L’Oréal CEO on AI, India manufacturing and creating beauty products for the world

Exclusive | L’Oréal CEO on AI, India manufacturing and creating beauty products for the world

L’Oréal CEO Nicolas Hieronimus speaks exclusively to CNBC-TV18 about India’s growing role in the beauty giant’s global manufacturing and innovation network. He discusses the company’s plans to expand production capacity, its Hyderabad technology centre, India-made innovations being taken global, and how artificial intelligence is accelerating product development, marketing and consumer engagement across L’Oréal.

By Shereen Bhan

L’Oréal is increasingly using India not only as a key market and manufacturing base, but also as a source of technology, innovation and consumer insights that can be deployed globally, CEO Nicolas Hieronimus told CNBC-TV18 in an exclusive interview.

Hieronimus said L’Oréal is expanding manufacturing capacity in India to meet rising domestic demand, with around 95% of products sold in the country made locally. About 20% of what the company manufactures in India is exported, primarily to markets in the region, and he expects exports to increase as production expands.

The company is also building out its technology capabilities in India, with its newly inaugurated Hyderabad tech centre expected to have more than 2,000 employees and provide technology and shared services to India and global operations.

Hieronimus highlighted India’s role in developing technologies for the global beauty market, citing products and formulations created by L’Oréal’s Indian laboratories. He said the company’s strategy is to create products that are highly relevant to India’s diverse climates and consumer needs, with the potential to succeed in other markets.

AI is another major focus. L’Oréal has tripled the number of ingredients it can scan for potential efficacy and cut product-development time by four, while training 84,000 employees on AI. Hieronimus also outlined the company’s approach to responsible AI, including its decision not to use AI-generated humans in advertising.

This is slightly edited excerpt of the interview.

Q: You were here with your global board just last year, so I want to start by talking to you about how India fits into L'Oréal's scheme of things today. It's part of your high-growth markets. It's the region that's seeing the fastest growth as far as the group is concerned today, but specifically for India, what would you read out?

Nicolas Hieronimus: India is indeed a very important and will be more and more important growth engine for the group. At the end of August, it's already made it to the top 10 of our gross contributors, which never happened before. It's the number seven country in terms of gross contribution, which shows that the acceleration is really taking place. The market is very dynamic, around plus 10%, and we are growing around plus 18%, so really outpacing the market. But it's just the beginning. I was with the team the whole week, and they are full of energy and passion, and they see the future with lots of optimism and ambition.

Q: Okay, so seven already. You've broken into the top 10 here in India.

Nicolas Hieronimus: Gross contributor, but not to the top 10 countries. That's the next thing.

Q: So when will that happen?

Nicolas Hieronimus: Hopefully before 2030. Before 2030, India can make it potentially to the top 10 countries of L'Oréal, which means being above €1 billion, basically.

Q: In terms of growth contribution from India, what is driving the India business today?

Nicolas Hieronimus: Well, you know, L'Oréal is a beauty player. We only do beauty, and we do it across four divisions. As you know, we have mass-market products. We have professional, which is hairdresser-inspired and creative products. We have dermatological beauty and luxury. Today, the growth is driven by mass market. India is a more mass-market [country] than maybe other countries, by professional a lot. I mean, L'Oréal Professional in this country is one of the most beautiful in the world. I'm very always impressed with what I see with the pro teams here, and dermatological beauty is really accelerating very strongly with the successful launch of CeraVe and La Roche-Posay. Luxury is booming, but it's much smaller today, considering the purchasing power of Indians. But it's growing double digits, so I'm very excited about luxury too. So we're basically firing on all engines and all categories. That's why India made it to the top seven position as a growth contributor.

Q: You know what's also interesting now in terms of what you're doing in India is acquiring Indian brands. Innovist is an acquisition that you've just done. Take me through the rationale behind that, and whether there is appetite to do more.

