SHANGHAI — L’Oréal executives in Asia said the French beauty giant is expecting to post another year of double-digit sales growth in China this year.
This story first appeared in the May 18, 2010 issue of WWD. Subscribe Today.
The company plans to reach sales in China of at least 1 billion euros this year, or $1.23 billion at current exchange, which would represent an increase of 16.1 percent on 2009’s figure of 861.6 million euros, or $1.2 billion at average exchange, executives said Monday at a press briefing here.
Last year, L’Oréal registered like-for-like sales growth in China of 17.6 percent. But executives said the market isn’t slowing down — they are just being cautious on the 2010 target and they plan to surpass it.
“That will be a fantastic achievement, a symbolic achievement,” said L’Oréal China chief executive officer Paolo Gasparrini.
Executives said they don’t expect the overall market to contract and, on the contrary, see plenty of untapped growth potential in the country, particularly in areas like online sales and men’s grooming products.
Gasparrini said China’s cosmetics market grew 10 percent last year to 98.09 billion yuan, or $14.35 billion, excluding salon sales. Like in Japan, women here are eager to preserve and protect their complexions through whitening regimes. Skin care is the most prominent product category accounting for 56 percent of the market, while hair care and makeup follow with 26 percent and 13 percent shares respectively, the Italian executive explained.
He also said the French giant’s market share in China has risen from 8 percent in 2004 to 11.7 percent in 2009. Procter & Gamble’s market share over the same period has fallen from 24 percent to 19 percent, while that of Shiseido has grown from 4 percent to 7.7 percent, he claimed.
L’Oréal approached the Chinese market in the Eighties and established its first market testing facility in Hong Kong in 1993. Since then, it has built a business here selling its luxury, midrange and mass market products through a network of 33,271 sales points including department stores, hypermarkets, hair salons and perfumeries. Its research center is located in the Pudong district of the city, home to the iconic Pearl Tower and the tallest skyscrapers in the city.
Much like its business elsewhere around the world, L’Oréal’s distribution in China is extremely varied. On the higher end of the spectrum, it supplies shampoos and other hair care products to a premium salon in the Plaza 66 shopping mall. But it also has a presence in the Shanghai No. 1 Pharmacy, where its Vichy counter is surrounded by glass display cases of ginseng and dried bullfrog organs.
Jochen Zaumseil, managing director of L’Oréal Asia-Pacific, said the company is growing elsewhere in the region and he estimated emerging markets in Asia will account for 25 percent of the French group’s turnover in 2020 compared with the 16 to 17 percent the firm currently generates.
“We are by far the strongest growing company in market share over the last four or five years,” Zaumseil said, stating L’Oréal had a market share of 10.8 percent in 2009 in Asia, excluding Japan. That compares with an 11.7 percent share for P&G, he added.
But, the executive said, L’Oréal is already the market leader in the region in certain areas such as skin care, men’s products, makeup, hair color and professional salon products.
“Men’s care is still a small business in Asia but very fast-growing,” he said
Zaumseil said China and India present “enormous potential for growth.” Beauty expense per capita is highest in the mature market of Japan a 115 euros, or $141.68 at current exchange, per year but it is only 5 euros, or $6.16, per year in China and 1 euro, or $1.23, in India, he explained.