FRANCONVILLE

New generations

LECLERC in FRANCONVILLE

New generations

Pascal Baudhuin Int'l Category Manager . L’Oréal DPGP

09. Maquillage01. Acs Maquillage09. Soin du visage & corps01,5. Parfums Femme03,5. Déo Femme01. Solaire

08. Savon Bain Douche05. Dentaire03. Para05. Coton mouchoir

07,5. Homme Rasage dépilatoire

05. Coloration03. Styling02. Acs Cheveux08. Shampooing

1. Innovation

Promotion

9. Maquillage

Inn

ov

atio

n

Pro

mo

Pro

mo

5. Dentaire

1,5. Parf 3,5. Déo F

Acsmaq

9. Soin visage & corpssolaire

07,5. homme . Ras depl H

3. styling 2. Acs chv 5. coloration

8. shp ap shp

8. SAVON BAIN DOUCHE

3. para

5. Coton mouchoir

SBD

Franconville

LECLERC in FRANCONVILLE

L’OREAL UK

A good example of anglo-saxon experience

Grocery Team Core Category Experts

The UK Category Management team is structured by category and there is a dedicated team for Grocery

Cat Man Key Tasks and Competencies

Deliver Category and Shopper Expertise Retailer Insights

Insights gained through Relationship and Retailer Meetings

Retailer’s Own Objectives for Category Reviews

Retailers View on Brand Performance

Retailers view on Commercial Teams and Overall Trading Relationship

Retailers Timings for Category Reviews

…..

Cat Man Key Tasks and Competencies

Support Range Reviews Optimising the retailer category range

Right brands, Right space, Right adjacencies

BUT ALSO:Defending and developing L’Oreal group share of space

through objective analysis

“Sweating the space as hard as possible!!!”

Reviewing the performance of every sku on each bay size to ensure

– best sales – balanced range– benchmarked vs market– ease of shop/brand blocking– space vs sales analysis

Cat Man Key Tasks and Competencies

Support Range Reviews

Planogram ProposalsCurrent Proposed

Cat Man Key Tasks and Competencies

Support Range Reviews Follow-up Analysis

Skincare Category Range Review Tracking

£500,000

£550,000

£600,000

£650,000

£700,000

£750,000

£800,000

£850,000

£900,000

£950,000

£1,000,000

Jan-

03

Feb

-03

Mar

-03

Apr

-03

May

-03

Jun-

03

Jul-0

3

Aug

-03

Sep

-03

Oct

-03

Nov

-03

Dec

-03

Jan-

04

Feb

-04

Mar

-04

Apr

-04

May

-04

Jun-

04

Jul-0

4

Aug

-04

Sep

-04

Oct

-04

Nov

-04

Dec

-04

Jan-

05

Feb

-05

Mar

-05

Apr

-05

May

-05

Jun-

05+£120k / week

Creating Category Growth following each Range Review…

Skincare Category Range Review Tracking

£0

£20,000

£40,000

£60,000

£80,000

£100,000

£120,000

Jan-

03

Feb

-03

Mar

-03

Apr

-03

May

-03

Jun-

03

Jul-0

3

Aug

-03

Sep

-03

Oct

-03

Nov

-03

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-03

Jan-

04

Feb

-04

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-04

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-04

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-04

Jun-

04

Jul-0

4

Aug

-04

Sep

-04

Oct

-04

Nov

-04

Dec

-04

Jan-

05

Feb

-05

Mar

-05

Apr

-05

May

-05

Jun-

05

We

ek

ly S

ale

s (£

)

Garnier L'Oreal Paris

Total L'Oreal & Garnier space +31% YoY May 05

Total L'Oreal & Garnier sales +21% YoY

… with L’Oreal Paris & Garnier’s sales leading the trend

Cat Man Key Tasks and Competencies

Drive the Beauty Opportunity

In-Store Environment

LARGE FORMAT (3,500 sq. ft): 15 Stores

Beauty AdviceCentre

Store Project Examples: Morrisons New Look H&B

Impactful visuals signpost entry to H&B; mixture of low and high fixtures encourages browsing; Headers and on- shelf education assist consumers navigate through the fixture

