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L’Oreal PESTLE Analysis 2021: Can the Cosmetics Brand Stay on Top?

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When it comes to make-up, there hardly might be someone who does not know about L’Oreal. One of the most widely recognized and used brands; L’Oreal has gained a cult following for cosmetics lovers however they also are known to provide amazing varieties of hair color, haircare, skincare, sun protection, and perfumes.

The largest cosmetics brand in the world, L’Oreal originated from Paris, France in 1909, an impressive 111 years ago! The headquarters of the brand is in Clichy, Hauts-de-Seine. The brand is actually based on the creation of a simple hair dye formula by Eugène Paul Louis Schueller. This hair dye allowed Schueller to grow the brand into the giant she is today.

Currently, Jean-Paul Agon serves as the CEO and chairman with Françoise Bettencourt Meyers and Paul Bulcke as the vice presidents of the board of directors. Up till 2019, it was reported that they have about 88,000 employees worldwide. You already know what the brand is, so let’s analyze it from a business perspective. Up ahead is the L’Oreal PESTLE Analysis.

Political Factors

Any company which makes the conscious decision of going global in its operations and availability should be open to the huge possibility of being affected by world politics and usually in negative ways. L’Oreal has to be extremely cautious of the policies, rules, and regulations according to the different countries they have business in.

The European Union has a huge impact on the brand; they have a set of very strict rules and regulations to which cosmetic brands must adhere in order to remain functional. Moreover, they have to fall strictly on the requirement of not including any harmful ingredients in their products.

It is also a bit challenging for brands like L’Oreal to run business in the Middle East and other conservative countries because of the culture clash. The advertisements which work in the West showing women in various forms of attire that are frowned upon in the East often lead to problems.

People these days are becoming more and more aware of political events and have lightning-quick access to information on the internet. People choose to support brands whose values synchronize to their own more so now than they did in the past. One such example is when L’Oreal had to let go of one of their spokespersons Amena Khan in 2018 when people found old “anti-Israel” tweets from her, otherwise many of the customers would have left the brand.

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Economic Factors

Once again, global brands are severely affected by global conditions including the economy. Countries with low or fluctuating economies are always a constant challenge.

Just like all other businesses, L’Oreal too was impacted by the Covid-19 pandemic. Though they did lose some money during the first half of 2020; their exceptional performance and dedication allowed them to enjoy a growth of 4.8% in the second half despite buying patterns having changed significantly during the crises.

A very big contributor to the success of the brand during such challenging times is its immaculate online presence. E-commerce has done wonders for them thanks to their effective use of various online platforms. Sales went up a whopping 62% via these online channels for the brand as a whole.

They have a huge chance to grow further in developing countries such as India and China but unfortunately due to the growing tensions in terms of trade wars between the Chinese and American governments, L’Oreal will have to work very hard on being a big deal in China. Naturally, their best interests lie with the USA.

Socio-Cultural Factors

L’Oreal has performed its CSR activities over the years but the recent most example is of how they made and distributed millions of units of sanitizers and lotions to be donated to the front-line workers.

In terms of opportunity here, now is the best time to be a cosmetics brand. L’Oreal caters to hundreds and thousands of consumers all around the world. People these days are more beauty conscious than ever especially when it comes to their social media platforms. Make-up is the ultimate evergreen fashion trend.

Although L’Oreal now claims to be a vegan brand meaning that their product formulas are free of animal products however the definition of veganism in brands transcends the ingredients to the testing of new creations on animals. Though the brand is strictly against animal testing now, they still have to perform animal tests in countries where it is a legal requirement such as China; this fact always puts the brand in serious hot water with modern-day consumers who are against animal cruelty.

When the brand is as big as L’Oreal, it has to be very careful of what it chooses to promote in terms of messaging. A transgender model Munroe Bergdorf slammed L’Oreal when they added a post on their social media in support of the Black Lives Matter movement by claiming that she got sacked by the brand as their ambassador in 2017 when she chose to publicly address white privilege and cruelty on people of color. She called out the hypocrisy stating that L’Oreal is just trying to play it safe. The brand has now apologized to the model for their poor management of the issue and she’s back to working with them.

In 2020, the brand group announced officially to remove words like “whitening” from their range of products especially in light of the BLM movement that took the USA and the world by storm after George Floyd’s murder. Consumers did point out that they were late to make this change but some people also admired the effort.

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Technological Factors

L’Oreal has been a player in the cosmetics industry for more than a hundred years now and the only way they made it possible was by introducing and valuing constant innovation in their products. These days, the focus at L’Oreal is to merge green science with digital technology; they want to offer sustainable and nature-based solutions innovated with the help of the latest technologies and research.

