Best Growth In A Decade Reported By L’Oreal Due To ‘Lipstick Effect’ & China Demand

The growth for the French cosmetics giant L’Oreal for 2018, as reported last Friday, was the highest for the company in more than a decade. This growth was primarily driven by very strong growth in its new markets with a 24 per cent gain in sales in the Asia-Pacific region.

There is currently no worry in the company because of the current slowdown in the Chinese economy, said CEO Jean-Paul Agon during an interview on Friday. In fact the company reported very strong demand for consumer luxury products in China for 2018. Agon said that the company has complete confidence about the sustainability about the growth of the company.

“The market accelerated and could stay strong in 2019. We have many reasons for this strong growth like Asia, eCommerce, travel retail, skin care, and all these reasons will stay here in 2019, so we are pretty optimistic for this new year,” he said.

Agon added that in the current year, the growth of L’Oreal could also be fuelled by slowdown in sectors such as autos and technology because that would mean that less money is being set aside by consumers for more expensive purchases.

“It’s the famous ‘lipstick effect’ — sometimes when people spend less on expensive items like cars or buying apartments, they have more available income and they like to indulge themselves with beautiful products. It could be absolutely positive for us,” he said.

The new markets, including the ones in the Asia-Pacific region, were the key drivers for the growth of the company in 2018. This included a strong demand for from Chinese consumers where there was a 24.1 per cent year on year growth in demand for luxury products. But despite this dependence on the Chinese demand, the company is not currently worried about a slowdown in the Chinese economy, Agon said.

“Let’s not cry before it hurts — there is a reason for this strong consumption. You have hundreds of millions of consumers exceeding to a level of income where they really want to indulge themselves,” he said. “In China we also have products at all levels of price … L’Oreal Paris is the number one beauty brand in China, and Maybelline is the number one make up brand, so we have products for everyone — we are still very confident.”

The company however reporter relatively lipid sale in some of the more established markets of the company. For example, there was 0.3 year on year drop in sale in Western Europe while a small 2.7 per cent growth\was reported from North America in 2018.

“It’s not a mystery the European market and economy in general has been pretty flat these past 12 months, which reverberates in the beauty market itself,” Agon said. “We cannot bet on the fact that the European economy will accelerate next year, but we are betting on the fact that we will be able to get more market share and accelerate our own growth.”

“The good thing for L’Oreal is that we are covering all segments, all markets, all categories, (so) when another part of the market is going faster we take advantage of it. There is always a bright spot somewhere, (and) we are always able to take advantage of that bright spot, so I’m not at all pessimistic or worried,” he said.

(Adapted from Finance.Yahoo.com)

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