Travel boom: L’Oréal banking on APAC travel retail opportunities to drive ‘big growth’ for the group

Despite global tourism woes brought about by the COVID-19 pandemic, growth of L’Oréal’s travel retail division has been positive, largely due to its performance in APAC.

“With Asia, the travel retail market has been growing. We estimate that the travel retail in Asia Pacific has grown by double-digits,” ​said deputy CEO Nicolas Hieronimus.

Speaking to analysts on the company’s Q1 2021 earnings call, L’Oréal’s incoming CEO estimated that the APAC now accounts for a whopping 90% of the travel retail business and said that the firm was currently outperforming the market.

This is being driven by the market on Hainan Island, China, which Hieronimus said has been going “very well”​ for the firm and he expected this growth to continue.

“It’s due to a little bit of Korean travel retail but mostly its Hainan. It’s become a very significant part of the market and we are growing there. Most of the growth in travel retail in Asia this quarter was from China and it will continue to develop as the Chinese authorities want the travel retail purchases to stay within China.”​

Last July, China’s government raised the annual offshore duty-free quotas for shoppers visiting Hainan island from RMB30,000RMB to RMB100,000 in determination to further open up Hainan Island.

According to data from the General Administration of Customs, China (GACC), Hainan recorded a surge in spending on duty-free shopping by visitors since the implementation of the policy.

Hainan recorded RMB8.61bn of duty-free spending by visitors from July 1 to Sept 30, a surge of 227.5% year-on-year, the administration said.

Hieronimus expressed confidence that the travel retail business in Asia will drive the growth of the business moving forward, especially with the boom in Hainan.

“Asia is the driving force with Hainan getting bigger within travel retail Asia. This is going to be a big growth driver in the future definitely.”​

APAC’s strong Q1​

Overall, L’Oréal received mostly good news in the Asia Pacific region as sales increased 23.8% on like-for-like basis in the first quarter of 2021.

The growth was driven by the strong sales of the active cosmetics, professional products and luxe divisions, which all recorded solid growth, said L’Oréal.

However, its consumer products division continued to be penalised by the decline of the make-up, which makes up 30% of the division’s sales.

Furthermore, Japanese skin care brand Takami, which the company acquired in the first quarter, made a strong start in Japan and China.

China itself posted strong growth at 37.9% like-for-like, with all divisions gaining market share.

The Active Cosmetics Division recorded significant market share gains, driven by SkinCeuticals and La Roche-Posay.

Additionally, the Professional Products Division almost doubled sales, thanks to a successful online activation and offline recovery.

In e-commerce, the company continued to dominate, with L’Oréal Paris and Lancôme recording strong growth, ranking first and second respectively on Tmall during International Women’s Day.