Nicolas Hieronimus: Well, you know, L'Oréal has always had the same growth pattern. We acquire brands and we expand them based on their complementarity with our existing portfolio. We have 40 brands, more or less, internationally. Two of them were created by L'Oréal, L'Oréal Paris, L'Oréal Professional, and Kérastase, and the rest were acquisitions. And in every country, we always try to have a mix of international brands that we bring to the country, always adapting, making them relevant for the local culture, which is what we do with L'Oréal Paris advertising around Diwali or Lancôme or L'Oréal Professional. But also, we have local brands because beauty is very cultural. It's always very tied into the history and the culture of a country. So in America, in the U.S., we have 11 American brands. We have a Chinese brand. We have two Japanese, two Korean brands, Italian and French, of course. And we didn't have an Indian brand, and when we saw the rise of this very beautiful, very well-crafted, actually, group of brands, because Innovist is a platform, and you have Bare Anatomy and Chemist at Play, which are, you know, great brands, and so they are very complementary to what we have, both in terms of categories, more into body or anti-dandruff, in terms of price points, and of course in a way in terms of ways of engaging with the Indian consumer. So we are very excited to work with them to globalise them, and by the way, they're already doing a great inroad in America, but also to learn from the way they engage with the Indian customer. So it's going to be a win-win, and I met the founder yesterday. He's a great guy, and very, very happy to work with them.

Q: So, is there appetite to do more? I mean, you talked about 11 in the U.S., but that's a much bigger market. What's the appetite for a market like India?

Nicolas Hieronimus: Well, you know, L'Oréal always studies all opportunities, but as I said, they have to be complementary to our portfolio. They have to have an economic equation that's worth it. So today we have Innovist, and we are very happy with it. There might be other opportunities in the future, but not in the short term.

Q: Well, let's talk about the opportunities that you foresee with the partnership that you have with Nykaa through Bold, and what is going to be driving the kind of investments that you make through that.

Nicolas Hieronimus: Well, you know, it's a bit the same story. We have a mantra at L'Oréal. We have many historical mantras. One is seize what is starting, and Bold, which stands for Business Opportunities for L'Oréal Development, is our internal VC where we invest either in new technologies that will be useful for our brands, new science, new ingredients, or sometimes nascent brands which we help grow with the potential either to acquire them or to let them live their life. And the partnership, whether it's Bold in general or the partnership with Nykaa, is precisely to understand the nascent trends in India and either to potentially make future acquisitions, but more importantly to feel the vibe of what is happening in India and to stimulate the beauty market because beauty is an offer market, so we always have to create. So it's a never-ending spinning wheel which we have to animate as the leader of this industry worldwide.

Q: So you're hoping to really seed the market in a sense as well.

Nicolas Hieronimus: Yeah.

Q: What is the India vibe then? What is the pulse check telling you today?

Nicolas Hieronimus: Well, what I see in India is, first of all, a fantastic appetite for beauty, like everywhere in the world. We were talking before the start of the interview of the incredible dynamism of the beauty industry and the resilience. Yeah, globally it's like plus 4.5%, and we could say that the global context is not particularly rosy. But, you know, when times are tough, men and women want to indulge in beauty, have this, like, moral-boosting treat, and beauty is doing well, and of course we are very proud to be not only the leaders but outperforming this market at plus 6.5%. And in India, where I would say the market and the population is younger, the dynamism is even greater. The market grows at around 10% and we grow at 18%. So we're gaining share, and we see a lot of appetite and a great sophistication in terms of beauty expectations. You know, the young generation of Indian boys and girls, they're all on their social networks, looking at what's happening on Instagram or other platforms, and they're really looking for the latest gloss or the latest great shampoo that works for them. They share a lot, and it makes it a very dynamic market. And having your pulse on that market helps us even create new products that are going to be great for India, potentially for the rest of the world.

Q: You know, so when we talk about creating for India, on the back of the insights that the Indian market is giving you, what are the white spaces that you believe that you don't occupy today, that you would like [to occupy]?

Nicolas Hieronimus: Well, I'm not going to tell you because I don't want to inform my competitors. It's a very competitive market. I'd rather tell you about how India is inspiring us beyond the Indian market. Some of our most successful and innovative technologies were actually created by our labs here in India. We have this patented molecule called Melasyl, which is, I think, the most powerful anti-dark-spot and de-tanning ingredient, as the Indians call it. It was invented here for Indians in India, and it's a global success through La Roche-Posay, for Vichy, and many other brands of L'Oréal. Another technology, which we call co-emulsion, which is a haircare shampoo technology. Again, it was invented here in India to have a particular type of foam and also cost, and we're rolling it out worldwide. And right now we are really breaking records in haircare. So, India, because it's a very challenging market in terms of climate, in terms of consumers' expectations, is not only forcing us to create products specifically for India, but also allows us to create technologies that are really great for the rest of the world. It's like, you know, made in India for the world, which I think is an important theme for the Indian people.