L’Oreal also offers virtual try-on’s for their products before the consumers actually pay. They also offer customized solutions to individuals who are interested in deep diagnoses.

One of the most remarkable technologies that L’Oreal has managed to conjure up is the “Perso’s Smart Skincare”. This device literally can conjure up customized skincare, lipstick, and foundation on the spot, though the make-up feature will be introduced later.

The device is connected to an app through which you can enter your requirements. It gives you options of explaining the extent of environmental pollution you face, your skin’s condition in terms of pigmentation, wrinkles, fine lines, etc., and the latest trends in skincare to produce the right product for you. In fact, you can even take a photo of your face and upload it via the app to get an AI assessment of what your skin is facing and what solutions it needs. Talk about innovation!

This machine is portable, it provides clean application and it even adjusts a night and day time routine. This is surely a huge leap for L’Oreal in the direction of becoming global leaders in Beauty Tech.

Legal Factors

It must be exciting to be one of the most renowned brands in the world, but it is also extremely taxing. The biggest problem brands face nowadays is counterfeit. Make-up and skincare counterfeit isn’t a new practice, nor is it going away any time soon, but it does really hurt the brand’s credibility and even profits when thousands of sellers in the world create cheap remakes.

In 2018, L’Oreal came to know about their counterfeits being sold in huge quantities on Alibaba. They got involved with the Chinese authorities to bring this fraud to light. They eventually managed to succeed in getting the fakes removed but this is just one example. it is impossible to keep a track of every fake product being produced.

Counterfeit makeup is detrimental for health as well because it contains cheap raw materials which can really cause harm to the skin.

In 2020 L’Oreal was in court under the accusation of illegally firing an attorney who worked for them because he refused to indulge in an activity terming it as unethical. He claimed L’Oreal asked him to do certain things which would not be right. Nothing concrete was proven here and the brand effectively denied all of these allegations.

According to Britain’s 2015 Modern Slavery Act, major business brands are required to release information every year on their efforts of eradicating any form of slavery in their supply chains. In 2017 it was reported that L’Oreal was one of the brands that did not bat an eye on the dangers of slavery in India especially because they were being exposed to raw mica which is an important ingredient in cosmetics.

They did release a statement claiming to be very against all forms of forced labor in third world countries. They claimed to make continuous efforts into the ethical extraction of mica from Indian mines.

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Environmental Factors

Environmental sustainability is a big goal for the brand to constantly achieve. By the end of the previous year of 2020, they have successfully reduced their CO2 emissions by a whopping 81% in comparison to what their plants and factories produced back in 2005.

L’Oreal further propels this dedication by maintaining a constant dialogue with all of the brand’s stakeholders so as to coherently work on sustainable solutions for the environment. The research process is in the works for coming up with ways to reduce their overall impact by the year 2030 as a part of their 10-year sustainability plan.

Despite their constant efforts, in 2019 it was noticed that L’Oreal’s website did not have much detail on their use of certain toxins such as parabens, triclosan, and phthalates which are banned by the EU because they are bad for health but they also pollute the environment. So the brand really ought to get on working up a proper policy for full transparency on their use of toxins.

L’Oreal also plans to increase its use of sustainable packaging. They aim that all of their plastic packages will either be biodegradable, recyclable, or refillable by 2025.

L’Oreal PESTLE Analysis: Conclusion

So by reading through this PESTLE Analysis for L’Oreal, the cosmetics and skincare giant, you now have an idea of where the brand currently stands in terms of business.

A brand as prestigious as L’Oreal, with such a rich history behind it, truly is inspiring especially because they managed to lead the market for over 100 years. It really boggles your mind to think they’ve made a century.

The brand although in no way is under even the slightest suspicion of extinction, they still have to work on correcting a few wrongs, the most important of which is completely eliminating animal testing. That will never be brushed under the rug. They also need to be very cautious of the contributing people in their supply chain so as to eliminate all sorts of slavery. They should develop a concrete policy on their use of toxins as well.

You will never be able to view a company in a full 360-degree perspective until you focus on understanding the various macro-economic factors that affect it. These factors play a very big role in shaping up the company’s overall performance. A PEST Analysis will help you not only in the identification but a thorough explanation of all of these factors.

PESTLE is simply an acronym for political, economic, socio-cultural, technological, legal, and environmental analysis, which helps one in understanding where a company stands in depth.

You are more than welcome to visit our website if you wish to teach yourself how to work on a PEST analysis. We have all the detail you would need for comprehending the entire process. In fact, for those of you who wish to put their knowledge to practice, we even have the perfect PESTLE Analysis template for you to make things faster.