How is the beauty market evolving around the world? – World Water Day

PARIS — The beauty market once again showed its mettle 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, a day after the company released its second-quarter and half-year 2022 results. .

L’Oréal estimates that worldwide beauty market sales rose more than 6 percent in the six months ending June 30, compared to the same period a year earlier.

“However, the pace of the market’s recovery remains contrasted,” Hieronimus said.

Europe’s beauty market posted an estimated 14 percent growth and had a favorable first half compared to 2019, before the coronavirus pandemic hit. “The market has fully recovered, up more than 8 percent,” Hieronimus said. “North America is keeping up its great pace with the recovery of physical stores.”

The increase in sales of beauty products in that continent was approximately 8 percent in the six months.

“China has experienced a difficult first half due to lockdowns,” he said. “In some cities, such as Shanghai, the market was negative in April and May, but recovered in June compared to 2019. Growth is still high, more than 9 percent, in half.”

Hieronimus called emerging markets “pretty dynamic,” with their reopenings and accelerating e-commerce.

According to L’Oréal estimates, the beauty market in the first half of 2022 grew by around 11 percent in South Asia-Pacific, the Middle East, North Africa and sub-Saharan Africa. [or SAPMENA-SSA] area, while sales fell by about 2 percent in North Asia.

“Each category is growing,” Hieronimus continued. “But let me highlight the strong comeback in makeup at over 8 percent, with lipstick in double digits. [growth]and continued fragrance acceleration, by more than 21 percent.”

Skin care sales grew about 3 percent, while hair care sales rose about 5 percent.

“Within this context, L’Oréal is showing another [half] of spectacular outperformance, growing at more than twice the pace of the market,” he continued, referring to the company’s sales that increased 13.5 percent on a like-for-like basis and 20.9 percent on a reported basis, to 18.37 billion of euros. “Compared to 2019, L’Oréal is growing at a steady rate of 20 percent.”

Hieronimus said: “L’Oréal is cruising over a very uneven landscape, with highly variable comparisons,” explaining that this is why it is important to use 2019 as a benchmark to monitor pace.

In the first half of 2022, L’Oréal’s e-commerce sales increased by 10.6%, at a slower pace than during the past two years of rapid growth.

“The distribution is rebalanced with the acceleration of physical stores, by more than 14.6 percent,” he explained.

In the same time period, four geographic regions (Europe, China, North America and emerging markets) contributed almost equally to L’Oréal’s earnings.

“This is the ultimate test of the success of our rebalancing or ‘derisking’ strategy,” Hieronimus said. “Europe is number one in contribution to growth with more than 14.3 percent [like-for-like]and more than 8 percent compared to 2019.”

He saw share increases in all of the company’s divisions in Europe outside of Russia, where L’Oréal has suspended almost all of its business.

Despite persistent supply chain disruptions, North America had a strong first half, with sales up 11.6 percent. “L’Oréal USA continues to move ahead of the market,” said Hieronimus.

L’Oréal’s sales in emerging countries increased by around 24 percent, including 23 percent in SAPMENA-SSA and 22.3 percent in Latin America, driven by the Consumer Products division. In the Gulf countries, sales advanced 68.7 percent, 4.5 percent in India, 42.5 percent in Malaysia and 32.2 percent in Mexico.

“Travel retail is showing strong growth [of 30.1 percent] with the largest triple-digit uptick in air traffic in Europe, where we benefited from the strength of our fragrance,” Hieronimus said, referring to a 425 percent peak flight.

Business on China’s duty-free island of Hainan picked up again in June, after a lull in April and May.

Hieronimus noted “the spectacular outperformance” of L’Oréal’s business in North Asia, where there were sales gains of 10.5 percent compared to the first half of 2021 and 40.5 percent compared to 2019. .

“Korea and Japan have been dynamic, and L’Oréal is gaining share, particularly in luxury,” he said. “But as China was everyone’s concern, and even a source of concern, I want to underline the ability of our local teams to deliver.

“In mainland China, which has been affected by COVID[-19] restrictions, and in particular the Shanghai lockdown which led to a negative market in the second quarter, at minus 7 [percent]L’Oréal China has generated net sales of more than 6 percent in [the second quarter]. In total sales, if you take China plus Hainan, we got more than 13 percent growth in the first half.”

At the same time, for the first time, L’Oréal captured more than a 30 percent share of the luxury beauty market in China.

“Now that we look at the second half, we are prepared and optimistic,” said Hieronimus, of L’Oréal’s general business. “Ready, because we are aware of the high level of uncertainty and volatility in the current economic outlook, fears of recession, the potential impact of inflation on consumption and the continuation of tensions in the supply chain.

“We have shown during COVID[-19] that in the event of a recession, we know how to outperform the market and maintain our profitability,” he added. “We remain confident in 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 last decade, the global beauty market has grown by 4.5 percent a year,” said Hieronimus. “The beauty market also has a long history of weathering periods of economic hardship.”

L’Oréal targets upper and upper middle class consumers, who are generally less affected by the economic crisis and continue to grow in number, especially in emerging markets and China.

“By 2030, experts estimate that the middle and upper classes will grow by an additional 1 billion in the world, including 250 million in China and 200 million in India,” Hieronimus said.

Still, L’Oréal also remains focused on accelerating across emerging markets, building strength in the US and strength in Europe.

“Finally, we are confident in our ability to overcome the inflationary context,” he said. “We will take more price increases in the second half.”

Hieronimus continued: “In the current context, we are prepared for the worst, but we are planning for the best, as we know very well that playing offense is what drives consumption, market share gains and growth.”

He called L’Oréal stronger today than before the health crisis and said the group’s balanced business model is “the best vaccine in a VUCA world”.

“L’Oréal has what it takes to weather short-term difficulties related to the microeconomic environment, and although the second half will not look as attractive as the first, due to comparisons and exceptions, we are very confident in our ability to beat the market and deliver another year of mid- to long-term sales and earnings growth,” Hieronimus said.

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