L'Oréal predicts China boom

11 April 2013

SHANGHAI: L'Oréal, the beauty group, believes its customer base in China could increase by 250m people in the next few years, as the country becomes the biggest global market for many of its products.

Nicolas Hieronimus, president of L'Oréal Luxe, told a press conference, covered by The Moodie Report, that this development was being driven by various factors.

These include "a new generation that is under 30, by growth in the lower tier cities and by many touchpoints with the consumer, from e-commerce to boutiques to international and domestic airports, as well as new locations like rail stations."

Jean-Paul Agon, chairman and CEO of L'Oréal Group, echoed those remarks, observing that penetration levels of cosmetics were still relatively low in China.

"There is still a limited number of Chinese cities where we have beauty counters," he said "and we'll see steady growth in the penetration and in the number of consumers we engage."

He cited the example of Lancôme, which currently has 170 counters in China, compared to more than 2,000 in the USA, "so the scope for growth is huge".

"A potential 250 million new Chinese consumers will be using L'Oréal's products in the next 10 to 15 years," Agon added.

Hieronimus explained that the company was doing more than simply introducing its brands to the country. "We have raised our game in retail excellence," he said, "and even recreated our brands, such as Helena Rubinstein, prompted by this market."

He outlined an approach to localisation. "We have learned to create specific products for Chinese consumers," he said, "tailored our advertising for this market and we have recruited a new generation of Chinese management".

Local brands could also travel in the opposite direction, he suggested, citing Yue Sai, a Chinese traditional medicine brand: "That could be the first great Chinese luxury beauty brand internationally."

The importance of travel retail was also underlined. "It's an expanding distribution channel," said Hieronimus. "International travel is showing healthy organic growth, and Asian consumers are now travelling more and more worldwide."

And with 60% of luxury purchases by Chinese consumers being made abroad, "we have to serve them wherever they shop … and airports are the best place to engage and seduce these travellers."

Data sourced from The Moodie Report; additional content by Warc staff