How is the beauty market evolving around the world? –WWD
PARIS – The beauty market once again proved its worth in the first half of 2022, despite a very difficult socio-economic and geopolitical context.
Nicolas Hieronimus, chief executive of L’Oréal, praised the resilience of the beauty market during a conference call with financial analysts and journalists on Friday morning, the day after the company published its second quarter results and of the semester 2022.
L’Oréal estimates that sales in the beauty market worldwide increased by more than 6% during the six months ended June 30, compared to the same period of the previous year.
“The pace of market recovery, however, remains mixed,” Hieronimus said.
The European beauty market recorded an estimated growth of 14% and had a favorable first half compared to 2019, before the coronavirus pandemic hit. “The market has fully recovered, over 8%,” Hieronimus said. “North America keeps pace with brick-and-mortar rebound.”
The gain in beauty product sales on this continent was around 8% in the six months.
“China had a complicated first half, due to the lockdowns,” he said. “In some cities, such as Shanghai, the market was negative in April and May, but rebounded in June compared to 2019. Growth remains high, at more than 9%, in the semester.
Hieronimus called emerging markets “quite dynamic”, with their reopenings and the acceleration of e-commerce.
According to L’Oréal estimates, the beauty market in the first half of 2022 grew by around 11% in South Asia Pacific, the Middle East, North Africa and Sub-Saharan Africa [or SAPMENA-SSA] area, while sales were down around 2 percent in North Asia.
“Every category is growing,” Hieronimus continued. “But let me highlight the strong recovery in makeup at over 8%, with lipstick in double digits [growth]and the continued acceleration of the fragrance, to over 21%. »
Skin care sales increased about 3%, while hair care sales increased about 5%.
“In this context, L’Oréal is showing another [half] dramatic outperformance, growing more than twice as fast as the market,” he continued, referring to the company’s sales which grew 13.5% like-for-like and 20.9% like-for-like. published data, at 18.37 billion euros. “Compared to 2019, L’Oréal is growing at a constant rate of 20%.”
Hieronimus said, “L’Oréal is flying at cruising speed in a very uneven landscape, with widely varying comparisons,” explaining why it’s important to use 2019 as a benchmark to monitor the pace.
In the first half of 2022, L’Oréal’s e-commerce sales grew by 10.6%, at a slower pace than in the past two years of rapid growth.
“The distribution is rebalanced by the acceleration of brick and mortar, to more than 14.6%,” he explained.
Over the same period, four geographies – Europe, China, North America and emerging markets – contributed almost equally to L’Oréal’s earnings.
“This is the ultimate proof of the success of our rebalancing or ‘risk reduction’ strategy,” Hieronimus said. “Europe is number one in terms of contribution to growth with more than 14.3% [like-for-like]and more 8% compared to 2019.”
He noted increases in market share across all of the company’s divisions in Europe excluding Russia, where L’Oreal has suspended nearly all of its operations.
Despite ongoing supply chain disruptions, North America had a strong first half, with sales up 11.6%. “L’Oreal USA continues to be ahead of the market,” said Hieronimus.
L’Oréal’s sales in emerging countries increased by around 24%, of which 23% in SAPMENA-SSA and 22.3% in Latin America, driven by the Consumer Products division. In the Gulf countries, sales increased by 68.7%, by 4.5% in India, by 42.5% in Malaysia and by 32.2% in Mexico.
“Travel retail is showing strong growth [of 30.1 percent] with the major triple-digit air traffic rebound in Europe, where we are benefiting from the strength of our fragrance,” said Hieronimus, referring to a 425% peak in flight.
Activity on the duty-free Chinese island of Hainan picked up again in June, after a pause in April and May.
Hieronimus noted the “dramatic outperformance” of L’Oréal’s business in North Asia, where sales were up 10.5% compared to the first half of 2021 and 40.5% compared to 2019.
“Both Korea and Japan have been dynamic and L’Oréal is gaining market share, especially in luxury,” he said. “But as China was everyone’s concern, even a source of concern, I would like to highlight the ability of our local teams to over-deliver.
“In mainland China, which has been affected by COVID[-19] restrictions, including the Shanghai lockdown leading to a negative market in Q2, at minus 7 [percent]L’Oréal China achieved net sales of more than 6% in [the second quarter]. In sales, if you take China plus Hainan, we had more than 13% growth in the first half. »
At the same time, for the first time, L’Oréal captured more than 30% of the luxury beauty market in China.
“Now looking at the second half, we are both prepared and optimistic,” said Hieronimus, of L’Oreal’s global business. “Prepared, as we recognize the high level of uncertainty and volatility in the current economic outlook, recession fears, the potential impact of inflation on consumption and continued supply chain tensions .
“We showed during COVID[-19] that in the event of a downturn, we will know how to outperform the market and maintain our profitability,” he added. “We remain confident for the second half and, of course, in the future of the beauty industry and the prospects for L’Oréal.”
On the one hand, there is constant growth. “Over the past decade, the global beauty market has grown by 4.5% per year,” Hieronimus said. “The beauty market also has a long history of weathering tough economic times.”
L’Oréal targets consumers from the middle and upper classes, who are generally less affected by economic turbulence and whose number continues to increase, particularly in emerging countries and China.
“By 2030, experts estimate that the middle and upper classes will grow by an additional $1 billion globally, including $250 million in China and $200 million in India,” Hieronimus said.
Nevertheless, L’Oréal also remains focused on accelerating in all emerging markets, growing its strength in the United States and its solidity in Europe.
“Finally, we are confident in our ability to overcome the inflationary backdrop,” he said. “We will take further price increases in the second half.”
Hieronimus continued: “In the current environment, we are prepared for the worst, but we anticipate the best, because we know very well that playing on the offensive is what drives consumption, market share gains and growth. “
He called L’Oreal stronger today than before the health crisis and said the group’s balanced business model was “the best vaccine in a VUCA world”.
“L’Oréal continues to transform to ensure long-term and sustainable growth,” said Hieronimus.