The beauty market has remained sluggish in China and was estimated to have dipped by 2% to 3% for the company as consumer sentiment remained subdued.
“After a very slight recovery at the start of the year, market growth turned negative in the second quarter as the comparison base was very high. And we are not seeing any pickup in consumer confidence which is critical to growth in beauty. Overall, we estimated that the market was down between 2% and 3% in the first half,” said L’Oreal’s chief executive Nicolas Hieronimus.
The company’s consumer products division increased slightly while luxury fell by a high single digit.
Against this backdrop, the company has observed more demand for cost-effective products.
“The only part of the world where consumer confidence remains low is China... The pattern that we see in Chinese consumers right now is that they are indeed buying less and buying more looking for value-for-money,” said Hieronimus.
This was driving L’Oreal Paris, its flagship mass beauty brand, in the Chinese market.
“L’Oreal Paris remains, by the way, the number one beauty brand in mass in China despite the success of some other Chinese brands,” said Hieronimus.
However, he emphasised that Chinese consumers would continue to make luxury purchases as long as brands give them enough reason to.
“Which doesn’t mean that we can’t sell luxury products. Yves Saint Laurent grew double digits in China. Why? Because we have great innovation, and the brand is super aspirational.”
Regardless, he highlighted a major opportunity to grow L’Oreal Paris.
“But overall, the average Chinese consumer today is more into value-for-money, which gives us, I think, a lot of opportunities to recruit new consumers with L'Oreal Paris.”
'We are not dependant'
Moving forward, Hieronimus said the Chinese market was expected to remain “slightly negative” in the next half of the year.
Despite this, the company has continued to outpace China’s beauty market, Hieronimus emphasised.
“In that context, we grew plus 0.8% and continued to outperform the market. We gained share in three of our divisions, especially Luxe, where we outpaced the market by six points. I'm very impressed by the performance of dermatological beauty thanks to the triple engine of Skinceuticals, La Roche Posay, and increasingly CeraVe. The division has grown threefold in size and now accounts for 11% of sales.”
He reiterated the importance of China but noted that the company was not relying completely on its recovery.
“We'd love to have a growing China, but we are not dependent upon a growing China,” he said.
In fact, in the first half, L’Oreal’s business in emerging markets such as India, South East Asia, and South America, in total equalled that of China.
Hieronimus said: “We are becoming a more balanced company. In the first half the size of our business in emerging markets equalled that of Mainland China, which means that they now have a real impact.”
