How Do We Expect L’Oreal’s Haircare Segment To Grow Over The Next Five Years?
Haircare is the biggest revenue generating segment for L’Oreal with 33% of its revenues coming from this category. The cosmetics giant currently enjoys around 20% of the global haircare market share–the largest share among its competitors. We expect L’Oreal’s haircare revenues to rise by a CAGR of ~5% over the next 5 years. Below, we outline some of the reasons for this.
Note: Retailers Average Gross Profit is the gross income earned by the distributor or retailer on account of selling. This income is used for paying expenses on rents, staff, and other logistics and admin costs, leaving the seller with a net income (profit). L’Oreal’s revenues are calculated after subtracting the retailer’s profit margin from its total market share. We expect the retailer’s gross profit margin to remain at around 42% over the five year period.
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Reasons Behind The Expected Growth In L’Oreal’s Haircare Market Size
- With ~$30 billion in annual sales, L’Oreal is the world’s biggest cosmetics company and it enjoys ~one fifth of the world’s haircare market, the largest share owned by a single beauty player.
- L’Oreal’s product portfolio in haircare ranges from the expensive brands like Kerastase, Redken, and L’Oreal Professional to more affordable ones such as Matrix and Garnier. The presence of L’Oreal products across different price points enables the company to maintain and grow its market share.
- Its presence across large distribution channels enables L’Oreal to reach out to more consumers than its competitors.
- With almost 4,000 researchers and a budget representing ~3% of its sales, L’Oréal has the largest Research and Innovation team in the cosmetics industry. L’Oreal currently spends over $1 billion annually in R&D. The innovative product lineup as a result of this research ensures that the growth of L’Oreal’s haircare segment continues for now.
Have more questions on L’Oreal? See the links below.
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