L'Oréal China's Growth Hits 15-year High, "HUGE Project" Unveiled to Lead the Future of Good Consumption

Shanghai, March 5th, 2020 – In the season of awakening ("Jingzhe"), all come back to life. And when spring returns, L'Oréal, China's largest beauty group with 23 years of firm commitment to the local market, has just finished a record year for growth in 2019, the fastest in the past 15 years, casting a strong vote of confidence for the development prospects in China.

Today, at a special epidemic-fighting moment, president and CEO of L'Oréal China Mr. Fabrice Megarbane, together with representatives of the management team and guest speakers, convened the Group's first conference in 2020- the Annual Results Press Meeting - in digital form for the first time.

The conference highlighted L'Oréal China's phenomenal 2019 results and industry-leading innovations, and announced the launch of "HUGE Project", its new strategy for the next 10 years. With a long-term vision in mind, L'Oréal China is building a company of the future, leading the future of beauty, and co-creating with all partners a new ecosystem for good consumption.

In an era of Hundun (chaotic complexity) amid global changes, China's reform and opening up of China continue to scale new heights; the troika of consumption, quality, and innovation drives structural economic reforms; entering the final stretch of fighting poverty, China is marching towards building a comprehensively well-off society by 2020 --- All these are driving China to undertake greater responsibilities on the global stage.

At the same time, people's aspirations for a better life is creating immense dichotomies never seen before on China's market: consumption upgrading vs. consumption segmentation, consumerism vs. consumer social responsibility, fragmentation vs. aggravation, tech fanatic vs. technophobia, and new competitors vs. new partners, bringing forth new opportunities and challenges like never before. As the frontrunner of the beauty industry,

L’Oréal China is initiating innovative responses to meet the consumers' desire for a better life, in an entrepreneurial spirit unique to startups: exploring new accelerators for business, developing most loved brands digitally, piloting efficacy skincare, live streaming, C2B innovative (reversed consumer-led innovation), IP crossover, and smart supply chain, nurturing fast learning culture in the team.

As a result, the company has surged to new heights in 2019, and made ten remarkable achievements:

• L’Oréal China achieved the 15-year record growth in 2019, with a year-on-year growth rate of 35%.

• Consumer Product Division, Luxe Division, Active Cosmetics Division, and Professional Product Division, the 4 divisions have all scored major progress in both sales and market share, with the leading brands going from strength to strength.

• New category, new ingredient, new technology, new mechanism, new claim, and new occasion: leading the skincare market with edgy innovation.

• Ever stronger makeup brand portfolio: L’Oréal Paris, Lancôme, Maybelline New York, YSL Beauty, Armani Beauty, Shu Umerea, 3CE Stylenanda lighting the desires of consumers and meeting the demands of personalization, also reinforced by two new stars: NYX Professional Makeup, and URBAN DECAY.

• Product-driven innovation and D2C (direct-to-consumer) approach combined to foster more consumer-centric growth.

• Back-to-back champion of 618 and double 11 shopping festivals, No. 1 in both brand and group.

• Accelerate the beauty-tech transformation: dynamic 3D makeup try-on applet, the pioneering L’Oréal Paris Midnight Cream co-created via C2B model, China's first acne diagnosis technology adopted globally, and winning the annual ONE business award from Alibaba's Second ONE business conference.

• Participated in the CIIE as the largest FMCG exhibitor for the second year in a row, creating a 3-in-1 pavilion new consumption experience, launching new products, brands and techs in national and Asian debuts, earning the reputation of a must-go pavilion for the visitors.

• L’Oréal China market became the first to realize carbon-neutrality in all major operation sites including factories, distribution centers, research and innovation centers, and offices; delivered more than 10 million recyclable and bio-degradable green parcels across 14 brands in the year of 2019; more and more brands including L’Oréal Paris, Lancôme, YSL Beauty are launching products with rechargeable packaging. • New height in employee engagement and more breakthroughs in developing a fast learning organization: in 2019, the average annual learning time per employee was 62.7 hours, No.1 across the global markets; and more plans are developed to provide training and learning opportunities for employees worldwide, leveraging China's expertise in e-commerce, beauty technology and sustainable development.

