Because He's Worth It

LINDSAY OWEN-JONES is the most successful British businessman that you have never heard of. In truth, he can claim to be one of the most successful British entrepreneurs on the planet. The reason you may not have heard of him is that he has never worked in Britain: he has spent most of his career in France, and his entire career working for one French company.

L'Oreal, largely thanks to Mr Owen-Jones, is the largest cosmetics firm in the world and the only truly global player in all branches of the beauty and bodycare market. L'Oreal has enjoyed a double-digit increase in profits every year for the past 14 years, a record unparalleled outside accredited high-growth sectors such as information technology. The company has grown twice as fast as its industry for the past five years, and its share price has increased by 1,100 per cent in the 1990s.

Tomorrow L'Oreal - slogan: "Because you're worth it" - will announce its figures for the first six months of 1999. The company, which started by pioneering women's hair dyes from a back street in Paris in the 1930s, is confidently predicted by insiders to be on course for its 15th year of double-digit earnings growth.

What is the secret? There appear to be two, both refreshingly simple (but maybe not so simple to implement). First, L'Oreal and Mr Owen-Jones refused to be bullied by the economic slow-down and conventional wisdom of the early 1990s into preserving short-term profits by downsizing and slashing costs. The company invested massively, in research in particular, and was rewarded by strong internal growth. The turnover of the company has tripled since Mr Owen-Jones became president in 1988, rising from pounds 2.4bn to pounds 7.5bn at the end of last year.

L'Oreal also made a series of small and medium acquisitions in the US, Italy and Germany, and turned its new labels - notably Maybelline-New York, formerly a rather parochial brand from Tennessee - into world beaters. Mr Owen-Jones's strategy was, in one sense, to turn globalisation on its head. He used the research and marketing clout of L'Oreal to put the new labels (and the old ones) in shops and bathrooms and handbags all over the world; but he did not impose a unifying or suffocating French style. He allowed the American and Italian brands to preserve - even to build - their specific national identity and cultural cachet.

Through its French brands - L'Oreal, Garnier, Lancome, Vichy, Helena Rubinstein - L'Oreal still markets French elegance to women (and some men) worldwide. But it also offers Italian allure to the same women (or more likely somewhat different ones) through its Giorgio Armani perfumes and provides much younger women with American sassiness and street-credibility through Maybelline-New York and Redken-5th Avenue.

To personify the different brands, Mr Owen-Jones has assembled an international team of the beautiful people: Claudia Schiffer, Andie McDowell, Juliette Binoche, David Ginola ... .

Consider, for a moment, the richness of the paradoxes. No other multinational company - save possibly some of the big drinks companies - has simultaneously tried to market so many different products based on affirming so many disparate national and cultural identities. The strategy was masterminded from France, a country which purports to fear that its own extremely vigorous national identity is menaced by the cultural conformity of Worldco PLC.

So who is Lindsay Owen-Jones? He likes to be described as a Welshman but his French Who's Who entry reveals the subversive fact that he was born in March 1946 in Wallasey, on the Wirral (ie on the English side of the river Dee). He studied at Oxford and at the Parisian business school, the Institut Europeen d'Administration des Affaires (Insead).

He married his second, Italian, wife five years ago; he has a daughter from his first marriage to a French woman; he lives in the select Parisian suburb of Neuilly-sur-Seine, not far from the company headquarters in Clichy. Until recently, his hobby was driving cars extremely fast on the amateur racing circuit. He speaks four languages, including it is said, French as well as any other executive in the company.

Upon graduation, he joined L'Oreal as a trainee manager and was immediately sent on the road, selling, among other things, shampoo to municipal baths in Normandy. It remains an axiom of L'Oreal under Mr Owen-Jones that the most senior managers should return to the selling fields as often as possible. The first day of any Owen-Jones trip aboard is devoted to touring shops which sell L'Oreal products and quizzing salespeople and customers. (Hair-colouring is all the rage in China: in Peking, earlier this year, Owen-Jones accosted two gaily-tinted women on the street and offered them free home hair-colouring kits).

From his first job as a product manager, he became head of L'Oreal in Italy in 1978, a spectacularly successful head of the company's US marketing agency in 1981, executive vice-president in Paris in 1984 and chairman and chief executive - at the age of 42 - in 1988. He was then, and still is, the only Briton at the head of a large French company. France made him a knight and then, last year, an officer of its most prestigious civil order, the Legion d'Honneur.

This is, to say the least, an unusual French business career. Successful French tycoons tend to fall into two categories: those who rise through the ranks of the elite civil service departments and politics, and those who build an empire through piratical attacks on ailing and disparate companies. To rise, unchecked, and to build success in one company is rare. Some of the credit must go to the chief share-holder, the formidable Liliane Bettencourt, the daughter of L'Oreal's founder, who spotted Mr Owen-Jones's talent early and - again, unusually for a French company - failed to be deterred by the fact that he was not French. In return, Mr Owen-Jones has helped to make the Bettencourts, who own roughly 25 per cent of L'Oreal, into the wealthiest family in France, with a fortune estimated at pounds 7bn.

