L'Oréal optimistic on emerging markets

12 October 2011

PARIS: L'Oréal, the beauty group, believes emerging markets could deliver up to 60% of its revenue in ten years time.

Currently, the owner of Garnier, Maybelline and Lancôme generates 37% of sales from fast-growth economies, but Jean-Paul Agon, L'Oréal's CEO, predicted this figure should rise quickly.

"The percentage of business in new markets was about 10% [around] 20 years ago. It was 20% ten years ago. It is now 40%," he said, the Times of India reported. "I believe this could very soon be more than 50% in the next ten years or even 60% depending on the currency."

More specifically, Agon argued many large developing nations housing substantial populations, and where affluence levels are expanding, present major possibilities.

"In India, where we are growing rapidly, there is a huge potential to grow. So also in China, Indonesia and Brazil," he said.

As an example, although L'Oréal India yields just 1% of its parent's €19.5bn ($27bn; £17bn) global sales, it has seen growth of 30% per year in the recent past, and is likely to maintain such momentum going forward.

While L'Oréal may not always hold the lead position at present, Agon favourably quoted the view of Jack Welsh, former CEO of General Electric, in assessing the opportunities.

"When you are only 40% of the market, you have room to grow faster. Jack Welsh says when you have big market share you have small growth and when you have small market share you will have big growth. Our share is increasing every year," he said.

Given the low prices and reduced pack sizes often required in developing nations, they are sometimes perceived as offering limited profits, but Agon disputed this standpoint.

"There seems to be some kind of an opinion that doing business in new markets is somewhat less profitable than in existing markets," he said. "I would tell you that the cost of growing your market share in new markets is less than the cost of growing share in existing markets."

However, despite the appeal of emerging economies, Agon also suggested the US is still a key outlet for the company, with local sales rising by 6%, to $4.7bn, last year.

"The US is not only a market of today, it's a market of the future. We are very optimistic about the future of L'Oréal in this market," he said.

Data sourced from Times of India; additional content by Warc staff