L'Oréal targets one billion new consumers

17 February 2010

PARIS: L'Oréal, the cosmetics giant, is aiming to add one billion consumers to its customer base over the next decade, with advertising and innovation set to play a key role in this process.

The Paris-based firm posted a 0.4% contraction in revenues last year, to €17.4 billion, with like-for-like sales also falling by 1.1%.

L'Oréal's consumer products division delivered comparable growth of 3.2%, while its luxury arm was off by 9%, and its professional products and active cosmetics units both experienced moderate declines.

Jean-Paul Agon, the organisation's chief executive, said "after a difficult start to the year ... the cosmetics market has gradually improved and ended up slightly positive."

"We are at the beginning of a new phase of expansion for L'Oréal, in terms of sales and results," he added. "We have the feeling that this is the year we are exiting the crisis."

According to Agon, one of L'Oréal's priorities in 2009 was to prepare for the future through "a determined increase of investments in R&D and advertising and promotion to accelerate growth."

In demonstration of its commitment to this objective, the company's advertising and promotional expenses climbed to 30.8% of total sales in the last 12 months, an expansion of 0.8% on 2008.

This equated to an outlay of €5.39bn, up from the figure of €5.27bn recorded the previous year, as "investments to support the brands … increased across all divisions and zones."

Similarly, the owner of Garnier and Maybelline plans to heighten its media budget at a "high level" in 2010, with the overall uptick in expenditure set to outpace its sales growth.

Looking even further ahead, Agon stated that another of L'Oréal's goals was "the broadening of the consumer base with the target of winning a billion new consumers" in the next ten years.

In the first instance, this will involve the introduction of more "entry-level" products, such as Essentielles, part of its Vichy cosmetics range, and Basics from Garnier, where prices start at just €5.

"We have proof that this really does get us new consumers," Agon suggested, adding that it also encourages people to make more expensive purchases in the long term.

L'Oréal is similarly expanding its premium portfolio, in recognition of the need to cater for shoppers across a wide range of different price points.

For example, it recently unveiled a 30ml bottle of Genefique, its skincare line, which is available for €40, and is thus considerably cheaper than many other items in this range.

Genifique Youth Activating Serum was one of its best-selling products last year, despite the fact it carries a price tag of €78, indicating that high-end goods still have a vital role to play.

"The real issue after the crisis is innovation at the right price," Agon suggested.

More broadly, the beauty specialist will seek to extend its reach in regions like Latin America and Asia, where brands like Garnier, Kiehl's and L'Oréal Paris are performing particularly well at present.

Its recent successes in the latter of these areas have included the roll out of Garnier Men in India, where male consumers have been identified as being a potentially lucrative audience.

Data sourced from L'Oreal/Reuters; additional content by Warc staff