Mr Owen-Jones is both feared and revered at L'Oreal. Senior executives are said to tremble before they enter the "confrontation room", the large conference room at the Clichy headquarters, where potential new products are run past "O-J". On one occasion, 10 years ago, product managers presented 23 possible new types of perfume for the Lancome range: Mr Owen-Jones turned down all but one, which, as Tresor, became the world's best-selling perfume for many years. He has been described by colleagues as brilliant, supernaturally quick at spotting market trends but also tyrannical, bordering on megalomaniacal. At the same time, he is given credit for breaking down the rigid hierarchies which hobbled the company in the 1980s and delegating both creative and managerial power to those who prove themselves capable of using it.

L'Oreal's successful strategy has been based on the double principle that a successful company had to be global but there was no such thing as a "global" cachet, especially for cosmetic products. Brands had to be marketed globally but conceived nationally. ("Chinese women do not want us to create brands or sub-brands for them," Mr Owen-Jones told shareholders last year. "They want to buy what is fashionable in Paris or New York.")

His great coup was to realise it was quite possible, even essential, for a French-based company to sell the spirit of New York to the Chinese at the same time as the essence of France to the British or the Americans. Maybelline, mass-market cosmetics based on a mixture of French and American core research and purely American styling, was launched on the Chinese market two years ago and the British market last year. It is now the market leader in China, expanding rapidly in Britain, and number one worldwide. Maybelline's sales, almost entirely in the US before the L'Oreal takeover in 1996, doubled to $600m in the past three years. The range, full of startling yellows and greens, can be found in 70 countries.

At the same time, L'Oreal's up-market Lancome brand of skincare and cosmetic products, sold on both French "cachet" and a series of technical advances, have ousted Estee Lauder and Elizabeth Arden to become the world's number one. L'Oreal's hair colourings Preference and Excellence are the world leaders.

Mr Owen-Jones describes himself as an "inspiration and a critic" to more junior executives and the company's subsidiaries; he says that his role as president is to "challenge, provoke, preach and teach".

"I have, obviously, a power of veto, but I see myself primarily as a coach ... My role is to ensure the strategic coherence of the company and, above all, encourage our teams to be more and more daring. But what you cannot delegate is the taking of risks. It is the president who carries the can with the financial community."

Some can. The L'Oreal share price has increased six-fold in the past five years. So much so that some shareholders and analysts complain that the unit price - at around pounds 400 each share - is too unwieldy for short- term investments.

Despite 15 acquisitions, most of the company's growth has been "internal". Mr Owen-Jones stripped away the accretions of non-core activities - from household cleaners to audio-visual ventures - which the company had assembled. He decreed that, in future, L'Oreal would be in four businesses only: haircare (where everything started), make-up, skincare and perfumes. To sell these products, the company (unlike other cosmetics firms) would be prepared to go to the customer wherever the customer was: whether in the big department store or in the specialist parfumerie; in the chemist's shop or the hairdressers or even at home, by mail order.

Finally, the strategy would be based on a select number of brands - presently 10, but Mr Owen-Jones had envisaged going up 20 - both mass-market and up-market but not at the luxury or snob end of the range. (The 10 core brands, for the record, are L'Oreal, Ralph Lauren, Lancome, Giorgio Armani, Laboratoires Garnier, Biotherm, Maybelline-New York, Helena Rubinstein, Vichy and Redken-5th Avenue).

The company has spent pounds 1.2 bn on research in the past 10 years, taking out 2,000 patents. All of this basic research - on everything from anti- balding agents to hand creams - feeds into all the company's brands, but local teams are left to provide the final styling spin which distinguishes one product from another.

Mr Owen-Jones recently (to the dismay of some in Paris) took the process a step further by setting up a second large research "pole" in New York as an internal collaborator and rival to the large laboratories in Paris. "We set up a counter-power in New York with people of a totally different mindset, background and creativity," he said. Inevitably, this produces tension but so what, says Mr Owen-Jones. "A charged atmosphere is exactly what I'm looking for."

Where next? Most of L'Oreal's problems are problems of success: how do you keep those double digits coming to avoid accusations of "slumping" to 9 per cent profit growth? Company executives say the potential for internal growth, without new acquisitions, especially by further conquests in the Asian markets, remains enormous. Mr Owen-Jones has hinted that further purchases will be made but probably not large ones. "In this business, all that glitters is not gold," he said recently. He prefers to buy small and medium brands which can be developed into jewels in the L'Oreal crown. As one US analyst puts it: "They haven't messed up in a long, long time."