Q: But it's not just made in India. It's actually innovated in India for the world, right?

Nicolas Hieronimus: Created in India for the world, exactly. And some of it is manufactured in India, of course, where we have two factories.

Q: Are there any specific priorities that you're giving to the India team on the back of what works in India and so on and so forth for them to be able to innovate for L'Oréal globally?

Nicolas Hieronimus: Well, what I tell my teams first is to be extremely relevant for Indian consumers. As I said, first of all, it's an incredibly vast country, so there's not one Indian customer. There are consumers in the south, in the north. I'm not even talking about the languages, but the climates can be either very cold or very hot, or very humid or not, so it's a torture test for beauty products, for makeup, for foundation that resists sweat, for skincare that's not too sticky or icky, as they say. And so my first message to my teams is: be relevant for India. And if you are relevant for India, both in terms of the formula quality, but also in terms of the way you speak to the Indian consumers, taking into account their culture and their relevance, then you will create products that have the potential to travel the world. So, as it's a tough market, create for India, and that it's probably going to be a global success, particularly in other countries with similar climates, like Brazil, like the Middle East, or Southeast Asia.

Q: You know what you sell in India, you make in India. At least 90% of that you do make in India.

Nicolas Hieronimus: 95%. We also export from India to other countries.

Q: What is the value of the exports from India today?

Nicolas Hieronimus: I don't have the number on top of my mind, but I think we export probably 20% of what we manufacture here to other countries, mostly in the region, and we continue to invest in our factories, and we will continue to invest in more capacity because, as I have great ambitions for India, that means being able to manufacture more units here in India, and that's very exciting for the future.

Q: So, do you envisage over the next five years a significant jump in what you export from India to the world?

Nicolas Hieronimus: Our first objective is to cater to the growth of the Indian market, and as we will, you know, be creating great products at great cost, we will obviously increase our exports from India to the rest of the world and the region by definition.

Q: So you have two manufacturing facilities today. Are you looking at adding capacity there? Are you looking at new greenfield capacity as well?

Nicolas Hieronimus: I think usually what we like to do is to increase the capacity of the sites where we operate. Sometimes we can, you know, create new ones, but we have very loyal and strong teams in our factories, and I really want to pay tribute to them because they are doing a phenomenal job. So, rather than going to another place, we'd like to build on this capacity to have L'Oréalians, as we call them, totally dedicated to making our brands a success in India. So it's more likely to be capacity increase than greenfields, as you call them. But we're opening, if I may call that a greenfield, with our tech centre in Hyderabad, which we just inaugurated this year. There's going to be more than 2,000 people here, and this is going to be serving not only India but, you know, almost the whole world in terms of technological support with shared services. It's going to be a big adventure.

Q: For people who are watching this, what does a beauty tech centre do exactly?

Nicolas Hieronimus: Well, they can do so many things. They can do things that go from, you know, paying invoices or salaries to creating content for social platforms. So it's a vast array of possibilities. We start with the things that are a bit more administrative, and the more we grow, there will be more and more creativity involved, as we already do in Kuala Lumpur, where we have such a centre.

Q: Since we're talking tech, let's talk about AI. And I think, you know, the promise of what AI is likely to do, as far as the beauty business is concerned. How much of AI are you already putting to use at L'Oréal? What have been the benefits that you've started to accrue on account of that? But over the next five years, how do you really see it shaping or redesigning your business?

Nicolas Hieronimus: It is an incredible revolution that comes with these drawbacks, and we are very eager to always, you know, make sure that our AI is trustworthy and ethical. But the possibilities it creates for the consumers, for our employees, and for all the functions of L'Oréal are infinite. I can give you, you know, a couple of examples. For us, the first area where AI really made an impact is in R&D, in formulation. We have increased tremendously our pace of innovation thanks to AI. We've multiplied by three the number of ingredients or molecules we can scan in a year to discover new potential efficacy, and we've divided by four the time to develop new products, and that, in a market, as I said, is an offer market. This, I would say, augmented R&D with superpowers. With AI it is really accelerating our innovation power, with the costs remaining flat. So that's a great lever.

