China Is The Next Big Growth Market For L’Oreal And Estee Lauder

by Trefis Team
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China has been the fastest growing global beauty and personal care market over the last decade. The growth has now turned even more attractive with strong growth in the high-margin prestige beauty segment with impressive trends of consumer up-trading, that has outpaced mass segments growth. China has now also the achieved the distinction of being the largest online beauty market in the world, nine times the U.S. online beauty market. Leading international cosmetics and beauty players like L’Oreal (PINK:LRLCY) and Estee Lauder (NYSE:EL) have strongly capitalized on the fast beauty market expansion in China over the last decade. While L’Oreal exceeded one billion euro sales mark in the market last year growing by 17-18%, Estee Lauder has made its way through strong airport retail expansion and online channels.

View our detailed analysis for L’Oreal | Estee Lauder here

Market Expansion Stimulated By Growing Demand

Chinese beauty and personal care market has witnessed dynamic value growth in China over the last decade, with consistent economic growth, rising disposable incomes and demand from burgeoning Chinese middle class. The growth has also been accompanied by strong trends of up trading towards premium products and China could become the largest market of global cosmetics industry over time.

Beauty and personal care sales growth in 2011 was mainly driven by premium products that outpaced the mass segment growth. Chinese prestige beauty market grew at 21% in 2011, with 23% growth in skincare and 17% growth in makeup. It is further likely to achieve significant market expansion through the upcoming baby boom and growth of child-specific product categories and quickly increasing demand for anti-ageing and male grooming and skin care products. [1]

Fast Expansion Of Online Beauty Retail

Online Chinese beauty sales have grown 200% since 2006 and reached $8 billion in 2011, making it the largest Internet beauty market in the world, nine times the U.S. online beauty market and almost equal to France’s total beauty market size. Internet retailing has grown rapidly from a small base in China, with increasing internet access with its easy-access features, explosive growth in internet usage, attractive prices and convenient delivery services. In 2011, China had around 457 million internet users, up from just 137 million in 2006, with a huge number of over 205 million online buyers.

L’Oreal and Estee Lauder Have Quickly Capitalized on Chinese Beauty Market Growth

International cosmetics giants have quickly expanded across the Chinese market over the last decade. It is estimated that currently foreign-owned and joint enterprises like L’Oreal and Estee Lauder have market share up to 80%, particularly in the premium categories and are thus likely to be among the major beneficiaries of the upcoming market growth and expansion.

L’Oreal has grown in double digits annually in China over the last decade and recently crossed $1.6 billion annual sales, growing at over 17-18% in 2011, with a market share increasing from 11.4% to 13%. L’Oreal China is now also accelerating its deployment in 600 second-tier cities in China, of which half of these cities are with a population of over one million.

Estee Lauder has also capitalized on strong prestige beauty market growth in China particularly through airport retail and online channels and has been gradually trying to expand into smaller cities and more airports.

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Notes:
  1. Beauty and Personal Care in China Report, Euromonitor, May 2012 []
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