Looking into the future, beauty industry will further integrate with digital and technology, and the public will look forward to more sustainable and responsible beauty products. Eventually for the consumers, beauty will never be one size fits all, instead it will be all for all, or even all for one; it will be diverse, inclusive, and universal. Hence, the L’Oréal Group puts forward the new vision this year: creating the future of beauty and building the company of the future. To that end, the L’Oréal Group will undertake full transformation into a completely digital and tech company, a benchmark for global sustainable development and corporate social responsibility, and provide employees with ever more human care.

L’Oréal China started from zero 23 years ago in China, and has grown to be the leader of the country's beauty industry. To continue to make wave in this increasingly open and huge market, L’Oréal China has released a new development strategy, namely the "HUGE Project" and "1 + 1 + 2" four key drivers to becoming HUGE, so as to create a greater future for all:

HUGE Project

• H – Horizon: World for China and China for World

• U – You: Co-creation with everyone-consumers, partners, employees

• G – Good growth: Healthy, sustainable & inclusive growth with new capabilities

• E – Ecosystem: Winning and benefiting all in an evolving eco-system

"1 +1 + 2" four key drivers to becoming HUGE

• 1 ENGINE - NEW CONSUMPTION

- New consumers to be targeted through demographic/social value/Micro/Lifestyle

- New customized beauty solutions to be presented through new products combined with new services delivered through new connections with consumers

• 1 ACCELERATOR - NEW TECH (BEAUTY-TECH)

- Beauty industry's tech transformation fundamentally driven by its quest to meet future consumers' ultimate needs for personalization

- Data-driven tech solutions to empower the beauty industry's capabilities

- All-round tech-driven transformation to cover the entire value chain from R&D, to manufacturing, marketing, operations and management

- Open innovation teamed with diversified partners both internal and external

- Tech for good: public good always higher than business good

• 2 CORNERSTONES

- New Value: First in the new governance, featuring diversity, inclusion, legal- and ethical-compliance, and a system for the people and by the people. Second in the pursuit of new sustainability, featuring reduction, regeneration and no waste operation, and a sustainable ecosystem on top of the sustainable product lifecycle.

- New Organization and Culture: Strategically centralized & operationally decentralized, nurturing both poet & peasant mentality, full freedom within the frame, full empowerment and accountability, dare to test and learn, emphasis of scale, agility, speed and co-creation.

"HUGE Project" is more about co-creating a new landscape of "good consumption" with local partners, than meeting the needs of business growth. "The philosophy of 'consumption for good' is inspired by the ancient Chinese philosophy of 'She De', and one needs to spare and give up ('She') in order to earn ('De') to create better consumption", according to Mr. Fabrice Megarbane, president and CEO of L'Oréal China, "Consumption for good takes into account both the 'good for me' and the 'good for all' values, therefore is the co-creation of good by the consumer, the business and the society as a whole. The emerging 'good consumption' trend in China will start our future development on the right foot, and we look forward to working with more partners, including consumers, to make good consumption a lifestyle, and to promote Chinese consumption towards high quality, sustainability and innovation, which put people in the center and get widely shared across the world. "

"People's longing for a better life first manifests itself in a good consumption, " comments Professor William WANG Hua, Associate Dean of Em-Lyon Business School, " A good consumption is a social co-creation, in which each of our consumers is also a producer in the process of creating social wealth.

Companies must actively respond to the megatrend of good consumption, and continuously upgrade their products, services, business models, and values, so as to resonate with the consumers searching for good consumption. China is the driving force behind the globalization of consumption. The Chinese philosophy and behavior of good consumption will contribute the 'Chinese wisdom' and 'China plan' to the globalization trend of consumption. "

China is a huge sea teemed with huge fish, which is boundless for the brave to explore at will. The implementation of the "HUGE Project" has also taken L’Oréal China on a broad path towards an even greater vision: to become No. 1 market of the Group's , to become a future beauty lab for the world, and to become a lighthouse of good consumption of the world.

To this vision, Mr. Fabrice Megarbane replied, "In the past 23 years, we have embraced China's speed and scale to become its largest beauty company. And today, setting off on the shoulders of the giant, we are sailing in a flotilla of small boats with huge engine, ambition, and strong passion to lead more partners deep into the vastness of the blue sea. The short-term effect of the epidemic will not sway our firm commitment to China and our endeavor to usher in an even brighter future together with China. And in that future, we will think HUGE, and reimagine beauty! "