If I look at our marketing, we're talking about content creation. Even though I have pledged and we have pledged never to depict fake humans in our ads because we sell real products for real beauty with real people, but as far as the rest is concerned, all the content with pack shots and creative stuff, this can be done with AI, and we have multiplied the number of pieces of content that we've been able to create, and that also helps us engage with the new generations. We have, like, a content gluttony on their phones. So that's another accelerator provided by AI.

So I'm talking a lot about acceleration and augmentation rather than cost reduction, which obviously is also one of the benefits of AI, whether [it's] the way we use it to allocate our media monies to the right platforms, or whether [it's] the way we free the time of our employees more and more. We've trained 84,000 people at L'Oréal on AI, and 25,000 of our employees use it on a daily basis. So we see efficacy there, so it's touching the whole company.

And I was mentioning consumers to finish. Consumers are searching, are using LLMs to get their beauty recommendations instead of going through the search bar they were using before, and that changes also the way to present our brands. And the good thing here is that because we have so much data and so much science behind our products, it allows us to have very rich content that LLMs can tap into, and our brands. I was talking about CeraVe. If you want to try to ask a question about skincare, I'm pretty sure you'll find a CeraVe recommendation because it's backed by science, and therefore it's not just about who pays for the keyword. It's about who's got the real hard data about our products.

Q: Lots of stuff that you've said there. So let me try and unpack some of it. So this decision to not replace human beings or models or real people — was there a discussion about this? Because, you know, a lot of brands have faced flak for doing that. So, how did you arrive at that decision?

Nicolas Hieronimus: It was very obvious to me. You know, one of the backbones of L'Oréal since 117 years are its values. Ethics are very important. Next week, I have the Ethics Day of L'Oréal, where I'm going to answer, you know, questions for any employee around our ethical point of view, and it's very important. We decided, you know, there were talks a few years ago about how young consumers could be targeted for beauty products, and about, you know, 12-year-old kids buying anti-wrinkles, and we took a position never to market and to target specifically young kids with products that were not meant for them. I'm not talking sunscreen on the beach, which is useful for a kid, but for other types of products.

And the same thing happened when AI, you know, started to be a tool to create. There was no discussion. I decided it, and everybody at L'Oréal agreed. Of course, we could save a lot of money in shootings, etc. But there's always this thing about: Are you selling real products with real performance for real people, or are you selling a dream? At L'Oréal, we don't sell a dream. We, of course, create inspiration. And I felt, and I think all my leaders agreed with me that, you know, telling people you're going to look like that, but the result is imaginary, was absolutely unethical and not doing us ourselves a favour. So there was no hesitation, and we're sticking to this.

Q: You know, you talked about ethics, and I want to understand in the current context what are the red lines that you believe L'Oréal will not cross. What is non-negotiable?

Nicolas Hieronimus: Well, these are a few examples. You know, of course, the safety of our products is our absolute obsession, and the quality, the number of quality controls we put behind our products, and I think that's a very important message because we were talking about the explosion of new brands and, of course, you know, many of these brands are doing a very serious job. By the way, that's one of the things I liked about the Innovist team is that they are very serious about what's in their products, but there are a lot of other brands that are, I would say, a bit more lenient on the quality, on the choice of ingredients.

So that's, for me, that's a red line, as well as our commitments to sustainability. L'Oréal for the future has many commitments as it relates to the reduction in packaging weight, the use of renewable ingredients. Of course, we know we're not perfect, and as there is a long trajectory to achieve our objectives, but we don't compromise. We have developed all our fragrances in refillable versions. So there's a lot of, you know, I don't want to spend too much time on all these lines, but safety, respecting the consumer in everything we do.

Of course, in our value chain, our industry is doing a lot of controls on how the products are sourced, where they're sourced from, our suppliers. It's a lot of work, a lot of people involved. It has a cost, but that's what being a leader is about. It's also about showing the way, and we're trying to do it.