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The popularity of fragrance among young Chinese consumers is boosting sales for L’Oréal in the country as it reopens after pandemic lockdowns, according to Cyril Chapuy, president of the L’Oréal Luxe division.
An index tracking daily usage of fragrances in China rose from 40 to 52 points between 2017 and 2021, he notes. “Half of Chinese consumers use fragrance every day, which is pretty new. Overall, the market is bound to grow thanks to the development of the usage, especially among the young generations in America and China. They are crazy about fragrance right now — not only because of its social benefits but also because of the wellness benefits.”
Sales in China are likely to sustain a “progressive” rebound from Q2 this year, says L’Oréal CEO Nicolas Hieronimus, speaking in Paris with Chapuy in a wide-ranging earnings presentation, the first held in-person since 2020.
The reopening of China is on everyone’s mind. “December and the beginning of January had low consumption,” says Hieronimus at the group’s headquarters in Clichy, north of Paris. “The early signs in the beginning of February are very positive in terms of traffic and in terms of purchases. I think the Chinese market will rebound from Q2, not H2, but probably it will be progressive as consumers need to regain trust. It will bounce back for all the divisions — and L’Oréal Luxe will benefit even more.”
Hieronimus’s comments come after L’Oréal reported a strong set of results on Thursday. For the full year, L’Oréal’s sales grew 10.9 per cent to €38.26 billion, well ahead of “robust” overall beauty market growth of 6 per cent. By category, the company’s growth was led by fragrances (22.8 per cent), followed by haircare (12 per cent) skincare (10.1 per cent) and makeup (9.2 per cent). Hieronimous predicts the overall market will continue to grow at a rate of 4 to 5 per cent for some years to come.
“While remaining prudent in this world of poly crisis, I am confident in L’Oréal’s ability to build on our strength and deliver another year of growth in sales and profits,” he says.
Annual sales from the L’Oréal Luxe division were up 10.2 per cent, again led by fragrances. “Our worldwide blockbusters consolidated, such as Libre by YSL that became number three in Europe only three years after hitting the market,” says Chapuy. “Paradoxe by Prada was the best feminine launch of 2022. Our collection business in Asia maintained an impressive momentum – Maison Margiela recorded phenomenal growth at 19 per cent.”
Another major trend is the rise of ultra-premium skincare. L’Oréal Luxe has turbocharged Helena Rubinstein. “The brand was rather tiny a few years ago,” Chapuy says. “We decided to develop it in an accelerated way because we saw the premium skincare market was growing three times faster than the average luxury skincare. So, we needed a strong offer in this market, and we thought the Helena Rubinstein brand had the perfect DNA to do so.”
Sales for Helena Rubinstein ended the year at €950 million, according to the company. “So, it’s going to be a €1 billion brand in 2023,” Chapuy says. “The prices of Helena Rubinstein products are between $200 and $300. Then we have another offer, which we launched just this year to go higher — Carita, ultra-premium skincare with prices above the $300 bar.”
Investment in beauty is stepping up. Last week, Kering announced the creation of a new entity, Kering Beaut��, that will support Bottega Veneta, Balenciaga, Alexander McQueen, Pomellato and Qeelin in their development of the category. Hieronimus says: “We take the decision of Kering to enter beauty as a very strong sign that beauty is a category to invest in. It’s not an easy category but we see that there are new players.”
L’Oréal acquired the licence for YSL Beauté from Kering (then named PPR) in 2008. Hieronimus says this was an investment made with a very long-term view. “There is absolutely no risk that this licence is taken back from L’Oréal.”
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