In terms of growth, 2018 was the best year cosmetics brand L'Oréal has had in a decade. The success is mainly due to the Asian market and the so-called 'lipstick effect'. 2019 looks promising as well.
Hundreds of millions of Asians indulging themselves
The group closed 2018 with a turnover of 26.9 billion euros, almost a billion more than in 2017. Most remarkable is the growth in Asia, where turnover increased by a whopping 24% on a comparable basis. Profit came to 3.9 billion euros, 8.8% more than the year before.
It's L'Oréal's strongest growth in ten years, thanks to strong consumption in Asia: "You have hundreds of millions of consumers exceeding to a level of income where they really want to indulge themselves," CEO Jean-Paul Agon told CNBC. The top executive is not afraid of the Chinese economy slowing down. "L'Oreal Paris is the number one beauty brand in China, and Maybelline is the number one make up brand, so we have products for everyone — we are still very confident."
Agon believes this growth is sustainable: "The market accelerated and could stay strong in 2019. We have many reasons for this strong growth like Asia, eCommerce, travel retail, skin care, and all these reasons will stay here in 2019, so we are pretty optimistic for this new year."
Lipstick effect for Western Europe?
In the developed Western markets, growth was quite a bit lower: in North America, turnover increased by 2.7%, but in Western Europe there was a 0.3% drop. Still, even there L'Oréal is hoping for a silver lining, namely the lipstick effect: in less favourable economic situations, people tend to avoid big expenses, but they're more likely to treat themselves to something small like make-up.
"We cannot bet on the fact that the European economy will accelerate next year, but we are betting on the fact that we will be able to get more market share and accelerate our own growth," Agon said. "The good thing for L'Oreal is that we are covering all segments, all markets, all categories, (so) when another part of the market is going faster we take advantage of it. There is always a bright spot somewhere, (and) we are always able to take advantage of that bright spot, so I'm not at all pessimistic or worried."