How is the beauty market evolving around the world?  – WWD

How is the beauty market evolving around the world? – WWD

How is the beauty market evolving around the world?  – WWD

PARIS – The beauty market once again showed its courage in the first half of 2022, despite a very difficult socio-economic and geopolitical context.

Nicolas Hieronimus, L’Oréal’s chief executive, praised the resilience of the beauty market during a conference call with financial analysts and reporters on Friday morning, one day after the company released its second quarter and half year results for 2022.

L’Oréal estimates that worldwide beauty market sales increased by more than 6% in the six months ended June 30, compared to the same period last year.

“However, the pace of the market recovery remains mixed,” said Hieronimus.

The beauty market in Europe recorded an estimated 14% growth and had a favorable first half compared to 2019, before the coronavirus pandemic hit. “The market has fully recovered, with an increase of 8 percent,” said Hieronimus. “North America is maintaining its excellent pace with the rebound of the bricks and mortar.”

The increase in sales of beauty products on that continent was about 8% in the six months.

“China has had a complicated first half due to the blockades,” 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, with +9 per cent, in the half year.”

Hieronimus called emerging markets “quite dynamic”, with their reopening and the acceleration of e-commerce.

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

“Each category is growing,” Hieronimus continued. “But let me point out the strong makeup recovery at plus 8 percent, with double-digit lipstick [growth]and the continued acceleration of fragrances, to more than 21 percent. “

Sales of skin care products grew by around 3%, while sales of hair care products increased by around 5%.

“In this context, L’Oréal shows another one [half] of spectacular outperformance, growing more than double the pace of the market “, he continued, referring to the company’s sales which increased by 13.5% on a like-for-like basis and by 20.9% in reported terms, to 18.37 billion euros. “Compared to 2019, L’Oréal is growing at a steady rate of 20 percent.”

Hieronimus said: “L’Oréal is flying at cruising speeds over a very irregular landscape, with very variable comparative parameters”, explaining 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 in the past two years of rapid growth.

“Distribution is rebalanced by the acceleration of brick and mortar, up to 14.6 percent,” he explained.

Over the same time frame, 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,” said Hieronimus. “Europe is number one for contribution to growth with an increase of 14.3%. [like-for-like]and more than 8% compared to 2019 “.

He has noticed quota increases in all divisions of the company in Europe outside of Russia, where L’Oréal has suspended almost all of its activities.

Despite persistent supply chain disruptions, North America had a good first half, with sales up 11.6%. “L’Oréal USA continues to be one step ahead of the market,” said Hieronimus.

L’Oréal’s sales in emerging countries increased by approximately 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 strong rebound of triple-digit air traffic in Europe, where we benefit from our fragrance strength, “said Hieronimus, referring to a peak flight of 425%.

Business on the Chinese duty-free island of Hainan accelerated again in June, after a lull in April and May.

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

“Korea and Japan have both been dynamic and L’Oréal is gaining share, particularly in luxury,” he said. “But since China was everyone’s concern, and even a cause for concern, I want to emphasize the ability of our local teams to over-deliver.

“In mainland China, which has been hit by COVID[-19] restrictions, and in particular the Shanghai blockade which led to a negative market in the second quarter, minus 7 [percent]L’Oréal China posted net sales of over 6%. [the second quarter]. In full house, if you take China plus Hainan, we achieved growth of over 13% in the first half. “

At the same time, for the first time, L’Oréal lassoed more than 30% of China’s luxury beauty market share.

“Now looking at the second half, we are both prepared and bullish,” said Hieronimus, of L’Oréal’s business overall. “Get ready, because you are aware of the high uncertainty and volatility of the current economic scenario, the fears of recession, the potential impact of inflation on consumption and the continuing tensions on the supply chain.

“We demonstrated during COVID[-19] that in the event of a downturn, we know how to outperform the market and maintain our profitability, “he added.” We remain confident for the second half and, of course, for the future of the beauty industry and for L’Oréal’s prospects. “

For one, there is constant growth. “Over the past decade, the global beauty market has grown 4.5% annually,” said Hieronimus. “The beauty market also has a long history of resisting periods of economic difficulty”.

L’Oréal caters to upper-middle and upper-class consumers, who are generally less affected by the economic turmoil and continue to expand in numbers, especially in emerging markets and China.

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

However, L’Oréal also remains focused on accelerating in all emerging markets, strengthening its strength in the US and strength in Europe.

“Finally, we are confident in our ability to overcome the inflationary environment,” he said. “We will resume further price increases in the second half.”

Hieronimus continued: “In the current environment, we are prepared for the worst, but we are planning for the best, as we know very well that playing up front 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 all the credentials to overcome the short-term difficulties related to the microeconomic context, and even if the second half will not be as good as the first, due to comparative and one-offs, we are very confident in our ability to beat the market and deliver another year of medium to long term sales and profit growth, ”said Hieronimus.

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