SMALL FORMAT (2,600 sq. ft): 60 Stores

Adaption & Roll-out to 3- Aisle Stores

RESULTS: Morrisons is the fastest growing Retailer in the Beauty Categories

8,6% 8,6%

1,6%

-2,8%

1,2%

3,4%

-4,0%

-2,0%

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

2008 YTD 09

Market Morrisons Tesco

Store Project Examples: Morrisons New Look H&B

Tesco Nottingham 2008

Tesco Home Plus In Store Evolution

•13 stores over 3 year period 2006 -2009• Future vision layout & merchandising for H&B achieved in 2008 stores • Key features – curved free standing gondolas, testers, illuminated branded headers, graphics and lightboxes, interactive educational panels for Skincare & Colourants and category information

bespoke Skincare units (headers + Shelfstrips)

Educational GE’s on Skincare Regime + Testers

bespoke Colourants units (headers + Shelfstrips)

Skincare Advise Tool

Tesco Nottingham 2008

Tesco Homeplus

Engagement at fixture is also key – over 10 minutes browsing result in higher purchase basket

shelf-strips can be used to help consumers understand the different franchises, Leading to consumers purchasing what is right for them

Women find shopping the category confusing and overwhelming in both high-street and supermarkets

32% of skincare shoppers wanting more ‘consultant/advice available’

Over 70% of shoppers know what brand/product they want before entering the store

Shopper insights: Branding and education is key in skincare

Source: L’Oreal Skincare U&A 2009, In-store Research 2010, Quantitative & Qualitative Research Insights February 2009

Tesco Extra Slough

Morrisons Milton Keynes Asda Living Bradford

Superdrug Westfield

Boots Hammersmith

Opportunity: Facial skincare

FAIRPRICE SINGAPORE

TESCO HUNGARY

CARREFOUR AUTEUIL

GUARDIAN MALAYSIA KUALA LUMPUR

CARREFOUR ARGENTINA

FAIRPRICE SINGAPORE

Opportunity: Facial skincare

Impactful visuals in ‘chilled’ section

Generic fins to navigate through Herbs & Spices

Large banners and on-shelf education

Sainsbury’s using strong, clear signage throughout Food & Beverage

How can we replicate education in Skincare to maximise growth?

Very little inspiration to encourage browsing -no clear signage or on-shelf education to assist consumers in finding the right brand/product to match their needs

JS Skincare Vision: Use of impactful visuals and lit shelving to create an inspirational environment; while branded fins help navigate

the fixture…

LOW FIXTURE: Bringing a high-street feel to the grocery environment to encourage browsing

…complemented with information panels and educational shelf strips across all key players to assist shoppers in making the right

choice

…with information panels (and glorifiers) centrally located at eye-level

Interchangeable -to provide

generic information as

well as to shout about ‘New’

The Future

The concepts of the future

« Christophe Robin, Expert Colorist for L’Oréal Paris gives you live all his expert tips and advice »

1.  « Bring your phone close to the shelf and meet Christophe Robin, the colorist of the stars »

2.  « Select the product of your choice and get Christophe Robin’s specific advice on it »

3.  « You need more advice? An expert advisor calls you on the spot to guide you in your selection »

Mobile Initiatives EVENT & IMAGE COMMUNICATION

Mobile Initiatives EVENT & IMAGE COMMUNICATION

« L’Oréal Paris star secrets confidentially on your mobile »

1.  « Bring your phone close to the shelf »

2.  « Enter in a confidential relation with Laetitia Casta and discover her

favorite lipstick color »

3.  « Download a signed kiss from Laetitia Casta as

wallpaper and send it over »

« Download for free «The World Is Mine» on your mobile for one Party Proof purchased!! »

1.  « Bring your phone close to the

shelf »

2.  « Listen to an extract of Guetta’s last HIT»

3.  « At the cashier, download for free the whole HIT on your mobile, and you’re ready to

challenge your look! »

Mobile Initiatives Promotion cross merchandising

« 1€ reduction on your Party Proof for the purchase of Guetta’s CD »

1.  « Bring your phone close to the

shelf »

2.  « Discover how you can challenge your look with Party Proof»

3.  « At the cashier, for the purchase of David Guetta’s CD, 1€ reduction on your

Party Proof! »

Mobile Initiatives Promotion cross merchandising