Laboratoires de Biologic Végétale Yves Rocher

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Laboratoires de Biologic Végétale Yves Rocher

3, allée de Grenelle CP
92444 Issy Les Moulineaux
France
Telephone: (+ 33) 1 41 08 57 00
Fax: (+ 33) 1 41 08 58 61
Web site: http://www.yvesrocher.fr

Private Company
Incorporated: 1965
Employees: 6,800
Sales: FFr 10.78 billion ($1.79 billion) (1999 est.)
NAIC: 32562 Toilet Preparation Manufacturing

World-renowned Laboratoires de Biologic Végétale Yves Rocher is one of the world’s leading producers of plant-based cosmetics and skin care and other personal care products and is one of the pioneers of natural and environmentally friendly beauty products. Marketing more than 300 different products in nearly 90 countries, Yves Rocher operates a—primarily fran-chised—chain of more than 1,350 “Centres de Beauté” world-wide. More than 70 percent of the private company’s more than FFr 10 billion in annual sales is produced outside of the company’s French home. Although the company’s beauty center network assures a large part of Yves Rocher’s sales, it also sells through other retail distribution networks, including sales to large supermarkets and department stores. Yet direct sales and correspondence sales have long been a principal vehicle for Yves Rocher’s distribution. The company’s catalog sales alone number 15 million clients, resulting in shipments of more than 130 million packages each year. Since 1997, Yves Rocher also has held one of the leading positions worldwide in door-to-door sales, thanks to its acquisition of Stanhome Worldwide Direct Selling, which boasts some 60,000 salespeople hosting in-home sales parties throughout the world. The company continues to be led by founder Yves Rocher, who is joined by sons Daniel and Jacques, and the Rocher family has maintained a tight grip on its voting rights majority, while Elf Aquitaine S.A. subsidiary Sanofi holds 60 percent of the company sales and 40 percent of its voting rights. In 2000, Sanofi, since its merger with Synthlabo and a resulting reorganization of its activities around its core Pharmaceuticals base, has indicated its willingness to sell back its share of the company to the Rocher family. Despite a decade of increasingly intense competition—not only from large supermarkets hoping to join in on the natural products bandwagon, but also from such global giants as L’Oreal or catalog sales powerhouse 3 Suisses—Yves Rocher continues to play a leading role in sales of natural beauty products and has declared its expectations to double its sales (to FFr 20 billion) by the early years of the new century.

Rubbing the Right Way in the 1950s

Born and raised in the tiny village of La Gacilly in the Morbihan, Brittany region of France, Yves Rocher remained committed to his birthplace when he began to build his career. Rocher had long held an interest in plants and their properties and their uses in traditional healing techniques. Rocher left school to begin a career as a clothing salesman in the region’s markets. But a recipe—for a hemorrhoid salve based on ingredients taken from plants—given to him by an elderly “healer” sent Rocher in a new direction.

Using the attic of his family’s La Gacilly home, Rocher set to work preparing the recipe and in 1956 started sales of the hemorrhoid salve, taking out an ad in the magazine Id Paris. Orders for the salve poured in, and Rocher, encouraged, began to extend his range of products, adding cosmetics at the start of the 1960s. Mail order remained Rocher’s primary sales channel through that decade. In the meantime, Rocher became mayor of La Gacilly, vowing to stop the erosion of its population, which had been fleeing the village in search of work. Part of Rocher’s solution to this problem was to found his own company, creating jobs for the benefit of the community. In this, Rocher was entirely successful; from a population at a low of 1,100 people in 1994, La Gacilly entered the 21st century with a population of nearly 2,350, many of whom were employed in Rocher’s business.

Yves Rocher proved equally successful as a businessman. In 1959, the company’s sales had grown sufficiently to support the company’s own botanical garden and laboratory. Apart from Yves Rocher’s own experiments and research, the company began searching throughout the world for plants susceptible to providing ingredients for a growing list of skin care and beauty products.

If Rocher’s business had remained primarily on the cottage-industry level at the start of the 1960s, by the middle of the decade sales had grown large enough to enable Rocher to incorporate his company, as Laboratoires de Biologic Végétale Yves Rocher, and to build his first factory, as well as an expanded botanical garden and laboratory facility specialized in trans-forming botanical substances into cosmetic ingredients, now given the lofty name of “Le Centre d’Etudes et de Recherche en Cosmetologie” (Center for the Study and Research of Beauty Care). With ingredients such as camomile and lime-blossom, Rocher had anticipated the coming boom of interest in natural products and ecology in general. In 1965, the company produced its first catalog, the “Green Book of Beauty,” which remained a hallmark of the company into the 1990s.

Rocher’s success in selling beauty care products by mail order—considered a rarity for the time—translated into steadily increasing sales and the need for increased production capacity. In 1969, Yves Rocher opened a new production facility in its La Gacilly home town. The company also eyed a move into the retail arena and opened its first retail store in Paris in 1970. The success of that location led the company to launch a rapid expansion of its retail network, through company-owned stores but especially through selling franchises to the Yves Rocher name and product line. By then, too, the company had begun to move into the international marketplace, expanding its mail order and retail business into the rest of Europe. Germany proved especially susceptible to Rocher’s message of affordably priced, natural ingredients-based products, and Rocher soon rose to the lead in that country’s market. By the early 1970s, the company’s sales had topped FFr 80 million.

