L’Oreal (PINK:LRLCY) is going to build Latin American Research and Innovation Center in Rio de Janeiro to develop customized product offerings for its Latin American consumers. L’Oreal expects more than three-fourths of its future growth to come from the emerging markets of Asia and Latin America. Latin America generated around 9% of L’Oreal’s global sales in the first three quarters of 2011, growing by 14%, making it the company’s fastest growing market. L’Oreal’s products in the emerging markets compete with hair and skin care products of consumer giants Procter & Gamble (NYSE:PG) and Unilever (NYSE:UL).
The Rio R&D Center
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The Rio R&D Center would require an investment of around €30 million and would accelerate the growth of innovative products tailored especially for the Brazilian and Latin American markets. Brazil is among L’Oreal’s top five global markets and provides strong growth opportunity for the company.
L’Oreal in Latin America
Latin America generated around 9% of L’Oreal’s annual global sales and grew by 14% during the first three quarters of 2011, making it the fastest growing market for the company. L’Oreal’s global growth rate for the same period was 5% while its emerging or “New Markets” (that include Asia-Pacific, Eastern Europe, Latin America, Middle East and Africa) together grew at 10%. Overall, the markets outside of North America and Western Europe generated about 38% of its sales, growing by 9.7% during the period, compared to Western Europe that generated almost similar sales but grew by less than 1%.
The Trefis price estimate of $23 implies an upside of about 10% to the current market price.