Speaking during the firm’s FY2020 earnings conference on February 12, deputy CEO Nicolas Hieronimus said furthering the growth in China would be one of its key areas of focus.
“We are the number one beauty group in China, and we have been lucky to have two brands Lancôme and L’Oréal, well, really the favourite brands of Chinese consumers. And we see a lot of – still a lot of growth potential in this country,” said Hieronimus.
Hieronimus was named as the successor to current chief Jean-Paul Agon in October 2020 and will take over on May 1.
For this fiscal year, sales in mainland China grew 27% like-for-like, significantly outperforming the market with double-digit growth in all divisions.
Despite the tremendous success L’Oréal has had in China over the past few years, Hieronimus believes that the company still has plenty of room to grow in the market.
“The market has still many years of growth ahead… The spending per capita of Chinese consumers is still quite low compared to that of the USA. So, there is no limit to the growth potential of China.”
Hieronimus said the company could leverage its strong reputation in China to strengthen its position as a leader in the country.
“The Chinese love beauty – and it's not just Chinese women, it's also Chinese men. They love great brands and they know quality – they want quality products. And we've established in the minds of the Chinese consumers that the L’Oréal brands are providing superior quality at a good price. And for that, I'm extremely confident in our capacity to continue to lead in this market.”
Furthermore, L’Oréal’s e-commerce capabilities would give it an advantage in China, said Hieronimus.
“We're also very strong in e-commerce. It’s a market where 50% of the market is already online and our digital advantage, our capacity to over-perform, as you mentioned on Tmall, on the market that's already 50% digital and 60% for our business, is extremely powerful. And that will continue to allow us to overperform.”
Expansion potential
Hieronimus highlighted that the company has yet to launch all its brands in the Chinese market and has yet to tap into potentials in Stylenanda and Takami, its latest acquisition.
“We've made acquisitions a brand like Takami, which is a Japanese skincare brand. We also have very interesting potential in China likes Stylenanda. So overall, we are, China will remain probably the strongest or one of the strongest growth engines for the group for the next years.”
The group believes skin care will continue to be the growth driver for China because of the potential for growth as well as the country’s ageing population.
As such, it sees opportunities to expand its Active Cosmetics division, which consists of brands like CeraVe, La Roche-Posay and SkinCeuticals.
“Our Active Cosmetics Division is still quite small in China. It's growing very fast, but we can probably double its size,” said Hieronimus.
He added that the sun care category will also be an important element for the skin care business in China.
“Being able to provide consumers with the right protection against UV is one of the important missions of their L’Oréal R&I. And you're right to say that our research gives us the upper hand in this category.”
He emphasised that skin care would remain the 'number one driving force’ of the growth in China but added that there were opportunities in other categories such as premium hair care.
“The Professional Division is having great results. Kérastase is booming in China and even for our Consumer Products Division, we see that their premium haircare lines are doing great in China and probably have lots of growth potential ahead.”
He added: “Haircare is becoming a category where consumers expect more and more quality and we see the premiumisation, the valorisation of this category which is great for us. So, we're going to be investing with behind all these categories including hair colour.”