To fund its expansion and to enter the global marketplace, Rocher, described by Le Monde as “totalitarian and autocratic” chose to avoid a public listing of his company and, instead, sought to form an alliance with a larger partner. In 1973, Rocher sold 60 percent of his company to Elf Aquitaine subsidiary Sanofi, yet Rocher retained the majority—57 percent—of the company’s voting rights and, therefore, control of its direction. Sanofi was, in fact, to remain more or less a silent partner throughout the two companies’ relationship.

As Rocher continued to build up its retail network as well as increase its mail order catalog customer list, it also sought to launch the company into another direct sales arena, setting up its own in-home party sales service. By 1981, Yves Rocher’s three-pronged approached had enabled the company to top FFr 1 billion in annual sales. Mail order remained the company’s largest sales channel, accounting for as much as 70 percent of its sales each year. The company, meanwhile, continued to invest in research and development of new products and technologies, now in its own “Center for Applied Research.” In 1982, the company released the results of one effort, in which it claimed to have developed a technique to extract the DNA of certain plants and then re-engineer the plants to produce heightened benefits. The company’s A.D.N Revitalizing Resource line of skin care products helped boost the company into the top ranks of the world’s cosmetics products manufacturers. By 1984, Yves Rocher’s sales had reached FFr 2.6 billion.

Refocusing in the 1990s

During the 1980s, Yves Rocher sought to expand its cosmetics empire into other areas. The company began a diversification program that saw it enter into the textiles industry, especially the market for women’s and children’s clothing. Over the course of the decade, the company made a number of acquisitions of clothing manufacturers, including the brands Jean Chancel, Claverie, Tartine et Chocolat, Sym et Danjean, and Petit Bateau, which the company acquired in 1988, following the counsel of the BNP (Banque Nationale de Paris). Yves Rocher also gave his blessing to a new cosmetics company, Daniel Jouvance, founded by son Daniel, which became an Yves Rocher subsidiary. By the end of the decade, Rocher’s clothing division rivaled its cosmetics group with some FFr 1 billion in annual sales. Yet the Petit Bateau acquisition seemed to have given the company a case of seasickness.

By the end of the year, Yves Rocher discovered that its new subsidiary was, in fact, sinking fast, with losses mounting to FFr 178 million for that year alone. In fact, as was later shown in a court-ordered financial review of Petit Bateau pre-acquisition accounts, Petit Bateau had been taking on water for some time. Its accounts had been falsified, however, with its stock overvalued by more than FFr 20 million, its capital holdings inflated by more than FFr 40 million, and accounting errors adding another FFr 3.5 million—on top of underestimated consolidated losses remaining from the 1987 year.

Company Perspectives:

Nature is man’s future. This conviction, inscribed at the heart of the company, opens infinite perspectives for us. As we know, we are far from knowing all of Nature’s secrets. Out of the 300,000 plants that have been categorized, only a few hundred are being used for their cosmetic properties. Thanks to 30 years of experience on research trips and in our bio-vegetable research laboratories, we have discovered new active plants and have shown their effectiveness. In return, Nature needs to be respected. This is why our company and all of its employees contribute to its protection through concrete actions. Man’s future will be that much more beautiful if Nature is respected. It’s all a matter of conviction and feeling.

After discovering Petit Bateau’s losses in 1988, Yves Rocher promptly accused BNP—which had been the company’s counselor, but, in a conflict of interest, not only held ten percent of Petit Bateau, but also represented the interests of that company’s former owners—of fraudulent behavior, sparking a legal and publicity battle that was to last throughout the 1990s. The battlelines were drawn when Yves Rocher’s employees marched on the BNP headquarters in Paris, shouting, “BNP, give us back our bread!” An amicable settlement, reached in 1989, quickly fell through and the two companies moved to the legal battlefield. There, Yves Rocher filed a number of court complaints against BNP, which countersued—and won—in 1991. Yves Rocher and son and future heir Didier, charged with blackmail and attempted extortion, were required to pay damages amounting to one franc. Yet the same court decision ordered a review of Petit Bateau’s 1987 books.

Meanwhile, Yves Rocher, which stuck firmly to its private status, was faced with pumping its own capital into raising the Petit Bateau subsidiary. By the mid-1990s, the company had successfully turned around the maker of children’s clothing and undergarments, transforming it into its most profitable clothing subsidiary. The rest of Yves Rocher’s empire, however, was struggling. Amid a worldwide recession, Yves Rocher was seeing steady erosions in its share of the marketplace as more powerful rivals such as L’Oreal, Estée Lauder, and Unilever, or mail order specialists such as La Redoute and 3 Suisses, moved to enter the natural beauty products business. At the same time, the major retail circuit, eager to participate in the surging demand for natural and plant-based cosmetics, began rolling out their own low-priced alternatives. As a result, Yves Rocher watched its market share tumble; in France alone, its share dropped to just 5.5 percent by 1991. At the same time, its textiles wing was faltering, as its various clothing subsidiaries struggled to fight the tide of declining sales in the depressed European and French marketplaces.

