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Date
2024-10-30
L'Oréal China Faces Challenges Amid Two Consecutive Quarterly Sales Declines
On October 23rd, L'Oréal Group released its performance report for the first three quarters of 2024. During the reporting period, the group's sales reached €32.406 billion (approximately 249.488 billion yuan), a year-on-year increase of 6.0%. The financial report shows that all departments of L'Oréal Group achieved growth; North Asia, where China is located, was the only market with declining sales.
L'Oréal Group's Chief Executive Officer, Nicolas Hieronimus, described L'Oréal's performance in the Chinese market as "surprisingly turbulent" in a media interview.
As 2024 draws to a close, the "Double 11" shopping festival is expected to be a key battle for L'Oréal China to change the current downward trend in sales.
The "speed-up" of the four major departments is limited
In the business structure of L'Oréal Group, its four core departments - professional hair care products, mass-market cosmetics, luxury cosmetics, and skin science beauty - all achieved growth in the first three quarters of 2024. However, compared to last year, the growth rate of these departments has slowed down.
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In this growth trend, the skin science beauty department stood out as the only department maintaining double-digit growth. Nevertheless, its growth rate also shows a slowing trend, gradually approaching the boundary of double-digit growth.
The mass-market cosmetics department's sales for the first three quarters increased by 6.4% year-on-year to €12.07 billion (approximately 92.79 billion yuan), accounting for 37.25% of the group's total sales. All categories experienced growth, with hair care being the fastest-growing category.
The luxury cosmetics department's sales for the first three quarters increased by 3.4% year-on-year, reaching €11.35 billion (approximately 88.73 billion yuan). Compared to the first half of the year, the department's performance improved in the third quarter, with a year-on-year increase of 5.8% for the quarter. Despite challenges in the beauty market for mainland China and the Asia travel retail business department, the luxury cosmetics department still performed excellently, further consolidating its market leadership.
In this regard, although the financial report specifically mentioned, "The luxury cosmetics department accelerated growth for the third consecutive quarter." However, compared to the growth rate of 1.8% in the first quarter and 2.3% in the first half of this year, its "speed-up" is also limited.
It is worth mentioning that the fragrance category under the luxury cosmetics department maintains double-digit growth. As the leader in the fragrance market, brands such as YSL, Valentino, and Prada have made significant contributions to growth. The makeup business also continues to make a strong comeback, with YSL achieving double-digit growth in all regions.The sales of the Skin Science Beauty division increased by 11.3% year-on-year, reaching €5.39 billion (approximately RMB 42.102 billion). However, the growth rate of the division slowed down in the third quarter, with an increase of only 0.8%. Both developed and emerging markets achieved double-digit growth, especially with significant expansion in the SAPMENA-SSA region, and the market performance in Mainland China, the United States, and Europe was also significantly better than the market average.
Compared to the growth rate of 28.4% in 2023 and 16.4% in the first half of this year, the slowing growth trend of the Skin Science Beauty division is significant. The financial report also stated, "The market has been slowing down, mainly influenced by the United States, and the contribution of value is relatively low."
By brand, La Roche-Posay launched Mela B3 serum, leading the growth; CeraVe continued to grow faster than the market in all regions; Vichy achieved double-digit growth with its Dercos hair care series; and SkinCeuticals introduced the professional anti-wrinkle serum P-Tiox.
The sales of the Professional Hair Products division increased by 5.8% year-on-year, reaching €3.59 billion (approximately RMB 28.002 billion). The division outperformed the market globally and achieved growth in all regions, especially in North Asia (particularly China).
Specifically, in the hair care category, Kerastase, with the new launches of Première and Elixir Ultime, drove the growth of the division; in the hair color category, Redken's Shades EQ, iNOA, and L'Oréal Professionnel's Dia Color maintained their previous performance levels.
The Chinese market becomes more challenging.
Regionally, L'Oréal Group achieved growth in Europe, North America, the SAPMENA-SSA region (South Asia Pacific, Middle East, North Africa, Sub-Saharan Africa), and Latin America in the first three quarters, with North Asia being the only market with declining sales.
The European market remains the primary market for L'Oréal Group, with sales increasing by 9.3% to €10.7 billion (approximately RMB 82.25 billion), and all product categories achieved double-digit growth, with hair care and fragrances performing best.
North American market sales increased by 6.9%, reaching €8.905 billion (approximately RMB 68.45 billion), while the SAPMENA-SSA and Latin American regions' sales increased by 12.6% and 12.3%, respectively, to €2.84 billion (approximately RMB 21.83 billion) and €2.53 billion (approximately RMB 19.45 billion), maintaining rapid growth.
Alexis Perakis-Valat commented that the global beauty market growth is stable, with easing price pressures in developed markets, and the growth momentum in Europe, North America, and emerging markets remains strong.North Asia's sales decreased by 3% to €7.43 billion (approximately 57.1 billion yuan), with the decline in the third quarter widening to 6.5%. Ye Hongmu admitted that the performance in North Asia during the third quarter was not good, but there were still highlights in innovative and creative brands. "We are doing very well in hair care, with double-digit growth. We are also doing very well in perfumes, almost reaching around 15%, which is far higher than the market." However, the key still lies in the performance of the skincare sector, as this category accounts for 40% of the weight in North Asia.
Focusing on the Chinese market, L'Oréal noted in its financial report that due to the continued low consumer confidence, L'Oréal Group has already encountered negative growth in the second quarter of 2024, and this trend did not improve in the third quarter, leading to a low single-digit decrease in sales for the first nine months.
Although L'Oréal China still achieved low single-digit growth in the first half of the year, the challenges intensified in the third quarter, with sales declining by 6.5% year-on-year. If this trend cannot be reversed in the fourth quarter, 2024 may become the first year in nearly 13 years that L'Oréal China's sales have experienced an annual decline.
Faced with the current challenges in the Chinese market, L'Oréal Group's priority task in the fourth quarter is to reverse the trend of declining sales, and the Double 11 shopping festival has become the key to achieving this goal.
Currently, L'Oréal China has increased its investment in Double 11, such as launching the "Buy One, Get More Than One" promotional campaign, participating in Li Jiaqi's preheating program "All Girls' Offer," and commercial placements on platforms like Xiaohongshu.
From the current sales situation, L'Oréal China's strategy has achieved preliminary results. According to the latest sales list released by Tmall's major beauty brands on October 23, although the cumulative transaction of the domestic brand Pechoin occupied the first place in the pre-sale, L'Oréal Group occupied two seats in the top three, namely L'Oréal Paris and Lancôme brands.
It is particularly worth noting that on the Douyin e-commerce platform, L'Oréal Paris has surpassed Han Shu, which has long occupied the top spot, to become the number one on the beauty list.
L'Oréal Group CEO Ye Hongmu said that although the performance of the Chinese market in the third quarter was very poor, he looks forward to the Chinese government's stimulus measures effectively boosting consumer confidence and promoting market recovery. At the same time, L'Oréal Group is also actively adjusting its strategy to seek further growth in China through product innovation and market penetration.