Amid the company’s woes, its founder decided to step down, placing in his stead eldest son Didier in 1992. Having been groomed to take over his father’s business for some years, Didier Rocher nonetheless inherited a company in dire straits. According to a confidential company memo, as reported by the Nouvel Observateur, the company’s financial position was such that it could no longer “assure the financing of its development and therefore the continuity and independence of the company.” To restore Yves Rocher’s financial position, Didier Rocher led the company on a belt-tightening exercise, slashing costs to save some FFr 171 million per year, dropping prices by up to 50 percent on some products, and—most dramatic in a company originally founded to create jobs—the cutting back of some five percent of the company’s 4,500 employees, a number that included 35 positions in La Gacilly itself.

In addition, Yves Rocher began to shed much of its textiles division, shutting down its Danjean subsidiary and relinquishing the license to the Tartine and Chocolat brand before finding a buyer for most of its other clothing subsidiaries in Italy’s Miroglio Tessile. By 1993, Yves Rocher had trimmed down the division to just Petit Bateau, by then the company’s strongest clothing performer.

On the positive side, Yves Rocher worked to modernize its image to compete with its flashier competitors, dropping its Green Book. The company also made a number of product breakthroughs, including its 1993 introduction of the ingredient Retinol, a vitamin A derivative, said to help protect the skin against sun and pollution damage. By the mid-1990s, the company was back on the growth track, building up its customer base to more than 25 million worldwide and extending its network of retail stores to 1,000 locations in 84 companies. Its sales had grown to an estimated FFr 7 billion, with benefits said to have topped FFr 350 million in 1994. In September 1994, the company began preparations to double its production capacity at La Gacilly, boosting its payroll there from 1,200 to 2,200 employees.

Yet the end of 1994 brought tragedy to the company, when Didier Rocher, practicing shooting high-calibre weapons, acci-dentally shot himself in the head, dying from the wound. At the age of 65, Yves Rocher returned to the helm of the company he had founded, seconded by sons Daniel and Jacques. Rocher remained in charge long enough to restructure the company’s executive directorship and named long-time employee Jean-Christian Fandeux as head of the company’s operations. One of the company’s first acts was to continue the announced construction of the new FFr 100 million production facility that had been announced by Didier Rocher.

Soon after, the simmering war between Yves Rocher and BNP flared up with the release of the report on Petit Bateau’s 1987 finances. Yves Rocher, convinced that he had been defrauded, printed and mailed out 23,000 copies of a 12-page account of his version of how BNP allegedly defrauded his company, while at the same time buying advertising space in the country’s newspapers and magazines. The Rocher-BNP battle once again wound up in court.

In the meantime, Yves Rocher continued to make gains in rebuilding its international position. By 1997, the company’s annual sales neared FFr 8 billion. The company by then boasted five production facilities and another five sites for its clothing production. Although mail order still accounted for more than 50 percent of its annual sales, its network of 1,350 retail stores had risen to represent 19 percent of its sales.

In 1997, the company took a step forward when it acquired Stanhome Inc.’s Stanhome Worldwide Direct Selling subsidiary, adding that company’s “party plan” sales force of more than 60,000, with sales of FFr 1.3 billion bringing Yves Rocher into the North American, South American, and Asian markets. The company announced its intention to double its sales to secure a position among the world’s top ten cosmetics companies and also among the world’s top direct sales organizations.

Key Dates:

1956:: Yves Rocher begins home-made production of hemorrhoid cream.
1965:: Creation of Yves Rocher brand and incorporation of company.
1969:: Opened new production facility.
1970:: Launch of first retail magazine in Paris; beginning of European expansion.
1973:: Sanofi acquires 60 percent of company’s share (43 percent of voting rights).
1980:: Launch of in-home party direct sales operation.
1981:: Sales top FFr 1 billion.
1988:: Acquisition of Petit Bateau.
1992:: Shutdown of subsidiary Danjean.
1993:: Sell-off of clothing subsidiaries.
1997:: Acquisition of Stanhome Worldwide Direct Selling Service.
2000:: Proposed acquisition of Sanofi’s shares.

Yves Rocher returned from retirement once again in September 1998, taking over control of the company he had founded. The following year, the company announced its interest in regaining the shares of its company long held by Sanofi, as the company completed its merger with Synthlabo and began a process of shedding its nonchemicals holdings—including the fashion house of Yves Saint Laurent—to refocus on its core Pharmaceuticals division. With Yves Rocher back at the company’s helm, and sons Daniel and Jacques retaining active roles in the company’s operations, the company continued to enjoy both strong sales and high levels of customer loyalty.